Treasury Deputy Secretary and British

UNCLAS LONDON 000778 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON EFIN UK SUBJECT: Treasury Deputy Secretary and British International Affairs Advisor Share Views On Challenges Facing The U.S. and UK REFTEL LONDON 0750 Summary -------------- ¶1. (SBU) Key issues facing the UK, the likely passage of the EU treaty, U.S. financial markets, sovereign wealth funds (SWFs),and the Clean Technology fund were discussed by Jon Cunliffe, Head of International Affairs and Europe at the Cabinet Office in a March 10 meeting with Treasury Deputy Secretary Robert Kimmitt that was attended by Ambassador Tuttle. END SUMMARY Key UK Issues And The EU Treaty -------------- ¶2. (SBU) Cunliffe said the key issues facing the UK include: keeping the UK open for foreign investment; managing globalization; resisting overregulation in response to the financial crisis, and managing climate change. ¶3. (SBU) Parliament will likely pass the EU Treaty in mid to late June, according to Cunliffe. He said the House of Commons passed the treaty the week of March 3, but the House of Lords cannot be given a schedule by which to consider the treaty. When it does consider the treaty, it might offer amendments that will require it to ping pong back and forth with the Commons for up to three times, but Cunliffe said he is now confident that the treaty will pass. He added that this was less clear last September and October when there were three national newspapers leading campaigns for a referendum on the treaty. SWFs Vs State Owned Enterprises -------------- ¶4. (SBU) Cunliffe agreed with Kimmitt that State-owned Enterprises (SOEs) are different from Sovereign Wealth Funds (SWFs),which have been historically non- political. Cunliffe said that while the UK no longer had its own SOEs, it had no problem with SOEs as long as they were governed by independent management, were transparent in their dealings, and followed the rules applicable to all companies. When assessing a SOE investing in the U.S., Kimmitt said the government looks at the investing company, but also looks at the government shareholder to assess the potential that it would influence the SOE for political ends. U.S. Financial Markets -------------- ¶5. (SBU) Regarding the current U.S. financial market crisis, Cunliffe said what concerns him most is how the crisis is slowly spreading to new financial products and entities, like the monoline insurance companies and other asset classes. He said that recent hits on bank capital must begin to take their toll at some point. Climate Change And Clean Technology Fund -------------- ¶6. (SBU) Managing the climate change debate is a key challenge, said Cunliffe. WeQve got to get climate change out of the trenches and away from a win-lose mentality. The problem is no longer just an issue for the Department of Environment Food and Rural Affairs (DEFRA). It cuts right across all government, said Cunliffe. The U.S. will not sign up for a climate change deal unless it includes China, and neither will the UK. He then added that India was different in that it is in a very early stage of development. Cunliffe said we are breaking out of the cold war on climate change and that there is broad recognition in the EU that the U.S. position shifted eight or nine months ago. As we prepare for the upcoming G-7 and G- 8 meetings, he said we need to find a climate change solution that meets the needs of all parties. ¶7. (SBU) Kimmitt added that the Clean Technology Fund (CTF) is an important part of addressing the climate change issue. He said that Treasury Under Secretary McCormick has the lead on the CTF and will suggest he schedule a call with Cunliffe to discuss the CTF prior to Cunliffe leaving for Japan on Saturday, March 15 for a sherpa meeting. (NOTE: Chancellor Darling mentioned the CTF in his budget presentation to Parliament on March 12. See reftel). ¶8. (U) Participants: USG: Ambassador Robert Tuttle; Robert Kimmitt, Deputy Secretary, Treasury; Eric Meyer, Director, Europe and Eurasia, Treasury; Rob Saliterman, Spokesman, International Affairs, Treasury; Warren Chane, Notetaker. UK: Jon Cunliffe, Head of International Affairs and Europe; Simon Girdlestone, Desk Officer Q EC Budget and Future Financing. ¶9. (U) Deputy Secretary Kimmitt has cleared this message. TUTTLE