Bilateral encounters of a tougher kind

Trade Commissioner Peter Mandelson knows that the bullying methods he has used to nail down new economic partnership agreements with African, Caribbean and Pacific countries will not work with India.

The redoubtable Kamal Nath, India’s commerce minister, is, for example, no Billie Miller, who has to fulfil the roles of both foreign minister and trade negotiator for Barbados. No wonder then that Mandelson turned up in London last week (14 December) for the launch of Nath’s new book on the Indian economy.

Nailing down the proposed bilateral trade and investment agreement with India would give Mandelson something of real substance to show for his sojourn in Brussels. For it is not just because of trade policy that the EU-India talks are so important. The Commission has to demonstrate that now that it is putting trade firmly into the context of a broader international ‘economic foreign policy’, it can deliver on its objectives.

One element of the Lisbon Agenda, mentioned in the strategic report on Lisbon launched last week by President José Manuel Barroso (11 December), is a new emphasis on foreign trade. This calls for promoting "ambitious bilateral agreements" (India and South Korea are top of the list). There is also to be more aggressive use of EU trade defence instruments such as anti-dumping in order to beef up the Community’s efforts to prise open barriers to access to foreign markets.

What all this amounts to is a bigger effort to use the EU’s dominant role in world trade - eurozone exports last year totalled €1.9 trillion compared with €1.1 trillion for the US - as a foreign policy ‘soft power’ tool.

China is among the obvious targets. The Commission expects the EU’s rocketing trade deficit with China to hit €170 billion this year (it was €131bn in 2006). The EU is, not surprisingly, becoming increasingly impatient about Chinese barriers to EU exports, especially at a time when China wants to boost its foreign direct and portfolio investment in Europe as well as its exports.

In public nobody will link EU trade policy with member states’ foreign policy. But China should not be surprised if its current aggressive stance towards Germany following Chancellor Angela Merkel’s meeting with the Dalai Lama, does harden the mood in Brussels on trade and wider economic relations. Germany has clout in the EU and presenting a united front is what a joined-up foreign policy is all about.

Europe is now more determined, in a multi-polar world, not to leave itself vulnerable to the divide-and-rule approach which, for example, the Americans perfected towards the EU and its member states. The Russians also refined these divide-and-rule tactics to an art form. They, too, are now being mentioned as particularly vulnerable to a more cohesive EU foreign economic policy approach which makes better use of the Union’s ‘soft’ trade power. Remember, Russia is not yet a member of the World Trade Organization. But one of many things which will be needed to help realise the EU’s foreign economic policy potential is closer co-operation among the relevant commissioners. How much of a team player can Mandelson be?

As for India, like the EU, it has much to gain from improved bilateral trade relations. I wrote a year ago, after a visit there, that the international economic climate was likely to be less supportive of sustained near double-digit economic growth for India in the next ten years than it has been for China in the past 20. Among other things, I suggested, the US was not going to carry on being the world’s consumer of last resort for the next 15 years. The fall-out from the US sub-prime disaster has confirmed this.

Professor Jim Rollo of Sussex University is among those who believe that, in spite of the complexity of negotiations, the potential for reaching an EU-India free trade agreement is high. The fact that agriculture is not going to be an issue in the talks (too sensitive for both sides) and that trade structures are complementary rather than overlapping, are grounds for optimism. He worries, however, that India’s ambitions for the agreement are more limited than the EU’s. Moreover, the Indians themselves are making it clear that if the EU pushes for non-trade and investment elements to be part of an agreement (Rollo mentions environmental, social and human rights issues) then reaching a deal will be very difficult.

But perhaps the bigger threat to a speedy agreement is likely to be the coming downturn in the rapid pace of growth of the world economy, particularly if India’s growth also slows and this coincides with the forthcoming Indian elections.

When the Lisbon Agenda was launched nearly eight years ago, it was too much of an exercise in rhetoric, Community navel-gazing and gawping at America’s (short-lived) economic miracle. Thankfully those days are over. The strategic report on Lisbon and the engagement with India illustrate the way in which the EU is at last fixing its gaze firmly on the global horizon. Bilateral trade talks are an important element of this wider vision.

• Stewart Fleming is a freelance journalist based in Brussels.

Trade Commissioner Peter Mandelson knows that the bullying methods he has used to nail down new economic partnership agreements with African, Caribbean and Pacific countries will not work with India.