"We Have To Reinvent The Idea Of Europe"

A s a chief architect of Britain's "New Labour" strategy, Peter Mandelson was Tony Blair's most valued adviser. As E.U. Commissioner for Trade, he now focuses on Europe's competitiveness. He spoke last week in Brussels to Time's Leo Cendrowicz — but only until a phone call from 10 Downing Street interrupted the interview ...

The European Union is facing a crisis of confidence. How can the E.U. make itself more relevant in an increasingly complex environment? It's a crisis of direction rather than a crisis of identity. It reflects two things. Firstly, people take for granted that the E.U. has created the biggest economic space in the world. Secondly, it reflects a loss of confidence. Europe feels under pressure, not sure if it should be a bulwark against globalization or a means of embracing it. This confusion is not unique to Europe, but it has come at a time when populists on the left are whipping up public opinion against foreign competition and market forces, and those on the right are fermenting hostility against foreign migrants.

You helped rebrand the Labour Party in Britain. Are there any lessons there for Europe? Yes. With the Labour Party I realized quickly that you couldn't simply do a spray job. If you repaint an old car, it's still going to be an old car. Instead you have to re-engineer the model, reconstruct it, rethink whether that model is what the public wants and whether they would feel comfortable driving it. In a sense, we've got to do the same for Europe

How do you do that? How do you make Europe relevant and meaningful? The European project was originally about war and peace. Now it's about jobs and growth, for most people. What we have to do is reinvent the idea of Europe. We have to show how our combined economic strength equips us to come to terms with globalization and benefit from it. We've got to reinterpret Europe in terms of the shifts that are taking place in the global economy. We've got to demonstrate why European unity and integration, our vast single market, our single currency, equip us with the strength to embrace globalization.

Why are we seeing protectionist tendencies emerging in Europe and the u.s.? It is because all our economic certainties are being eroded. In the space of a decade, China and India have emerged as dramatic, dynamic competitors. Over here and in America, there is a sense this has put our jobs and livelihoods at stake, that we've given away too much in the name of free trade. It's hard to overstate the importance of explaining why this is not the case. The case for an open trading system needs to be made again and again. The aggressive removal of quotas and tariffs over the past half-century has helped create a prosperity that has never been higher in human history. Instead of saying that globalization is a fact, that it's inevitable, we've also got to demonstrate that while the growing interdependence of the world economy is indeed a fact, it's not uncontrollable. It's not some force governing our lives in which we have no influence. After all, what is the World Trade Organization if not an extraordinary international attempt to govern global trade by the application of commonly agreed rules?

How do you see the transatlantic relationship? If I could give some advice to the White House, it would be that President Bush should be his own ambassador more. He has a combination of personality, insight and charm that is disarmingly refreshing.

What about your own relationship with the Americans? You shrugged off the jibes from former U.S. trade representative Robert Zoellick about your style, but it must have stung. I couldn't understand it. Why should critical policy issues be turned into character references? The U.S.-E.U. relationship is a billion-dollar-a-day relationship. The disputes between us are a fraction of the total, and have to be seen in perspective.

You've just negotiated a deal with China limiting exports to the E.U. until 2008. Won't there always be the risk that some industrial sector will become vulnerable to cheap foreign imports? I've made it clear that this is a transitional arrangement to deal with the economic shock of unwinding protection in the textiles trade. I believe that if you treat China as an enemy, then it is likely to become one. China is perfectly entitled to its liberalization. My preference was to seek a lasting agreement because the importance of our relationship demands it. This is a strong signal that China takes its international trading responsibilities seriously and that Europe respects China's right to benefit from trade liberalization. We will face some difficult issues with China over full implementation of its wto commitments, its obligation to open its markets, to reduce barriers to trade and to respect and enforce intellectual property rights. On this, Europe and America have a shared agenda.

Is there a perception of weakness among Europe's leaders? Europe needs strong leadership. That means taking a long-term view, not squandering what we've built up, and not taking for granted the benefits we have from European unity. It also means explaining things properly to a public that is either skeptical or complacent. Instead of confidently facing up to it, leaders are shrinking from it. In the process, change is being exploited by extremist forces.

Do you think it is fair for the poor new members from eastern Europe to pay for Britain's rebate? The main issue is what we are spending this money on. We've got to rethink Europe's direction. We have to satisfy the public that the direction is right, the policy is right and that therefore the spending priorities are right. While there is the immediate issue of who pays what into the budget, any new thinking has to be preceded by a debate and a new consensus about Europe's performance, how its social model can be sustained, and how we can modernize the model in a way that makes us competitive in the global economy.