FRANCE TO WORK WITH GERMANS ON WTO INITIATIVE

UNCLAS SECTION 01 OF 02 PARIS 000200 SIPDIS SENSITIVE STATE ALSO FOR E, EB, EB/TPP, EUR/ERA, AND EUR/WE COMMERCE FOR ITA STATE PLEASE PASS USTR (ALLGEIER, DWOSKIN, DONNELLY) GENEVA FOR USTR E.O. 12958: N/A TAGS: ETRD EAGR FR WTRO SUBJECT: FRANCE TO WORK WITH GERMANS ON WTO INITIATIVE ¶1. (SBU) SUMMARY. France intends to work with Germany to develop a trade proposal for the EU that would be focused on services and non-agricultural market access (NAMA) according to Trade minister-delegate Christine Lagarde's staff. Trade Minister Lagarde's advisor Eric Peters (protect) told Econoff Jan 10 that she believed France was pleased with the way the Hong Kong ministerial had turned out. While France's agricultural (and political) interests were protected, she believes the time has now come to pursue France's economic interests in terms of services and access to developing country markets for industrial goods. French officials see working with the new German government as a way to protect the GOF's flanks within the EU and as a way to piggyback on Germany's success as Europe's top exporter. END SUMMARY. ¶2. (SBU) Trade Minister Lagarde's advisor Eric Peters (protect) told Econoff that France had begun to meet with German counterparts to fashion a "Franco-German" WTO initiative to present to EU member states before the Davos meetings at the end of January. The substance of the initiative would focus on non-agricultural market access (NAMA) and services. He said both sides shared a broadly similar analysis of NAMA and services, and had begun to identify in detail specific industries by sector and country. SERVICES -------------- ¶3. (SBU) Peters said that Trade Minister-delegate Lagarde had been pleased with the results of the Hong Kong WTO ministerial. He said she believed it was necessary politically to rein in EU Commissioner Peter Mandelson and to defend the EU's commitments on the Common Agricultural Policy (CAP). Now, however, the ministry was working quietly with the private sector to emphasize to others in and outside the GOF how important services and exports were to the French economy. Close to 70 percent of French jobs are in the services sector, and 75 percent of France's GDP is related to services. Peters said the GOF was not chagrined that the numerical benchmarks in the Commission's services proposals were gone. France, however, took this issue seriously, and was looking for other ways to hold developing countries' feet to the fire on their services commitments. HELPING EXPORTS -------------- ¶4. (SBU) France also sees a "European" advantage to working with the Germans. He said the GOF believes the new German government's momentum in economic affairs could rub off on French efforts. France is Germany's top source for imports at close to 10 percent. French officials, whose own export performance is distinctly less dynamic, view Germany's position as Europe's top exporter with envy. Recent numbers show a serious gap, with Germany posting a surplus of 155 billion Euros in 2004, and France a deficit of 8 billion Euros. PRESSING THE BRAZILIANS? -------------- ¶5. (U) Peters said that Lagarde and other French observers were impressed with the performance of the U.S. delegation at the Hong Kong WTO Ministerial. "They played their hand well", he said. However, echoing a frequent theme of French trade policy, he said Lagarde and others had expressed concern that the U.S. was working so closely with the Brazilians, a dangerously competitive exporter. He asked how, in that light, could the U.S. and the EU work together to challenge developing countries like India and Brazil on market access? COMMENT: A SLOW SHIFT? -------------- ¶6. (SBU) COMMENT. Having successfully defended its political interests within the European Union and the WTO, France can now pursue its offensive agenda. But by focusing now on services and NAMA, France has hardly put its agricultural interests behind it. The GOF has solid economic reasons to propose a NAMA and services initiative. But the move also seems to reflect what analysts have called a "slow shift" of elite public opinion in France on agricultural support programs. The shift is due in part to criticism from other European partners in the course of the recent EU budget debates, and to a wave of editorial and academic criticism of the cost and poor implementation of the CAP that appeared in the local and international media following the government's defeat in last spring's European constitutional referendum. But however costly and however poorly implemented, the broad public continues to be largely supportive of a significant government role in agriculture - especially when financed by Brussels.