U.S.-FRENCH INFORMAL COMMERCIAL EXCHANGE TALKS,

UNCLAS SECTION 01 OF 03 PARIS 005145

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SENSITIVE

E.O. 12958: N/A
TAGS: ECON ETRD PREL FR DOC
SUBJECT: U.S.-FRENCH INFORMAL COMMERCIAL EXCHANGE TALKS,
JULY 2005


NOT FOR INTERNET DISTRIBUTION


1. (SBU) Summary. U.S. and French officials held another
round of Informal Commercial Exchange (ICE) talks on July
12, 2005. A U.S. delegation led by Deputy Assistant
Secretary for Europe (DOC) Eric Stewart met with a French

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delegation headed by DGTPE Director-General Pierre
Moraillon. The informal dialogue served in part as a follow-
up on select issues from the U.S.-EU summit including TABD,
IPR and various EU directives. The talks also served as a
forum to discuss bilateral and multilateral matters such as
innovation, the pharmaceutical industry, WTO issues and
China textiles. Both sides cited the need for a precise
vision and concrete actions on transatlantic trade
initiatives. Both sides stressed the importance of
continued dialogue to reinforce the generally positive
bilateral trade and commercial climate. End Summary.

BILATERAL ISSUES
--------------

2. (SBU) Innovation: Commerce Department DAS Stewart noted
the recent meeting between Commerce Secretary Gutierrez and
EU Commissioner Verheugen, in which both stressed the need
for transatlantic cooperation on innovation, as emphasized
by the economic statement released at the recent U.S.-EU
Summit. DAS Stewart commented that he sees France as a key
player in transatlantic innovation dialogue. In order to
pinpoint the key elements of such a transatlantic dialogue,
the U.S. will meet with innovative companies at home and
abroad. The U.S. also suggested concrete steps to enhance
innovation, including the development of a matrix to measure
innovation progress, removal of barriers to innovation and
the promotion of IPR training and entrepreneurship.


3. (SBU) The GOF officials stated that France is striving
to increase innovation under the auspices of the EU's Lisbon
Agenda. On July 11, 2005, the GOF announced the
identification 67 "poles de competitivite" (competitive
clusters) of which 15 will have international visibility.
The GOF will allot 1.5 billion euros for innovative research
by these clusters, marking a 50 percent increase in
financing for research and development. Other measures
include a research tax credit and fiscal and social charge
incentives for young, innovative companies (a status for
which the GOF has received 1000 applications to date).
These measures have already been explained to foreign
markets as part of a French effort to attract innovative
companies. A key pillar of French innovation plans is the
enhancement of synergy between the public and private
sectors. The French delegation expressed an interest in
American SBA and SBIR programs as well as the way the
public/private/university research relationship is managed
in the United States. The two sides agreed to share
information and exchange key contacts.


4. (SBU) Pharmaceutical industry: DAS Stewart gave the
U.S. pharmaceutical industry was, overall, comfortable with
the situation in France. DAS Stewart noted his appreciation
for the Government of France's efforts to keep lines of
communication open with industry - something that does not
happen in many other countries. The U.S. was pleased to see
that France was taking a "holistic" approach to health care.
DAS Stewart highlighted a recent meeting with American
pharmaceutical companies in France. The compliments served
mainly as a means of contrasting French pharmaceutical
policies with those of other European countries who have
implemented caps and other restrictive pricing mechanisms.
Director Dacher then highlighted the findings of the recent
interagency visit to Berlin to discuss pharmaceutical
pricing matters. The U.S. advanced the idea that France
could act as a leader (creating a "positive domino effect")
in proactive health policy by continuing to foster
innovative pharmaceutical research and development that
promotes a holistic approach to treatment. The French
stated that they were reworking their pharmacy patent
protection system to improve an existing breach in
legislation and were open to further discussions about the
creation of a reference system to link drug approval and
patent officials.

MULTILATERAL ISSUES
--------------

5. (SBU) WTO: DAS Stewart expressed satisfaction with the
recent progress made in EU and U.S. discussions regarding
the Doha Round. Agriculture and geographical indicator (GI)
debates aside, DAS Stewart stated that he values the
partnership with the EU and finds that the two regions share
similar objectives. The U.S. would like to see more buy-in
on trade facilitation. On the issue of the Swiss formula
(highest industrial tariffs receive the largest cuts) both
sides concur that the model is a good choice. France voiced
concerns on the application of this model to Brazil, Korea
and Caribbean nations.


6. (SBU) Both sides requested agricultural updates in the
wake of recent calls to end farming subsidies. Then DAS
Stewart reiterated that the United States is willing to "put
down the pitchfork" if Europeans do the same.


7. (SBU) China textiles: The U.S. asserted the importance
of agreement on respective approaches to deal with the China
textile situation, as the situation is sensitive for all
involved. DAS Stewart reminded France that our quotas were
undertaken as a "safeguard" measure under WTO regulation
with the intent to make a transition to a quota-free
environment. These safeguards are re-evaluated on an annual
basis.

8. (SBU) French officials reported that France has lost 50
percent of its textile jobs in the last ten years. The
French expressed a desire to deal with unfair Chinese
business practices such as dumping and counterfeiting.
Under EU agreements, France is also moving towards an end to
their quota system. Limitations to imports (in ten
categories) continue until the end of 2007. The French
delegation admitted that the European Commission is not
certain of how to proceed with the safeguard measures, as it
has been several years since such measures were in place.
Further complications include the EUROMED commercial
development agreement with Northern African countries.
These developing countries face difficulties in developing
their own textile industries in the face of Chinese
competition. France can compete with Chinese textiles on
two levels: by reinforcing its own high-valued added textile
industries and assisting the North African industry to
relieve Chinese pressure.


9. (SBU) GPA: The GOF stated that the EU is in the process
of preparing an offer in the GPA negotiations that will be
quite broad. The key element will be balance in commitments
and trade flows. France stated that the new GPA
requirements are bold, covering most of the EU states, local
governments and EU procurements. The French are looking for
a U.S. agreement that seeks the same level of commitment
with both federal and state entities included. (At present,
only 39 states in the U.S. are covered, along with most
public procurements.) DAS Stewart affirmed that the United
States looks forward to increased competition and reciprocal
treatment in markets. With a guarantee of reciprocity, the
USG will waive "Buy America" rules for France (as it does
for suppliers from all GPA countries),thus providing
economic benefits for both countries.


10. (SBU) Trefinmetaux: The French government raised the
technical issue of Trefinmetaux, a French metallurgical
company (brass and steel) currently subject to U.S.
antidumping and countervailing duties. The issues on the
table included previous U.S. refusal to complete a full
sunset review and major discrepancies in statistics produced
by U.S. and French customs as well as export data. The
French delegation stated that Trefinmetaux has been
privatized since 1987 and had paid off all preferentially
conditioned loans by 1997. The company submitted a file on
July 11 of this year requesting a full sunset review by the
USG in order to have current restrictions lifted. DAS
Stewart recognized the importance of this issue and promised
to bring the matter to the attention of the Acting Assistant
Secretary for Import Administration with a decision to be

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forthcoming.

TRANSATLANTIC ISSUES
--------------

11. (SBU) TABD: The U.S. delegation lauded the progress
made in the Transatlantic Business Dialogue (TABD) over the
past two years. TABD now focuses on fewer issues, allowing
a higher incidence of concrete successes. The U.S. feels
that TABD is a positive addition to the EU-U.S. summit, but
would like to see a CEO from one of the Central/Eastern
European countries (one of the ten newest EU members)
represented. France agreed that the TABD should fully
represent the EU-25.


12. (SBU) The idea of a regulatory forum discussed at the
recent summit holds great promise in the eyes of both France
and the U.S. Such a forum would permit enhanced
harmonization of standards and regulations, thereby reducing
trade barriers. However, both sides recognized the need for
a specific "road map" so that the proposed regulatory forum
has a real impact beyond dialogue. DAS Stewart also
emphasized that an American political impetus (support of
various regulatory agencies, the executive and even
Congress) would be crucial to the development of such a
forum as 90 percent of TABD issues fall outside the domain
of DOC authority.


13. (SBU) IPR: France evoked the paper produced at the
recent Gleneagles G-8 meeting as an example of European and
American collaboration on intellectual property rights
(IPR). The GOF lauded the thoroughness of the paper, as it
evokes both piracy and counterfeiting as IPR challenges in
addition to specific references to the TRIPS agreement and
the WIPO. France stressed that geographical indicators
(GIs) are one tool among many in the TRIPS agreement. As a
member of TRIPS, the GOF insisted that the USG should
respect the validity of GIs, even if they do not consent to
them. On the bilateral level, France evoked its support of
the U.S. STOP! Program and GOF plans to formulate a French
equivalent of the U.S. good practice guidelines promoted by
STOP!. France also highlighted the need for national
projects (such as a plan against counterfeiting and IPR
representatives posted abroad) as a way to advance
enforcement and educate third parties.


14. (SBU) DAS Stewart emphasized the importance of France
as a partner in the fight against IPR--especially in light
of a few EU officials' hesitancy to cooperate in this
matter. Although France and the U.S. may have different IPR
priorities, the USG believes that they share a common goal
of improving IPR enforcement worldwide and reaching out to
third countries. Close cooperation between the USG and the
GOF to advance EU IPR enforcement would demonstrate the
strength of our bilateral economic relationship.


15. (SBU) REACH: Both countries agree with the goals
advanced by the REACH (registration, evaluation and
authorization of chemicals) agreement but see problems in
the current form of the agreement. France observed that
some type of legislation will have to be passed, but the
process could take years. Due to opposition from several
large European countries, including France, any legislation
is likely to be watered-down and symbolic.


16. (SBU) WEEE/ROHS: As an EU-member, France must comply
with the WEEE (waste electric/electronic equipment)
directive (active at the end of August). DAS Stewart
expressed concerns about implementation consistency, fearing
25 different means of application that would pose challenges
for U.S. businesses. France is willing to counsel any
businesses on WEEE implementation procedures but has yet to
receive a request from any American business. It has
consulted with Japanese and Korean companies.


17. (SBU) Regarding the status of the ROHS directive
(restriction on the use of hazardous substances),DAS
Stewart stated that there are currently eight exemptions to
this directive that are stuck in the approval processes of
the European Parliament and Commission. An additional
package of exemptions has been submitted to the Parliament,
but cannot be passed until the original eight exceptions
have been confirmed. Under Secretary Moraillon stated that
he would update the U.S on the status of the exemptions, as
discussed in the EC 133 Committee.


18. (SBU) Wood packaging: France (along with Portugal)
abstained from the EU vote while the other 23 members voted
to delay implementation of this directive. The current
directive combines all international standards instead of
choosing one. France stated that it would wait for a risk
assessment by the Commission before choosing a camp. The GOF
hopes for a decision in early 2006, as it does not wish the
present moratorium to last indefinitely.


19. Members of the U.S. delegation have cleared this
message.