European Union trade commissioner Peter Mandelson has had a political career characterised by the ups and downs which accompany a professional life under the public spotlight. Of the many hurdles he has encountered along the way, never has he been more visibly defeated than in July, when negotiations at the World Trade Organization’s ninth Doha round broke down following a disagreement between the US, China and India about access to developing world agricultural markets.
Mr Mandelson tells fDi: “We have just lost the opportunity to put in place the openness that we need, not just for next year, but 10 years from now. We have just lost the insurance policy that would have bound in the openness of the global economy against future protectionism.”
A fierce proponent of liberalising trade, Mr Mandelson’s recent public spat with president Nicolas Sarkozy of France centred around Mr Mandelson’s proposal to cut European farm tariffs to secure a world trade deal. It is not the first time the commissioner’s perceived economic liberalism has clashed with some of Europe’s more protectionist forces.
“The GATT and WTO systems have been remarkably effective at chipping away at tariffs for five decades, especially in developed economies, but tariffs are still very high throughout the developing world,” says Mr Mandelson. However, on balance, tariffs are not the biggest threat to free and open global trade. The real culprits lie behind the border; non-tariff barriers, such as product licensing restrictions and discriminatory standards in investment restrictions, all hinder free trade in Mr Mandelson’s opinion, and not just for importers of finished goods but for the very creation and sustainability of trade.
“Non-tariff barriers can block the creation of supply chains or even market entry because they can stop you getting your product licence, which is ultimately the first step to building a supply chain or producing within new markets,” he says. “Non-tariff barriers are tougher to tackle because they can keep springing up in new forms and are usually politically motivated.” Dealing with the problem requires constant vigilance and case-by-case action, not to mention good political intelligence and contacts.
And non-tariff barriers weigh particularly heavily on Europe’s global competitiveness. Market penetration costs, product licensing, proper protection for intellectual property rights and reliable legal systems are all areas that need continuous improvement if Europe is to remain globally competitive, according to the commissioner.
Europe’s comparative advantage will continue to be in added-value goods and services, says Mr Mandelson, because high wages are not a competitive disadvantage so long as the best skills or quality in the market are offered alongside them. “Europe will also be fighting harder for global services markets so it is important not to become complacent about our expertise in financial services, construction, environmental services and transport,” he says.
Although the economic gravity may shift to the East, it will be important to see what rising transport and labour costs in the East will mean for European business’ supply chains, says Mr Mandelson. “My guess is that we will see many European businesses reflecting on supply chains routed closer to home – in the EuroMed area for example – in order to reduce transport costs and even some labour costs which are arising in Asia. I hope that when costs in Asia rise far enough, we will be able to look to parts in Africa as well,” he adds.
With his direct experience in global trade issues, it is not surprising that Mr Mandelson says he imagines he will continue working in international affairs. “I have had a huge insight into international business and economy, particularly among the faster-developing countries, but in the meantime I have plenty to focus on during the year-and-a-half of my remaining tenure and I will worry about my next job when the time comes.”
Commissioner for trade
Secretary of state
Secretary of state for trade and industry
Campaign manager for Tony Blair