US embassy cable - 05PARIS598

C O N F I D E N T I A L SECTION 01 OF 02 PARIS 000598 
 
SIPDIS 
 
STATE FOR E, EB, EUR/ERA AND EUR/WE 
STATE ALSO FOR OES AND STAS (ATKINSON) 
STATE PASS USTR (NOVELLI) 
 
E.O. 12958: DECL: 01/31/2015 
TAGS: ECON, ETRD, KIPR, EAID, EFIN, TRGY, PREL, FR 
SUBJECT: MFA ROUND-UP ON BILATERAL ECONOMIC ISSUES 
 
Classified By: Econ Minister-Counselor Thomas White for reasons 1.5 (b) 
 and (d). 
 
1.  (C) SUMMARY: Senior economic policy officials at the MFA 
have noted their relief at the three-month "cease fire" over 
the Airbus/Boeing case but explain that contrary to the U.S. 
views, they believe the soon to be developed A350 would be 
covered by the 1992 aircraft agreement.  They explained that 
France is not embarking on a new policy of promoting national 
champions and that President Chirac will continue to press 
the global tax idea at Davos and in other fora.  Our contacts 
report no progress in talks with Japan on ITER, but note that 
the EU will not wait interminably before beginning 
construction at the Cardarache site.  End Summary. 
 
2.  (C)  On 25 January Econ Minister-Counselor and Econ Chief 
called on MFA Economic Director (U/S equivalent) Alain Le Roy 
and his deputy, Jean-Christophe Chouvet, to review current 
bilateral economic policy issues.  Econ M/C started by asking 
Leroy about his reaction to the recent U.S.-EU agreement to 
take no further steps toward litigation in the large 
commercial aircraft (LCA) area.  He underlined for Le Roy 
that this was an issue that remained extremely important for 
the USG and added that the key issue will be how the launch 
of the Airbus A350 is handled.  Le Roy said that he 
understood that the 1992 LCA agreement covered the A350 and 
that therefore previous practices (loans, launch aid) would 
be allowed.  Econ M/C noted that U.S. lawyers had a different 
interpretation.  Le Roy asked if Boeing was prepared to 
renounce "subsidies" that it received from the Japanese 
government.  Econ M/C said that would be an issue to be 
discussed between EU and Japanese officials.  He closed by 
noting that both Boeing and Airbus were mature and successful 
firms that should be allowed to compete in the future without 
subsidies.  The WTO subsidies code was a good place to start 
in coming to definitions of what constituted subsidies. 
 
3.  (SBU) Referring to the recent Airbus A380 rollout, Econ 
M/C noted that it was interesting that former Airbus EADS CEO 
Philippe Camus was not present at the ceremony.  Le Roy only 
noted that, "Well, his time has passed." 
 
4.  (C) Econ M/C then recalled for Le Roy President Chirac's 
New Year's speech in which Chirac promised to create a new 
agency to fund research and development efforts to "create 
the new Airbus and Ariane of the 21st century."  Econ M/C 
noted that the USG hoped that this did not signal a new 
strategy of promoting national champions.  Any restrictions 
on which countries could invest or participate in the 
projects would be an unfortunate development, particularly if 
it affected reasonable merger and acquisition activities.  He 
cited the 2003 Aventis case (in which PM Raffarin determined 
that pharmaceutical firm Sanofi was of "strategic" importance 
to France and could thus not be bought by Swiss giant 
Aventis) as a troubling example of what could cause concern 
in foreign capitals.  Le Roy replied that Chirac's intent was 
"much more voluntary" and that there was no intention to 
exclude anybody.  He said he really did not understand how 
Chirac's proposal could be construed as potentially 
advocating a national champions strategy.  He added, though, 
that clearly, "Europe" needed to maintain "its capacity in 
certain fields." 
 
5.  (C) Econ M/C asked whether there had been any recent 
progress with the Japanese on ITER (the International 
Thermonuclear Experimental Reactor project).  Not 
particularly, Le Roy replied.  He said that the GOF believed 
that the U.S. was the key player in the ITER discussions and 
restated the GOF position that "most of the scientific 
community" supports the French site of Cardarache for the 
facility.  He asked if the U.S. would support the Cardarache 
location if the EU and Japan came to an agreement.  Econ M/C 
responded that the USG was looking for a consensus and that 
once there was one, the U.S. would look carefully at the 
proposal.  Le Roy added that there was "some pressure" to get 
the project in Cardarache started.  While the EU was not 
ready to begin its own project on the site at this time, they 
were not prepared to wait forever.  While the EU would prefer 
to proceed with all six parties on board, he said, they were 
prepared to move forward without some of the others if 
necessary. 
 
6.  (C) On FSC, Econ M/C reminded Le Roy that both the 
Administration and the U.S. Congress had worked hard to come 
up with a legislative package that would address the WTO 
case's concerns and that difficult political decisions were 
made.  He explained that the EU's decision to re-impose 
sanctions retroactively and automatically should the WTO 
decide the U.S. measures were insufficient was not well 
received in Washington.  With Congressional consideration of 
fast-track authority scheduled this summer, it is unwise to 
ignore Congressional trade views.  Le Roy took those points 
on board. 
 
7.  (C) Turning to Davos, Le Roy noted that President Chirac 
would be appearing in Davos and would speak on the GOF 
"global tax" proposal as a way to fund development 
initiatives.  He said that Chirac would propose that a tax be 
levied on specific international transactions such as 
international airline ticket sales.  Le Roy said he hoped 
that a new suggestion that nations be allowed to "opt out" of 
the proposed tax plan would make the proposal more attractive 
to the U.S.  Econ M/C informed Le Roy that the idea was not a 
popular one in the USG because it raised some fundamental 
questions about how such a tax could be administered and what 
its impact on economic growth would be. 
 
8.  (C) Econ Chief also briefed Le Roy on a proposed OECD 
study on anti-piracy and anti-counterfeiting.  He explained 
that we had hoped to work closely with the GOF on anti-piracy 
measures and that a good place to start would be a study on 
the subject.  Econ Chief continued by noting that the USG was 
prepared to pay for a significant amount of the study under 
certain conditions.  Unfortunately, he added, the French 
delegation was insisting that the study cover digital piracy 
in its first stage and would not agree to support any study 
without this provision.  Econ Chief added that the USG may be 
willing to consider a study in that area at a future date, 
but could not support it now.  With a plurality of OECD 
members supporting a study without the digital piracy 
component, Econ Chief opined that it would be a shame to miss 
this opportunity to begin to tackle a problem of great 
importance to both the U.S. and France.  He said he hoped 
that France would reconsider its all-or-nothing approach.  Le 
Roy said he would look into the issue. 
Leach