SCENESETTER FOR PARIS VISIT HHS DEPUTY SECRETARY

UNCLAS SECTION 01 OF 02 PARIS 000706

SIPDIS

SENSITIVE

FOR DEPUTY SECRETARY AZAR;
HHS FOR INTL STEIGER, BUDASHEWITZ; STATE FOR OES/IHA; EUR/WE

E.O. 12958: N/A
TAGS: TBIO PREL ECON SOCI FR
SUBJECT: SCENESETTER FOR PARIS VISIT HHS DEPUTY SECRETARY
AZAR



1. (SBU) I warmly welcome you to Paris to meet with Health
Minister Bertrand and sign a Memorandum of Understanding with
the President of Institut Pasteur, Professor Alice Dautry.
The Embassy works closely with the Ministry of Health on a
range of matters, including avian flu, AIDS and the Global
Fund, and biomedical research, as well as Institut Pasteur,
and your meetings with the Minister and Professor Dautry will
cement those ties. I plan to accompany you to both events.

Avian Flu Preparations
--------------


2. (SBU) Former HHS Secretary Thompson visited Paris in
December 2004 to attend a meeting of the Global Health
Security Initiative hosted by then Health Minister Douste
Blazy. In a reshuffling of French cabinet portfolios in May
2005, Douste Blazy became Foreign Minister and Bertrand moved
up within the Health Ministry to become Minister. In late
August, I called on Bertrand to encourage French government
participation in the International Partnership on Avian
Pandemic Influenza (IPAPI). Bertrand raised a number
detailed questions regarding avian flu preparedness in the
United States. While meetings of experts on this subject
have taken place since, I expect Bertrand to re-engage on his
top priority, preparation for an avian flu pandemic. Prior
to your meetings on Monday, our Country Team, chaired by
Deputy Chief of Mission Karl Hofmann, looks forward to
briefing you on aspects of our own preparations against a
pandemic, and U.S.-French issues of interest to you.

Pre-elections Political Setting
--------------


3. (SBU) You will be visiting a France grappling with
political, economic and social challenges at a time of
international uncertainties connected with the Middle East,
and globalization. The political context is defined by
maneuvering on the center-right and the center-left in
advance of the 2007 presidential elections. French popular
rejection of the largely French-inspired EU constitutional
treaty last May, combined with the unrest in the suburbs of
late autumn, has spurred a lively debate about France's
economic and social models and its influence in an enlarged
European Union. The jockeying among the political parties --
between PM de Villepin and Interior Minister Sarkozy within
the UMP governing party, and among a plethora of candidates
in the Socialist Party -- to succeed one of France's
longest-serving politicians, combined with France's two-round
election system, have rendered the outcome of the
presidential nomination races more open than ever before.
Notwithstanding Chirac's lame-duck status, he retains
considerable power and prerogatives, especially in the
foreign policy area, and remains interested in burnishing his
legacy.

Unrest in the Suburbs
--------------


4. (SBU) The three weeks of unrest last autumn caused many
to wonder about the nature of its origins. It is true that
most of the perpetrators of the urban unrest were of
Arab-African and Black-African descent, members of France's
racially distinct, recent immigrant underclass. They were
also predominately Muslim, by culture if not religion.
However, there is general agreement that unemployment and
lack of opportunity were the primary factors underlying the
angry actions of these youths. Discrimination was also a
factor. However, no links were found between the violence
and Islamic extremism; the youths did not act on any "Islamic
identity," nor were Islamic political groupings viewed as
being behind the violence. Moreover, the unrest manifested
itself almost exclusively through acts of property
destruction (primarily of cars, but also of some public
buildings),but not individuals; only one death was
attributed, indirectly, to the unrest.

The Economy and Reform
--------------


5. (U) During the past few years, the French economy has
sputtered along with low GDP growth rates (1.1% in 2002, 0.5%
in 2003, 2.1% in 2004, and 1.7% estimated in 2005),high
deficits (3.6% budget deficit as percentage of GDP in 2004),
high central government public sector debt (estimates range
from 66% to 110% of GDP in 2005, depending on the accounting
method),and high unemployment hovering around 10%.
Structural issues such as the 35-hour work week, rigid labor
laws, and the disruptive role of unions have made economic
reform a political hot potato. The large size of the
government, high taxes, and France,s aging population
further complicate the economic picture.


6. (U) Prime Minister de Villepin has taken credit for the
slow but steady decrease in the unemployment rate, which by
November had fallen to 9.6% from its peak of 10.2% in March
through May 2005. However, the private sector accounts for
only a small portion of this decline. French fears of high
unemployment have resulted in less helpful policy making, as
the GoF feels pressured to showcase 'economic patriotism' as
a means to demonstrate that it is protecting French jobs.

7. (U) The PM is proceeding slowly with privatization,
selling off bits of the national electricity and the gas
utility companies, as well as some toll-roads concessions.
In September, he announced plans for social economic growth,
postponing promised income tax cuts (a Chirac campaign
pledge) until January 1, 2007.

Pharmaceuticals Sectors/Pricing
--------------


8. (U) The roughly 300 pharmaceutical companies in France,
employing 18,500 and spending USD 3.5 billion in R&D, have
annual sales of USD 41 billion, of which USD 17 billion are
exports. Imports are about USD 10 billion. Almost all top
U.S. firms (Pfizer, Abbott, etc.) have a presence in the
French market, and many have research facilities. French
firms account for only 40 percent of local production.
France ranks third worldwide in sales, behind the U.S. and
Japan. Drugs represent about 22 percent of health care
spending. As part of a policy of containing health care
costs, government intervention has led to prices generally
lower than in unregulated European markets such as Germany or
the UK. Nevertheless, French OTC drugs, with 8 percent of
the market, represent one of the smallest market shares in
Europe, although it is growing. Virtually the whole
population is covered by medical insurance that reimburses 65
percent of total pharmaceutical sales, though reimbursement
rates vary by category of drug, from zero to 100 percent.
The French government views pharmaceuticals as a key
industry, hence its aggressive support of SanofiSyntholoabo
in 2004 to buy Aventis to "save" it from the Swiss Novartis.


Public Affairs Environment
--------------


9. (SBU) The outreach to Europe by the President and
Secretary of State Rice early in 2005 laid the foundations

SIPDIS
for a more favorable public affairs climate in France, and
French people continue to manifest their traditional like for
Americans. U.S.-European and U.S.-French common positions on
several hot-topic areas, such as Lebanon, Syria, and Iran,
have reinforced the positive with concrete examples of the
U.S. and Europe working together to solve global and regional
problems. While much general anti-Americanism, especially as
it relates to images of U.S. values and society, can be
linked to France,s own malaise, France,s opinion joins much
of the rest of Europe in specific areas, and lingering
negative notes are sounded by many media and some opinion
leaders in public fora. Hurricane Katrina offers critics new
examples of a society of inequality. Skepticism about U.S.
international participation in the interest of 'greater'
common good appears often, and our failure to join Kyoto
protocol closes ears to the many areas where the U.S. is
leading in environmental problem-solving. Guantanamo and
the recent stories of CIA secret prisons and 'outsourcing' of
torture filled pages, and reinforced negative perceptions of
U.S. policy in Iraq and general non-adherence to
international law and norms.


Please visit Paris' Classified Website at:
http://www.state.sgov.gov/p/eur/paris/index.c fm

Stapleton