Charlemagne. Trading blows

How Peter Mandelson, the EU trade commissioner, ran into a spot of bother

IT FEELS all wrong. A British election campaign is on and Tony Blair is battling for a third election win. Yet on the eve of the launch of the Labour manifesto, Peter Mandelson - for many years Mr Blair's most trusted adviser - was stuck in Strasbourg, attending routine meetings at the European Parliament.

It gets worse. Although Mr Mandelson's new job as the European Union's trade commissioner has taken him out of British politics, it also offers the compensating advantage of a chance to rebuild his battered reputation. After two forced resignations from the British cabinet, a stint in Brussels may have seemed a good idea. But only six months into his new job, Mr Mandelson is in danger of having a new and damaging placard hung around his neck: “the man who wrecked transatlantic trade relations”.

At issue is an increasingly acrimonious dispute between the EU and the United States over subsidies to Airbus and Boeing, which has degenerated into a bitter personal quarrel between Mr Mandelson and Bob Zoellick, America's outgoing trade representative and incoming deputy secretary of state. Last October, before Mr Mandelson took up his job, the Americans filed a suit at the World Trade Organisation (WTO) against “launch aid”, the soft loans that European governments give to Airbus. One of Mr Mandelson's first acts as trade commissioner was to persuade Mr Zoellick to put the lawsuit on hold, and seek a negotiated settlement. This week, the three-month deadline the two men had set ran out, amid a slew of angry words - and no deal.

As far as the Americans are concerned, Mr Mandelson lured them into a negotiation against their better judgment and changed the terms of the debate to include discussion of alleged subsidies to Boeing - only to prove quite unable to deliver the cuts in aid to Airbus that he had promised. Mr Zoellick, who has a short fuse at the best of times, is fuming. He has publicly accused Mr Mandelson of using political “spin” and compared him unfavourably with his (French) predecessor, Pascal Lamy. For his part, Mr Mandelson sees “Bob” as intellectually arrogant and overly academic. “It's like trying to negotiate with a brick wall,” complains one member of the EU's trade team.

There is little doubt that a personality clash between Mr Zoellick and Mr Mandelson has contributed to a marked worsening in the transatlantic trade relationship - just as did the personal animosity between a previous (British) EU trade commissioner, Sir Leon Brittan, and a previous American trade representative, Charlene Barshefsky. On paper, Mr Zoellick and Mr Lamy (an American Republican and a French Socialist) might have been expected to clash even more overtly. But in fact, the two men were similar: both swotty nerds, whose idea of relaxation was to train for running the marathon. Mr Mandelson, by contrast, is shrewd but not intellectual, a deal-maker, not a technocrat. His team hopes that he will get on better with Mr Zoellick's successor, Rob Portman, who as a Republican congressman is a fellow politician. He should be in place next month. But there is also an appreciation in Brussels that things have gone so far in the Airbus-Boeing dispute that it will take more than a friendlier face in Washington to defuse the row.

Prince of darkness

This deterioration in trade relations is a blow to Mr Mandelson, who had been settling into Brussels well. In a European Commission short of obvious stars, he has been regarded as one of the more assured performers. The Mandelson style has always been to position himself as the trusted adviser of the leader. Having done it with Mr Blair, he seems to have replicated this relationship with José Manuel Barroso, the president of the European Commission. Mr Barroso has appointed Mr Mandelson to a number of key advisory groups: the commission president's speeches are larded with Mandelsonian phrases. But to maintain his position as a trusted adviser, the spinmaster needs also to preserve his reputation for competence. A damaging dispute with the United States on his watch is distinctly unwelcome. That a row with the Bush administration actually plays well in some quarters in Brussels is scant compensation.

However entertaining it looks, the Mandelson-Zoellick dispute is not ultimately the nub of the problem. Bigger political and economic forces are at work. It is surely no accident that the Bush administration's decision to get tough over Airbus was made during a presidential election campaign. Boeing's complaints continue to attract a ready audience in Washington. On April 11th, when the original deadline for a negotiated agreement ran out, the Senate passed a resolution by 96-0, urging the Bush administration to return swiftly to the WTO, “if there is no immediate agreement to eliminate launch aid.” The Senate resolution, which talks of the “loss of over 60,000 high-paying US aerospace jobs” and “$30 billion in market-distorting subsidies” to Airbus, captures the current American mood.

Political considerations also play a role in Europe, where Airbus symbolises lots of things that EU leaders would love to believe in: the benefits of European integration, European technological prowess, the possibility of a successful industrial policy, and the preservation of all those lovely high-paying manufacturing jobs. Mr Mandelson may have succeeded in building a good relationship with the president of the commission, but he must in the end follow the wishes of Europe's national governments. And even Mr Blair, whose non-interventionist, pro-American creed was honed by Mr Mandelson, is an unabashed Airbus fan. On a campaign visit this week to a British factory that makes wings for Airbus, the prime minister hinted that he would look favourably on an application for “launch aid” for its new A350 aircraft. The Americans have promised that any such aid will automatically trigger further WTO action. For Mr Mandelson, it seems, there may be no getting away from the British election after all.

Commentary feature looks at how Peter Mandelson is fitting in as a European Commission and focuses, in particular, on the tensions in trade relations between the EU and US over aircraft subsidies.

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