Examination of Witness (Questions 241-260)
Mr Peter Mandelson
24 JUNE 2008
Q241 Chairman: Good
morning. It is good of you to see us this morning.
Mr Mandelson: What I should have intelligently
done—I did think about this last night but forgot to do
anything about it this morning—is given you a copy of my
remarks yesterday which I delivered at the civil society on the
civil society dialogue meeting, which I have periodically, on
the state of play of the DDA. I am going to get copies and you
can take it away.
Q242 Chairman: We will absorb them
as we go along.
Mr Mandelson: What I was thinking of
was if you had read it before I came in then you could have asked
some questions on the basis of it. This DDA today is a very good
example. Yesterday was a good day in Geneva. We resolved one issue,
which is better than none. Yesterday we resolved the assumptions
that the Mercosur countries, Brazil, Argentina, Paraguay and Uruguay,
want us to take into account the basis of their Customs Union
when calculating the impact of the formula concerning non-agricultural
market access on those countries, given the quantity of intra-regional
trade that takes place amongst them, because it would make a difference
to the use of their flexibilities and how far they can shelter
their prized sensitive product sectors from imports through the
operation of the formula on the basis of the 2004 Framework Agreement,
and so it goes on, and on and on. They are such technically complex
issues, fraught with political tension, Argentina being the main
driver of this issue with that country at loggerheads with each
other, as you know, because they are going through one of their
periodic Argentine phases. We have been held up on this issue
of the treatment of their Customs Union and their intra-regional
trade for some time now. We come to Friday, no resolution of this
matter. Brazil and the United States, their ambassadors and senior
officials, meet throughout the weekend. They come back into a
wider group of 12 yesterday, Monday, and resolve it by the afternoon,
but it has taken us a week to resolve one issue in this matter
on the industrial goods side. At this rate of resolving one issue
per week, we might have a Ministerial in July 2009 or 2010, not
the week after next. So, yesterday was a good day in the sense
we resolved it. Today is a very bad day, which is why I have been—
Q243 Chairman: It has gone backwards?
Mr Mandelson: --- very intensively on
the phone last night and this morning. We have gone to the next
issue, which is the question of an anti-concentration clause to
give operational effect to a line in paragraph eight of the 2004
Framework Agreement which said that it will not be possible to
shelter an entire product sector in a developing country's flexibilities,
so that we will at least have some new market access within that
chapter, within that product sector, and therefore some new trade
for our exporters as a result of this Round. Why is this very
important? I am sorry to go straight into this but it is as well
to illustrate to you how the technical interacts with the political
in the negotiating process. Why is this important? It is important
because we are paying in agriculture. Other developing countries
and agricultural exporters would say, "Up to a point you
are paying because you have your own little special sensitive
products and flexibilities that enable you to shelter what they
need". Let us assume we are paying through the nose. We are
paying through the nose on agriculture and the big issue of trade
and politics for me, representing the European Union, is that
if we really want this Round to make a contribution to the global
economy and trade flows in the future, if we really want to put
in place that sort of ratchet to stop protectionist pressures
pushing the great global economic machine backwards, if we want
an insurance policy put in place, in other words, to make sure
there is less scope, less space and opportunity for the emerging
economies to put their tariffs up in the future, then we have
got not only to bind their existing openness where their duties
are applied at this level as opposed to bound here to reduce this
gap between the two, but we also want to shave off their applied
duties so as to create some new market access as a result of this
Round as well as simply consolidating their existing openness.
We need this not only for good trade reasons, this Round is after
all meant to be contributing to new trade flows, new business
opportunities around the world, but politically. Unless I can
bring this back and demonstrate to those I represent, to my domestic
constituency, that there are opportunities being created for us
whilst at the same time as we are paying in agriculture for others,
then I am not going to get it passed through our Member States
and there is going to be a road crash between the Commissioner
and the Member States.
Q244 Chairman: I see.
Mr Mandelson: For example, some Member
States will say, "Well, there we are, we told you all along
the Commissioner is a naive, gullible Brit who is only interested
in selling our European agriculture and not committed to getting
anything back in return. We told you this all along, so let's
block his deal and turf him out on his ear". Politically,
I have a real challenge in this negotiation and I have to persuade
the larger, more competitive developing countries, what I would
call the emerging economies, to make some contribution of their
own to creating some new market access, not across the board but
within their flexibilities as agreed, but slightly constraining
their flexibilities through this anti-concentration clause that
we are discussing in Geneva today, implemented over many years,
not overnight. So it is limited, it is countered by flexibilities,
it is not overnight, it is implemented over many years, and one
day you might actually thank us for putting in place that modest
external pressure to continue your liberalisation, to continue
your opening up, because you need it as developing countries in
order to keep driving your economic growth and lift more people
out of poverty. My God, is it a devil's own job persuading them.
Q245 Chairman: My first question
was going to have been can you offer the Committee an overview
of where the trade negotiations are at the moment which you have,
as it were, really told us, that it remains extremely difficult.
We have also got a couple of questions on what do we do if it
all does not work, which you may well wish not to speak of on
the record.
Mr Mandelson: I am prepared to because
I alluded to it in my public remarks yesterday. I have been quite
cautious in what I have said. I think the systemic consequences
would be very substantial, not only for the multilateral system
as it operates within trade but the multilateral system more widely.
If the negotiations collapsed, if we were not able to bring the
Round to conclusion, not only would it be the first World Trade
Round in history that did not conclude in a positive way, but
the developing countries would draw the very ready conclusion
that this Round, which was set up as a "Development Round",
and I come back to the wisdom of describing it as such in a moment,
as they would see it to enable the rich countries to pay back
to the developing countries some of the gains, benefits and advantages
that they claim we have 'wrung out' of developing countries over
generations in trade, which has driven our growth and now is the
time for us to pay back, to open up our markets, to reform our
agriculture, not only here but in the United States as well, to
put in place trade rules, slightly stronger or different trade
rules that benefit developing countries, putting in place an important
package of special assistance and support for the least developed
countries in the world, and here we are, we cannot live up to
our original intention, we cannot live up to the name of the Doha
Development Agenda because we are so greedy, we are so selfish,
here again we have a bunch of rich countries wanting to settle
everything on their own terms as they have done in every previous
Trade Round and it is entirely their fault that the thing has
collapsed. The blame game will be huge. There will be endless
platform seeking and rabble-rousing about rich countries wanting
everything their own way and not prepared to pay back, not prepared
to recognise that there is a new multi-polar economic world emerging,
that globalisation means we cannot call the shots entirely on
our own, that we refuse to acknowledge this shift of economic
power from West to East, we are not enfranchising and incorporating
the interests and political weight of the emerging economies because
we just cannot bear the thought that whilst they are emerging
we are submerging, and in spite of our inability to come to terms
with the global age in the 21st Century we have caused this collapse
of the World Trade Round, and so it will spread throughout the
multilateral system.
Q246 Chairman: This critique presumably
being delivered mostly by, as it were, the rather richer of the
developing countries.
Mr Mandelson: Absolutely.
Q247 Chairman: Not by the poorest?
Mr Mandelson: No, but there is the alliance
of 110, which is all the developing countries, which is not a
real alliance at all rooted in any common economic interest, by
the way, except in the general geopolitical sense that, "We
are developing countries and they are rich". So you will
have developing country solidarity kicking in but it will be led
most articulately by President Lula of Brazil, President Mbeki
of South Africa, but with a lot of others joining in. You will
have the Chinese as well in a rather audacious spirit expressing
their own solidarity with the developing world, of course the
developing world being rather resistant to making commitments
to open up their economies because they are most afraid of China,
not anyone else. They are terrified of this great Chinese manufacturing
machine and export monolith rolling through their lowered tariffs
scrunching the manufacturing base of every developing country
within shooting distance, and that is a real issue in this Round.
It is one of the reasons why a multilateral round as opposed to
a bilaterally negotiated Free Trade Agreement creates real difficulties
for developing countries and emerging economies because they cannot
discriminate against who they open up to, they have to open up
to everyone being in a multilateral round, including China. I
have lost count of the times that the Foreign Minister of Brazil
or the Commerce Minister of India have said to me, "Look,
if we were just negotiating with Europe we could do business,
but the fact is in a multilateral round we are taking on commitments
to open up to all, including China, and it is China we are most
fearful of". However, that will not be said if the talks
collapse because China will be there with the rest banging the
drum against the rich countries. What validity is there in this
argument against the "rich countries"? There is some
validity in the sense that whilst we in the OECD area are making
real commitments, certainly both in agriculture, reform of our
subsidies, and lowering of tariffs, and the United States will
do so as well if this Round is negotiated to a positive conclusion,
but the United States will not follow us, incidentally, they will
follow their new Farm Bill if they do not have a World Trade Round
to follow and the Farm Bill takes American trade distorting farm
subsidies to a new level of unacceptability, we are making real
commitments and the United States will follow us from agricultural
trade distorting farm subsidies, and on farm tariffs, and on industrial
tariffs too we are opening up considerably both to each other
and to the emerging economies really significantly lowering even
further tariffs which are extremely low already. I think we are
doing our bit. I do not feel, from a European point of view, that
we are holding back, that we are making offers that I am ashamed
of; I am not ashamed of them. In agriculture it is true we can
only take things to a limit. We take things to a limit in reform
of our subsidies that our CAP reform in 2003 took us to but, even
so, we are talking about a 70 per cent cut in most trade distorting
farm subsidies and an overall trade distorting subsidy ceiling
cut by 80 per cent. We are able to do this as a result of the
2003 reforms, and we need to do this, so I am not asking anyone
to express any pity or sympathy for what we are doing. What we
are doing is real on the subsidy side and on the tariff side.
It is a real effort, if you take in agriculture a combination
of our decoupling of our domestic support, the real percentage
cuts, plus our commitment to eliminate all our export subsidies
by 2013, plus our tariff cuts, you are talking about a real change,
and a creation of real space, both in our domestic European market
and international farm markets where we will have a smaller European
presence which is opening up real new market access for agricultural
exporters in the world. Who are the agricultural exporters that
will benefit? In the main, apart from Australia, the United States
and New Zealand, it will benefit Brazil, Argentina, South Africa.
You would be right in saying what about the other real developing
countries, the smaller less competitive but more needy where levels
of poverty are much higher, to which I would say we have a darn
good record in the European Union in giving duty-free, quota-free
access to developing countries, not only the 50 poorest developing
countries in the world are able to export Everything But Arms
into the European market duty-free, quota-free with a small interim
transition for sugar, but to the ACP countries, the African, Caribbean
and Pacific countries, with whom we are negotiating Economic Partnership
Agreements, they will have duty-free, quota-free access to the
European market on a scale that they have not previously enjoyed.
Alongside the multilateral negotiation, which will, I accept,
benefit the larger, more competitive developing countries, we
have in place duty-free, quota-free access for the least developed
countries and for the African, Caribbean and Pacific countries
where they wish to avail themselves of the opportunity provided
by those Economic Partnership Agreements. So, all told, I think
we have a pretty good record, but it is an illustration of where
the multilateral sits comfortably beside the plurilateral and
the bilateral.
Q248 Chairman: Thank you, that was
very useful. Let me just try and pick apart what we have got.
I would like to ask you what does "good" look like in
this context? Is there something short of complete success? Is
there something short of complete success that will do, or short
of a full Round it is failure?
Mr Mandelson: It depends on your point
of view. From a classical liberal point of view, I would define
success as getting to the finishing line given this Herculean
difficulty that we have in pushing this boulder uphill. To get
it to the top of the hill would be a cause for immense celebration.
The fact that we had not broken up, the talks had not collapsed,
the international trading system and its rules were still in place
and the WTO was still intact and all we associate with the WTO
was still motoring in, that would be success in itself. I have
to tell you that is a rather British view. If I were expressing
a more continental view I would have to define success not only
as success for the multilateral system but success for new trade
flows creating genuine new market access where there were real,
new, practical, tangible business opportunities being created
as a result of the action on tariffs and subsidies in agriculture,
tariffs in industrial goods and in the case of services, where
there are neither tariffs nor subsidies but a consolidation of
the opening to foreign competition of different countries' services
sectors. The question, however, is whether it is reasonable to
attach value as a result of this negotiation to simply consolidating
the existing openness of the world trading system or whether you
have to define success in terms of additional value, new market
access being created directly as a result of this Round. My view,
and it is both an institutional view as well as a personal view,
is we need more than consolidation.
Q249 Chairman: Not just locking in
existing liberalisation?
Mr Mandelson: Yes. I accept that this
is the first Round in which the emerging economies, developing
countries will be making real cuts in their applied tariffs or,
indeed, their theoretical bound tariffs as well, and it marks
a real gearshift for the international trading system in our method
of negotiation to get the emerging economies, to get the more
competitive developing countries to do that, but, nonetheless,
it is a reasonable thing to ask them to do, first of all because
everyone has to make their proportional contribution, secondly
because it is in their own best interests and, thirdly, I cannot
sell it politically if they do not.
Q250 Chairman: Absolutely. When will
you know? How will you know? Who is going to blow the whistle?
Does a moment come when you say, "Okay, actually I can't
get any further"?
Mr Mandelson: The next defining moment
is to put in place the modalities for agricultural and non-agricultural
market access. The modalities are basically the tariff cutting
formula, how it will apply to developed and developing countries,
differentially of course, what flexibilities will be enjoyed by
whom, what exclusions will be enjoyed by whom, which is very difficult
for this reason: developing countries are not identikit, they
do not all come out of central casting, they are not homogenous
countries with replica tariff structures and schedules, they are
different. Therefore, the way in which the formula bites into
both their bound and applied duties will be different. Let me
give you an illustration of this. South Africa entered the WTO
as a sort of developed country and it has taken on tariff cuts
and it does not have a great difference between its bound and
applied duties, so a formula which causes it to reduce its tariffs,
for South Africa more than other emerging economies, bites more
and more quickly straight into its applied tariffs.
Q251 Chairman: It is not theoretical
at all?
Mr Mandelson: It is not theoretical,
it is more real and live. Now, South Africa says, "We are
a competitive developing country, you have got to see us in the
same way as you judge other emerging economies. We have a tariff
structure and scheduling different from these others, you have
got to make special provision for us so that the formula, when
agreed at the time of modalities, bites us in a slightly less
severe way than it will others", not in fact that it bites
anyone in a particularly severe way but, anyway, we will put that
aside for one moment, "you must make an allowance for us".
I have always taken the view that we should make such an allowance,
we should recognise the particular status and difference in treatment
that South Africa should attract. The United States has taken
rather longer to be persuaded to arrive at this point of view,
but they have and we are doing it. We are making a little bit
of a special allowance for South Africa. We are making another
special little allowance for the Mercosur countries. Then Venezuela
wants to come in. Despite its oil wealth, it wants to be treated
as a small and vulnerable economy. Bolivia also wants to be treated
in an exceptional way. It does not make much odds to us how Bolivia
is treated, to be perfectly frank, although it would be helpful
if they stopped nationalising our companies without compensation.
The fear is that this will spread and the ASEAN countries in South
East Asia will say, "Hold on a moment, if you are making
an exception here, an allowance there and a special provision
over here, we want some special help as well". The fear is
that as you start making these special provisions you create an
epidemic amongst countries, all of whom are demanding are special
treatment at the time of modalities, which will make it impossible
for us to arrive at an agreement. That is the defining moment,
when we agree how the formula for tariff reductions in agricultural
and non-agricultural market access will be put in place, in what
form, how they will bite on different developed as opposed to
developing and then amongst developing, how they will bite with
certain exceptions. We have also said at that time we must have
a clear view and we want everyone to signal what final offers
they will make in services as well because if I am going to be
able to persuade EU Member States and the USTR is going to be
able to persuade her US constituency that these modalities are
acceptable, we want to see this outcome more in the round, as
it were, and have some idea of what binding of existing openness
and, indeed, what new openings might be created in the services
sector as well. Again, a very big ask to make of developing countries,
not because they do not, cannot and should not make these commitments,
but because on the basis of a previous agreement the services
offers were going to follow, not come at the same time as industrial
goods and agriculture. For reasons that I have explained, we need
to have some signalling of intention by the emerging economies,
by the 30-odd developing countries who matter, at the time of
the modalities otherwise it will be harder for me to sell the
outcome at the time of modalities.
Q252 Lord Kerr of Kinlochard: And
outside you have all these people saying it is quite wrong and
wicked to be trying to get to that on agriculture.
Mr Mandelson: Not all of them, but a
lot of civil society say, "You are just trying to force-feed
liberalisation and globalisation and push it down the throats
of poor developing countries". Yes, you have a bit of that
as well.
Chairman: You said earlier in the game that
Doha was trailed as a Development Round. Can I get colleagues
to ask a couple of questions on development, Lord Woolmer?
Q253 Lord Woolmer of Leeds: I think
the Commissioner Peter has covered quite a few things. What, if
anything, further do you think European trade policy can do to
help the least or less developed countries to meet the calls from,
as you put it, civil society and so on?
Mr Mandelson: It needs capacity building.
It is one thing giving them access to our market, which we do
in Europe, but if they have insufficient goods to trade then they
are no better off. This requires a number of things. LDCs and
a number of developing countries rely historically on the export
of a very limited number of commodities, barely transformed commodities
with little added value to those commodities. We have got to operate
our policies in a way that enables the economies of the least
developed countries first of all to have greater opportunity and
success in turning their commodities into tradable goods so that
they are transformed rather than simply exported. We can help
in doing that, first of all, by opening our markets to their goods
as well as their commodities and, secondly, easing and simplifying
the Rules of Origin that we apply to their preferential access
to the European market. I will illustrate what I mean by that.
If you say, "If we are giving a tariff preference and special
access to our market to country X, we expect those goods genuinely
to be produced in country X, not produced in China and shipped
through country X to use that channel to get access to the European
market but genuinely from that country", the country will
turn round and say, "Yes, but we need to import certain basic
materials possibly to contribute to our transformation of those
materials into tradable goods and products. We want you just to
show a little more leniency and latitude about the sourcing of
materials for our goods and in the case of textiles or whatever
we want to have a single transformation. So we are getting a raw
material or an unfinished good into our market, we transform it
or fully finish it, and then we export it and it only has one
transformation and you accept it into your market". There
are those who take a rather more prudent view of this than perhaps
we would on the trade side. We favour trade. We favour opportunities
for trade from these countries and, therefore, we would take a
wider view of what has gone into making this product for onward
export to the European Union than some who would say, "No,
the rules have been abused, they are far too flexible. Any Tom,
Dick or Harry is able to channel what they are producing, just
a little finishing job, a little label, by country X for onward
transmission to Europe and that is not good enough. That is too
flexible. It is bending the rules". So there is a tension
over that. That is one way where we can open our markets, make
our Rules of Origin slightly more simple and flexible. Thirdly,
to help these LDCs invest in their capacity to produce as well
their infrastructure through Aid for Trade and gear our aid to
trade and to capacity related to trade. We also want them to grow
their own regional markets. It is one thing saying, "We are
open to you" but, let us be honest, they should have more
and easier accessed markets within their regions and in closer
proximity to them than the European market can provide. We encourage
them to lower the tariff barriers amongst themselves. We encourage
them to integrate their economies regionally so that their trading
space, the local markets for their businesses in which to supply
goods and services, allow those businesses to become more competitive
and profitable and employ more people, but also to use those regional
markets as a more attractive magnet to bring in inward investment
and foreign direct investment, private investment, because that
is what they need as well. You are actually tying in many strands
of development policy and strategy to your trade platform and
arriving at a point where developing countries are integrating,
co-ordinating, incorporating a whole number of different strands
of policy to a single development strategy, of which trade then
is a major part and provides some sort of driver of economic growth,
but it is trade being harnessed to development with a development
strategy being built up not only on a national basis by the countries
concerned but regionally amongst themselves. This is absolutely
at the philosophical and policy core of the Economic Partnership
Agreements that we are attempting to put in place with the African,
Caribbean and Pacific countries. It is a better development paradigm,
in my view, and it is a more modern 21st Century approach to combining
development and trade strategies. Where there are necessary adjustments
to be made as they lower tariffs so as to create greater trade
opportunities amongst themselves they lose revenue for their finance
ministries, so we offer assistance to meet the adjustment costs
and offer them ideas and help over a period of time to bring about
that adjustment from tariff revenue to alternative sources of
revenue raising within their economies. It is very complicated,
you have a whole number of different pieces to the development
jigsaw based on a firm trading platform. Is it easy to get developing
countries to approach this in such a coherent, strategic and long-term
way? It is really, really hard.
Q254 Chairman: I am sure.
Mr Mandelson: It is really hard in some
cases because of the limited capacity to grasp what we are trying
to achieve or because local vested interests prefer the status
quo because they have local markets tied up for their own companies
and interests and they do not want change, they do not want opening
up and do not want competition. Thirdly, they do not want to be
told what to do or even advised by the European Union. Fourthly,
because there are so many political tensions and disagreements
within countries and between countries, getting them to integrate
economically and in trade terms is a very difficult thing to achieve.
Q255 Chairman: After all, we have
not been that great at it ourselves in many ways, it took us a
long time.
Mr Mandelson: It has taken us in Europe
50-odd years.
Q256 Lord Kerr of Kinlochard: You
are also keen on bilateral agreements. What is the trade-off?
You are trying to bring this great thing to a satisfactory conclusion
but you are also out on another track. How does that work?
Mr Mandelson: It works in the following
way. In a multilateral negotiation you have optimal coverage across
the trading system of what you have agreed. You are, in a sense,
generalising and applying to particular countries which are anxious
and resistant to taking on multilateral commitments because they
feel that they are insufficiently taking into account the particularities
of their economies in their stage of development. In the case
of Free Trade Agreements you are taking the particular circumstances
of a country, or group of countries, and its trading relationship
with the European Union, putting in place more tailor-made openings,
adjustments, opportunities for investment, rules between us dealing
with non-tariff barriers as well as tariff barriers. In a sense,
it is a more replete tailor-made agreement which in time you should
be able to generalise more to the multilateral system so your
depth and reach is greater in the case of Free Trade Agreements.
But, if it is working well, Free Trade Agreements should be absolutely
in keeping with WTO requirements, they should not be some sort
of superficial, loose-fitting, rather narrow politically expedient
trade diversionary agreement, they should be a more replete WTO
compliant trade creating agreement which, because of the greater
openness or liberalisation or progress that those two negotiating
or trading partners are taking on, in time should enable them,
persuade them, to be more willing to multilateralise in the longer
term what they are accepting on a bilateral basis. In a sense,
in a multilateral you are generalising to the particular and in
Free Trade Agreements you are taking the particular and, hopefully,
in time folding it into the multilateral. That is a rather benign
view.
Q257 Lord Kerr of Kinlochard: It
is wonderful. Beautiful, sunlit uplands stretching ahead. Supposing
we get a train wreck in the Doha Round or, more plausibly, a Democratic
run Congress meaning some of this protectionist rhetoric, and
it all runs into the sands during the course of 2009, do you immediately
jump to bilateral agreements, the Free Trade Agreements? What
is the right position to get into, that the Doha Round needs to
be kept alive on life support in case views change, on that the
Doha Round should be dropped and one should start a narrower negotiation?
We have got to have a narrative.
Mr Mandelson: You have got to have a
narrative and you have got to have your apples and pears in the
same basket, but they are apples and pears. You have also got
to realise that each is going to be on different timelines. Thirdly,
and most importantly, you must ensure that what you are negotiating
bilaterally is consistent with and capable of being folded into
subsequent multilateral agreement. It is very hard to do but,
I will be honest with you, I have already started doing it. I
proposed to our Member States that our approach should change
on this. I did say that in 2006 because I wanted to be ready for
what I anticipated then would be the completion of the Doha Round
in 2007. I said that our priorities one, two and three are the
multilateral, but remember we have already got our existing EU-Mercosur
negotiations, which did not come to completion in 2004, they have
been suspended, so we reignite those. We have existing negotiations
between the EU and the Gulf States currently coming to a conclusion
but held up on two ticklish issues: Saudi Arabia's objection to
taking constraints on their export duties and, secondly, political
clauses that our Member States insist on inserting into this trade
negotiation. Then we have negotiations started with South East
Asia by me, negotiations started with India by me, and negotiations
with Korea, also started with me and possibly coming to a conclusion
at the end of this year. I am already doing it and I am already
there. I am there partly because in policy terms and philosophically
I do not see an opposition between the multilateral and the bilateral,
and, also, because in the event of the multilateral talks failing,
I felt Europe should be in a position where it could make up,
in trade terms through bilateral agreements some of what it had,
I hope, temporarily lost through the temporary failure of the
multilateral. I cannot stand still. I cannot see the United States
or Japan and others concluding bilateral agreements of their own
and have Europe left so far behind the curve, given it takes us
six months to get a policy in place, six months to get the policy
agreed by our Member States and the mandate put in place and another
three months to start the negotiation. If I had not prepared the
ground and paved the way for this at the time that I did, I could
have been facing the failure of the Doha Round this year or next
and then scrambling in a rather undignified way to put bilateral
negotiation alternatives in place whilst others were a long way
up the course ahead of me.
Q258 Lord Maclennan of Rogart: Peter
has answered a great many questions very informatively. I am wondering
as we approach the end of our talk whether if things go less well
than you would hope in the Doha Round, and bearing in mind some
of the things you said earlier about the desirability of regional
negotiation at the EPA level, do you have any thoughts about structural
change in WTO that might make the conclusion of agreements easier,
particularly in respect of the least developed countries? Although
they are all equal, obviously some members are much more equal
than others. The criticisms we have had from the NGOs and some
of the academics on this have all pointed to the powerlessness,
vulnerability and incapacity to negotiate and so forth. I do not
know whether there is a structural way forward, but I wonder if
it has occurred to you.
Mr Mandelson: This is an extremely important
issue and I am glad you have asked the question. We have recognised
it for a long time. We make the following provisions. First, we
have a relationship with African, Caribbean and Pacific countries
because of our historical relationship, because of Lomé,
Cotonou and now the replacement trade relationship in the form
of Economic Partnership Agreements. I would not say that we look
after the interests of the ACP and the WTO but we give them a
heck of a lot of support, a lot of financial support. Their organisations,
opportunities for meeting, the people who service them, those
who professionally equip them to undertake negotiations are often
paid for by the European Union. Even when we are paying for platforms
on which they stand and criticise us, we equip them with sticks
to beat us around the head, et cetera. We do that very generously.
I have the bruises and scars to show how effective they are in
using their sticks and bars from time to time. Secondly, we recognise
and support the view that any agreement on trade with really developing
countries, particularly LDCs, has to be deeply asymmetrical. There
has to be reciprocity otherwise they are not WTO compliant, but
they are incredibly lopsided reciprocal trade agreements. Thirdly,
we recognise the need for capacity building and we give and organise
Aid for Trade to increase capacity. Lastly, in the context of
the multilateral programme, for example, when we are negotiating
the lowering of tariffs we have to understand that for those countries
whose trade depends on tariff preferences, as the tariff comes
down so do the preferences and, therefore, there is a major issue
in the multilateral round about preference erosion. There we are
trying to strike a balance between our desire to increase trade
flows in the international trading system by lowering tariffs,
whilst at the same time in practice and over time to take account
of the lower tariff preferences from which LDCs are suffering
as a result of multilateral negotiation. It is hard to do and
results in tremendous tensions amongst developing countries, the
more competitive ones who want tariffs lowered and the least developed
ones relying on preferences who want the tariffs kept up so that
their ability to jump over them remains intact as far as possible.
We try to strike that balance for them. Structurally, institutionally,
I think the WTO is very cognisant of the needs and special position
of smaller, more vulnerable, less competitive developing countries.
We not only have the special development package for LDCs negotiated
in place, in which we have been the market leader, we have pioneered
it in Europe more than anyone else in the WTO, and I am proud
of that, but we have got to maintain that cognisance, that allowance,
practical facility and negotiating resources given to LDCs. If
I can just make this last point, and in a sense it goes back to
what Lord Kerr said. If the multilateral talks fail the systemic
damage, not only to the international trading system but the multilateral
system as a whole, in my view will be substantial. We are not
going to see a collapse of international trade as a result, but
the systemic damage will be substantial. For example, I think
that it will be less easy to get agreement with developing countries,
the emerging economies in the post-Kyoto talks heading towards
Copenhagen and the very, very difficult reciprocal, binding proportional
commitments we are trying to get on the climate change side if
we have collapsed on the trade side.
Q259 Chairman: Nobody will try a
multilateral ever again?
Mr Mandelson: I will come back to that
question in a moment. I am saying that the relationships, the
negotiating dynamic, the texture and conversation that needs to
take place between developed and developing countries on climate
change, for example, I believe will not be helped if there is
collapse and fallout from the failed Trade Round. Managing the
process of globalisation, managing the emergence of a multi-polar
economic world in which we are coming to live in this century,
managing the negotiation about who does what in the world to make
it work, to tackle the many global challenges we have, all require
a new set of relationships, a new sort of political management,
a new sort of give and take, new definitions of reciprocity and
what should be in our commitments and which are bound and which
not. This is the way the world is going and we have to recognise
this. I am sorry to keep pushing my speeches at you but I will
give you copies of the Churchill Lecture from New York the other
week where I addressed this. If the WTO talks fail it will be
less easy to manage all these relationships and bring negotiations
to agreement across a whole range of issues in the coming years.
That is my view. On trade specifically, will another multilateral
round be possible if this one fails? To be frank, I think it will
be hard to restart another multilateral round even if this one
succeeds. The appetite for them, the complexity of them, the number
of countries now in the WTO negotiating, the sheer number of cross-cutting
interests and issues will make the commencement and completion
of another multilateral trade round very hard work.
Q260 Lord Kerr of Kinlochard: Damage
to the dispute settlement procedure, the bicycle theory?
Mr Mandelson: I think the authority of
the WTO will be damaged if these talks fail. You will not see
a collapse of the dispute settlement machinery but what you will
see is the attachment of developing countries to the WTO and their
confidence in that system weakened. It will not collapse but it
will be weakened. I will tell you from a European perspective
that what I fear in a sense is the emergence of BRIC power as
an alternative to the international trading system or the emergence
of APEC, the Asia/Pacific, US-China led development of free trade.
The answer to this may be right, Europe has got to get its skates
on and start devising its own trade arrangements with the BRIC
countries and Asia/Pacific, but it is not that easy to do. Frankly,
the problems we are encountering multilaterally will be very similar
and will be replicated, except that we are not great agricultural
exporters in Europe so we have that happening less than the United
States does, but we will have these problems replicated. One development
which might gain support if the multilateral talks collapse is
a response by us that the developed world should start organising
their own free trade arrangements amongst themselves and excluding
the rest. There is a demand amongst some for an EU-Japan Free
Trade Agreement, an EU-US tariff-free area, et cetera. If we were
to make that the exclusive priority and put our energy only into
the developed world it would be damaging for the free trade system
in the world. You cannot say that we should forget about the progressive
integration of the emerging economies into the international trading
system, and instead concentrate on developing our own developed
country OECD trading arrangements. The risk would be that over
the long term you institutionalise a north-south division. We
need a single international trading system. We need a progressive
integration of developing countries to that international trading
system. We need to be able to anchor the emerging economies, the
Chinas, Indias and Brazils, into our rules-based international
system in order to hold them to account. Some in Europe will say
that is naive. Their view is that China, India and Brazil will
never play by the rules, let us just strengthen our own internal
market in Europe, our own OECD trading arrangements, and if they
cannot play by the rules they should not be rewarded by the international
trading system. This is a minority view, a view without legs at
the moment, but if things get more divided the sectarianism within
the international system will grow and international trade would
suffer if those ramifications were to come about. I am going to
have to leave you, I am afraid.
Chairman: You have given us more time than we
had hoped for. Thank you very much indeed for having us. I think
the only other thing we can do is wish you luck! Thank you.
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