The Wall Street Journal-20080216-The Weekend Interview with Peter Mandelson- New Labour- Free Trader

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The Weekend Interview with Peter Mandelson: New Labour, Free Trader

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Paris -- France seems like an odd place to catch up with Peter Mandelson. The European Union's trade commissioner is seen as the Prince of Darkness in this land of cosseted farmers, strike-prone workers and politicians who leap to defend them.

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."

Mr. Mandelson is no armchair pundit when it comes to campaign politics. He was present at the birth of New Labour in Britain, recovering from the party's landslide election loss in 1987 -- which he co-managed -- to be voted a member of Parliament in 1992.

Mr. Mandelson realized the jalopy that was Labour in the 1980s needed a complete overhaul, not just the new paint job he'd tried to give it, and teamed up with other young modernizers in the party. He served as a sort of tamer of Britain's roaring media, which slammed him as a spin doctor and first dubbed him the "Prince of Darkness."

When the time came, he threw his lot with Tony Blair over Gordon Brown. Mr. Mandelson then chaired the 1997 campaign in which Labour regained power after an 18-year drought, and was soon rewarded with two successive cabinet posts.

He resigned from each, however, amid screaming headlines about improprieties -- the first involving an undeclared loan from a fellow MP, the second related to his alleged attempts to help fast-track an Indian businessman's request for a U.K. passport. Subsequent inquiries, as Mr. Mandelson is quick to point out, cleared him of wrongdoing. But it was virtually impossible for him to return to Labour's front bench. So in 2004 he came to Brussels, long a place where pols go to wind down their careers or rehabilitate them, to take on the external trade brief. (Trade within the bloc is overseen by a different office.)

Mr. Mandelson's post has more prominence in Brussels than does his opposite number, the U.S. trade representative, in Washington. That importance owes mostly to trade's position as one of the few policy areas where the EU has complete authority over its national governments. At least, that's the theory: National capitals wield veto power over trade deals, and while they are hesitant to exercise it, they are rather fond of threatening to do so.

Thus Mr. Mandelson's run-ins with the French. Shortly after winning the French presidency last spring, Nicolas Sarkozy called the trade chief "naive" in his approach to the Doha talks, in which Europe, the U.S. and other developed countries are being asked to open their agricultural markets more than ever to farmers from poorer nations.

It wasn't Sarko's first attack on Mandy (as the headline writers at British tabloids know him). "I felt I was being used as a kind of campaign stage prop," Mr. Mandelson recalls, "and I was a convenient whipping boy for his speechwriter."

But he says Brussels puts up with a certain amount of Monsieur le President's bluster because of the importance of his agenda for changing France. "We want to make his life easier to carry out those reforms," Mr. Mandelson says, "not to make it harder for him to do so."

Mr. Sarkozy's reforms -- which cut across tax rates (too high), working hours (too few), trade-union power (too much) -- are important for France, Mr. Mandelson says, as well as for the whole of Europe, which needs "that strong French motor at [its] heart."

Liberalization, he says, is part of accomplishing that. "When I'm in France, and point out that France is the fifth-biggest exporter of goods, services and capital in the world, that a quarter of French manufacturing jobs are capitalized by foreign direct investment, that French companies are strongly present in the markets of every emerging economy in the world," he says, "people realize that there's a lot at stake, and that if we start to erect protectionist barriers against others, then they will do the same toward us in Europe."

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."

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."

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."

Mr. Mandelson uses that word, "modern," in connection with social policies on six other occasions during our hour-long meeting. The last of these references comes as he ponders the changes in New Labour's electoral prospects since its leadership passed from Tony Blair to Gordon Brown last June.

Mr. Brown toyed with calling an early poll last October, only to back down red-faced after it appeared he might lose to David Cameron's revitalized Conservative Party. Ever since then, Mr. Brown's political fortunes -- and those of the New Labour movement -- have been waning.

Mr. Brown isn't catching any breaks from the British press, which smells blood over his missteps on the Northern Rock bank collapse, party fund-raising scandals and more. He probably shouldn't expect that to change. "The press," Mr. Mandelson says, not admiringly, "don't owe anyone any favors."

He's not alone in that opinion. Toward the end of his time at Number Ten, Mr. Blair labeled the media "a feral beast, just tearing people and reputations to bits." Asked about that quotation, Mr. Mandelson responds not with a sarcastic remark or bitter dissertation on a press corps with which he did battle for the better part of two decades, but by nodding his head.

Maybe it's age or experience; maybe he's been in sleepy Brussels too long. But the Prince of Darkness only says, softly, "I've been savaged by the beast on one or two occasions." Then he smiles. "But here I am, intact, alive to tell the tale."

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Mr. Wingfield is an editorial page writer for The Wall Street Journal Europe.