SCENE-SETTER FOR U.S.-EU SUMMIT

C O N F I D E N T I A L SECTION 01 OF 04 BRUSSELS 001380

SIPDIS

NOFORN
SIPDIS

STATE PASS NSC FOR TMCKIBBEN

E.O. 12958: DECL: 04/24/2017
TAGS: PREL ECON ENRG EU PGOV
SUBJECT: SCENE-SETTER FOR U.S.-EU SUMMIT


Classified By: USEU CDA MCKINLEY FOR REASONS 1.5(D) AND (E)


1. (C/NF) Summary: The April 30th U.S.-EU Summit should
ratify an important economic package with positive messages
for our improved economic and political relationship. This
is Chancellor Merkel's Summit, and EU officials coming to
Washington will be conscious that they are playing more of a
second fiddle role to the Presidency than they are accustomed
to. The Summit should also demonstrate that on the key
foreign policy issues, transatlantic cooperation is in very
good shape. Despite lingering disputes on energy and climate
issues, there is broad agreement between us that these need
to be treated as part of an integrated package.


2. (C/NF) The early date of this year's Summit allows us
something that has been lacking in the past: immediate follow
up with the same EU Presidency. We should take the
opportunity for real-time reviews of next steps on Iran
sanctions, Sudan, and Kosovo where European cooperation is
essential as more difficult decisions loom. This year, with
two months available before Europe's summer break, we also
have the chance to reinforce the transatlantic economic
partnership and energy/climate pieces with specific and
targeted events and meetings. It will be important for key
U.S. and EU regulatory officials to meet to establish the
regulatory work plan and decide how to approach the specific
objectives laid out in the Summit. On the energy and climate
side too, we need to build on the cooperation established
over the past two years. Finally, Europeans have celebrated
fifty years of remarkable achievements through the EU, but
are less clear on what the future holds. Capitalizing on
their desire to exert influence on a global stage, we have
the opportunity to project a compelling message of unity on
the critical issues before us. End summary.

Germany's Summit
--------------


3. (C/NF) Much more than is usually the case, this is the
presidency country's Summit. That reflects not only how much
Merkel has taken charge of both the ideas and the process,
but more broadly the reality that the entire German
presidency has been perceived as muscular, and, on occasion,
exclusionary when the Germans felt the need. This is
particularly true at Brussels senior staffing levels, where
contacts have complained of being steam-rolled on German
foreign policy goals, such as the development of a new
Central Asia strategy. Others have been irritated at being
virtually cut-out of the U.S.-EU summit preparations, with
Permreps complaining that they did not even see the
declaration drafts until last week, while a Commission source
noted that the German tactic of running the Summit statements
on three separate tracks had made it harder for the other EU
institutions to shape the outcome.

Ruffling feathers but respected nonetheless
--------------


4. (C/NF) Bruised feelings aside, however, we mostly hear
high praise for what the German presidency has actually
accomplished. Top of that list is the sense that the
U.S.-German relationship is back on track, something which
all here recognize will pay dividends for the EU as a whole.
Second, our contacts credit Merkel with a shrewd choice in
focusing on the economic partnership as the new centerpiece
for transatlantic relatios at the Summit. It offers a way
to both impove relations with the U.S. in general and lay
the foundations for a more efficient transatlantic market in
particular. Further, the Germans appear on track to produce
a U.S.-EU Summit that will, as one contact noted, "for the
first time in awhile, have some really meaningful
deliverables". Third, our contacts admit that the Germans
have mostly pushed EU foreign policy in a productive
direction (for example, the new Central Asia strategy is a
long-overdue rethinking of the EU's relationship with its
eastern neighbors). Indeed, there is a general recognition
that the Germans, thanks to their deep bureaucratic bench,
have run the myriad EU meetings and troikas with remarkable
effectiveness (a strong managerial hand has been particularly
important in keeping the internal Kosovo debate on track).


5. (C/NF) All of this gives Merkel a strong hand coming into
the Summit -- and potentially for the follow-up beyond.
Thus, other EU leaders will come to Washington conscious that
this is really more Merkel's Summit than theirs, but
nevertheless pleased with the overall results. Indeed,
already some sources are beginning to worry about the ability
of the Portuguese to pick up the German baton in July.

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The foreign policy relationship: in strong shape
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6. (C/NF) For many Brussels foreign policy thinkers, U.S.-EU
cooperation has never been better. The key new development
of 2007, from their perspective, has been the reemergence of
a robust MEPP process and, in particular, the reinvigoration
of the Quartet. Although we hear this across the board,
Commission sources, traditionally the most impatient for
movement on the peace process, have been especially effusive
in praising the Secretary's engagement in the process. In
turn, the public perception of a new peace process -- one in
which the EU has a visible role -- has strengthened Brussels'
ability to resist the pressures of (certain) member states to
engage the NUG and Hamas more directly. In fact, at the
recent Gymnich, it was Commissioner Ferrero-Waldner who
reportedly knocked back several foreign ministers impatient
to go beyond Quartet principles.


7. (C/NF) On almost all other foreign policy issues as well,
the Brussels' perspective is that U.S.-EU cooperation is as
close or closer than it was a year ago. On Iran, the EU is
breathing a collective sigh of relief that the 27 held
together on sanctions implementation, and have moved further
toward reducing export credits to Iran than most had thought
likely. (Although the German EU Presidency continues to
avoid EU-wide consideration of a cessation of export credits
and other economic measures -- fears of a loss of business to
Russia and China loom large in this regard.) Although
Brussels and Berlin remain on the same general line with
respect to Iran with the EU's so-called "double track"
approach of sanctions and dialogue, the recent dust-up over
Iran's detention of UK military personnel served to swing the
EU toward a tougher policy line against Tehran.


8. (C/NF) On Kosovo, key EU players are similarly pleased
with what the U.S. and the EU have accomplished together.
Though just as clearly worried about holding the 27 together,
and aware that it will be the EU's job to knock heads among
wavering member states, they do believe that the very high
degree of U.S.-EU dialogue has made that job easier. On
Russia, the EU (in particular Germany) seems to be moving
closer to our analysis (though the implications for energy
policy and greater EU proactiveness on the frozen conflicts
still seem distant). On Afghanistan, the EU is proud it has
put together the police training mission so quickly (though
conscious we would like to see more). On Sudan, the EU is
edging closer towards a sanctions perspective, though here
too not as quickly as we would like. Somalia is one
potential note of EU unhappiness, as the EU institutions
believe that the U.S. could have pushed the TFG harder
towards national reconciliation.

Economic issues
--------------


9. (C/NF) On the economic side, this Summit really should
mark a key change from previous ones, not so much for the
content but because of the political force behind it.
Breaking down remaining barriers and improving the
functioning of the transatlantic marketplace are ideas that
have been around for a while. But Merkel's political push,
and the focus now on improving and reducing regulatory
burdens, give new and useful emphasis to the practical steps
needed to achieve long-sought goals. It is important to keep
in mind two of the factors influencing the Chancellor. One
is geopolitical, which is to use success in the transatlantic
partnership to counterbalance the stance of her coalition
partners, who are less critical of Russia and more critical
of us. The second is to have the U.S. help the EU
deregulate, an objective which cannot be emphasized too
publicly in the EU, but which nevertheless is a strong factor
in Merkel's thinking. The Summit should also give the U.S. a
tool to face down the EU as they try to build a role as the
de facto global regulator, with the excesses of the chemical
regulation REACH as the most obvious example. Finally, in
order to see this through, it will be important to make
progress on realizing the ideas featured at the Summit within
the next two months. Near-term follow-through should also be
an outcome of this Summit, with a focus on achieving some
quick successes on regulatory reforms with the involvement of
the U.S. Congress.


10. (C/NF) It is important in all the talk of this economic
partnership not to lose sight of completing the Doha round,
and we have been emphasizing to our contacts in the business
community that the Merkel initiative is a complement to Doha.

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While this distinction often gets lost in the press here, we
should be able to clarify this at the Summit.


11. (C/NF) The major unresolved issue for the Summit as we
write is how to handle the energy and climate statement. The
Germans and the Commission are aligned in wanting a robust
statement on the dangers of climate change and on the need
for launching a new international agreement. They want to
lay a foundation for the G8 Summit in June and tell us that
the "European public" needs to see something new in a U.S.-EU
Summit document. These issues will have to be resolved in
the course of this week. On the plus side, there is a new
acknowledgement in Brussels that energy and climate issues
need to be dealt with together. This gives us a lot to work
with because it allows us to promote our results-based agenda
on climate and energy.


12. (C/NF) On the energy and climate statement, it is a mark
of progress in the U.S.-EU relationship that we are clearly
dealing with these issues in an integrated way. The EU's
spring Council ratified a joint approach to energy and
climate issues, greatly pushed by Merkel. We have developed
practical cooperation with the Europeans on energy matters
over the past two years with the idea that whatever we do
also has positive implications for our relationship on
climate issues. Commission officials understand that the
real reductions of greenhouse gas emissions will come from
increased energy efficiency, the development of new
technologies and improvements in regulatory policy. They
also see the need to develop a comprehensive international
approach, enshrined in some sort of post-Kyoto framework,
which would allow them to internationalize some of the
commitments they have taken on themselves. This means
engaging China and the developing world, something many
leading Europeans say privately, if not publicly. Europeans
should be reminded that the need to engage China is fully
bipartisan in the U.S.

The home stretch of the German presidency
--------------


13. (C/NF) The German Presidency is a good example of what
can happen when a large member state puts its political
muscle behind its Presidency, rather than act like an
impartial broker, as the UK tried to do in 2005. With the
European project at a bit of standstill -- new leadership in
the large member states yet to take office and the future of
the Constitution in limbo -- the EU can use the help of key
governments to propel it forward. That means redefining the
debate on integration, future enlargement, and the European
response to globalization. It is fortunate that Merkel used
her influence to focus on building the transatlantic economic
relationship during Germany's six-month Presidency.
Recognizing that we can do more to build the transatlantic
marketplace by improving regulation on both sides of the
Atlantic is an important insight widely supported by the
business community. We anticipate that PNR and visa waiver
questions will be raised, but not as central topics of
discussion. The Summit should also provide an opportunity to
cement our excellent cooperation on Iran in particular.
Cooperation on PNR, visa waiver, SWIFT, and Iran illustrate
the high-level of commonality on counter-terrorism issues,
notwithstanding the adverse press on Guantanamo and
renditions.


14. (C/NF) That the Summit is occurring so early in the
Presidency also affords us a unique opportunity to kick-start
the early implementation of Summit commitments. On the
economic side, this will be relatively easy: the Presidency
will be looking to work closely with us in the remaining
months to move forward on its highest priorities. On the
other hand, second tier priorities risk being triaged away as
the Presidency (and the entire EU) becomes increasingly
focused on the Constitution issue. In this context, we
suspect that we will have to work harder to ensure that many
foreign policy priorities, including Russia, the frozen
conflicts, and Iran, continue to receive the attention they
have in recent months. The likely successes on the economic
and energy/climate at the Summit, should not obscure the
importance of producing similarly strong messages on U.S.-EU
political cooperation on the critical issues before us. High
Representative Solana and, to a lesser extent External
Relations Commissioner Ferrero-Waldner, will remain
indispensable in helping form European consensus on difficult
questions regarding Iran, the Middle East, and Sudan (to name
a few issues),once the German Presidency is behind us.
Merkel has delivered for the six months she sat in the
Presidency: ensuring implementation will come down to the EU

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institutions and U.S. institutions as well. The Germans will
stay with the economic integration issues through the next
two Presidencies. We must also do our part.

MCKINLEY
.