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Cablegate: Treasury Deputy Secretary and British

VZCZCXYZ0004
RR RUEHWEB

DE RUEHLO #0778/01 0770947
ZNR UUUUU ZZH
R 170947Z MAR 08
FM AMEMBASSY LONDON
TO RUEHC/SECSTATE WASHDC 7818
INFO RUEHBS/USEU BRUSSELS
RUEATRS/DEPT OF TREASURY WASHDC

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

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