FRANCE: SCENESETTER FOR SECRETARY LAHOOD VISIT

UNCLAS PARIS 000669

SENSITIVE
SIPDIS

FOR SECRETARY LAHOOD AND DELEGATION

E.O. 12958: N/A
TAGS: ECON ETRN EWWT ECON PREL FR
SUBJECT: FRANCE: SCENESETTER FOR SECRETARY LAHOOD VISIT

Ref: Paris 0520


1. (SBU) Mission France extends a warm welcome to you and your
delegation. Your visit comes two years into President Nicolas
Sarkozy's five-year term, a period marked by strong coordination
between the U.S. and France on key strategic issues. Your
interlocutors will likely make a case for dedicated very high-speed
rail (VHSR) passenger networks using the latest technology, as
opposed to a shared freight/passenger system with incremental
upgrades to existing U.S. infrastructure. The French are anxious to
understand the U.S. project selection process and the regulatory
oversight for inter- and intra-state corridors. Transport Minister
Bussereau will also be keen to share France's accomplishments in
financing infrastructure and staying on the cutting edge in
transportation technologies and environmental protection, as well as
combining modes of transportation.

POLITICS
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2. (SBU) Arguably the most pro-American French President since
World War II, Sarkozy should be credited with making the U.S.-French
bilateral relationship the best it has ever been. The politically
robust government-to-government relations do not mean for Sarkozy,
nevertheless, that being "allies" leads to across-the-board and
automatic "alignment" with U.S. positions. President Sarkozy at
times equates the health of the relationship with the strength of
U.S.-French political and strategic cooperation in other parts of
the world, rather than with the economic relationship. The trade
and investment relationship is substantial, with 17 USD billion in
exports to France and 29 USD billion French imports to the U.S.
(2008). Recently, the new U.S. Administration has inspired popular
support for the transatlantic relationship. An April poll found
that 54 percent of the French think that Franco-American relations
have improved following President Obama's visit to France for the
NATO summit in Strasbourg. The press has complimented the President
for bolstering the U.S. image, while contrasting him with President
Sarkozy whose approval rate is at 36 percent.


3. (U) The global recession has not spared France. GDP is expected
to contract by at least 3 percent in 2009. In response to the
crisis, the GOF passed a 26 billion euro (USD 35 billion) stimulus
package in February to help businesses improve their cash flow
through tax measures, and boost infrastructure investments,
including in rail. Globally, President Sarkozy helped launch the
series of G20 summits, and has been pleased with cooperation with
the United States in that forum.

ENVIRONMENT
--------------


4. (SBU) The environment is a signature issue for the Sarkozy
government. One of his first initiatives was to create a
"super-ministry" of sustainable development, consolidating the
ministry-equivalents of energy, infrastructure, transportation and
environment into a single entity. The goal was to internalize
environmental factors into decision-making on these policies.
President Sarkozy has spoken of the need to rethink transportation
policy to meet environmental challenges, including climate change,
e.g. eco-taxes, increased investment in public transportation and
eco-loans at zero interest to promote energy efficiency improvements
in residential housing. (Note: France will host the a Major
Economies Forum (MEF) on Energy and Climate in Paris the day of your
arrival, following onto the one held in Washington, D.C. last month.
End note.) As a presidential legacy project, Nicholas Sarkozy
unveiled his "Grand Paris" project on April 29 which calls for urban
and transport overhaul to expand Paris city limits and make it a
more sustainable and eco-friendly metropolis. Beginning in 2012,
the plan calls for construction of an automated, 90-mile metro line,
and new and upgraded tramway, metro and suburban lines to alleviate
mass transit congestion and integrate isolated suburbs. The GOF
plan represents 35 billion euros (47 billion USD) in new funds from
both public and private sources yet to be identified.

HIGH-SPEED RAIL
--------------


5. (SBU) Minister Bussereau and SNCF Group CEO Guillaume Pepy will
make a strong case to compete for U.S. HSR development. Although
keen on the Asian markets, Argentina, and possibly India, the French
clearly have shown renewed interest in the United States in the wake
of the USG's announced "Vision for HSR" and the Invest in America
Act. French rail policy makers and companies are particularly
interested in corridor development in California, Florida, and
Texas. In your conversations, they will likely make a case for a
dedicated very high-speed rail passenger network using the latest
technology, as opposed to a shared freight/passenger system with
incremental upgrades to existing U.S. infrastructure.


6. (SBU) SNCF is gearing up to compete with outside rail companies
in 2010 as part of EU agreements. The government-owned French Rail
Network (RFF) currently acts principally as a financial structure,
delegating the majority of infrastructure management to the SNCF,
but when competition opens up to EU countries in 2010, RFF is
expected to build, maintain and renovate railway infrastructure on
its own. SNCF CEO Guillaume Pepy, whom you will meet, has noted
expansion and upgrade of freight services will also be a priority in
the next decade and has targeted East European markets as he aspires
to make SNCF a multimodal European group with rail at its center.

URBAN TRANPORT
--------------


7. (SBU) The French are equally proud of their global urban
transportation groups. Veolia is Europe's leading private public
transport operator. Keolis, the subsidiary of the SNCF is a world
player and Transdev, a leading operator of urban public transport
systems in France and Europe and of tram services globally, is
expanding its international activities. They will be eager to
engage you on municipal transport plans in the United States, and
your visit to Strasbourg will allow them to show you their solution
to urban mobility while protecting the natural environment and
promoting non-polluting means of transportation (tram, cycling,
walking, electric vehicles). Future extensions of their tramway will
be subsidized as part of France's economic recovery program. One
extension (projected completion in 2014) will result in a tram link
with Kehl, Germany (cross-border cooperation is a major thrust of
Mayor Ries' administration).

OTHER TRANSPORTATION ISSUES
--------------


8. (SBU) Although your trip is focused on rail, other priorities
for the French include aviation emissions and traffic control
systems issues, and further opening of U.S. airlines to foreign
investment under the current round of U.S.- EU Air Transport
Agreement. The French supported the European Parliament legislation
which includes aviation in the EU's CO2 cap and trade system (the
Emissions Trading Scheme -- ETS). In the absence of progress
towards a global CO2 emissions target (including through the UN
Framework Convention on Climate Change),the EU ETS scheme will take
effect in 2012 for U.S. carriers flying to and from Europe.
However, the French are open to a greater role for the International
Civil Aviation Organization (ICAO) in EU ETS implementation. France
also wants full access to cross-border mergers, and cabotage in the
second stage of the U.S. Air Transportation Agreement.


9. (U) On maritime transport, Dominique Bussereau recently traveled
to Hong Kong, China and South Korea with French port directors and
Prime Minister Fillon was in North Africa to attract foreign
investment in French ports. President Sarkozy's reforms will reduce
state control of the waterfronts and privatize container handling.
Bussereau and his Spanish counterpart signed an agreement to invest
30 million euros in the next five years to develop sea motorways to
transport freight carrying trucks in an effort to reduce road
congestion. Another top French priority is international
cooperation on the fight against maritime piracy. They welcome the
U.S. sense of urgency in tackling the problem of piracy at sea.


10. (SBU) On road transportation which represents 68 percent of
pubic transport investment, new consumer incentives are planned to
boost the GOF's existing "bonus-malus" or "fee-bate" system of tax
incentives that favor the purchase of low-emission vehicles.
President Sarkozy announced in February that the GOF will provide
rebates of up to one thousand euros for car buyers who scrap older,
high CO2 emission vehicles. It will mobilize 400 million euros of
public financing over the next three years exclusively for R and D
on zero-emission vehicles. France also aims to include 7 percent
biofuel at the pumps by 2010, beyond the European targets. The
state will support some pilot projects for second general biofuel
production (Reftel).

YOUR VISIT
--------------


11. (SBU) Your visit and pursuit of France's cooperation will be
taken as a reassuring sign that the solid economic partnership
between the two countries will continue. Your European tour is also
a signal that France is not the only competitive player. Your
French counterparts will welcome the opportunity to learn more of
the new Administration's approach to a nation-wide rail network and
the long-term financial investment it intends to make. The French
are anxious to understand who will regulate inter- and intra-state
corridors and be the interlocutor for foreign firms. They are also
interested in the dynamics of the decision making process for
project selection. Finally, given France's experience in innovative
cross-subsidization systems for financing transportation
infrastructure (Public-Private Partnerships PPP),this will be an
excellent chance to discuss lessons learned and the prospects of
transatlantic partnerships.

Bio of Dominique Bussereau
- - - - - - - - - - - - -


12. (SBU) Dominique Bussereau, born in 1952, is the son of a
railway worker. After holding staff positions in several
Ministries, he worked for the commercial department of the SNCF.
Since 2002, he has held ministerial level appointments in
transportation, budget, and agriculture, and in 2007 was appointed
for a second time State Secretary for Transportation. Bussereau is
close to former French Prime Minister Jean-Pierre Raffarin who
currently chairs a think tank for which Bussereau is Secretary
General. They have long-standing political ties to President
Sarkozy's UMP party and to the western coastal region of
Poitou-Charente. Bussereau is Chairman of the General Council of
Charente-Maritime department whose economic livelihood is based on
maritime industry and is home to the French engineering giant Alstom
which manufactures TGV cars and metro trains. Bussereau has an
active domestic record in introducing an eco-tax, based on 'user
pays' and 'polluter pays' principles. The tax is part of the
"Eurovignette" Directive that allows EU Member States to charge
heavy goods vehicles for wear on the road network and environmental
costs with the ultimate aim of shifting freight away from roads onto
less-polluting modes of transport (rail and waterways). He
understands some English but prefers to use an interpreter.

Pekala