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P 251512Z JAN 10
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC PRIORITY 4763
INFO RUCNMEM/EU MEMBER STATES COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 LONDON 000164 
 
SIPDIS 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ECON PGOV EU UK
SUBJECT: UK CABINET SECRETARIES AND PROMINENT BUSINESS 
LEADERS TALK ABOUT THE EU POST-LISBON 
 
LONDON 00000164  001.2 OF 002 
 
 
¶1. (SBU) Summary. The United Kingdom cannot risk disengaging 
or distancing itself from Brussels. The enhanced powers of 
the EU post-Lisbon treaty, the size of the market, the 
shifting economic power from developed to developing 
countries, all underscore the need for an engaged, committed 
UK in the EU, stated all the speakers at a January 14th 
conference, sponsored by Business for a New Europe and the 
Center for European Reform. Foreign Secretary Miliband and 
Business Secretary Mandelson also stressed the importance of 
concluding the Doha trade round, preventing protectionist 
measures - though Mandelson gave a mixed message on "state 
aid." They also called for a climate change strategy in the 
wake of what they said was a "failed" conference in 
Copenhagen.  Business leaders, including Richard Branson, 
Founder and Chairman of Virgin, John Kerr, Deputy Chairman of 
Royal Dutch Shell, Michael Rake, Chairman of British Telecom, 
urged the EU to adapt policies to promote green and 
innovative technologies, be more pro-business, continue 
service sector liberalization, and internally police 
governments that adopt anti-competitiveness policies. Several 
speakers cautioned the UK Conservative Party from allowing 
its euro-skeptic wing dictate its approach to Brussels.  End 
Summary. 
 
The Government View 
------------------- 
 
¶2. (SBU) All member governments of the European Union need to 
wake up to a new realty: the power of the emerging economies, 
which is as historically significant as the industrial 
revolution, argued Foreign Secretary Miliband. The iconic 
image of U.S President Obama and Chinese President Hu huddled 
together, tackling global issues, at the G-20 in London and 
at the climate change conference in Copenhagen, is the new 
reality of shifting global power. Europe needs to ask itself 
what is its role? Europe's external power rests on its 
internal strength, and Europe as a continent needs to put its 
fiscal house in order and to concentrate on economic growth, 
in particular, by focusing less on EU institutional reform 
and more on the broader economic reform agenda - liberalizing 
services, including health care and legal, pursuing green and 
innovative technologies, and resisting calls for 
protectionism. The UK must be fully engaged with Brussels and 
with other member states on EU reform, otherwise the UK risks 
being sidelined and disadvantaged, argued Miliband. 
 
¶3. (SBU) Business Secretary Mandelson argued against 
regulatory grand-standing or heavy-handedness by Brussels. 
The need was for better, not more regulation, he stated. He 
viewed new EU Commissioner for Internal Markets, Michel 
Barnier, as sensible and not out to undermine London as 
Europe's financial center. He joked, however, that he had 
seen Barnier differently when the latter was France's 
agriculture minister, defending French farming interests.  "I 
worked very closely indeed with him," he said wryly. "In 
fact, I never took my eyes off him."  Mandelson stated that 
the previous EU Commission was anti-London. The Alternative 
Investment Fund Management Directive (AIFM) reflected a 
long-standing grudge against UK hedge funds rather than an 
earnest attempt at regulation, he claimed.  He said, however, 
he was encouraged by recent changes proposed to the AIFM, and 
hoped the new Commission would recognize the City of London's 
key role in promoting growth throughout Europe. 
 
¶4. (SBU) Mandelson also called for increased flexibility in 
EU state aid rules to allow public financing of high tech and 
innovative companies, and praised the industrial policy of 
France as a good model to follow. (Comment: Mandelson was 
vociferous in his opposition to the Kraft bid for Cadbury, 
and on January 14, called together representatives from some 
major UK companies to encourage company shareholders to take 
a more active role in considering take-over bids. Responding 
to an inquiry from the audience, Mandelson said that 
government should be able to comment on such hostile 
take-overs, but side-stepped the question about government 
intervention. End Comment.) Contradictorily, at the same 
time, he also argued that Europe should end this year the 
temporary flexibility introduced into EU state aid rules 
following the financial crisis. 
 
¶5. (SBU) Both Miliband and Mandelson criticized the slow pace 
of progress in the Doha trade round, with Miliband calling 
negotiations "lifeless" and pointing to the resistance of 
some "major economies" to engage in serious talks. Mandelson 
described the Doha round as a source of immense personal 
grief, and said that failure would deal a crippling blow to 
the multilateral trade regime.  Many countries already have 
given up on this process and are striking bilateral deals 
that actually could impede global trade, Mandelson argued. 
 
LONDON 00000164  002.2 OF 002 
 
 
 
The Business View 
----------------- 
 
¶6. (SBU) The EU should follow the Hippocratic Oath: Do no 
harm with its regulations, said Lord John Kerr, Deputy 
Chairman of Royal Dutch Shell. He expressed concern that the 
EU is not spending enough on infrastructure, innovation and 
research. Percentages spent on these lagged the U.S., China, 
and many other countries.  He called the concept of binding 
emissions targets nonsense, arguing that in the absence of 
punitive measures against those who fall short, the targets 
are meaningless. Germany is the biggest obstacle to pursuing 
an EU energy security policy that lessens dependence on 
Russian oil and gas.  The EU has managed its relations with 
Russia in general very badly, with too many individual states 
pursuing their own agenda. The Germans also are dragging 
their feet in allowing the EU to pursue nuclear energy, he 
said. 
 
¶7. (SBU) Helen Alexander, president of the Confederation of 
British Industries, also criticized the EU for its failure to 
police governments that do not completely fulfill regulatory 
requirements.  Too many governments get just a slap on the 
wrist when adopting protectionists measures. Richard Branson 
of Virgin and Michael Rake of British Telecom also called for 
greater expenditures on research and development, especially 
in the innovative and green technology industries. 
 
Advice for the Conservatives 
---------------------------- 
 
¶8. (SBU) There is genuine concern in Brussels how the 
Conservatives, if they win the general election, will engage 
with the Commission and Parliament, said George Parker, 
Political Editor, Financial Times.  The Tories need to 
understand  how influential the European Parliament is and 
will be, and how ill-advised it would be to disengage from 
Brussels.  The Tories also need to understand and use wisely 
Britain's soft power and influence in Brussels, which Parker 
noted, has been too often downplayed by the British press and 
commentators.  Without the UK's active engagement, the EU 
would have been more anti-business and less competitive, and 
would have less flexible labor markets and liberalization of 
services. These same pressures are back, and without the UK's 
involvement, the EU market could reflect the worst tendencies 
of individual member states. 
 
 
 
 
 
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http://www.intelink.sgov.gov/wiki/Portal:Unit ed_Kingdom 
 
SUSMAN