SCENESETTER FOR UNDERSECRETARY SHINER'S VISIT TO

UNCLAS SECTION 01 OF 03 PARIS 003167 SIPDIS STATE FOR E, EB, AND EUR/WE E.O. 12958: N/A TAGS: ECON PREL FR SUBJECT: SCENESETTER FOR UNDERSECRETARY SHINER'S VISIT TO PARIS REF: A. PARIS 1876 ¶B. PARIS 1304 Summary: -------------- ¶1. (SBU) Embassy Paris and the U.S. Mission to the OECD welcome Undersecretary Shiner's visit to Paris. The largest component of her visit will be with the head of Agence Francaise de Developpement, AFD, Jean-Michel Severino to discuss UN reform in the areas of development policy and humanitarian assistance. The Embassy has proposed a series of bilateral consultations with the French to coordinate our activities (and to leverage our own programs) in regions of interest such as the Middle East, Africa, and the Caribbean Basin. U/S Shiner may want to gauge Severino's receptiveness to such an idea. U/S Shiner will also be meeting with PM de Villepin's chief economic advisor, Alain Demarolle. U/S Shiner's primary message to him should be that we would welcome economic policies that increase growth and that keep France's investment regime open. Finally, USOECD representatives will accompany you to a meeting with Claude Mandil and Ambassador Ramsay at the International Energy Agency to discuss energy securit y issues. End Summary. Political Backdrop -------------- ¶2. (SBU) U/S Shiner's visit to France comes at a time of roiled political waters and a weak government. Prime Minister de Villepin is currently at the center of a political scandal involving an investment firm called Clearstream and an alleged dirty-tricks campaign involving political rivals. President Chirac is said to have been at least indirectly involved. This, coupled with last year's referendum rejecting the EU constitution, suburban unrest last November, and widespread public rejection of a minor youth employment proposal, has resulted in a government that has become extremely risk averse. Moreover, with Presidential elections due in 2007, politicians on both the left and the right are jockeying for position and are little inclined to compromise. All this means that the appetite for pushing through necessary and promised economic reforms has all but disappeared, at least until after the election. Nevertheless, the general government weakness and unpopularity may give the Chirac/de Villepin gove rnment a new impetus to cooperate with the USG as it searches for elusive policy "successes," especially in foreign policy, where Chirac retains his institutional prerogatives. Development Background -------------- ¶3. (U) We will not comment on the UN development reform discussions U/S Shiner has been undertaking as we have not been party to those ongoing discussions. We give you below background on the French development policy establishment and the Embassy's proposal for developing and energizing the comparatively dormant bilateral relationship in this area. ¶4. (U) France is a major actor in international development. In 2004, having spent $8.5 billion, France was the third largest contributor of overseas development assistance (ODA), putting it only behind Japan ($8.6 bil),and the U.S. ($19 bil). France sees itself as having a compelling message to developing countries and President Chirac goes out of his way to cultivate developing country leaders as he did by inviting a large cross section of such leaders to join the 2003 G-8 summit in Evian. ¶5. (U) France is a large donor, and one with whom we periodically work together bilaterally, although in a largely ad hoc fashion. Cooperation on debt reduction for HIPC countries in the Paris Club has generally been good and cooperation in other fora such as the DAC in the OECD has been productive. We have also worked well bilaterally on a case-by-case basis: our cooperation in Haiti comes to mind as perhaps one of the better recent examples. ¶6. (SBU) However, there is a range of big-picture development issues on which we do not agree with the French. President Chirac has long pushed in the G-8 and elsewhere for an internationally-administered (Tobin) tax on items like international air travel or arms sales. The French have not been supportive of our BMENA initiatives, including the Foundation and Fund for the Future, important policies for us and ones which should have been seen as complementing ongoing French efforts in the region. ¶7. (SBU) The French development policy establishment is coming out of a period of some change. The Ministry of Cooperation and Francophonie is in the final throes of being absorbed by the MFA. "Cooperation" is effectively the policy branch of the GOF's development bureaucracy, ensuring that overall goals are consistent with MFA (and Presidential) priorities. Minister-Delegate, Brigitte Girardin, is a junior minister and reports to Foreign Minister Douste-Blazy. Director-General of International Cooperation and Development, Philippe Etienne, a career diplomat, serves as Girardin's deputy and the chief of the "Cooperation" operations of the Ministry of Cooperation and Francophonie. Cooperation has been instructed by parliament to focus on three priorities: 1) to be the center of development policy promulgation and analysis in the GOF; 2) to ensure geographic coordination with overseas missions; 3) to enhance the role of NGO's to leverage GOF priorities. Importantly, Cooperation has recently created a sub -directorate for "democratic governance" which is to put increased policy resources behind the GOF's belief that good governance is a key to the success of development initiatives. ¶8. (U) AFD is the financing and implementing branch of the GOF's development policy apparatus. AFD finances economic and social projects carried out by government authorities, parastatal companies as well as private sector and civil society groups. Their focus has been on urban infrastructure, rural development, industry, financial systems, education and health. These projects are funded by subsidies, guarantees, shareholdings, and assisted and commercial loans. AFD works closely with NGO's and the private sector to implement the policies and priorities as articulated by Cooperation and the MFA. Embassy's interaction with AFD has until recently been limited. Nevertheless, we have found AFD officials to be extremely open to suggestions of cooperation with the USG. They have noted their work with U.S. agencies and NGO's in the field has traditionally been excellent. ¶9. (SBU) Given that we pursue many of the same goals in developing countries - democracy, rule of law, good governance - Embassy believes there is scope for more bilateral cooperation and coordination. There is also considerable overlap in terms of geographic priorities with the French particularly concerned about and well-represented in the Middle East and North Africa, Sub-Saharan Africa and the Caribbean Basin. We have proposed a strategy for engaging the GOF in Paris 1876. Economic Background -------------- ¶10. (SBU) From our perspective, this is a dangerous time for French economic policy-making. Popular anti-globalization sentiment and government weakness due to political uncertainly raise the risk of politically-expedient protectionist measures. PM de Villepin's Economic Advisor Alain Demarolle has particular responsibility for foreign investment issues. ¶11. (SBU) Embassy believes the USG should urge GOF action to support open markets and recognize the need for continued economic reform, particularly on labor market rigidities. At this time when the world is watching France's political troubles, the image it projects on economic policy is especially important. "Economic patriotism", including government review of foreign investment in strategic sectors, and legislation strengthening hostile takeover defenses, can send the message that France is not open to foreign capital. GOF actions must prove otherwise. ¶12. (SBU) Embassy also believes that continued economic reform is crucial to long-term growth prospects, and that foreign investment -- a major employer in France -- is crucial to France's ability to innovate and remain competitive in a globalized economy. With nearly $ 50 billion in stock investment, the U.S. is a major investor in France. ¶13. (SBU) We suggest that U/S Shiner ask about economic reform prospects and growth forecasts for the remainder of the Villepin government. Urging movement on the Doha Round would also be a worthwhile point to make. IEA and Energy Issues -------------- ¶14. (SBU) International Energy Agency Executive Director Claude Mandil called his March visit to Washington one of the most productive trips he has taken as head of the agency. U/S Shiner will recall from her meeting with him at that time, Mandil was interested in lobbying G-7 countries to deliver a strong signal to Russia on energy security at the St. Petersburg Summit. He clearly received the message that a top U.S. priority for the summit this year is a stronger bilateral relationship with Russia. While he and other IEA staff have continued to call for reform in Russia's energy sector, the tone has been somewhat muted. Still, it is likely that he will take the opportunity to revisit the subject during your meeting in Paris. ¶15. (SBU) Mandil will also be interested in measures taken and contemplated by the U.S. Government in response to the recent surge in gasoline and crude prices. In his comments to the International Energy Forum in Qatar in April, Mandil identified enhanced energy efficiency as the most viable short-term solution for consumer countries and emphasized stepped-up investment and a diversity of fuels as key medium-term goals. Mandil has also spoken out in interviews to the mainstream media in recent days of the IEA's willingness and ability to coordinate the release of stocks in case of a disruption of Iranian supplies to the market. ¶16. (SBU) At the March IEA Governing Board meeting, Mandil announced his intention to retire at the conclusion of his term at the end of his term. He is expected to remain in his position until August 2007 to ensure a smooth and timely transition with his successor. There is no clear candidate to succeed him at this time. The IEA Deputy Director, Bill Ramsay, will join Mandil for the meeting. Please visit Paris' Classified Website at: http://www.state.sgov.gov/p/eur/paris/index.c fm Stapleton