VZCZCXRO6093
PP RUEHIK
DE RUEHFR #1611/01 3370742
ZNR UUUUU ZZH
P 030742Z DEC 09
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC PRIORITY 7665
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 03 PARIS 001611 
 
SENSITIVE 
 
SIPDIS 
 
STATE FOR EB and EUR/WE 
 
E.O. 12958: N/A 
TAGS: ECON ETRD ENRG EAGR PREL SENV FR
SUBJECT: Scenesetter for EEB A/S Jose Fernandez 
 
PARIS 00001611  001.2 OF 003 
 
 
¶1.  (SBU) Mission France warmly welcomes your visit on December 7-8. 
 You will arrive half way through President Nicolas Sarkozy's 
five-year term, a period marked by strong coordination between the 
U.S. and France on key strategic issues.  The financial crisis and 
subsequent G20 response, as well as the lead-up to the Copenhagen 
climate change summit, have tested this relationship and shown that 
we can find ways to work together despite fundamental differences on 
some issues. 
 
US-French Relations 
------------------- 
¶2.  (SBU)  Since the election of President Sarkozy in 2007 and the 
election of President Obama in 2008, the U.S.-French bilateral 
relationship has become arguably the best it has ever been, with a 
robust political relationship buoyed by renewed support for the U.S. 
in public opinion.  Sarkozy is a fierce advocate for French 
interests; is committed to pushing France forward as a global 
leader; and, believes he can best advance French interests by 
working in tandem with the United States rather than in opposition 
to us.  Politically robust government-to-government relations do not 
mean, however, that France always aligns itself with the United 
States.  Sarkozy equates the health of the relationship with the 
strength of U.S.-French political and strategic cooperation in other 
parts of the world, rather than with the economic relationship. 
 
¶3.  (SBU)  Franco-American economic ties are robust. Bilateral 
trade, investment and affiliate sales amount to an estimated $1.3 
billion per day.  France is the United States' 8th largest trade 
partner, and the United States is France's 6th largest trade 
partner.   The U.S. is the top destination for French foreign 
investment, with direct investment stock of $163 billion.  There are 
approximately 2,300 French subsidiaries in the U.S. that provide 
more than 520,000 jobs and generate about $235 billion in turnover. 
The U.S. is in turn the largest foreign investor in France, with $75 
billion in investment , and turnover of about $228 billion.  U.S. 
firms employ 650,000 people in France.  This Embassy is committed to 
further enhancing these economic ties. 
 
State of the French Economy 
--------------------------- 
¶4. (SBU) France's economy has outperformed most other EU member 
states during the financial crisis, due largely to France's 
extensive social safety net (e.g. long-lasting unemployment benefits 
and training programs) which acts as an automatic stabilizer.  But 
government stimulus has also played an important role.  The Sarkozy 
administration pushed through a 26 billion euro stimulus package, 
which -- with automatic stabilizers -- equals 2.5 percent of gross 
domestic product (GDP).  More recently, the government announced a 
35 billion euro "grand emprunt" (a "recovery bond" offering) to 
stimulate research and investment in innovative industries.  The 
French economy grew at an annual rate of 1.2 percent in the second 
quarter, driven largely by a decline in the trade deficit, and by 
government consumption.  Unemployment increased to 9.1 percent on 
average, compared to 7.4 percent in 2008, with a 23.9percent youth 
unemployment rate.  To date, secondary effects of lower employment 
rates have not significantly weakened what until now has been 
remarkably resilient consumer demand.  The dark side of all this, 
however, is the soaring budget deficit, which has doubled and will 
reach 8.2 percent of GDP this year. .  Because of this, Sarkozy 
continues to press for reforms that reduce the burden of the state 
(reducing the civil service by attrition, consolidating sub-national 
administrative layers) as well as encourage small and medium-sized 
businesses (reduced paperwork, tax exemptions, financing) and 
provide investment incentives. 
 
The G20 Agenda 
-------------- 
¶5.  (SBU)  France strongly supports the G20 process as the premier 
forum for treating global economic issues, but takes a sharply 
different stance on some G20 issues than the United States.  The 
French have aggressively advocated for improved global economic 
governance (tighter regulation of the financial sector, and 
international norms to discourage excessive bonuses for bank 
executives), and have been critical of the U.S. or "Anglo-Saxon" 
economic model, which they argue has been discredited by the crisis 
as dangerously underregulated.   Before the G20 summit in 
Pittsburgh, France, along with Germany, sought a common EU position 
on financial regulation in an unsuccessful attempt to influence the 
outcome of the summit.   France has publicly downplayed its own 
reliance on the social safety net and government stimulus programs 
to support economic demand.  Despite its support for the G20, France 
believes there may well be a continuing role for the G8 in certain 
areas, and senior officials have told us that G8 members have to 
look carefully at what to do with the many issues and partners 
involved in the G7, G8 and other formats.  France will take over 
lead for the G8 and G20 in 2011. 
 
Climate Change 
-------------- 
 
PARIS 00001611  002.2 OF 003 
 
 
¶6.  (SBU)  The environment is a signature issue for the Sarkozy 
government, which created a new "super-ministry" of sustainable 
development, consolidating the ministry-equivalents of energy, 
infrastructure, transport and environment into a single body.  The 
goal was to internalize environmental factors into decision-making 
on these policies.  Last year, France successfully guided EU member 
state negotiations on the EU's climate change and energy package, 
committing the EU to reduce its greenhouse gas emissions by 20 
percent by 2020 compared to 1990 levels. The French, especially 
President Sarkozy and Environment Minister Borloo, were critical of 
the USG approach to climate change and Copenhagen, saying that the 
U.S. legislative process is too slow.   They also charged that the 
Waxman-Markey cap-and-trade bill will produce insufficient 
reductions by 2020.  France has meanwhile sought to forge alliances 
to achieve binding agreements at Copenhagen.  The Sarkozy 
administration has introduced a bill into the French Parliament to 
implement a carbon tax starting from January 1, 2010. 
 
Doha 
---- 
¶7. (SBU)  France pushed back hard against emerging economies at the 
July 2008 Doha talks over the issue of market access, but then 
reversed itself at the end of the year, advocating rapid conclusion 
of the Doha package.  President Sarkozy has called for conclusion of 
the round to avoid any further steep declines in trade.  France 
fears that emerging economies (India and China) could legally raise 
their current low applied tariff rates to the higher bound tariff 
rates.  Locking in lower rates seems to be the GOF's priority , even 
if the current deal offers little else.  French officials have also 
publicly blamed the U.S. for the failure to reach agreement on Doha. 
 We have made clear that what is on the table is not sellable to 
Congress.  Privately, French officials complain that they do not 
understand the United State's current objectives or negotiating 
strategy on Doha. 
 
Intellectual Property Rights 
---------------------------- 
¶8.  (SBU)  The French government is often at the cutting edge of 
intellectual property protection in Europe and recently enacted a 
controversial "graduated response" law (the UK and EU drafted 
similar laws) that provides for an illegal downloader to lose 
internet access for up to one year after two  warnings.  French 
courts also back rights holders in IPR cases, such as Louis 
Vuitton's successful suits against Ebay and Google over copyright 
infringement, and French publishers will likely be successful in 
their current suit over the Google Books program.  With an immense 
amount of intellectual property to protect and one of the worst 
illegal download rates in the Europe, the French will continue to 
push the envelope in Europe in IPR enforcement. 
 
Bilateral Trade and Investment Issues 
------------------------------------- 
¶9.  (SBU)  Several bilateral trade and investment issues have 
captured the attention of leaders on both sides.  Senior French 
business officials have complained that the U.S. Air Force's KC-X 
Tanker draft procurement proposal is unfair and stacked in favor of 
Boeing.  The Air Force  reopened its bidding process after the 
original selection of Northrup-Grumman /EADS  was overturned. 
French business officials complain that the new draft RFP  sets 
standards that  heavily favor Boeing's offer.  Both aircraft would 
be assembled in the United States and both have significant American 
content. 
 
¶10.  (SBU) EDF recently bought a 49.9 percent stake in the existing 
nuclear assets (five reactors) of Constellation Energy Nuclear Group 
(CEG), based in Baltimore, Maryland.  After rocky negotiations over 
the summer, the State of Maryland approved the acquisition in early 
November. It is worth mentioning, however, that the new CEO of EDF, 
Henri Proglio, told the press he has not yet fully endorsed the move 
and questions if it was in the company's best interests. 
 
¶11.  (SBU) GE France lost it's 4 billion euro bid to buy  Areva T&D 
(Transmission and Development), the non-nuclear arm of Areva Group. 
 The other bidders were Toshiba, backed by the Japanese sovereign 
fund INCJ, and a joint bid by  Alstom and Schneider Electric.  Areva 
(or more likely President Sarkozy) chose the Alstom/Schneider 
Electric French bid, despite indications that its initial offer was 
inferior from several standpoints. 
 
Agricultural Issues 
-------------------- 
¶12. (SBU) Once a leading supporter of agricultural biotech in 
Europe, the Sarkozy administration has  banned the cultivation of 
genetically modified organisms (GMOs).  Some GMO imports are 
permitted as animal feed subject to approval by the European 
Commission.  However, Europe's zero-tolerance for traces of GMOs 
caused U.S. soy shipments to be blocked this year at European ports 
when minute traces of GMO corn-dust was found in soy shipments.  The 
European Commission resolved the issue by approving the relevant 
 
PARIS 00001611  003.2 OF 003 
 
 
biotech products for importation at the end of November.  This issue 
is likely to recur with new biotech products. 
 
Paris Club 
---------- 
¶14.  (U)  The French Finance Ministry provides the secretariat 
services for the "Paris Club," which meets 10 times each  year under 
French chairmanship.  Founded as an ad-hoc group of creditor 
governments  during the 1956 Argentine debt crisis, the Paris Club 
is an informal group of 19 creditor governments who jointly 
negotiate with debtor governments.  This ranges from simple debt 
rescheduling to debt relief under the HIPC (Highly Indebted Poor 
Countries) initiative and is predicated upon the existence of an 
active IMF economic adjustment program. 
 
Development Assistance and Food Security 
---------------------------------------- 
¶15.  (SBU)  France is a major provider of development assistance 
around the world.  Although we have some different priorities, USAID 
and French development agencies cooperate well in the field, and 
there is great potential for coordination and cooperation on 
development aid issues globally.  President Sarkozy was the first 
world leader (in 2008) to call for a global partnership on food 
security, and France will be an active partner in carrying out the 
food security commitments made at the G8 summit in L'Aquila Italy in 
May 2008, which Secretary Clinton has endorsed as a U.S. diplomatic 
priority. 
 
Afghanistan 
----------- 
¶16.  (SBU)  France makes significant contributions to the NATO -led 
International Security Assistance Force in Afghanistan, (ISAF) 
including deployment of troops and now French gendarmes for police 
training, and will provide approximately 40-45 million euros of 
development assistance in gendarme forces, embedded training 
programs, and bilateral assistance in Kapisa and Surobi provinces, 
the regions where their troops are engaged.  France has not yet 
contributed to the development trust funds established to stand up 
and sustain the Afghan National Army and law enforcement forces 
training (ANA and LOFTA funds). 
 
RIVKIN