TREASURY DEPUTY SECRETARY MEETS WITH SENIOR

C O N F I D E N T I A L SECTION 01 OF 02 BERLIN 000271 SIPDIS SIPDIS E.O. 12958: DECL: 02/10/2107 TAGS: ECON EFIN PREL PTER GM SUBJECT: TREASURY DEPUTY SECRETARY MEETS WITH SENIOR CHANCELLERY ECONOMIC ADVISOR ON TRANSATLANTIC ECONOMIC ISSUES Classified By: EMIN Robert F. Cekuta for Reasons 1.4 (b) and (d) ¶1. (C) Summary -- Treasury Deputy Secretary Kimmitt discussed TFTP/SWIFT, terrorist financing, the importance of open investment policies, and the Chancellor's transatlantic economic initiative in a meeting February 8 with Jens Weidmann, Director General in the Chancellery for Economic and Financial Policy. On TFTP/SWIFT and terrorist financing, the key point for the Chancellery is to be aware of the issues involved and push as needed in the coming weeks to help ensure the necessary progress. Weidmann agreed with the need to keep countries open to the flow of international investment capital and said the rise of barriers to such flows will be an important focus for Germany's G-8 presidency. He stated barriers to foreign investment in U.S. air carriers, a topic in the U.S./EU civil aviation talks, remain a concern. On Merkel's transatlantic economic initiative, Weidmann noted positive reaction in COREPER to the new German paper (text e-mailed to EUR/ERA) and to moving forward. He discussed ways to engage policy-makers and legislators when needed when difficulties over regulatory issues arise. Weidmann also said the German Government sees the need to engage more effectively on regulatory issues as the leading transatlantic economic project for the coming years. End Summary. SWIFT/Terrorist Financing/Iran Sanctions -------------- ¶2. (C) Deputy Secretary Kimmitt said he had good discussions with the various German Ministers and State Secretaries on TFTP/SWIFT and implementing UNSCR 1737 concerning Iran's nuclear proliferation activities. On TFTP/SWIFT, EU Commissioner Frattini had suggested that Kimmitt come to Berlin. Talks on TFTP/SWIFT are moving in a good direction substantively. Treasury Deputy Secretary Kimmitt said the objective is to reach an understanding on the substance and memorialize it in an exchange of letters. Frattini suggested that a binding agreement might be more appropriate. Weidmann agreed neither side would want questions about SWIFT coming up at the U.S.-EU Summit. While there is nothing specific the Chancellery needs to do at the moment, Kimmitt said it is important the Chancellery keep the process of reaching a solution moving ahead. He also stressed the need to keep cooperating on the overall objective of stopping terrorists from abusing the global financial system; terrorists' money is killing NATO soldiers in Afghanistan and elsewhere. ¶3. (C) On Iran sanctions, Treasury Deputy Secretary Kimmitt pointed to the progress that is being made in implementing UNSCR 1737 and noted the contributions German officials had made in this regard. It is important this progress continue. Keeping Countries Open to Foreign Investment -------------- ¶4. (C) The Deputy Treasury Secretary mentioned that he would be speaking on Monday in Frankfurt about open investment. Weidmann raised the ongoing U.S./EU civil aviation talks and asked why the U.S. would not allow greater foreign investment in its civil air carriers. Deputy Secretary Kimmitt reviewed Administration efforts to address this situation. He noted while media and airlines are the only two areas in the U.S. where foreign investment is excluded, there is worrying international trend to raise new barriers against investment. Although Germany has been open to foreign investment, problems exist within Europe as a whole and there are significant barriers to investment in China, Russia, India, and other key emerging markets. Weidmann raised questions about the CFIUS process in the U.S. and moves in Congress to restrict foreign investment. He also argued German companies such as Deutsche Telekom should not be treated differently from other, fully privatized entities. Weidmann added barriers to foreign investment would be a topic for Germany's G-8 presidency. Deputy Treasury Secretary Kimmitt noted Administration positions on measures being debated in Congress. He also pointed out that U.S. companies coming to Germany to compete against entities such as Deutsche Telekom or Deutsche Post have found it difficult to enter the German market. Such issues could be topics for the Chancellor's transatlantic initiative. Chancellor Merkel's Transatlantic Economic Initiative -------------- -------------- ¶5. (C) Weidmann noted any initial objections to the Chancellor's initiative in the German ministries have been overcome and that the previous day's discussion of the new German paper in COREPER had been positive. The Commission BERLIN 00000271 002 OF 002 and the member states are on board with the general vision and the new paper. He agreed with Deputy Secretary Kimmitt that in addition to looking to include the initiative among the deliverables for the April 30 U.S.-EU Summit, a key concern is ensuring the work is carried forward in future presidencies. It is important what structures are set up and that there needs to be provisions to engage the policy level and legislators when necessary and appropriate to resolve differences or move things along. Weidmann said the Commission would be responsible for carrying the initiative forward. Raising the U.S. response to the paper, Weidmann said he did not find it "too courageous." He noted Germany sees the initiative for engaging on regulatory issues as the transatlantic economic project for the coming years. ¶6. (C) Treasury Deputy Secretary Kimmitt pointed to the Financial Markets Regulatory Dialogue as an example for how to proceed in other areas. Weidmann highlighted the need to engage both sides of the Atlantic on issues arising after regulations are established, on handling areas that are not yet regulated, and to accelerate cooperation. If regulators are unable to find agreement, then there needs to be a mechanism to bring an issue to the attention of policy makers and legislators, Weidmann argued. Deputy Secretary Kimmitt noted the asymmetry between the U.S. system of separate Congress and Executive and the parliamentary systems in Europe. We might look at other mechanisms, e.g., the Transatlantic Policy Network or the TABD, as means to bring parties together or to alert different levels to emerging regulatory issues. Weidmann said it may not be the right course to involve legislators too early in too great a level of detail, but some level of lawmakers' engagement in bringing the two sides' regulators together is important, to which the Deputy Treasury Secretary agreed. ¶7. (C) Looking ahead, Treasury Deputy Secretary Kimmitt said the new German paper (to COREPER) was a significant improvement over the initial one. However, the two acknowledged there was now an asymmetry between the USG and German papers. He suggested the USG would now need to look at a new response taking into account both the procedural as well as the substantive points. ¶8. (U) Treasury Deputy Secretary Kimmitt has cleared this message. TIMKEN JR