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UNCLAS SECTION 01 OF 07 BERLIN 000758 
 
SENSITIVE 
 
STATE FOR EEB(NELSON), EEB/OMA(SAKAUE, WHITTINGTON), 
EEB/IFD/ODF(LAITINEN), IO/EDA(DOWNES),DRL/ILCSR AND EUR/CE 
(SCHROEDER, HODGES) 
LABOR FOR ILAB(BRUMFIELD) 
TREASURY FOR ICN(KOHLER),IMB(MURDEN,MONROE,CARNES) AND OASIA 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN GM OECD PREL WTRO IO
SUBJECT: MERKEL'S CHARTER GETS GREEN LIGHT FROM G-20 SHERPAS 
 
REF: BERLIN 159 
 
BERLIN 00000758  001.2 OF 007 
 
 
¶1. (SBU) SUMMARY.  One of Chancellor Merkel's highest 
priority global economic initiatives got a boost from G-20 
Sherpas at a meeting in Berlin on June 12, 2009.  The 
Chancellor's top economic advisors presented her vision for a 
Charter for Sustainable Activity, which is Merkel's 
contribution to preventing another global crisis by 
establishing a broad set of principles for countries in 
economic affairs.  The scope of the project is vast, 
encompassing finance, trade and investment, environment, and 
development, among other areas.  As proposed, it would 
include not only a list of broad principles, but also a "code 
of codes" comprised of existing multilateral instruments, as 
well as a monitoring component.  Some developed countries 
present at the June 12 meeting questioned the need for such a 
Charter, and fretted over how the initiative could detract 
from more pressing work on the financial crisis and trade 
taking place in other fora.  Many developing countries were 
concerned the Charter would lack legitimacy unless non-G-20 
countries joined in the process early on.  In the end, most 
participants saw some value in drawing up an agreed set of 
broad principles.  A new working group co-chaired by Germany, 
the United States and an emerging economy country will carry 
Merkel's Charter initiative forward and report on progress to 
the G-20 Sherpas.  END SUMMARY. 
 
GERMANS MAKE THEIR PITCH 
------------------------ 
 
¶2. (SBU) On June 12, 2009, top-ranking German officials, 
including the Chancellor,s chief of staff, Thomas de 
Maziere, hosted G-20 Sherpas in Berlin to discuss Angela 
Merkel's proposed Charter for Sustainable Economic Activity 
("Charter").  Chancellery officials describe the Charter as 
non-binding "set of general principles," embodying "the 
values we seek to pursue in the context of our economic 
activity."  The aim is the "ensure stable, socially balanced 
and sustainable development of the global economy through the 
application of shared principles and commitments."  The 
proposal also includes a "code of codes" that brings together 
the "large but disparate body of existing rules," such as the 
various instruments of the Organization for Economic 
Cooperation and Development (OECD), International Labor 
Organization (ILO), World Trade Organization (WTO), World 
Bank and International Monetary Fund (IMF), all of which had 
contributed to a 191-page inventory in preparation for the 
June 12 meeting.  Finally, the Charter should hold countries 
to account by making use of "existing monitoring structures 
in different international fora." 
 
¶3. (SBU) Merkel's principal economic advisor Jens Weidmann 
proposed that the Charter cover seven distinct areas: 1) 
sustainable and balanced growth (i.e., free trade and open 
investment); 2) financial markets to support employment and 
growth (i.e., tighter financial sector regulation and 
supervision); 3) sound macroeconomic policy (i.e., cautious 
fiscal and monetary policy); 4) productive labor markets, 
decent work and social protection; 5) propriety, integrity 
and transparency (i.e., addressing tax havens, bank secrecy, 
 
BERLIN 00000758  002.2 OF 007 
 
 
corporate governance, etc.); 6) preserving our environment 
and resources; and 7) global partnership for balanced 
economic development.  (NOTE: Area 5: propriety, integrity 
and transparency will incorporate the Italian initiative 
known as the "Global Standard," renamed the "Lecce Framework" 
following the June 13-14, 2009 G-8 Finance Ministers meeting 
in Lecce, Italy.) 
 
¶4. (SBU) High-ranking officials from various German 
government ministries made their pitch for Charter elements 
falling under their responsibility.  State Secretary Joerg 
Asmussen of the Finance Ministry, said the Charter should 
address the flaws in the market revealed by the financial 
crisis, and described the Charter's essence as "regulation 
and oversight of all markets, products and participants." 
State Secretary Bernd Pfaffenbach of the Economics Ministry 
highlighted the importance of free trade and open investment 
to economic growth, adding that labor mobility, intellectual 
property rights and combating climate change were other 
priorities.  State Secretary Guenther Horzetzky of the 
Ministry of Labor put jobs at the top of his list, adding 
that the ILO's Decent Work Agenda could play an important 
role in the Charter.  The Foreign Ministry's State Secretary 
Peter Ammon thought the Charter could replace the Washington 
consensus with a new framework for balanced growth, based on 
strengthened international cooperation.  Ingrid Hoven of the 
Development Ministry said developing nations should 
participate in the Charter process once the G-20 had reached 
a consensus; she also articulated the Charter's value as a 
way to bring coherence to different policy areas.  Karsten 
Sach of the Environment Ministry emphasized that economic 
growth was not sustainable without factoring in the 
environment; Sach wants an acknowledgement in the Charter 
that environmental resources are finite and a commitment to a 
"green recovery" harnessing new technologies.  The Germans' 
strategy is to get agreement on the Charter by G-20 countries 
before inviting participation by a wider set of countries, 
possibly including all members of the United Nations. 
 
SUPPORTERS 
---------- 
 
¶5. (SBU) Remarks by the following participants were positive, 
on balance: 
 
AUSTRALIA: Australian participant Andrew Charlton said the 
Charter could be an important complement to the G-20 process. 
 It should be even "more than a declaration of principles," 
he said.  Since it represents the world's most important 
economies, the G-20 is the proper forum to take on the 
Charter project. 
 
ARGENTINA: Argentinean representative Hector Timerman thought 
the Charter was a "good idea," but should be even stronger 
than a political declaration.  He also thought its focus 
should be on development, and particularly "closing the 
income gaps among countries."  Other priority areas for 
Argentina include jobs, global imbalances, intellectual 
property rights, technology transfer, climate change, fiscal 
sustainability and trade liberalization.  Timerman said the 
 
BERLIN 00000758  003.2 OF 007 
 
 
UN should take over the Charter process so that other 
countries could get involved. 
 
CHINA: Chinese Ambassador MA Canrong said the Charter was a 
way to deal with the financial crisis through "common 
approaches."  He said the process should include non-G-20 
countries to strengthen legitimacy, and should respect the 
interests of developing countries.  He hoped the Charter 
would usher in a "new economic order that is just and 
rational." 
 
FRANCE: Among the strongest supporters of the Charter, France 
sees the initiative as a way to "fill the gap between global 
political and economic integration."  French participant 
Christian Masset noted that there had been a "change in the 
Washington consensus," and that the social and environmental 
factors were now considered just as important as economic 
factors.  Masset said the UN system should carry the Charter 
forward following agreement by the G-20.  General principles 
should be the first priority, with specifics to come later. 
Masset also voiced support for the Italians' "Global 
Standard." 
 
ITALY: With a related initiative underway in the G-8, the 
Italians are practically co-sponsors of the Charter. 
Giandomenico Magliano described the Charter as a response to 
the flaws of globalization, and a step towards "putting our 
houses in order."  He hoped the exercise could help reconcile 
the different instruments comprising the Charter.  He also 
hoped it could help bring together discussions on the 
financial crisis under way in various fora, including the UN. 
 Linking it to the Prussian philosopher Immanuel Kant, he 
described the Italians' "Global Standard" focusing on 
propriety, integrity and transparency as a building block for 
the Charter.  Magliano thought legitimacy rested on broad 
ownership, which would require patience. 
 
RUSSIA: Russia is another strong supporter of the Charter. 
Russian participant Alexander Pankin argued for a limited set 
of general principles, rather than more prescriptive rules, 
however.  He thought the Charter could represent an "economic 
constitution" or a "development constitution."  One way to 
include non-G-20 countries in the process could be by 
inviting international organizations to participate.  He also 
said "weaker signatories" may need assistance from the others. 
 
SPAIN: Spain is on the same page as Russia regarding the 
scope of the Charter.  Spanish representative Javier Valles 
said the Charter should focus on principles rather than 
codes.  He also agreed that international organizations, 
including the UN, should get involved.  Echoing France, he 
said the Charter should cover both economic and social issues. 
 
SAUDI ARABIA: Saudi delegate Hamad Al-Bazai said he thought 
the Charter was a good initiative.  Saudi Arabia sees the 
Charter as a way to revamp the Washington Consensus. 
 
THAILAND (ASEAN):  Recalling the Asian financial crisis of 
the 1990s, Thai participant Ampon Kittiampon said the economy 
recovered long before the broader social wounds healed.  He 
 
BERLIN 00000758  004.2 OF 007 
 
 
was therefore pleased to see the Charter address social 
factors in addition to economic ones.  He hoped the Charter 
could be a "code plus," focusing on four broad principles: 1) 
sustainability; 2) stability; 3) shared responsibility; and 
4) streamlining. 
 
TURKEY: Turkey's representative welcomed the Charter's wide 
focus on labor standards, the environment, financial sector 
reform and economic growth.  Selim Kuneralp stressed the 
importance of including non-G-20 countries in the Charter 
process to strengthen its legitimacy.  Since the Charter 
would be a non-binding, political agreement, however, 
Kuneralp did not foresee a big obstacle for the 
non-signatories to certain of the existing agreements 
comprising the Charter. 
 
EU COMMISSION: EU Commission representative Antonio Jose 
Cabral was supportive of the Charter, calling it a "top-down 
approach."  He said the Charter offered opportunities for 
change.  One area the Commission would like to see emphasized 
is taxation. 
 
OECD: Seeking to allay concerns over the application of 
instruments to which not all countries were signatories, OECD 
representative Rolf Alter explained that non-members often 
sign onto OECD commitments, while not all OECD members are 
signatories.  He hoped the Charter would be a "living 
instrument" that could adopt new elements as needed. 
 
SKEPTICS 
-------- 
 
¶6. (SBU) While none of the following was openly hostile to 
the Charter proposal, each expressed concerns over certain 
elements: 
 
BRAZIL: A clear skeptic of the Charter proposal was Brazil. 
While saying it was hard to disagree with the fundamental 
objectives of the Charter, Brazilian representative Luis 
Antonio Balduino strongly favored focusing on general 
principles rather than policy prescriptions.  He noted that 
Brazil had not been involved in the Italian-led discussions 
on the "Global Standard."  Balduino suggested that the 
Charter's drafters look to the preambles of existing 
instruments for inspiration rather than the text of those 
instruments. 
 
CANADA: Canadian participant Peter Boehm outlined three 
concerns over the Charter.  First, he fretted it could divert 
attention from the G-20 Working Groups following up on 
Washington and London Summit commitments.  Second, he worried 
that the benefits for the public might prove minimal. 
Lastly, Boehm doubted the London Summit Declaration really 
committed the G-20 to carrying the Charter proposal forward. 
He suggested that G-20 commitments and deadlines be 
referenced in any Charter document.  The success of the G-20 
process thus far was that it worked on a discrete set of 
issues.  He urged that G-20 members proceed "with their eyes 
open," and that failure was a possibility. 
 
 
BERLIN 00000758  005.2 OF 007 
 
 
CZECH REPUBLIC (EU PRESIDENCY): Czech participant Jana 
Matesova praised the G-20 forum, saying that the world's 
largest economies needed to talk to each other. 
Communication failure among G-20 countries was bad for 
everyone, including non-G-20 countries.  Matesova hoped the 
Charter effort would not mirror what was already going on it 
other fora, however.  She thought the Charter should address 
the question of "global imbalances." 
 
ETHIOPIA (NEPAD): Ethiopia's representative, Graham Stegmann, 
cautioned that others would judge the Charter by the results 
it achieved.  The peer monitoring envisaged by the Charter's 
supporters was not a bad concept, if it could be done 
effectively and take into account the interests of those who 
would be affected.  NEPAD does not want a "straightjacket" 
that might limit its flexibility in pursuing economic 
development goals.  Stegmann acknowledged a "tradeoff between 
inclusivity and workability." 
 
INDIA: Indian representative J.S. Mukul hoped the Charter 
would not supplant ongoing efforts to tackle the financial 
crisis in other fora.  He expressed two concerns shared by 
other non-OECD members of the G-20.  First, India is not a 
signatory to many of the instruments listed in the IO 
inventory.  Second, it wants to ensure the Charter does not 
include instruments that would "straightjacket" developing 
countries striving to eliminate poverty.  Overall, India 
would like the Charter's primary focus to be development. 
 
JAPAN: Japanese participant Masato Takaoka was among those 
most critical of the Charter.  He hoped Sherpas would not get 
ahead of G-20 leaders, and thought expectations should be 
played down with the public.  Takaoka questioned a 
"one-size-fits-all" set of fundamental values.  He thought 
that the issue of "global imbalances" was the most important 
issue at hand, but that the IMF was already addressing it. 
Takaoka questioned whether there was agreement at London G-20 
Summit to work on a Charter.  He also raised doubts about the 
legitimacy it would enjoy among non-G-20 members.  On 
implementation, the OECD might be best placed to take the 
lead.  Overall, Takaoka doubted the Charter represented any 
added value. 
 
KOREA: Skeptical of the Charter, South Korean delegate 
Ho-Yung Ahn doubted that the London Summit communique had 
committed the G-20 to working on the Charter.  He sought 
clarification on the Charter's relationship to ongoing 
efforts in other fora, and wondered if there was a real need 
for it.  Ahn thought a focus on broad principles was "the way 
to go." 
 
NETHERLANDS: Dutch participant Richard Van Zwol cautioned 
that the current crisis was far from over.  The G-20 should 
not neglect dealing with the immediate problems even as it 
tries to prevent future crises.  He hoped that the Charter 
process would be inclusive, flexible and transparent. 
 
SOUTH AFRICA: South African representative Mandisi BM Mpahlwa 
had concerns about the legitimacy the Charter would enjoy if 
elaborated by the G-20 in isolation.  There needs to be a 
 
BERLIN 00000758  006.2 OF 007 
 
 
basis for wider participation in the process.  He thought 
G-20 countries could have the biggest impact by leading by 
example.  Mpahlwa hoped any Charter would focus on 
"high-level principles" much as the Millennium Development 
Goals did. 
 
UNITED KINGDOM: UK representative Jon Cunliffe identified 
"global imbalances" as the "elephant in the room," and said 
the Financial Stability Board should be invited to future 
Charter meetings.  Imbalances had resulted from the 
previously held belief that if every country did what was 
good for itself, the entire system would benefit.  In the 
wake of the crisis, shortcomings of national regulators were 
brought into light, though a movement towards international 
regulation was unlikely.  Cunliffe questioned whether the 
machinery to ensure countries adhered to the Charter's 
standards was in place. 
 
NOTE: Indonesia was not represented at the meeting. 
 
U.S. CHARTS WAY FORWARD 
----------------------- 
 
¶7. (SBU) UNITED STATES: Calling the Charter a "long-term" 
project, U.S. Co-Sherpa David Nelson argued for a less 
technical, more principles-based approach.  The United States 
wants to ensure the Charter embodies the highest standard 
principles, and does not water down any existing commitments. 
 He echoed South Africa in calling for an inclusive process 
to bolster legitimacy, after the G20 countries chart a path, 
and stressed the need for accountability.  He also pointed 
out that many measures G-20 countries were undertaking to 
deal with the crisis in the short term may not be emblematic 
of long-term goals.  Another key challenge will be defining 
the term, "sustainability."  Keeping expectations realistic, 
the G-20 might consider forming a Charter working group, 
co-chaired by the United States, Germany and an emerging 
market country, which could report to G-20 Sherpas.  If 
sufficient progress is made, there could be a report on the 
Charter at the G-20 Summit in Pittsburgh. 
 
COMMENT 
------- 
 
¶8. (SBU) From the German perspective, the June 12 G-20 
Sherpas meeting on Merkel's Charter was largely a success. 
The Germans may have fallen short of getting agreement to 
pursue all three elements in their proposal -- principles, 
code of codes, and monitoring -- but they did get the green 
light to work on broad principles, which they regard as 
merely the first step.  Key in this regard was getting the 
United States, as host of the Pittsburgh Summit, on board. 
Whether or not the entire array of issues, from development 
assistance to climate change, remains on the table is an open 
question.  Broadening the G-20 agenda beyond the financial 
sector has implications for the future of the G-20 and global 
economic governance, and is hotly debated even within the 
German government.  The fact that the Charter is moving 
forward probably increases the chance, however marginally, 
that Chancellor Merkel will attend the Pittsburgh Summit, 
 
BERLIN 00000758  007.2 OF 007 
 
 
which takes place days before the September 27 national 
elections in Germany.  Being seen on the international stage 
playing a leading role on the issue of most importance in the 
election -- the economy -- may play well with German voters. 
Koenig