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