Mandelson Does His Bit for Doha

Much has been made (including by me) of French President Nicolas Sarkozy’s feud-by-press-release with Peter Mandelson, European Commissioner for Trade, over the EU’s offers in the World Trade Organization’s Doha round of trade talks. And a statement delivered yesterday by Mr. Mandelson clarifies why President Sarkozy feels he can get political mileage out of criticising the EU’s negotiating tactics.

Speaking to the main negotiating group of the WTO at the start of a week of intense negotiations (in the hope of putting this seven-years-old and four-years-overdue round to bed), Mr. Mandelson delivered the EU’s opening statement. The trade press went a bit wild (by trade press standards) when Mr. Mandelson appeards to increase the EUs market access offer in agriculture from an average 54 percent tariff cut to an average 60 percent tariff cut. Other WTO members suggested, and Mr. Mandelson seemed to confirm, that the “improved offer” was really just a recalculation using the type of convoluted accounting tricks favoured by Social Security administration officials. But in amongst Mr. Mandelson’s statement was this gem:

“On agriculture, the EU will be the major net loser in any deal.” (italics in original)

With statements like that from the EU’s chief negotiator and major promoter of the WTO trade talks, is it no wonder that mercantalism is rife in the EU? Mr. Mandelson is (unwittingly?) playing right into the hands of President Sarkozy and other critics of open markets in agriculture.

Farm subsidies in Europe currently account for about 40% of the EU budget, and Europeans currently pay high prices for, among other goods, dairy, sugar, bananas and beef. They deserve a break. While the farmers may fume, the EU would be a net gainer from the Doha Round overall. That’s the message Mr. Mandelson should be delivering to the WTO members and the world at large.

The raison d’etre of the WTO (and the GATT before it) was to allow countries to take politically difficult steps away from serving special interests, like farmers, under cover of promoting exports for other sectors. While I may lament this mercantalist mindset, it has achieved liberalization and avoided a repeat of the tariff wars of the 1930s. But maybe this whole idea has served its purpose. Maybe Brink was on to something.