Bridges Weekly Trade News Digest • Volume 12 • Number 33 • 9th October 2008

Mandelson Steps Down as EU Trade Rep

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Two months after the collapse of world trade talks at the WTO, EU Trade Commissioner Peter Mandelson, a key player in those negotiations, announced he would step down from his post as Europe’s chief trade official to join the cabinet of embattled British Prime Minister Gordon Brown.

Some trade delegates indicated that Mandelson’s departure spelled doom for the Doha Round of trade talks, which have stumbled repeatedly since the round was launched in the Qatari capital in 2001. “This is the final nail in the coffin,” a Geneva-based official said. “I think that would mean the end of the Doha Round.”

Since the failure of ministerial-level talks at the end of July, senior officials from seven major trading nations have continued to meet in an effort to breathe new life into the negotiations. But persistent disagreement scuppered those talks at the end of September, and now Mandelson’s departure means that the cast of players has shifted significantly.

Mandelson’s replacement, Catherine Ashton, previously the leader of the British House of Lords, filled the Trade Commissioner post almost immediately on 6 October, but will no doubt struggle to get up to speed in time to negotiate a trade deal before US citizens go to the polls in less than four weeks’ time. The presidential and congressional elections on 4 November mark a key political deadline for the conclusion of a framework agreement to lower tariffs and cut subsidies worldwide, analysts say.

Thanks to the recent setbacks, coupled with upcoming elections in the EU and India next year, it will be “at least 2011″ before a global trade deal can be reached, the trade official said. “For the next three years, the round is gone.”

But Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, offered a somewhat more optimistic view. While acknowledging that a framework deal on global trade was no longer a possibility this year, Schott stressed that Geneva-based officials should “keep to the task” of narrowing gaps in the talks, and that the change in the leadership of the EU Trade Commission would not put an end to the negotiations. “Though Europe is a key player, the Europeans have put most of their cards on the table,” he said. “The real question is whether the US, India and China find some sort of agreement.”

But Schott suggested that Mandelson’s departure could have an impact on the prospects for a bilateral trade deal between the EU and Korea. The EU Trade Commissioner launched those talks in May 2007, but the negotiations have stumbled recently. “The remaining areas of disagreement are politically sensitive,” Schott said. “I don’t know whether Mandelson would have been able to provide a political spark” to spur the talks to a conclusion.

Mandelson’s exit also affects the negotiations of Economic Partnership Agreements, or EPAs, bi-regional trade deals between the EU and several coalitions of African, Caribbean and Pacific states. Negotiations on the deals have moved slowly; no agreement has been finalised to date.

An African trade official told Bridges that the staff change at the commission would pose a challenge for the contentious EPA negotiations, saying that the talks would suffer from the loss of “a good negotiator, a tough negotiator.” “I believe he will be seriously missed,” the official said.

Mandelson’s record

A committed free trader, Peter Mandelson’s four-year stint as EU Trade Commissioner was marked by great ambition, fierce advocacy for a global trade deal, and more than a few political spats.

Soon after assuming the post, Mandelson became a key figure in a long-running fight over European tariffs on imports of Chinese textiles, what the British press dubbed ‘the bra wars’. Even within the 27-nation EU, the world’s largest trading bloc, Mandelson often struggled to balance divergent views on trade. Indeed, he made an enemy in French President Nicolas Sarkozy, who earlier this year blamed Mandelson’s hard push for a world trade deal for driving Irish voters to reject the Lisbon Treaty in a national referendum. France, joined by southern EU countries such as Greece and Italy, frequently argued that the more liberal trade regime that Mandelson sought would imperil the livelihoods of European farmers.

Many EU-based non-governmental organisations have also criticised Mandelson’s approach, particularly in relation to how his agenda for more liberal trade would impact developing countries.

“Mandelson’s term as EU Trade Commissioner leaves a bitter taste,” said Charly Poppe, trade campaigner at Friends of the Earth Europe. “Mandelson’s agenda failed almost on all lines, and where it succeeded, it was at the expense of the environment and poor countries.”

Luis Morago, the head of Oxfam’s Brussels office, agreed. “Under Commissioner Mandelson, the European Commission did not pass the ‘development test’ in the WTO’s Doha round of world trade talks,” he said.

But Mandelson earned the respect of his colleagues at the WTO for his toughness and unbending resolve to fight for a world trade deal. “I think he was very effective, he made a good contribution,” a developing country trade official said. “We have lost a good team member.”

Mandelson and Brown: ‘Two scorpions in a bottle’

The former European Trade Commissioner is no stranger to British politics. Indeed, Mandelson’s return to London to serve as Business Secretary under Gordon Brown will mark the third time that he has held a cabinet position in a Labour government. And working with Brown in the 1990s, Mandelson helped shape the ‘New Labour’ party, which eventually propelled Tony Blair into office in 1997.

But Brown and Mandelson have not always seen eye to eye. The current Prime Minister had hoped to win Mandelson’s support for his bid to head the Labour Party in 1994, but at the last moment Mandelson refused, choosing instead to throw his backing behind Blair. Brown, stung by the rejection, supposedly never forgave Mandelson for the slight. At one point, tensions between the two grew so strained that a Labour Party colleague called the men “scorpions in a bottle,” implying that only one would get out alive.

But relations between the two Labourites seem to have warmed recently. Brown visited Mandelson in Brussels in May, and the former trade commissioner has reportedly been informally advising the Prime Minister on economic affairs in recent months.

“We have had our ups and downs,” Mandelson said in an interview with The New Statesman. “But remember we have known each other for over 20 years.”

And this time around, Mandelson’s contribution to the Labour government will be especially critical. Brown is in a fight for his political life, as polls show that his popularity has plummeted, and some in his own party have called for him to step down.

The worldwide financial crisis has certainly raised the stakes for the embattled Prime Minister. Mandelson will figure prominently in the new National Economic Council created to manage the government’s response to the global financial crisis. The former trade commissioner’s experience in global economic affairs is seen as a key asset in pulling Britain out of financial turmoil.

“Our economy, like every other, is facing a very hard challenge,” Mandelson said, according to BBC News. “In a sense it’s all hands on deck.”

And Mandelson claimed that he has changed since his last stint in the British government.

“I’ve been away for four years,” Mandelson said in an interview with The Financial Times. “Time and distance have given me a different perspective.”

ICTSD reporting. “Mandelson’s return is a ‘no brainer,’” THE FINANCIAL TIMES, 5 October 2008; “Interview: Peter Mandelson,” THE NEW STATESMAN, 1 October 2008; “Business backs Mandelson’s Return,” BBC NEWS, 3 October 2008.