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Cablegate: Tec: German Chancellery Worried About Lost Momentum

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UNCLAS SECTION 01 OF 02 BERLIN 001842

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E.O. 12958: N/A
TAGS: ETRD EFIN PREL ECIN EU GM
SUBJECT: TEC: GERMAN CHANCELLERY WORRIED ABOUT LOST MOMENTUM

REF: A. BERLIN 1328
B. BERLIN 1254
C. MEMCON: AMBASSADOR TIMKEN'S MAY 31 MEETING WITH
BDI'S MANAGING DIRECTOR

1. (C) SUMMARY: Chancellor Merkel's chief economic adviser is
concerned that work on the Transatlantic Economic Council
program has slowed since Portugal took over the EU
Presidency. Other German government and industry
representatives report progress on the TEC's work program and
structure although they see problems ahead on U.S. secure
trade requirements. Germany will seek to closely monitor and
guide the TEC through the EU Troika. End summary.

--------------------------------------------- ---
MAINTAINING MOMENTUM: The Chancellery's Concerns
--------------------------------------------- ---

2. (C) Jens Weidmann, Chancellor Merkel's chief economic
adviser, told EMIN on September 28 that he was frustrated
wtih Portugal's lack of engagement on TEC issues, and feared
the initiative was losing momentum. Although action on the
TEC naturally belonged to the Commission, and communication
between Hubbard and Verheugen appeared to be intense and
productive, he feared implementation of TEC priorities could
become lost in the Brussels bureaucracy. Progress on
standards was key, he told us, emphasizing that Chancellor
Merkel herself was keenly interested in this area as it could
have an enormous impact on business. Yet more than dollars
and cents were involved, he told us. Mutual recognition and
adoption of common standards could help Europe and America
meet growing "globalization challenges" (read: Chinese
competition in the world marketplace). To help ensure
Germany's views are heard, Weidmann plans to attend the TEC's
November 9 meeting in Washington, D.C.

--------------------------------------------- ----
SUNNIER VIEW FROM ECONOMICS MINISTRY AND BUSINESS
--------------------------------------------- ----

3. (C) Officials at the Ministry of Economics, the lead
agency for TEC within the government, and representatives of
the German Federation of Industries (BDI) agreed that
Portugal's European Union Presidency has not prioritized TEC
as Germany did. Adrian Bothe, the Head of External Economic
Policy/North America at the Ministry of Economics, regarded
Slovenia, the next in line for the Presidency, as more
promising (i.e. free-market oriented), but inexperienced.
That's why it was so advantageous, in the view of the
Economics Ministry, that the Commission was in charge of the
TEC work program. On the whole, the Ministry was not unhappy
with progress on the TEC to date. (The Ministry also said it
works effectively through COTRA to make its views known in
Brussels.)

4. (C) German business also appears satisfied with how
things are going. Sigrid Zirbel, BDI's Regional Director for
North and Latin America, said the strong commitment from
political leaders, the high-level engagement by Al Hubbard
and Commissioner Guenther Verheugen in the TEC structure, and
the increased accountability and clear deadlines associated
with these two parties all set TEC's work apart from past
U.S.-EU economic cooperation initiatives. BDI President
Juergen Thumann will be the next co-chair of the
Transatlantic Business Dialogue (TABD) and will continue
promoting BDI's primary interest in horizontal and key
sectoral issues. BDI believes its enlarged role in TABD will
ensure it remains strongly engaged in TEC.

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AREAS OF CONCERN
----------------

5. (C) Delivery for November 9: The Ministry of Economics
stated the German business community will not be satisfied
with anything less than tangible deliverables. The Ministry
shared USG concerns that TEC would suffer if it became a
forum for complaints over policy differences. The key is to
focus on underlying areas of cooperation as identified by the
lighthouse projects in the Framework Agreement.

6. (C) Financial Reporting Standards: Weidmann was upset

BERLIN 00001842 002 OF 002


that the deadline for mutual recognition of accounting
standards -- regarded as a potential early milestone for TEC
at the June 28 kickoff (Ref A) -- had slipped. BDI itself
did not foresee any big stumbling blocks, maintaining that
differences between the EU and U.S. versions were minor. BDI
said EU Member States have amended International Financial
Reporting Standards (IFRS) on the margins because EU-wide
adoption of a single set of comprehensive standards would
require the EU Parliament's approval.

7. (C) Secure Trade: German interlocutors repeatedly
indicated that the EU will raise the 9/11 Act's 100 percent
scanning requirement at TEC's November 9 meeting. BDI said
it is dissatisfied with developments to date. BDI's
representative said, "This is not the kind of cooperation we
understood. This is a step backward in our view." BDI said
industry faces too much uncertainty surrounding
implementation dates and methods to commit to the significant
investments required to comply with the requirement. BDI's
representative asked if the requirement would be immediately
enforced in the event of a terrorist incident involving a
shipping container. TABD and BDI are organizing a supply
chain security conference to be held October 31 in
Washington, D.C.

8. (C) Regulatory concerns: Bothe noted European regulatory
agencies' history of "giving up regulatory sovereignty"
through EU compromises. He also argued that governments must
act as referees or watchdogs to ensure that no economic
sector uses TEC to push through one-sided regulatory changes.
Economics Ministry officials asked whether regulatory
cooperation within NAFTA had implications for TEC and German
companies operating within North America.

9. (C) Role of Congress: The Economics Ministry suggested
that Congress has significantly more power in the regulatory
arena than their European counterparts, as Congress sets
budgets and establishes headcounts to pursue specific
regulatory goals. The Ministry and BDI both inquired about
the level of Congressional support for TEC and indicated they
believe such involvement is necessary for the effort to
succeed.

10. (C) Comment: German interlocutors may differ on how well
the TEC is progressing, but in the end, it will all depend on
whether the November 9 meeting succeeds in delivering
concrete, short-term results. With Merkel's name and
prestige on the line, we expect Berlin to weigh in if
difficulties arise.


TIMKEN JR

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