Cablegate: Hm Treasury Officials On Tec and Doha

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1. (SBU) SUMMARY: HM Treasury officials worry the French may use
their EU Presidency to slow Common Agricultural Policy (CAP) reform
and may even try to use labor clauses in free trade agreements to
impose some of their own labor market rigidities. They are also
concerned by signs of protectionist rhetoric on the U.S. campaign
trail. They see Germany as an important partner in delivering EU
support for a Doha agreement. They are preparing for an interagency
discussion of the post-Doha trade agenda, and wonder whether a
smaller group might achieve more and whether some of the
Transatlantic Economic Council goals could be achieved in this
format. END SUMMARY.

2. (SBU) Acting Econ Minister and Counselors met with HM Treasury
officials, Paul Devenish, Head of Global Trade Policy and Joanne
Madders, EU External Openness, (please protect) May 23 to review UK
views on food prices, the TEC, Doha, and related concerns.

PM Wants Doha

3. (SBU) Devenish said that Doha Development Agenda WTO trade
negotiations (DDA), along with the Lisbon EU treaty, is a top
priority for the Prime Minister. Devenish said Foreign Secretary
David Miliband's comments in a speech in Washington earlier that
week warning U.S. political figures about protectionism reflected a
"twinge of concern" in HMG about rhetoric coming from the U.S.
Presidential campaign.

4. (SBU) Devenish asked about USG views on recent reports that
China would be permitted extra time to adopt tariff reductions as
part of the DDA agreement. He noted that some developing countries,
such as Argentina, had raised objections. Politically, it is
easier to change subsidies than tariffs, he argued, so getting the
tariffs right was crucial.

5. (SBU) Devenish said he thought it unlikely that France would
block a DDA trade agreement if one were reached in Geneva. Although
the French complain that EU Commissioner Mandelson is stepping
beyond his mandate, Devenish said he did not think he was "by much".
Should the UK get the sense that the French would block a deal,
however, the UK would work with Germany to prevent it from
happening, even if the UK had to make some unspecified concession in
another field to Germany to ensure its support. Germany is a swing
vote on the DDA, he said.

France Inflexible, So Others Should Be Too

6. (SBU) Devenish saw growing EU interest in adding labor and
environmental clauses to trade agreements, as the U.S. has done.
Devenish said that France may try to use free trade agreements with
third countries to add these clauses, if it is not successful in
other approaches, such as adding a tariff on goods coming from
countries without binding targets on greenhouse gas emissions.
France might also seek to impose some of its own labor market
rigidities on its trading partners, because it has not succeeded in
making its own market more flexible.

How to Preserve the TEC?

7. (SBU) Madders judged the recently concluded meeting of the
Transatlantic Economic Council (TEC) as positive overall. HMG was
optimistic about maintaining momentum. She worried how successful
the next session in October will be, however, coming less than a
month before the U.S. elections. She asked if by then the U.S. will
be hampered in offering contributions to move the TEC process

8. (SBU) Madders agreed that solving poultry was a crucial test for
the TEC, the "poster chicken" for the process. HMG's position has
always been purely based on science. If and when the tests
conclusively show the U.S. process is safe, the UK supports free
entry. Devenish conceded, however, that European protectionism is
part of the problem. EMIN stressed importance of solving poultry
issue, both in its own right and as a demonstration that the TEC can
resolve longstanding disputes.

Solve TEC through an OECD Agreement?

9. (SBU) Devenish also explained that the HMG is examining what the
options are for furthering world trade and reducing trade barriers
post-Doha. Negotiations among all members of the WTO are
burdensome; countries have varying degrees of interest in opening up
their markets. How can those who are willing to do more get
together? Is there a way for the U.S. and the EU, perhaps with the
OECD, or just certain partners, like Canada, to set out some areas
to reduce trade barriers which could then be expanded to include

LONDON 00001506 002.2 OF 002

others? Is the TEC a way to make progress in this field? He asked
whether the USG is considering the next step beyond Doha, whether it
succeeds or not, in terms of further trade liberalization.

10. (SBU) On food prices, Devenish pointed to the Chancellor's
letter to the EU on the CAP, calling for substantial revisions. He
said other EU members, mostly the northern Europeans, favored new
numbers but wondered how even-handed a President France would be on
this issue. He noted that the UK does not participate in Pillar I
of the EU Common Agricultural Policy (CAP) which pays subsidies to
farmers, but must contribute to it all the same. The UK does
participate in Pillar II, which supports environmental projects. As
part of the EU global budget review this year, the UK has pushed for
a review of CAP.


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