Trade in the Transatlantic Agenda

The Right Honorable Peter Mandelson, PC
Member of the European Commission for Trade

US Chamber of Commerce
Washington
11 February 2005

As you know this is my first visit to Washington in my new job. I was pleased to be able to come here before Bob Zoellick leaves his position as United States Trade Representative. He has made an outstanding contribution in that role and I am delighted that he will still be alongside us in the State Department. And, it goes without saying, I look forward to working very closely with his successor.

The first thing I have learnt about working with the US on trade is the vital role of Congress. That is why in this short visit I have spent most of my time on the Hill. This has been both illuminating and rewarding – if at times challenging!

I have also been able to meet some of the key figures in the second administration of President Bush. I am delighted that the President himself will be visiting Brussels in less than two weeks. Coming to Brussels is the best move he could make. That will follow the visits of Secretaries Rice and Gutierrez. I was pleased to be able to meet Condi Rice in Brussels on Wednesday before taking the plane to come here.

The current high level of Transatlantic activity tells us something. There is a sense of determination on both sides to give new life to the partnership between Europe and the United States and to put behind us the strains that arose from differences over Iraq.

The political bond between Europe’s democracies and America is deep. In the 20th Century we saved the world from fascism and then from communism. America’s power was essential for this. America’s steadfastness then made it possible for Europe to be reunited.

We in Europe have not, I hope, forgotten the debt we owe.

But our partnership has made an uncertain start to the 21st Century. Iraq was the most obvious cause of differences. But there have been others, such as how to respond to climate change. The differences of our societies and political cultures have been ruthlessly examined by Kagan and others. There is a fashionable argument that we are fundamentally and structurally diverging.

I can understand that argument. Our societies are not identical. Our values sometimes lead us in difficult directions. Whether it is in attitudes to the death penalty or GMOs [Genetically Modified Organisms]. Our self images are necessarily different: the United States is after all a remarkably powerful nation. The European Union is a complex and innovative co-operative system of 25 different nation states.

But it is short-sighted and superficial – and just plain wrong – to argue that, on what really matters, Europe and America are divided. Our fundamental values remain close. Our belief in democracy, the rights of the individual, economic, political and religious freedoms.

Although we no longer face a single, obvious political or military opponent, the threats to our security are still threats we share. We may not always agree on the urgency of a particular threat, nor on how best to counter it. But we do agree that terrorism and proliferation of weapons of mass destruction are the dangers we must confront and that we need a combination of “hard” and “soft” power to do so.

And equally, as we look forward, we identify the same agenda of wider issues facing humanity, such as poverty, migration, resource shortages and climate change. These are all issues which no one nation, neither the United States nor any nation of Europe, can address alone. We shall need to address them together, including through the UN and other international institutions.

Those are long-term issues. Right now, we have a common will, whatever the past differences, to build a stable democracy in Iraq. We all want to try again for a settlement between Israel and the new Palestinian State. I congratulate Condi Rice on the impact her activism is already having here. We have a common goal to prevent the Iranian government developing nuclear weapons – even if not all Europeans and all Americans see eye to eye on how best to pursue this – while making sure we keep abreast of what’s happening amongst the people of that country. And we have a shared interest in building new strategic relationships with countries such as China and India, even if here too, we have differences in particular areas of policy.

So this is my point. At the deep level – at the strategic level – there really isn’t a structural division between Europe and America. There is still a structural unity underpinned by shared values and similar interests. The simple truth is that neither of us has a partner in the world anywhere near as close or as important as the other. And in this uncertain world I think we all appreciate how important it is to have partners.

But we have to think about our relationship and how to adapt it to changing circumstances. We need the vision to renew it.

Because the relationship we need has to be equipped to deal with issues which are very different from those we faced only 20 years ago.

I want our future partnership to be more balanced and to be complementary. In international affairs, in foreign and defence policy, Europe needs to be more united and more willing to take a role in global leadership. At present, Europe has fine words and a large(ish) wallet. We need to build stronger foreign policies and defence capabilities to contribute to the security challenge. We are working on this, for example through the European Security Strategy, which was published a couple of years ago. We have a way to go.

The United States for its part should feel able to share leadership with Europe. I believe that it would be helpful if America were able to signal more clearly – as the President is signalling – a wish to work with Europeans on a broad global agenda. This is an agenda in which European influence and soft power can complement America’s more direct and tangible power.

These actions – stronger policies in Europe and a greater American readiness to share leadership – can, I believe, be mutually reinforcing. They are also mutually dependent: we will not have one without the other. It is not a question of chicken and egg. It is a question of hatching 2 eggs simultaneously.

What is really important is that Europe continues to be strong and united. We have recently taken a major step in enlarging the European Union to include 10 new countries, many former satellites of the Soviet Union. Inevitably it will take us time to adapt. But Europe will not be stronger if the consequence of enlargement is a dilution of our integration and ability to forge common policies. I hope that when President Bush visits us he will restate the historical support of America for European integration. This is the strongest signal he could send of support for what we are doing to reunite our continent in democracy and economic development and to build a Europe more capable of assuming its global role.

The new Commission of which I am a member, led by José Manuel Barroso, has an important part to play. European political strength, unity and social progress can only be achieved on the back of economic growth and confidence. This is the mission of the European Commission. We have recently published 5-year strategic objectives, which commit us to work for growth and jobs in the European Union. We have reviewed the so-called Lisbon agenda of measures designed to energise the European economy. We have committed ourselves to a push for economic dynamism as the only way of underpinning our broader political goals for social protection and a better environment. We are conscious that Europe has not matched the economic innovation of the United States. We want to do better.

This is important because the political relationship between us is underpinned by an immensely strong economic partnership. Trade and investment are the bedrock of Transatlantic relations – outside and beyond the sphere of political relations. It is driven by individuals and businesses, by NGOs and other actors in civil society, by investors, savers and pensioners.

I want to build on this. Both in working with the United States on issues of broad international economic policy and in working to strengthen our own bilateral trade and investment relationship.

Without doubt the biggest challenge in the trade policy sphere is to bring to successful fruition the Doha Development Agenda. The international trading system benefits us all. It gives us a stable environment based on common rules. However much we may sometimes resent those rules, they are better than the law of the jungle.

We need the Doha Round to succeed in order to reinforce the system. My aim is to help bring it to completion before US negotiating authority expires in 2007.

We need to be ambitious and we need to show a sense of urgency. I want to work during 2005 for balanced progress across the board: on agriculture, on industrial goods, on services and on trade rules.

On agriculture, the European Union is reforming its Common Agricultural Policy. This was necessary and I support it. The rewards will be enormous, making possible our offer to cut trade distorting subsidies by nearly two-thirds, to eliminate export subsidies and to offer improved market access on all products. We look to others to match this, including the United States. In particular we need to see how the US plans to reduce and discipline agricultural domestic support and export credit. This will enable the EU and the US to lead agricultural talks by example to a successful conclusion.

And if we are to make serious progress at the Hong Kong Ministerial in December we need to shift gears so that other areas catch up with agriculture. On industrial tariffs I want to see a more intensive negotiating process leading to real progress on the tariff reduction formula. In Davos in January we had good discussions on this and there are some interesting ideas around which may help us.

On services, I think the EU demonstrated its ambition through its offer of June 2003. We are ready to adjust that offer in May this year to take account of points that have been made to us. But we need the US and other developed countries to look hard at their own offers if we are to obtain serious commitments from the more advanced developing countries in particular. Those countries have a lot to do if the round on services is to succeed.

In the area of rules, we need to move fast on anti-dumping. More and more developing countries are building trade defence regimes. And many of those new rules don’t respect the agreed disciplines and are liable to be used for protectionism. Unless we reach rapid agreement on how to handle this issue, the opportunity for reform will be lost and countries across the world will lock in unsatisfactory and restrictive regimes damaging world economic growth.

Another area of trade rules which is important for the EU is geographical indications. So far there has been zero progress, despite what is agreed in the Doha Round mandate. Europe needs some flexibility from the US and the Cairns Group on this issue.

All this needs leadership. Europe and America still need to give that leadership to international trade talks. But we also need to be subtle. The days when Europe and America could fix the deal are long gone. The Group of 20 led by Brazil, India and China, is now a major player. The Group of 90 ACP [African-Caribbean-Pacific] countries is, rightly, pressing its demands. Negotiations are complicated because they have to be genuinely owned by all.

This is why development is so important in the Round. If we are to succeed we have to produce benefits for rich and poor. More than ever before the agenda for the poor is crucial. To achieve international buy-in to the global trading system which will enable it to survive and flourish, we have to harness international trade policy to wider efforts in 2005 to promote development and eliminate poverty. That means supporting efforts in the UN as we review the Millennium Development Goals and supporting the pro-development agenda of the British G8 Presidency.

Last week in London I set out a comprehensive agenda of ways in which trade could serve development in 2005. I am going to work for this agenda over the year ahead and I invite the United States to join me. The headline issues on my agenda include pressing for further market access for exports from poorer developing countries; more recourse to special and differential treatment; a rules and standards agenda in trade which favours development; support for reform of rules of origin.

Another priority is to continue to expand WTO membership. The experience with China shows how beneficial this can be. I hope that when we meet in Hong Kong in December we can welcome into the WTO 4 important economies that remain outside: Russia, Ukraine, Saudi Arabia and Vietnam.

With Russia and Ukraine the European Union has completed its bilateral negotiation. I hope very shortly to be able to move forward in negotiation with Saudi Arabia.

Last but not least, the economic relationship between Europe and America. Starting with the disputes. In our relationship I have found that people tend to focus on the negative. That’s normal, particularly in the media. Our bilateral trade is enormous. Inevitably there are disputes, and because Europe and America are big, our disputes are big news. They are important, and they are very political. In my short time in the job I have already understood that they absorb disproportionate amounts of energy.

We must set ourselves the objective of handling these disputes in a way that prevents them from dominating our agenda. In the roughly two-and-a-half months I have been in office the bulk of my discussion with Bob Zoellick has been dominated by civil aviation subsidies. More than the Doha Round. More than how to deal with poverty in Africa. More than how we can use trade to underpin progress in the Middle East Peace Process. I think this is a pity.

I am pleased on aircraft that we have been able to agree a framework for negotiation. It will be difficult to turn this into a solution of the problem but I am determined to try. Because I believe that we have to work constructively for fair solutions to these problems. My inclination is to negotiate where possible and to use formal dispute settlement only as a last resort. Of course the formal dispute settlement gives us an essential framework for negotiation and in every sense it is invaluable. But it cannot absolve us of political responsibility. I come to this job determined to solve problems where I can. I want to liberate our political energy in the pursuit of positive objectives.

So I am not going today to run through the litany of bilateral disputes. They are familiar to all of us. Sometimes they seem to generate more heat than light. Just let me assure you that, while I will defend European interests and rights with absolute conviction and determination, as you would expect US negotiators to do on their side, I will do so in a constructive spirit, seeking positive outcomes.

But in our bilateral relationship what interests me far more is the potential for further growth in trade and investment. At the EU/US Summit in Ireland last summer we agreed to consult widely on ideas for how we can improve things.

On the Europe side we are now beginning to digest the results. What this shows is that our stakeholders want us to address a new trade policy agenda. They don’t want us to work on tariff reduction bilaterally in a Transatlantic free trade area when we can do it multilaterally through the Doha Round. What they want us to do is remove regulatory and administrative burdens which affect competitiveness on both sides of the Atlantic. They want better regulation and more convergent regulation.

We need to come up with an agenda we can work on with a heavy emphasis on the regulatory dimension – be it in financial markets, trade in goods or trade in services. We need to look at other problematic areas like the relationship between trade and security in the post-9/11 world. And we need to keep going on familiar issues like public procurement and intellectual property, making a concerted effort on difficult points on both sides. And I think we need to take a fresh look at the idea of mutual recognition of services as a complement to what is going on in the Doha Round, with particular reference to licensing and recognition of professional qualifications across the Atlantic.

Let’s start with what is easier and try to build momentum. Those who have been around the course several times tell me that there is nothing new under the sun in Transatlantic trade negotiation. It may be true, (though I doubt it is) but it is no excuse. We need to take on forces of habit and vested interest.

This is where I am going to stop. This has been a most valuable visit to Washington. It has brought home to me the complexity and diversity of our agenda. It has shown me how political Transatlantic trade is. But while I do not underestimate the difficulties, I have a sense of hope: that we are understanding better the nature of the political challenges that face us; that we understand also how essential it is to use economic and trade policy instruments to address the new global agenda in foreign policy; that we seize the opportunity to make progress in 2005 on the Doha Round; and that we can inject new momentum into our own bilateral relationship both in solving disputes and in generating greater well-being.

Those are the aims that I want to contribute to in the five years ahead.