Cablegate: France: Scenesetter for Secretary Peters And


DE RUEHFR #4617/01 3341638
P 301638Z NOV 07





E.O. 12958: N/A

1. (SBU) Paris extends a warm welcome to you and your
delegation. Your visit comes close to six months into
President Nicolas Sarkozy's five-year term, a period in which
the strong U.S.-French bilateral relationship has been
reinvigorated. Sarkozy's personal initiative is already
visible in new approaches to politics and foreign policy, the
economy, and the environment. There are clear signs that
environmental concerns are causing France to begin to rethink
transportation and infrastructure policy. France will
continue to build on a strong record of accomplishment in
financing and building roads and bridges and developing
cutting-edge technology such as its high-speed train system.


2. (SBU) Through effective use of the media and by co-opting
leading opposition figures into his government, Sarkozy has
established himself as the dominant figure on the domestic
political scene. He has been assertive in pushing an
ambitious program of reform aimed at revitalizing the country
and liberating its economic potential. While still enjoying
substantial popular support (above 60 percent in most polls),
a difficult international economic environment and France's
budgetary constraints are restricting his room to maneuver.
A week of nationwide strikes by transportation workers and
civil servants in mid-November provided the first political
challenge to his reform program, which he appears to have
successfully met for the time being.

3. (SBU) In foreign policy Sarkozy is intent on reasserting
French leadership in Europe and in making his mark on the
international scene. He has moved to improve his relations
with the U.S., breaking with Chirac's view that saw France as
the natural leader of opponents of U.S. "unilateralism." We
have seen new warmth in public expressions of friendship for
the U.S. as well as dramatic shifts in French policy on Iraq
and NATO, and a toughened approach toward Iran and Russia.
Despite convergence with the U.S. on these key issues,
Sarkozy has repeatedly emphasized that being "allies" does
not mean across-the-board and automatic "alignment" with U.S.
positions. He has not hesitated to identify specific areas
of disagreement with the U.S., including admission of Turkey
into the EU, climate change and GMOs.

Sarkozy's Economic Agenda

4. (SBU) President Sarkozy wasted little time in moving
forward with a broad economic policy reform agenda. Labor
market reform, tax changes that encourage overtime work
beyond the 35 hour work week, mortgage deductibility to
encourage home ownership, further pension reform, smaller
government, the provision of minimum services during strikes
and possible changes to France's collective bargaining system
are highlights of the policy initiatives that are either
underway, or in the offing. The outcome of this process
could well determine whether the United States has a newly
confident, dynamic, forward-looking economic partner in

5. (U) Trade and investment between our countries is
significant. On average over one billion dollars in
commercial transactions take place between France and the
U.S. every day, with the U.S being France's third ranked
supplier and its fifth largest customer (France ranks as the
U.S.' eighth trading partner for total goods (imports and
exports). There are approximately 2,300 French subsidiaries
in the U.S. that provide more than 481,000 jobs and that
generate an estimated $178 billion in turnover. The U.S. is
the top destination for French investments worldwide.
Concurrently, the US is the largest foreign investor in
France, employing over 600,000 French citizens with aggregate
investment estimated at $65.9 billion in 2006.


6. (SBU) The environment has become a signature issue for the
Sarkozy government, which created an environmental
"super-ministry" incorporating energy, infrastructure, and
transportation. It is headed by the third-highest ranking
Minister in the French Government (Jean-Louis Borloo), and
includes a "State Secretary" (Dominique Bussereau) who is

responsible for all transportation issues. In its first
major undertaking, the new ministry recently concluded
broad-based national environmental consultations (the
"Grenelle de l'Environment.") At its conclusion, Sarkozy
underlined his desire to rethink transportation policy to
meet growing environmental challenges, including climate

Transportation and Infrastructure

7. (U) Building on an earlier announcement of the end of
major new road construction projects, Sarkozy has promised to
focus on the key problem of traffic congestion in cities by
directing resources in the future away from road transport.
He vowed to build 1500 kilometers of bus corridors, bike
paths, and streetcar lines in the Paris region, and to
construct 2000 kilometers of new high-speed rail lines in
France. Dedicated freight rail lines and investment in sea
and river port facilities would mean 3 million fewer
north-south truck passages by 2020, he said.

8. (U) These proposals come on the heels of strong investment
in French transportation infrastructure in recent years ( 15
percent in 2007), with about 45 percent of the total directed
toward roads. Highlights of recent budgets include continuing
expansion of France's impressive high-speed rail network
(TGV), and the development of multi-modal transport through
rail and sea conveyance of trucks. The latest TGV line
linking Paris to Strasbourg in Eastern France was put into
service in February, and work is underway on lines in Eastern
and Southern France, including one that will eventually put
Paris 5 1/2 hours from Barcelona. The French have been
particularly encouraged by international interest in TGV
technology (including a recent sale to Morocco) and visits by
a number of US delegations considering the TGV for possible
use in the US (particularly from California).

9. (U) Key parts of transportation infrastructure in France
also have been reorganized through partial privatization or
by decentralization to regional or local governments. The
French national railways (SNCF) was separated as an operating
company from the underlying infrastructure in 1997. State
holdings in toll-roads were privatized in 2006. Some local
airports and ports will be ceded to local governments, just
as a large chuck of secondary roadways passed from national
to regional control in 2006. Labor unions and some localities
have questioned this policy, raising concerns that the French
state is abandoning its historical commitment to providing
transportation as a public service.

10. (SBU) France began to introduce new approaches to
financing its transportation infrastructure after 1993, due
to European Community competition concerns with the system of
cross-subsidization that was originally used to build and
extend the French highway system. Each public-private
partnership project under the current system must be
economically viable in its own right, with public subsidies
clearly identified if needed. Concessionaires design,
finance, build and operate state-owned highways and bridges,
in exchange for a long-term grant of toll revenues, subject
to periodic review. France will also begin experimenting
soon with a new form of "partnership contract" in which the
state will pay concessionaires directly over a 20-30 year

Other Transportation Issues

11. (SBU) Several other transportation-related issues may be
on the minds of French officials you will meet. The GOF was
supportive of the US-EU Open Skies agreement, but continues
to hope for further opening of US airlines to foreign
investment. They would also like to see a speedy and
favorable decision on Skyteam's pending application for
anti-trust immunity. We have encountered many expressions of
concern about new requirements for 100 percent scanning of
US-bound maritime containers since the passage of the 9/11
act in September. And finally, there is considerable
interest in the status of the European Aviation Defense and
Space Company's (EADS) bid to sell refueling tankers in
partnership with Northrup-Grumman to the U.S. Air Force.
Since much of the production would take place in the US, this
would provide a politically palatable way for the company to
move production offshore in order to counteract the increased

value of the Euro.

Your visit

12. (SBU) State Secretary for Transportation Dominique
Bussereau is expected to brief you on the recent
reorganization of his ministry, the priorities of the Sarkozy
administration in transport and infrastructure planning and
financing, and to discuss how France is approaching the issue
of traffic congestion. A preliminary meeting with the
Transportation's head of traffic management for the Paris
region should provide an opportunity to discuss the issue of
congestion in greater detail. The American Chamber of
Commerce will host an informal discussion with infrastructure
companies over lunch, and officials from Vinci will discuss
the company's experience with infrastructure development,
tolls and concessions and parking in a separate meeting. A
presentation and tour of the A86 tunnel to the west of Paris
will conclude your program.

Please visit Paris' Classified Website at: fm


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