VZCZCXRO4282
RR RUEHIK
DE RUEHBS #1719/01 3571625
ZNR UUUUU ZZH
R 231625Z DEC 09
FM USEU BRUSSELS
TO RUEHC/SECSTATE WASHDC
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 04 BRUSSELS 001719 
 
SENSITIVE                                            SIPDIS 
E.O. 12958:  N/A 
TAGS: ECON ETRD EINV PREL PGOV EUN
SUBJECT: EEB A/S FERNANDEZ IN BRUSSELS: IMPACT OF LISBON TREATY AND 
OPPORTUNITIES FOR ENGAGEMENT WITH EU 
 
BRUSSELS 00001719  001.2 OF 004 
 
 
¶1. (SBU) Summary: During discussions with EU officials and 
stakeholders in Brussels on December 9-10, EEB Assistant Secretary 
Fernandez explored the current state of, and prospects for, the 
transatlantic economic relationship, the future of the Transatlantic 
Economic Council (TEC), the impact of the Lisbon Treaty and changes 
in EU leadership, and the enlarged role of the European Parliament. 
 The European Commission's new authority over investment policy 
presents both opportunities and challenges for the United States in 
working with the EU on investment protection agreements in Europe 
and globally.  The increased authority to the European Parliament 
requires the USG to work more closely with the EP, and suggests that 
we look at ways to increase EP coordination with the Congress.  The 
incoming Spanish Presidency, although it faces challenges with the 
transition to post-Lisbon mechanisms, has transatlantic cooperation 
as a top priority and is ready to work with the USG on the TEC, 
concluding a new aviation agreement, and implementing decisions 
reached at Copenhagen.  Counterterrorism cooperation will be a high 
priority for the Spanish, but we face challenges in moving ahead 
with an agreement on exchange of financial data; intensified U.S.-EU 
coordination is needed to ensure that European Court of Justice 
concerns are addressed in new United Nations sanctions resolutions. 
All interlocutors welcomed Fernandez' early visit and stressed the 
importance of intensifying the U.S.-EU dialogue as a means of 
increasing domestic and global economic prosperity.  End summary. 
 
¶2. (U) In his second week after taking up duties, State Department's 
Assistant Secretary for Economic, Energy and Business Affairs Jose 
¶W. Fernandez, accompanied by Executive Assistant Maryruth Coleman, 
visited Brussels December 9-10 for discussions with officials from a 
range of EU institutions as well as stakeholders and observers.  In 
a series of office calls and group engagements Fernandez was able to 
exchange views with the European Commission (EC) Director General 
for Trade, David O'Sullivan, Director for External Relations, Alan 
Seatter, and Director for Air Transport, Daniel Calleja-Crespo, as 
well as Commission Deputy Secretary General Alexander Italianer and 
the Chiefs of Staff to the Commissioners for Enterprise and External 
Relations; with several Members of European Parliament and staff, 
including Peter Skinner of the Economic and Monetary Affairs 
Committee; with the AmCham EU's transatlantic policy committee; and 
with several non-government and think tank representatives, 
including former Commission Ambassador Hugo Paemen.  He also held a 
roundtable session with an interagency group of staff from USEU and 
Embassy Brussels, and met with USEU Ambassador Kennard and Embassy 
Brussels Ambassador Gutman.  In all meetings A/S Fernandez noted 
that the United States' economic partnership with Europe is several 
times larger in size than any other market, explained that he wanted 
to understand the changes to the relationship that stem from the 
Lisbon Treaty, and solicited suggestions from all interlocutors of 
concrete opportunities for engagement that would improve 
transatlantic relations. 
 
-------------------- 
Lisbon Treaty impact 
-------------------- 
 
¶3. (SBU) One unanimous conclusion about the Lisbon Treaty, which 
entered into force on December 1, 2009 (reftel), is that the 
European Parliament's role will increase significantly (see further 
non of a structure for a more coherent EU foreign policy, 
it now appears that ne of Lisbon's greatest impact will be on 
ecoQomic policy making, specifically the increase oQ EP powers. 
 
------------------- 
European Parliament 
------------------- 
 
¶5. (SBU) The message to A/S Fernandez on the EP was clear and 
consistent:  its role has increased in recent years, and the new 
powers it has under Lisbon will make it a force that cannot be 
ignored.  One U.S. lawyer active in Brussels for thirty years said 
that not long ago he didn't even know where the EP was situated, but 
 
BRUSSELS 00001719  002.2 OF 004 
 
 
today he spends more time there than at any other EU institution. 
The observers noted that the EP's relationship with the Commission 
is already more like that of Congress's with the Administration, in 
that the EU does not have a parliamentary system, making the EP a 
more independent institution.  Lisbon gives the EP the right to vote 
on (and therefore veto) additional legislation that it previously 
was only consulted on, thus increasing it legislative authority with 
the European Council (made up of representatives of the 27 Member 
State governments).  The EP's new authorities include a say over the 
full EU budget (now including agricultural payments), agricultural 
policy, investment policy, trade agreements, justice and legal 
matters, and implementing rules for commercial regulations.  Many of 
the modalities for the new procedures have yet to be determined. 
Among the consequences of this shift in power discussed during 
Fernandez' visit: 
 
- The EP's elected representatives have different priorities from 
the Member State governments that make up the European Council: 
human rights and data protection, for instance, are a much higher 
priority and therefore will likely become more prominent in future 
EU negotiations. 
- The EP takes an up-or-down vote on legislation, whereas the 
Council nearly always works on the basis of consensus (even if 
Lisbon permits the Council to vote on the basis of a qualified 
majority):  EP debates will introduce greater transparency into EU 
deliberations; it will be important for stakeholders like the USG to 
provide information to both individual MEPs and parties (since party 
discipline is not universal); since MEPs have very limited staff, 
personal engagement is important. 
- Early and consistent consultation with the EP will be important to 
the success of Commission-proposed initiatives (and for the USG and 
other stakeholders to influence decisions). 
- For trade agreements, the Commission may need to consider 
requesting the sort of "fast track" authority used in the United 
States. 
- The EP will have to become more professional to take on its 
greater role. 
- The USG needs to engage more directly and more actively with the 
EP (DHS Secretary Napolitano's appearance before the EP's Civil 
Liberties, Justice and Home Affairs Committee in November was cited 
as a positive precedent). 
- The USG and EC should consider a more formal role for the EP (and 
the Congress) in the TEC. 
- Coordination between the EP and the U.S. Congress needs to be 
broader and deeper, including regular consultations between relevant 
committees (with a view to bringing policy approaches and laws 
closer together), staff exchanges, and interaction with the Senate 
as well as the House; the existing Transatlantic Legislators' 
Dialogue between the EP and the House is a good basis but is not 
sufficient. 
 
---------- 
Investment 
---------- 
 
¶6. (SBU) The Lisbon Treaty gives the Commission authority to 
negotiate investment protection agreements, a competence previously 
reserved to the individual Member States.  David O'Sullivan, 
Director General for Trade, told Fernandez that the Commission would 
take time to put procedures in place before commencing any 
negotiations.  He said that to avoid any legal uncertainty during 
the transition period, the Commission will grandfather Member State 
bilateral investment treaties that were in place prior to the entry 
into force of Lisbon.  Given that it will take some time before the 
Commission is prepared to exercise its new role, O'Sullivan also 
said it considering agreeing that Member States continue to 
negotiate BITs for an unspecified period of time. 
 
¶7. (SBU) The Commission has not determined which will be the first 
EU BIT that it negotiates, but O'Sullivan thought India may make 
sense given that free trade agreement negotiations are already 
underway.  An agreement with ASEAN will be a likely priority. 
O'Sullivan estimated that it will take "20-30 years" for the EU to 
replace existing Member State BITs.  Since the EU will only 
negotiate BITs with its most important investment partners, 
O'Sullivan predicted that some existing BITs between Member States 
and certain non-priority countries would remain valid indefinitely. 
 
--- 
TEC 
--- 
 
¶8. (SBU) Fernandez heard broad support for the Transatlantic 
Economic Council from all corners.  There was strong agreement that 
the U.S. and EU need a mechanism like the TEC for strategic 
coordination on economic priorities, and that it needed to operate 
at a strategic level; no one wants to see an issue like the 
long-standing poultry dispute come to dominate the TEC again.  As 
noted above, several officials (most prominently, but not 
exclusively, MEPs) believed the EP should be more engaged in the 
TEC. 
 
 
BRUSSELS 00001719  003.2 OF 004 
 
 
¶9. (SBU) In the second Barroso Commission that will take office in 
February, the EU lead for the TEC will be the designated Trade 
Commissioner, Karel De Gucht, shifting the staff lead from DG 
Enterprise to DG Trade.  This was generally seen as an improvement, 
with DG Trade expected to do a better job balancing competing EU 
interests.  O'Sullivan indicated that DG Trade was only starting the 
process of absorbing this new responsibility.  His goal is to keep 
the TEC focused on long-term objectives and strategic goals.  He and 
De Gucht (the current Development Commissioner) had already 
discussed the TEC; De Gucht is looking forward to taking on the TEC 
and to working together with the U.S. co-chair, Deputy NSA Mike 
Froman. 
 
¶10. (SBU) Several officials and observers saw the shift in EU lead 
on the TEC as a useful opportunity to re-examine existing 
procedures.  Some in the business community and elsewhere questioned 
USG commitment to the TEC process; some EC officials claimed they 
did not see a consistent high-level USG focus on TEC work program. 
All parties noted the Spanish desire to host a successful Spring TEC 
meeting as a prelude to a U.S.-EU Summit, and urged the USG to 
continue working on agreed projects with EU counterparts; EC 
officials offered assurances that the institutional and leadership 
transitions underway would not slow EU work on TEC priorities. 
 
---------------------------------- 
Counterterrorism:  TFTP and UNSCRs 
---------------------------------- 
 
¶11. (SBU) To highlight the difficulties the USG and the EC face in 
adjusting to Lisbon Treaty institutional arrangements, several 
interlocutors raised the bilateral agreement on data sharing under 
the U.S. Terrorist Finance Tracking Program (TFTP).  An interim 
agreement that will govern data sharing from February through 
October 2010 was signed on November 30, 2009, i.e., prior to Lisbon 
rules entering into effect.  MEPs and others complained that the EP 
was largely kept in the dark on the agreement, despite the 
well-known concerns of many MEPs about data privacy and suspicions 
over the program.  Because the agreement was not ratified by the 27 
national parliaments before December 1, post-Lisbon rules now apply: 
 the Commission and Council will forward the provisional interim 
agreement in December to the EP for its consideration in providing 
or withholding its consent in the coming year.  Commission officials 
thought it likely that a majority of MEPs would support the 
time-limited interim agreement, but that it would take a concerted 
and coordinated effort by both the EU and USG to achieve success. 
Given that January will be dominated by hearings on the new 
Commission, it seemed unlikely an EP vote on the TFTP agreement 
would take place before February 2010.  The relevant committee 
(Civil Liberties, Justice and Home Affairs) will likely take up 
discussions in early January. 
 
¶12. (SBU) The situation for a long-term TFTP agreement is much 
different.  The next College of Commissioners will need to propose a 
negotiating mandate for formal Council endorsement, probably with 
informal consultation of the EP.  Many MEPs are likely to seek to 
impose onerous data privacy provisions on Commission negotiators. 
EU officials and MEPs note that USG efforts to win approval of the 
interim agreement should anticipate a heated debate over the new 
negotiating mandate.  No official work on the new mandate can begin 
until after the new Commission takes office, expected in February. 
 
¶13. (SBU) Another counterterrorism issue raised was the need for 
future UN Security Council Resolutions sanctioning individuals 
(particularly those associated with NGOs) to take account of the due 
process concerns that have led the European Court of Justice (ECJ) 
to strike down many EU decisions that implement UNSCRs.  While it 
was noted that an element of the issue was the ECJ's effort to 
assert its own institutional prerogatives, in fact there are real 
substantive concerns that U.S. and EU experts need to pinpoin and 
ensure are taken into account in future UNSCRs, such as the UNSCR 
1267 renewal resolution anticipated this month from New York. 
 
-------------------------------- 
Other opportunities and concerns 
-------------------------------- 
 
¶14. (SBU) Other areas highlighted to A/S Fernandez as both 
opportunities for increased bilateral engagement and potential 
concerns that should be jointly addressed included: 
 
- Digital Economy:  both EC and EP are focused on new framework for 
information, communication and protection of consumer rights and 
intellectual property; early and consistent USG engagement is needed 
with both institutions to shape outcomes. 
- Financial services: the EC is moving ahead with many regulations 
that have far-reaching consequences; USG engagement is important to 
ensure these regulations are compatible with our own; the existing 
Financial Markets Regulatory Dialogue is working well, but needs to 
be high-level USG focus, and needs to include EP and Member States. 
- Third countries: the U.S. and EU share common objectives in many 
third countries; bringing competition rules to China is just one 
clear example; this could be a focus of the TEC. 
 
BRUSSELS 00001719  004.2 OF 004 
 
 
- Development: the decision at the November Summit to launch a new 
U.S.-EU development dialogue was seen as an excellent opportunity to 
work together to increase global prosperity and to work on food 
security. 
- Aviation: current negotiations on second stage air services 
agreement offer huge potential (the Commission estimates the impact 
to the U.S. economy of an agreement that meets their proposals - 
which includes loosening U.S. restrictions on airline investment - 
would exceed the expected impact of the Doha Round); 
- Doha: several EU officials, and several business representatives, 
questioned continued U.S. commitment to the Doha Development Agenda; 
there was general agreement that this Round, like any international 
undertaking, cannot succeed without the United States and EU working 
together; several EC officials and stakeholders complained that the 
current USG stance on Doha is not well understood. 
 
¶15. (SBU) Comment: The dual EU transitions now underway - the Lisbon 
institutional changes and impending seating of a new European 
Commission - offer both risks and opportunities.  There will be 
numerous difficulties confronting the Spanish Presidency as the 
various EU institutions adjust to Lisbon rules and engage in the 
inevitable jockeying for position.  This, plus the transition to new 
Commissioners, has the potential to slow bilateral cooperation with 
the EU.  While not ignoring the risk, A/S Fernandez' interlocutors 
in Brussels all stressed the opportunities inherent in these 
transitions.  We have the potential for some fresh thinking on the 
EU side of the TEC, to strike up a broader partnership with the 
increasingly powerful EP, and to take advantage of emerging power 
centers with the EU (the new centralized foreign policy apparatus, 
powerful committee chairs in the EP) to influence EU funding and 
focus for third country priorities.  USEU looks forwarding to 
working with A/S Fernandez and others in Washington on strategies to 
exploit these opportunities and achieve real progress with our EU 
partners on issues that will improve U.S. and global prosperity. 
 
KENNARD