FRANCE TO WORK WITH GERMANS ON WTO INITIATIVE

UNCLAS SECTION 01 OF 02 PARIS 000200

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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.