Peter Mandelson, a Free Trader Till the Last

♠ Posted by Emmanuel in ,, at 2/16/2008 09:44:00 PM
With New Labour being buffeted here in the UK over all sorts of things--lost confidential data, Northern Rock, non doms, and I don't know what else--it's somewhat comforting to know that New Labour stalwart Peter Mandelson is still sticking to his free trade stance (schtick?), no matter what. Despite being hit left and right for his stance, Mandelson has stuck by his convictions, and that is worth admiring regardless of whether you are pro- or anti-free trade (or somewhere in between) in this age of the opinion poll manufactured politician. If the Doha Round is going down, he's going down swingin', baby. Carted off to Brussels to serve as the EU trade commissioner, Mandelson is still very much the champion of free trade, however quixotic that may appear to some. The Wall Street Journal recently interviewed the venerable Mr. Mandelson, and while his thoughts are very much in line with what you would expect, it's somewhat surprising that he has not softened his approach. First, here is Mandelson stating that the US is now the #1 threat to the free trade cause:

Yet more than France, Mr. Mandelson argues on a recent afternoon -- more so than any of the EU's 27 member states -- it is America that threatens the cause of free trade today.

"You can see it in the politics of the country," he says from his armchair in an EU office in the shadow of the Eiffel Tower. "You can see it in the Congress, you can see it in the primaries, you can see it in the town-hall meetings, you can see it in the candidates who, in order to appeal to the public, articulate these arguments" of protectionism.

"I don't see anywhere in Europe similar sentiments being expressed. I hear reservations about agriculture, or . . . about whether [trade] talks are balanced." But, he adds, "You'll not find anyone running for election in Europe and questioning whether we should complete the Doha round [of world trade talks]. You hear that from some of the candidates in the U.S., some of them from the Republican and the Democrat side."

Mandelson has this to note regarding the US and the deadlocked Doha round of WTO negotiations:

On this score, the Doha talks are critical. And, Mr. Mandelson argues, they are at a critical stage. Those who follow trade talks are used to hearing about deadline after deadline after deadline being missed. But American electoral politics may mean it's true this time.

"I was very struck during the ministerial meetings I held in Davos" last month, Mr. Mandelson says, "that nobody, actually, pushed back against the argument . . . that if we do not get a breakthrough and conclude the negotiations this year that they will go nowhere in 2009 with the change of the administration in the United States, and we'll be firmly in the long grass by 2010."

It's not just a matter of momentum but, again, of the potential successors to George W. Bush. Hillary Clinton, to name one leading contender, has called for a "timeout" on free-trade deals.

"The caveat is that we're in the primary season," Mr. Mandelson observes. "That's not necessarily a position she would take into the general election, and if she did it's not necessarily one she would take into the White House if she won. But you can't ignore it.

"I've known the Clintons for over a decade, and I've always seen them as free traders. But most of the Democrat free traders seem to have taken to the hills," he laments. "I wish there was more pushback within the Democrat Party, because they know this is right, they know this is responsible, and for a long time now you've seen politicians on both sides of the aisle using trade as a wedge issue. And it's a very dangerous wedge to play with, because it's short-term, it's counterproductive, it leads you nowhere."

If there's a reason for optimism, Mr. Mandelson says, it's that "amongst the Democrat candidates, the person who's been questioning free trade most loudly and showing support for protectionism has been forced out of the race -- John Edwards. And the Republican candidate who is most strongly in favor of free trade seems to be leading the field at the moment -- John McCain."

Meanwhile, he also has this to say on the chances of the Doha round being completed while Bush is still around and the EU side of the equation:

Still, counting on a Doha deal after the 2008 campaign is risky at best. So can the Bush administration deliver?

Mr. Mandelson pauses. Then he says, slowly, "I think the verbal commitment is strong. I think the presidential will is strong." Another pause. "But we've got to see some final offers from the United States . . . [that] show more flexibility, and more generosity" -- chiefly on trade-distorting subsidies to cotton, corn, sugar and other producers -- "in return for what I hope will be reciprocal moves by others where the U.S. has legitimate interests" -- i.e., industrial goods and services.

Farming has been at the heart of Doha disagreements from the start. Emerging nations such as Brazil and India refuse to open their markets further to industrial goods and services until they see movement from the U.S. on ag subsidies and Europe on farm-product tariffs. But it's time for these fast-growing economies to liberalize, he says, both for their own good and so that they can "pick up the slack . . . when the international economy is going through difficult times," as it is now.

During our discussion, Mr. Mandelson indicates that the EU may be able to move closer to a deal if it can gain greater recognition of its trademarks for specialized goods such as wines, meats and cheeses. Known in trade lingo as "geographic indications," these trademarks usually mean that a good cannot be sold with a certain name -- say, Manchego cheese from Spain, or Parma ham from Italy -- unless it comes from the area indicated in its name.

Free traders consider this a form of protectionism; more than 160 European cheeses are sheltered in this way, including 45 from France alone. Mr. Mandelson counters that Europe is already yielding on subsidies, tariffs and export refunds, and can't come out of these talks empty-handed. "When we're lose-lose-losing like that across the agricultural board, it's necessary to bring something back," he says. "I don't think that's too much to ask."

Last, Mandelson warns that if Doha goes into the abyss, the chances for other multilateral talks such as those on climate change being completed will dim significantly. Call it a bad climate for international cooperation:

The cost of failure in the talks would be staggering. "We will have failed to put a ratchet in place to stop the global economic machine's slipping backwards under protectionist pressures," Mr. Mandelson says. "I think that the confidence in the WTO amongst developing countries and emerging economies would be damaged. . . . But beyond that, I think the cause of multilateralism will be set back."

He then makes a prediction: "I can assure you, it will be harder to find agreement in the post-Kyoto negotiations [on climate change] if we've failed to do so in the multilateral trade talks." He says the weakening of multilateralism in general would mean "we'll virtually all be losers."

Not that there aren't losers and winners from liberalization, at least in the short term. Dealing with the problems that arise from any dislocations is part of what motivates this life-long Labourite now that he directs trade policy for the world's largest free-trade zone.

"I'm not a pure market liberal. I'm a social democrat," Mr. Mandelson says. "I believe in the power of the market, I believe in free trade, but I also believe in modern social and labor-market policies that maintain the dynamism which is indispensable to our economy but which also eases adjustment and manages that change in a way that is responsive to individuals and communities."