SCENESETTER FOR TRANSATLANTIC ECONOMIC COUNCIL MEETING

UNCLAS USEU BRUSSELS 001420 C O R R E C T E D C O P Y SENSITIVE SIPDIS NSC FOR MICHAEL FROMAN, DOUG BELL, KRISTINA KVIEN STATE FOR E - ROBERT HORMATS DOC FOR DEPUTY SECRETARY HIGHTOWER PLEASE PASS TO USTR - SENIOR ADVISOR PETER COWEY OMB FOR OIRA - CASS SUNSTEIN AND MICHALE FITZPATRICK DHS FOR SECRETARY NAPOLITANO NOT FOR INTERNET DISTRIBUTION E.O. 12958: N/A TAGS: ECON PREL ETRD ENRG ECPS SENV EUN SUBJECT: SCENESETTER FOR TRANSATLANTIC ECONOMIC COUNCIL MEETING ¶1. (SBU) SUMMARY. The fourth meeting of the U.S.-EU Transatlantic Economic Council on October 27 will cover a solid agenda with our largest economic partner. The meeting will feature discussions on G20 commitments and our cooperation in financial reform, closer U.S.-EU regulatory cooperation in the context of the new U.S. approach to regulation, a new high-level innovation dialogue, and our ongoing work programs in IPR, investment, secure trade and other areas. The meeting will be bracketed by sessions with business, consumer and labor stakeholders. A five-member European Parliament group, led by Elmer Brok, the German chair of the Parliament's U.S. delegation, will also meet in Washington next week with the U.S. and EU TEC co-chairs. A successful meeting will set the stage for a more ambitious agenda with a new Commission in 2010. END SUMMARY. CONTEXT OF OCTOBER TEC MEETING WITH OUTGOING EU COMMISSION -------------- -------------- ¶2. (SBU) The fourth meeting of the Transatlantic Economic Council (TEC),on October 27, comes in the context of a global recovery which, though well along in the U.S., is just beginning to take hold in Europe: the UK, French and German economies are growing, while Spain, Italy, Ireland and many Central European states remain in recession. The TEC also occurs as European fears have risen over the Doha WTO round and the December UN Climate Change Conference in Copenhagen. ¶3. (SBU) The current European Commission has reached the end of its five-year mandate and will change shortly (depending on the timing of final ratification by the Czech Republic of the EU's Lisbon Treaty). The changeover could occur in January 2010. Commission President Barroso and perhaps a third of the current Commissioners will remain in office, however, so while most Commissioners are leaving, the entire Commission will retain significant continuity. Individual Commissioners' portfolios may change. ¶4. (SBU) The Commission and Swedish EU Presidency have pushed for an ambitious October TEC meeting that will do several things: ;a) emphasize more broad strategic discussions on issues such as post-global crisis cooperation on economic reform/implementing G20 commitments, avoiding protectionism, and collaboration to move toward a clean low carbon economy; b) increase our regulatory cooperation to reduce unnecessary regulatory divergences and further integrate our economies; c) retain the focus in the TEC on overcoming barriers to transatlantic trade and investment and on delivering concrete results; and d) avoid use of the TEC to settle trade disputes. ¶5. (SBU) The EU TEC co-chair, Commission Vice President and Enterprise and Industry Commissioner Gunter Verheugen (Germany), wants to maximize the TEC's reach and achievements as part of his own ten-year legacy as a Commissioner. This is particularly so given that his record as co-chair is viewed as mixed, especially after the EU's intense political debate last spring over permitting the import of U.S. poultry. Verheugen earlier sought to raise the level of ambition dramatically for the TEC and to use it to push toward a "barrier-free transatlantic market." He stresses the need for strong TEC political buy-in and engagement to force recalcitrant bureaucracies to meet commitments on results. Opposition from Barroso's private office to Verheugen's specific plan for the TEC forced Verheugen to scale back his ambitions, however. Verheugen will leave the Commission at the end of the current mandate. ¶6. (SBU) This TEC will see strong attendance by EU Commissioners, with six confirmed to attend. Besides Verheugen, the others expected are: Catherine Ashton (UK),Trade, who has developed a strong relationship with USTR Kirk and could well remain in the next Commission; Joaquin Almunia (Spain),Economic and Monetary Affairs, who has played a prominent role in the EU's G20 participation and will remain in the next Commission; Neelie Kroes (Netherlands),Competition, a trans-atlanticist who has played a key role in evaluating EU member state supports to financial institutions and other firms in the wake of the economic crisis (and who has also imposed hefty fines on Microsoft, Intel and major EU cartels, but hopes to reach a final agreement with Microsoft before she leaves the Commission); Meglena Kuneva (Bulgaria),Consumer Protection, who has become a strong ally on pro-consumer measures and is quite popular in Europe, but who may not be in the next Commission; and Laszlo Kovacs (Hungary),Customs and Taxation, who will leave the Commission. ¶7. (SBU) In addition, Swedish Trade Minister Ewa Bjorling will attend for the Swedish EU Presidency, along with other Swedish officials and two subcabinet-level officials from the future Spanish EU Presidency. Other Commission officials will be present as well. EU ATTENDEES' EXPECTED ROLES DURING TEC MEETING -------------- -- ¶8. (SBU) The Commission has retained the dominant role for the EU in the TEC, relegating the Presidency country to a supporting role. Commissioners will take leading roles on the agenda points covering their respective portfolio areas as follows: WORKING GROUP REPORTS TO THE TEC. During the report from the High Level Regulatory Cooperation Forum, Commissioner Verheugen will outline his interest in pursuing new approaches to mutual recognition with the U.S. wherever feasible. Verheugen and Kovacs likely will press the U.S. for action on our 100 percent cargo scanning legislative requirement, and Verheugen is expected to ask about the status of the OSHA response to the Request For Information (RFI) on the proposal that OSHA permit the use of a Suppliers' Declaration of Conformity (SDoC) for certain low voltage electrical equipment. FINANCIAL MARKETS DISCUSSION. Commissioner Almunia likely will lead here, and emphasize the need for continued coordination to implement our G20 commitments, including on U.S. and EU parallel financial regulatory and reform efforts, for strong U.S. action to extend supervision to all parts of the financial sector, and to coordinate implementation of exit strategies as recovery advances. INNOVATION. Commissioner Verheugen should lead here, to stress the vital importance of promoting EU and U.S. innovation to enhance our economic competitiveness, welcome the U.S. initiative for a bilateral innovation dialogue, and describe EU interest in a productive discussion around concrete projects in specific sectors. The Swedes and Spanish may both chime in supporting the launch of the dialogue. REGULATORY APPROACHES. Verheugen will again emphasize his interest in exploring new approaches to mutual recognition with the U.S. and in "upstream" cooperation to avoid future regulatory divergences in emerging technology areas such as nanotech and clean energy efficient technologies. Kuneva should highlight our deepening cooperation on product and toy safety, and Vassiliou may stress her interest in a broader approach to addressing our thorny trade problems on food safety, as she foreshadowed in meetings this summer with USTR Kirk and USDA Secretary Vilsak. LUNCH DISCUSSION. The Principals'-only lunch discussion is the venue for addressing broad strategic issues - with the focus on ensuring coherence in our response to the economic crisis. The EU, for its part, wants to discuss how we will work together under new international arrangements like the G-20, the need for coordination on financial reform, and the importance of a successful outcome to the WTO negotiations. Kroes may emphasize her role in reviewing the many EU state aid packages for the financial sector, and her determination to prevent national responses to the financial crisis that are self-focused and have the effect of undermining the EU internal market. Kovacs will suggest enhancing U.S. and EU cooperation on addressing problems with tax havens ("good governance in tax matters"),including with respect to information sharing. POTENTIAL CURVEBALLS -------------- ¶9. (SBU) Although the EU wants to make sure the TEC is seen as a success, EU officials may touch on any of several contentious points, including their frustration over the pace of U.S. legislative action on financial regulatory and supervisory reform or climate, their belief that the Commission has fulfilled its obligations to the U.S. on the REACH chemicals registration issue (not the case),their feeling that OSHA should have completed its review of RFI submissions over the Suppliers' Declaration of Conformity (SDoC),and their concern over the U.S. legislative requirement for 100 percent scanning of cargo imports by 2012. Stakeholders in the morning and afternoon outreach sessions may echo these or similar issues. COMMENT -------------- ¶10. (SBU) The stage is set for a successful fourth meeting of the Transatlantic Economic Council on October 27. We can also use this meeting to work toward improving the longer term effectiveness of the TEC. The original rationale for the TEC - to generate economic growth by promoting transatlantic economic integration, including by reducing unnecessary regulatory divergences - has only strengthened after the global economic crisis. ¶11. (SBU) We can, and should, get more out of the TEC. This year has clearly been a transition, as both we and the EU have responded to the economic crisis and as the EU goes through significant political changes with the election of a new Parliament, a new Commission and major institutional changes with the entry into force of the Lisbon Treaty. Next year, however, presents a new opportunity to use the "intergovernmental cabinet meeting" nature of the TEC to ensure the EU works with us in the G-20, in promoting reforms in major emerging economies, in adjusting to the transformation inherent in our shifts to low-carbon economies. ¶12. (SBU) The TEC has inherent weaknesses on the EU side: member states are not as actively involved as they should be, and the Commissioner co-chair has no formal power to compel action by other Commissioners on issues that fall under their purview but are on the TEC/Framework agenda. President Barroso's repeated declaration of his commitment to the TEC and Framework, perhaps offers an opening to help strengthen EU TEC management under the new Commission. The November 3 U.S.-EU Summit might be an opportunity to express U.S. willingness to work with the EU on ways to improve the TEC's functioning and effectiveness in the future. This could help prepare the way for a more ambitious TEC meeting in 2010 with a new European Commission. MURRAY