Council on Foreign Relations
New York, N.Y.
ROBERT HORMATS: May I have your attention? We’re going to begin. My name is Bob Hormats, and I want to welcome all of you to what I know is going to be an extremely interesting discussion and presentation by Peter Mandelson.
Before I begin the introduction of Peter, I’d like to just make a couple of comments. This meeting is part of the C. Peter McColough series on international economics. It’s been organized by the Council’s Corporate Program and the Maurice R. Greenberg Center for Geoeconomic Studies. Peter’s presentation will be on the record today, and I am instructed by the Council to ask all of you to turn off your cell phones, your BlackBerries, and various and sundry other economic—other electronic devices.
First of all, it’s a real pleasure to introduce Peter, and to be able to preside at this meeting. Peter is someone I’ve known for a very long time. He has served as a British combination of a—in his past—of a [political adviser] Karl Rove and a [former Secretary of State] Henry Kissinger. He has been—you can interpret that differently. He has been actively involved in developing strategy for the [British] Labor Party. He was director of campaigns and communications in 1985. Later, he was [British Prime Minister] Tony Blair’s campaign manager in the 1997 election, which brought Labor to power in Great Britain.
Since 1990, he’s been a member of Parliament, up until he had to leave to go to the [European] Commission. He’s also served on the British cabinet as secretary of state for trade and industry, where he introduced Britain’s first-ever national minimum wage policy, oversaw a number of measures to strengthen regional development in the country, and very importantly, given the kinds of issues we and Britain and other countries are facing today, he was instrumental in presenting the government white paper, Building the Knowledge-Driven Economy. This is obviously something Americans and Europeans and others are focusing on a great deal. And Peter was really doing this in the latter part of the 1990s.
Subsequently, he was appointed secretary of state for Northern Ireland, where he worked out the Northern Irish power-sharing government, and worked out an agreement with the IRA [Irish Republican Army] to put aside their weapons. And he’s done a number of other things there. That’s the Henry Kissinger side of Peter. He has been very actively in the development of policy, the policy network in Europe, which is essentially designed to deal with policy issues in the U.K. and other parts of the continent. It’s been an important think tank, an important generator of ideas.
And since the beginning of the year, Peter has been, I guess, last year, the new [European Union (EU)] commissioner for trade, and has been focusing a great deal on a range of issues that have to do not simply with U.S.-European economic and trade issues, but with a broader set of issues that are related to the current round of trade negotiations, the [World Trade Organization (WTO)] Doha Round, which are focusing not simply on trade amongst the industrialized countries, but focusing also on ways of developing a greater relationship between industrialized and developing countries, so the developing countries feel they have a greater sense of participation in the international trade system, and derive greater benefits from it.
It’s a particular pleasure to introduce Peter, because we share something that is rather unique in this part of the world, and that is, we both spent our early years in the same region of Tanzania, where I was doing some research, and Peter was participating in a group of voluntary activities in the Musoma region of Tanzania. Probably most of you have never heard of it, but it’s where President [Julius] Nyerere came from. And I think that background is something that’s influenced Peter a great deal in the way he’s looked at trade and the way he’s looked at other issues, with a focus on economic development and how they impact on poorer countries.
The moment that we now face today, and where we are trying to address a number of trade issues, as a nation, as a world, I think, is rather interesting, and I think it’s particularly timely in this respect to have Peter speaking to us, because as many of you know, there is a great deal of economic nationalism in this country and many other parts of the world.
There’s a concern in this country that we have a growing trade and current-accounts deficit. Normally at a time in this country when you don’t have an election year and when employment is improving, you tend to not have protectionist pressure, or inward-looking trade pressures. We do at this time, largely because certain pockets of the country don’t feel they’re benefiting from global trade and are concerned about the overall trade environment.
It’s not very different in other countries where you have people questioning globalization, questioning whether there should be an expansion of trade, questioning whether the trade agreements that we’ve entered into in the past have benefited large numbers of people, questioning whether we should go forward to cut barriers further, to expand trade more. Does this not expose weaker groups of people to more competition? Are the costs not greater than the benefits? This kind of debate is going on in this country and in many other parts of the world.
And of course, there are lots of frictions between the United States and the EU on a wide range of issues, and between the United States and the EU together and China and other emerging economies, as peoples, workers, businesses in our country are concerned about large numbers of imports coming in, particularly from low-wage countries such as China.
I cannot think of a more interesting and appropriate moment for us to hear from Peter Mandelson, given his background, given his interests, given the role he’s playing in global trade today. It’s a real pleasure to introduce Peter Mandelson, the commissioner for external trade of the European Union. Peter. [Applause]
PETER MANDELSON: Well, Bob, thank you very much indeed for that introduction. I must say, I’m absolutely delighted to be described as a combination of Henry Kissinger and Karl Rove. I don’t think anything could give me more pleasure at this time of the day. I know Henry reasonably well. I’ve never met Karl Rove in my life. And I hope neither of them will feel insulted by your description of me combining the best of both of them.
Now it’s very nice indeed to be back here at the Council. My experiences of being here, I find that as long as I rattle through my remarks quickly enough it gives you an opportunity to ask whatever you want of me quite unrelated from what I’ve said to you in the first place. So please don’t be worried about asking me any question whatsoever—obviously within reason. But my contention—and your introduction, Bob, was extremely appropriate—my contention is that we are at risk seeing an unhealthy isolationism gather force in Europe and America, driven by what I regard as a misguided critique of globalization.
It is not exactly the kind of critique that one might have heard from the Green movement in years gone past, or the more thoughtful elements that backed the demonstration [at the WTO conference] in Seattle five years ago. It’s a less theoretical critique, it is a critique which is more sort of economic at a street-level critique which says, “Foreign goods, foreign competition, are taking away my job, and I want to know what you guys are going to do about it and me and my future.”It’s as basic as that. And the new Asian—Chinese essentially, but Asian-wide, the competition is stoking these public fears. Doubly terrifying, because with this competition comes low wages and low costs that we simply can’t compete with in America and Europe, but together with mounting skills, mounting research, and other capabilities which eventually we may also fail to match.
Now, that means that the age-old fear of job loss on both sides of the Atlantic—and fear of losing your job is not exactly new—but what is new is that this is now compounded by the fear that there is also this unprecedented wave of competition, shift in sort of balance of comparative advantages between our own economies and those in Asia, that old jobs simply will not be replaced with a sufficient number of new jobs, that our job-creating capacity in our economies will not keep up in the way that it has in the past. And therefore the standard of living of many seems threatened.
My topic today is how our political leadership on both sides of the Atlantic needs to respond to these fears, and how we should make a fresh case for an open trading system. Now, for all our legitimate concerns with the war on terror, proliferation of weapons of mass destruction, the global challenges that will be debated at the G-8 next week, poverty, Africa, climate change, this question of free trade, in my view, once seen as a golden opportunity, now seen by many as a threat, is moving center stage in the transatlantic relationship. I was very struck when EU leaders met with President Bush and senior members of his Cabinet last Monday in Washington, how of all the things that we discussed, the thing that triggered the most keenest, the most intense politically exchange between us was China, competition, job loss, and the impact on both our politics.
At an everyday level, of course—and this needs just to be said, finally, because it’s important to do so—as far as we are concerned, Europe and America, the state of our transatlantic economic relationship is very strong. Flows of trade and investment back and forth across the Atlantic are massive. Political tensions in the recent past between the United States and some European countries have made little difference to this growing, deepening economic interdependence between Europe and the U.S. And here, politically, there has been Bush’s visit to Brussels in February, I think, generated a new momentum in the transatlantic [relationship]. He should have, incidentally, in my view, been more often his own ambassador during his first term. He is in my view, in the way he comes across, his own best friend, not his own worst enemy, although that’s—I’m not going to go back into dealing with people’s images.
But the EU-U.S. bilateral summit that we had, I thought it cemented our readiness to work together, not only on our bilateral links, but what we’re doing multilaterally together. In addition to deepening transatlantic trade and the investment relationship, we need to stand up for trade liberalization by coordinating our efforts to secure decisive progress this year in the completion of the multilateral trade talks, the Doha, redevelopment.
In liberalizing trade, making the case for open markets, we have an enormous past to build on. We worked together in the GATT [General Agreement on Tariffs and Trade], together, Europe and America, steadily knocked chunks off the world protectionism between the more developed countries, and as a result helped to deliver a large part of the prosperity that we have enjoyed, both of us, in the past half century of our economic history.
The establishment of the World Trade Organization was a culmination of decades of progress toward more open trade, with the establishment of a multilateral system of rules-based order including a unique international arbitration system for settling trade disputes—I mean, one that functions very well. I mean, it might be slightly tested—I hope not to destruction—by the current Boeing-Airbus dispute, which I regret has gone to the WTO. But it’s a durable mechanism.
And all told, these achievements are remarkable, they need to be safeguarded, and they need to be nurtured. But the fact is, these achievements that we’ve made together in opening trade, world trade, and creating this system, we’ve taken them for granted, and they’re now coming under growing public pressure.
Public opinion is constantly told that globalization victims—inevitable, it’s a fact of life—which was fine for people to hear when we were the principal beneficiaries of globalization. Now that globalization is dramatically serving the needs of more economies than our own, and there are big emerging economies—not just in China, and India, but Brazil and South Africa, and other agrarian economies—public opinion is growing a little bit more restless, and that’s why it needs to be more carefully addressed.
We have to demonstrate that globalization, if properly harnessed, can deliver benefits and opportunities for all, and that in contrast, sheltering our economies from growing competition is self-defeating, it’s a cul de sac, it’s a dead end, which will simply sentence to sort of a slow lingering economic death. And as the European Union opens its own single market to further competition by enlarging itself to the new accession countries, what we call the EU-10, the accession countries of central and eastern Europe, as we did a year ago, the low-cost economies which are now drawn within the European Union. This only increases the pressures of globalization. It only intensifies competition on our own continent, with the public backlash to that increased competition that we’ve witnesses in the recent referendums on our constitutional treaty.
I don’t know whether this was sort of described and summed up for you in the way that it was in Europe, by the means of the syndrome, the concept of the Polish plumber. Did the Polish plumber come across to you in the States? It was a complete sort of errant nonsense. But that is by the by. The onward march of the Polish plumber has struck fear into the hearts not just of plumbers, but many besides, living in what [Secretary of Defense] Don Rumsfeld rather undiplomatically called “Old Europe.”
Now in the public’s growing negative mood, they are frankly, in Europe, answering nearly for absolutely everything before they’ve even heard what the question is. That is the mood of the public in Europe. And let’s be clear about the basic physical problems with open markets. The problem with open markets is that the benefits of lower consumer prices and the benefits of growing consumer choice are spread out across the economy as a whole, while the costs of adjustment, cost in job losses, are concentrated on the few, the more vulnerable, and the more vocal.
Now that is the political dynamic which is created within our economies and our societies. And this of course exerts colossal pressure on policy-makers, who will inevitably have to respond more to the immediate pain of those who lose out from market openings than to those, very many more, who stand to gain.
Now it’s not easy for politicians—easy for European trade commissioner, to stand out in front of an audience of people—and I’m not actually talking about the audience of people I have met in the Council of Foreign Relations here in New York today—I’m thinking more of textiles, clothes, in France, or footwear manufacturers and workers in Tuscany, in Italy, or whatever, whose jobs are threatened by foreign competition, and to argue that in the economy as a whole, the jobs saved through barriers to trade usually involve extensive opportunity costs, higher consumer prices, lower rates of return to investors, and reduced incentives for innovation. That is fine for the economic theorists, fine for column—legal writers in newspapers. It doesn’t sound so great, it doesn’t sound quite so attractive, if your job is at stake this month or this year as a result of foreign competition.
Nonetheless, the argument for open trade has to be made, while at the local level, I believe, strongly alleviating—we have to alleviate anxieties, cushion in an appropriate way those who lose out from greater competition. Public policy, market industrial sectors exposed to very sharp sudden adjustments, local communities and individuals who need to be reequipped for change and for future employment.
Now let me bring this close to home very quickly politically in Europe. On our continent, our response to this growing public unhappiness and eventual backlash, our response requires a new aggressive economic and social—in Europe, we seek economic dynamism allied to new forms of social protection. Whereas we want a little bit more of America, a little bit more of your economic dynamism, coupled with concern for people’s welfare. The problem within the recent past, our social model, our way of pursuing social policies, have been better at protecting existing jobs than creating new ones. That, if I can find a simple way to sum up the problem, is, has been the problem of Europe.
At this juncture, therefore, Europe is faced, I think, with a fairly fundamental choice of direction. One way we continue—and leaping into wild generalization, but just bear with me—one way that we continue as we are, business as usual in Europe, and we sink forever into protectionism and the sort of populism which defeated the constitutional treaty recently in the French-Dutch referenda. The other way is to make our economies more dynamic, flexible, receptive to competition within Europe and from outside by pressing ahead with some painful economic moves to move the European economy up the value chain.
Our priorities should therefore be making what I think is the only choice we have available to us, but there are others who would disagree. Our priorities should therefore be to invest massively more in the future rather than invest heavily in holding on to what we have, and how we’ve done things in the past; massively more in the future, in Europe’s science space, in our infrastructure, in our flexibilities and the major efficiencies of our products and our capital and labor markets, and at the same time, help people, help workers adapt to the more rapid economic change that a combination of deeper market integration within Europe.
An increased supply-side investment that will bring adjustment is hard. It is tough when you are at the sharp end. People are entitled to expect support from their policy-makers and their government in making that change and carrying out that adjustment. At least that’s what I, as a progressive politician—but reform is for a purpose. The purpose of economic reform, the purpose of changing our welfare and our social systems in Europe, is not to Americanize Europe, as many would claim people like me, others [inaudible] sort of Brits and Blairites would want to do. We don’t want our precious values in Europe incinerated in the heat of this sort of economic fire. What we want, though, is reform that will enable us to make our European model of society sustainable for generations.
At the moment, the way we’re doing things, the direction in which we’re going will not be able to sustain what we prize and hold most dear to our way of—in Europe. Some will argue that changing our systems, changing our policies in Europe means abandoning our values; that we have to cleave to the sort of past way of doing things, otherwise we will lose our unique European identity. It’s an argument, a bogus one, which I became familiar with in our struggle to reform the [British] Labor Party in the country I know best, that if we modernize ourselves, we simply abandon what we stand for, forsake our identity, and as a result jettison public support in battling for what we’re doing. Incidentally, doing it New Labor went on to fight and win three general elections, but that aside.
Now we need social policies, therefore, that go with the grain of economic change, not fight it. We need new approaches, new institutions in Europe to tackle the new social challenges of extended opportunity throughout the [inaudible], whether tackling inherited disadvantage by investing in the social supports and education of young children and their mothers, or helping older workers reintegrate to the labor market, and adapting the traditional concept of retirement to the needs of the 21st century. At the same time, we need to focus European spending programs on the creation of European centers of research excellence, building technology platforms, and help counter the transatlantic brain-drain that Europe is suffering at the moment.
Now just one last point: We don’t need to combat isolationism and protectionism simply for our own economic base. Open trade has been and will continue to be the foundation of our prosperity. But we also have a moral obligation to support free trade and open markets, and that is for the sake of developing countries, poor countries, needy people across our globe who also want to climb up that ladder which we have already ascended. And if we don’t deal with our policies to help developing countries at the same time, all we are doing is enjoying the benefits of climbing that ladder for ourselves, only to sort of kick it away when others want to climb it in our wake.
And in Europe, our approach to trade policy for the developing world can best be described, or at least I describe it, as progressive liberalization—not sort of opening markets overnight to this radical exposure to international market forces; that’s just going to kill people stone dead. It has to be a progressive, steady step-by-step opening markets to trade, particularly to regional economies and regional trade and markets, in the first instance, to bring about a step-by-step integration to the global economy. And I’m happy to come back and comment further on that if you want.
Let me just say, in conclusion, no point politically at home, in the face of the public pressures we’re experiencing—there’s no point just saying to people, you know, “It’s sink-or-swim time; do your damnedest, and good luck, and we’ll be there to see what happens.”There have to be policies that support and equip the losers from globalization as well as rewarding the winners in globalization. Internationally, our approach should be progressive market opening, helping the poor countries, as I say, step by step to become full partners in the global trading system.
My basic stance, therefore, this morning is pro-open markets that foster innovation, growth in the U.S. and in the EU, and pro a trading system. And the Doha development round works to raise the living standards for the world’s poorest. That, I think, is the [inaudible]. That’s the best path [inaudible] here, there, and internationally, what I hope that the G-8 meeting next week in Gleneagles [Scotland] champions and takes forward [inaudible]. Thank you very much, indeed. [Applause]
HORMATS: Thank you. Thank you very much, Peter. Now we have the opportunity to hear from the audience. Larry, would you like to start?
QUESTIONER: I’m Larry [inaudible]. It seems to me the problems between Europe and the rest of [inaudible] are very strongly presented within Europe. Where do you foresee, or how do you foresee that evolution, working with the Poles, and as you add new countries and so forth—sort of problems?
MANDELSON: Well, the Poles are up for it. They’re all for it. I mean, the Poles and the Hungarians and the Czechs and the Slovaks and the Slovenes and the Baltic states, they’re all up for this. I mean, why are they up for it? I mean, they’re born again. I mean, when you’ve been through what they’ve been through, you’d be born again. And they are—with gusto, and with a vengeance. You know, they’re born-again enthusiasts for open markets, and they’re born-again adherents to the virtues of the open trade. They’re born-again advocates of the conditions we need to create if we’re going to factor mobile foreign capital and investments, and they’re born-again enthusiasts toward the transatlantic alliance. They’re also good Europeans. You know, they’re enthusiasts and advocatesâ€”
QUESTIONER: What about the French?
MANDELSON: --because of—let me—let me come, not to the French—to other countries in a moment. They’re advocates and enthusiasts because they’re good Europeans—not because they’re sort of visitors to Europe, not because they’re passing through the club to pick up whatever sort of benefit or bauble they can sort of stuff into their pockets en route. No. They’re there to stay. They are Europe. They always have been part of Europe, and would have been clearly so, had it not been for the Iron Curtain that descended on and divided our continent.
What other European nations have got to do, though, is to come to terms with the fact that they’re not sort of add-ons. They’re not sort of—them, over there, but not part of us. But they are European citizens, like the rest of us, who—when some politician in some of the older European countries, they talk about, you know, “these people, they’re coming into our economy to take our jobs.”These people are equal European citizens with the same rights, the same entitlements, but also the same obligations. And also the same potential to contribute hugely to the growth of Europe’s single market, to grow its market to what now has 470 million people, grow our intra-European trade opportunities.
And let’s not forget this too, that when people complain about what is called in some of our member-states delocalization—i.e., you know, some firm, some business is choosing to relocate from, I don’t know, France, for example, just to take an example—to Poland or Hungary. You know, these are businesses that are not leaving Europe. These are businesses that are seeking cost advantages by staying in Europe. If they weren’t able to find cost advantages in the new accession states, they would be more likely to leave Europe all together and to find those cost advantages in Asia.
So, what the new accession states have done in providing this new and additional lower-cost base in Europe have done, is made sure that a whole number of our larger European companies stayed in Europe, rather than taking themselves elsewhere.
HORMATS: Stanley [inaudible]?
QUESTIONER: Perhaps I misunderstand, but are you suggesting at some point what with this barbarous [inaudible] globalization, does that also mean that we will march towards similar social-support programs and the other countries would join this compact? Same work rules [inaudible]?
MANDELSON: [Inaudible] and, do you mean in Europe or internationally? I mean, what people do internationally and what rules they apply and what legislation they introduce and how they order their social systems are their business. And similarly in Europe, whilst there are certain sort of minimum standards and minimum expectations of entitlements and obligations, I am not advocating a sort of common, single, homogenous, European, EU-wide set of social policies and social institutions in which we are all sort of harmonized in some sort of seamless socially united sort of way right across our continent. No, I’m not, because these social legislation, social institutions and systems are better tailored and better operated nationally rather than at some grand, federal European level. But what I do believe—just as, when you’re intervening to support or act in a supportive way of different industries or different parts of the economic anatomy of your country, those actions are best tailored and designed and delivered on the ground; I mean, near to where they’re going to be experienced and near to where people are going to benefit from them.
But what I do believe is that what we have to do in Europe is to recognize that if we want the sort of economic change and reform that I believe is so strongly needed if Europe’s going to raise its game, mend its ways, repair some of the inflexibilities and some of the rigidities that its economy is currently exhibiting, then we do need to combine economic reform with social action to create a greater sense of confidence and security amongst people that will encourage them to embrace change and go with the grain of that change to recognize the benefits and the returns from globalization rather than viewing it as some sort of destructive tidal wave that’s going to sweep over them and destroy their lives. Yeah, we have to work with people and support them if we’re going to give them the confidence to go with the changes and the reforms that we want to see.
Now, those policies, in my view, are best delivered not centrally from Brussels, but by individual member states in their own national context. What we can do at a European level is encourage, point a way, create a sense of direction and momentum and build a consensus for the sorts of approaches and sorts of policies that I think are needed. And it’s a sort of social—in a sense, there’s a social justice consensus in favor of economic reform, economic change—one, as I say, that goes with the grain of economic change rather than sort of fights it through fear of what it’s going to do to you and your family.
QUESTIONER: [Inaudible]. You started by speaking about the misguided critique of globalization. And while one can maybe understand the politics of labor leaders, of congressmen here and there, of sector leaders, I’m very puzzled still with the position of the executive branch on both sides, here and in Europe. And let me take China as a case in point. I think there is a professional consensus that protectionism will not produce jobs, will not accelerate growth, will not solve the rigidities in Europe, will not solve the U.S. current account [deficit], and will not help the U.S. savings rate. And yet, one sees the China-bashing on the, say, exchange-rate policy, while everyone knows that the public-bashing is counterproductive. How can one explain the fact that secretaries, ministers on both sides of the Atlantic take such positions that are known in advance to be counterproductive?
MANDELSON: Well, because—two reasons. One is, as a response to public fears and public opinion, for all the reasons that I’ve rehearsed. The public feels and is touched by the short-term pain of adjustment much more readily than they understand and commit themselves to the long-term economic benefits of free trade and foreign competition. Obviously, that is being human.
Also, people do identify, and not unreasonably, some trading practices followed by China which they regard as unfair. Now, don’t ask me how—we could have a wider discussion—I mean, how China is able to flood European and American markets with goods that seem to be produced below cost. Don’t ask me how they do it. But we could have a discussion about what they pay their labor, but also what they pay the banks for their loans, which seem negligible, if amounting to anything at all. And these are important questions.
I’m not, by the way, one of those who labels China as a currency manipulator. Look, it wasn’t so long ago that China wouldn’t have had the technical competency to have a floating exchange rate and to peg the value of the Chinese currency to a basket of other currencies. They do have that technical competency now. And therefore, it’s a matter of political will, political judgment. But it’s a political judgment which, in my view, will not be helped or encouraged by an hysterical clamor being directed at Chinese policy-makers, either from Europe or from the Hill in Washington, DC.
I think we have to say something else about China, too—in fact, two things. One is that China’s entitled to its economic growth. China’s entitled to its development as an economy. China’s economic development has lifted a quarter of a billion people in China out of abject poverty in the last 10 years, and very, very—more millions of Chinese are going to be—are going to emerge further from poverty as China’s economic—export-driven economic growth continues. Now that’s something that surely we applaud. We want to see millions of Chinese lifted out of poverty, don’t we? Don’t we want to see that? I think we do, for this reason as well.
Yes, there is a big competitive minus for us from China’s growth and China’s expansion, and India and Vietnam and other Asian economies waiting to follow suit. But whilst there is a big competitive minus in the short term from this competition, fair or unfair, [inaudible], there’s also a huge plus for us in business and job opportunities for those of us in the West who are going to be producing and selling goods and services into the Chinese market as the Chinese people, or a growing proportion of them, start acquiring Western tastes and Western demand for high-quality and branded goods.
So let’s just bear this mind, that, you know, yes, we are facing ferocious competition in particular sectors and particular levels of the value chain, in a whole range of goods and services, but we’re also going to see the creation of what, a quarter of a billion, a half a billion middle-class Chinese who are going to have the consumer tastes and the spending power to buy an awful lot of our goods and services. That’s, of course, the ones that are not counterfeited and fall off of the back of the veritable Chinese lorry on the way to the market.
And that’s why standing up for our rights, particularly in relation to intellectual property rights, making sure that China complies with its obligations under its WTO accession—why one of the outcomes of the EU-U.S. summit that we had with the president and his colleagues last Monday was stronger collaborative action between the U.S. and the EU to deal with IPR [intellectual property rights] infringement. That’s not singling out China, incidentally—not singling out China—nor is it America and Europe ganging up on any third countries. But it is America and Europe joining up rather more effectively in coordinating our policies in this area. That, we’ve got to do more of.
HORMATS: I have a number of requests. Let’s start here, then we’ll go there and thenâ€”
QUESTIONER: Good morning. I’m John O’Connor. Peter, this debate is often framed as a regional or national set of cost and benefits to different interests. Could you comment on it as a demographic set of cost and benefits and is this going to become part of the practical politics? Is this as much about young versus old when you’re talking about restructuring economies? And will not one of those successful strategies available to politicians at the grassroots level to be more specific in targeting their arguments to the young who are going to have to compete and frame it as the old in your country are making you less competitive and making it less likely that you will maintain their standard of living.
MANDELSON: I don’t think I’d put it quite that way. I think I would describe it in a slightly more benign way than that, certainly if I was standing for election and wanted to be reelected. But look, we have an aging population, a changing age structure of our societies. We need to work harder and differently in order to generate the wealth to pay for that aging society. But we also have to find ways of enabling older members of our society to remain economically active. You know, we have to gear our way in which we employ people more casually but not in a way that necessarily obviously degrades them or diminishes their employment rights and the respect due to them, but to organize our work and employment practices, and therefore, our legislation and our trade union attitudes, practices too, in a way, that encourages people to carry on working in different ways, but enables rights and the way in which we organize work to be tailored more to the needs of those individuals. That’s what I would like to see.
Now for the young, I think that there is a revolutionary attitude taking place among the younger generation, and as I’m sort of suspended rather uncomfortably now at the age I’ve reached being one of those who are on the older side than those who are on the younger side, and a great deal in touch with the younger generation, and they’ve changed. See, their whole attitude to work is completely different. Their expectations about what work they will be doing and how they’ll be doing it, how many times they’ll change jobs and how many times they will re-skill and how many new waves of technological change that they will have to come to terms with, it’s all changing.
In Europe, the way in which people look at mobility is completely different from, you know, what it was when, you know, I was their age. People expect to move—move jobs, move homes, move within their countries, move from country to country within European continents, and move internationally. And I think that one of the problems we have in the Delhi trade route at the moment is finding ways in which we can change rules and make offers to others of our trading partners to recognize this need and demand for work and mobility [inaudible] rather ungainly way. The problem for us is getting mixed up a lot of public fears about mass migration, about immigration.
Now in the United States, this will have a particularly acute poignancy. You’re worried about people coming into your country: Who are they? What did they come here to do? Who’s trained them? What motives do they have? You know, and there’s a fear, and it’s not just in the United States, it’s in the European continent, as well. Different faces, different colors. Who’s behind these people? Not just a sort of fear of job insecurity, you know, Polish plumber on a very grand scale, but when, for example, people have advocated bringing Turkey into the European Union, there you’re talking about a country, very large in size, huge population, who if their country were to join the European Union, would give them rights to move to seek employment, to travel freely within the European Union, and people are saying, “Are we ready for this? Do we want this?”Now, this is a roundabout way, and I can’t even remember the original question. This is a roundabout way of saying that, when we’re talking about coming to terms with migration and movements of people on a large scale, in my view, our economies need mobility of people. You know, I don’t need to come to the United States and preach the virtues of immigration, given the basis on which your economy was built. But we need to be regenerated and refreshed and with people with different skills and different contributions to make to our society and our economy. But high, high unemployment in a number of our European economies, thus fear of being swamped, as the media would put it, plus that added turn of fear of terrorism is having a negative impact, and it’s something that we’re going to have to manage in public terms, especially [more] than we have been doing today.
HORMATS: I’ve got eight names and five minutes. I’ll try to take you in the order that I saw you raise your hand. We’ll start here and then this table and then we’ll try to get to more. Please.
MANDELSON: And I’ll be very quick as well.
QUESTIONER: Peter Brown. Peter, would you tell us what in fact the eleventh-hour agreement was? Where does that leadâ€”
MANDELSON: The eleventh-hour agreement after ten hours of extremely intensive negotiation with some very tough and rather competent Chinese interlocutors on textiles resulted in the government of China agreeing voluntarily to acquiesce, in a sense, self-limit their export of textile goods and clothing in a range of different product categories to Europe for the next two and a half years.
That’s not saying I want to turn my back on liberalization. I’m not seeking to, you know, restore quotas in textile trade. Those have gone have been negotiated away, and that’s a great prize of the international trading system. What it does enable us to do is just slow down the unwinding of protectionism over a slightly short—longer period, giving a breathing space for European—think it was the sensible path to take rather than getting into a trade wall with China over this, which would have been the alternative. Thankfully, a very aggravating, very unpleasant trade war with us using autonomous measures which we were permitted to do, but which are no less pleasant to employ, leaving in my view, to a considerable political fallout in the relationship between China and Europe in the long term, and that’s what I was seeking to avoid.
What America does, I don’t know what America will do. I know they’re having discussions with the Chinese and they’re going to be discussions the week after next between the USTR [Office of the U.S. Trade Representative], I read in the newspaper yesterday, and the Chinese government talking about a similar approach, but I can’t speak for the U.S.
QUESTIONER: David [inaudible]. Do you think it’s possible to advocate international trade without appropriate leadership of the European Commission? Last Friday, the European Commission was resoundingly defeated on agricultural biotechnology. Only one country out of 25 supported the European Commission, 22 opposed it. And you say that the Europeans shouldn’t invest in the future. Is it possible to invest in the future without recognizing the value of biotechnology and the free trade of biotechnological products? The U.S. State Department complained against this division. Do you feel a certain nostalgia for the days when [inaudible] assured effective leadership of the European Commission?
MANDELSON: Well, don’t criticize the leadership of the European Commission. We gave the leadership, thank you very much. Indeed, it’s just that it wasn’t warmly embraced by our member states. [Laughter] At any rate, on this subject of biotechnology, GMOs [genetically modified organisms], and free trade, there are, you know, officials of the European Commission strategically placed around this room, looking at with me with very beady eyes, waiting for me to misspeak in my response to what you say, and are terrified that I’m going to expose my own personal attitudes and beliefs on this subject in a way that might run counter to the case existing in the WTO. So I hope you’ve got the drift and burden of my views on this subject without my actually replying to your question. [Laughter].
HORMATS: Yes. Let’s take two more quick questions. Why don’t you ask your question, ask yours, and then Peter can answer them together.
QUESTIONER: Hi, I’m Bob Sinche. You talked—I think your comments are spot-on. The benefits to trade are really spread around a large part of the population, where—while the harm is really concentrated. Here in the United States, we have this institution called Wal-Mart, which I think the statistics show it’s probably China’s eighth-largest trading partner, and they estimate that 108 million Americans shop there every year. Do you think the retailing structure in Europe—you know, minimum selling prices, restrictions on retailers’ hours, et cetera, et cetera—prevent a lot of Europeans from realizing the benefit of trade the way many Americans are able to realize that here?
MANDELSON: Yes, I do.
QUESTIONER: That was easy.
MANDELSON: Now, just before, before you run away, I mean, there are different laws and different standards and different opening hours that exist in different countries. I mean, in the European nation I know best, opening hours are very liberal, but not, but the ability to locate wherever you want to locate is not quite so liberal. You know, there are different, you know, you can go to—though other European states—and you, member states, and you know, you’ll be lucky to sort of be able to shop for your groceries after 4:00 on a Saturday afternoon.
Actually, I was having this discussion with a Scotland CEO [chief executive officer] only last week. Doing great gains in China, as you say, and bringing huge benefits, incidentally, to European consumers, bringing in cheap, Chinese-made, children’s clothing for example, makes a huge welfare difference to many poor families in Europe who can clothe their children less expensively and more suitably than they were ever able to do before. But of course, there swings in roundabouts, different balances, considerations, factors.
HORMATS: One last quick question, please.
QUESTIONER: In attempt at a quick question, you talked—and I think most educated individuals would agree—about the value of globalization. But at the same time, there’s the negative of the Polish plumber fear, the overtime by the minute, the God-given right of ten, 12 weeks of vacation. The question is, how does globalization win? You talked a little bit about helping the loser, so to speak, in the global economy, what can realistically be done in a campaign or marketing or policy context. So—and the real specific question is, if you were to mention some of those items, would a French or Dutch or potential U.K. vote be any different?
MANDELSON: Look, don’t generalize about Europe and don’t confuse the European public with European politicians. I’ve talked about a potential public backlash in Europe against globalization and I’ve talked about the French referendum, for example, where the sort of center ground was all but sort of vacated in favor of, you know, the two extreme viewpoints or two different sort of populisms. The populism of the left, which you know gave vent against foreign competition and the populism of the right, which gave vent simply against foreigners. And it was not attractive.
But that’s not to say that there isn’t a vast wave mainstream opinion in France as there is in all European countries that is waiting to be mobilized, which is waiting to be galvanized, not by policies which are backward-looking or protectionists, actually, because people know that you’re not going to make your living by cutting yourself off from the rest of the world. You’re not going to get better jobs or more jobs by sort of putting up the draw bridges and sort of putting down the shutters and saying, “No, thank you very much, you know, we’ll operate some sort of form of European preference, some sort of fortress Europe in order to sort of cling on to what we have.”
Most people know that that’s just a cul de sac, as I say. But if you’re going to preach the virtues of greater flexibility to people, you’ve also got to offer them the support of education, training throughout their lives, much better relationship between your welfare system and your labor market than the one that is grown up in many of our European countries.
A different sort of culture, not one that says, “Through legislation and through collective bargaining and union rights, you can just sort of, you know, protect the status quo and hang on to the jobs that you have. In fact, all that does is to sort of deepen and institutionalize the very, very deep social injustice, what you’re saying, in pursuing those policies is, that we protect the jobs of those who are in employment, but we don’t do anything to create jobs and new employment opportunities for those who are presently excluded from the labor market. It is a new sort of social injustice when you run protectionist policies, you’re protecting what you have and for those who have got it at the expense of those who haven’t gotten it and they’re never likely to get it if you carry on with those policies.
Now that’s why we need different sorts of, you know, approaches to labor-market regulation, social policies, operating our welfare systems, to create that flexibility, that dynamism that creates opportunities for everyone to move more freely in and out of the labor market rather than, as I say, defending the jobs of those who are lucky to have them without placing sufficient emphasis on creating new jobs for those that haven’t.
All that restrictive labor laws do, frankly—I’m not—you know, I don’t want to sound like some sort of born-again sort of Thatcherite individual, and it’s not where I’m coming from. I happen to believe in minimum standards of social protection and employment rights, but if all you’re going to do is build up more and more protections and defenses, what are you doing is locking people into a status quo that doesn’t move, that isn’t dynamic, that doesn’t face foreign competition in a way that it needs to do. And it’s not going to serve you or sustain your way of life for the longer term. That’s the point. [Applause]
HORMATS: Peter, on behalf of all of us let me thank you. The title of your speech was, the Progressive Case for Open Markets, and I think you have certainly made it. This is going to be one of the most controversial issues of our time, how we deal with trade, how we deal with globalization, how we deal with foreign [inaudible]. You’ve given us some extremely compelling thoughts and we very much appreciate it. Thank you very much. [Applause]
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