Europe and the United States must cooperate in creating "equitable economic globalization".
The global economy can only safely absorb the spectacular rise of China - which just overtook Germany as the world's biggest exporter - and other emerging powers if Europe and the United States jointly push for more free trade, good economic governance and fair investment rules.
Speaking to reporters after the speech, he also said that EU and U.S. negotiators on the continuing Doha round of global trade talks have been making progress on agricultural disputes that have held up a deal. But he added that time was running out.
"We can't go that far into 2008 and sustain these negotiations without fatigue finally setting in," he said.
Addressing Russia in his speech, Mandelson said the EU and the U.S. should work toward an international "code of conduct" to safeguard foreign investments in the country's vast energy industry. The EU is concerned Russia uses its energy as a political tool to keep neighbors in line while keeping foreign investors out.
"While I do not believe we can any longer dictate the global agenda, nor should we do so, we nevertheless still have the collective weight and influence ... to shape that agenda," he said in a speech at the Carnegie Endowment for International Peace, on the eve of the inaugural session of the trans-Atlantic Economic Council.
Mandelson said the German-proposed forum for the EU and U.S. to discuss strategic economic issues must be the venue where the two - which account for a billion people and the bulk of global wealth - develop joint approaches to sound economic governance.
Jointly chaired by EU Industry Commissioner Guenter Verheugen and Allan Hubbard, chief of the White House National Economic Council, Friday's session will focus on cutting red tape in transatlantic trade and investments.
Annual EU-US trade totals ($909.3 billion (euro620 billion)) and accounts for 40 percent of world trade. Two-way investments provide 14 million jobs, according to EU data.
Mandelson said these figures give Europe and the United States the power put "equitable economic globalization" at the core of trans-Atlantic relations, mirroring "the mutual commitment to democracy the (NATO) charter embodied six decades ago."
Globalization brought a billion new workers into the worldwide labor force in the last 20 years and made China a massive trading partner for Europe.
The EU-China trade deficit grows every hour by $20 million (euro13.6 million) and just two weeks ago China overtook Germany to become the world's biggest exporter, Mandelson said.
He said Europe and the U.S. must make clear "we are going to deal with (China) as we would any other major trading power. We will deal with China as we would each other."
But while the U.S. has agressively challenged China at the World Trade Organization, launching four new commercial complaints since 2006, Europe has been more reticent. It has initiated only one dispute, joining Washington in a case over Chinese rules on imports of foreign-made auto parts.
Mandelson called for cooperation to convince China to open its markets, boost protection of intellectual property and raise the value of the yuan. He said a stronger yuan would stabilize the Chinese economy by boosting domestic demand, slow the furious rate of its exports and "help cool an overheating heavy industry sector which is swollen with overcapacity and artificially cheap capital."
"China has been perhaps the single greatest beneficiary of a rules-based open trading system in the last decade. Now China must live by those same rules," said Mandelson.
The U.S., the EU and Japan have been demanding answers from Beijing on the commitments it made to open up its markets when it joined the WTO in 2001.
They have all expressed disappointment with China's refusal in WTO meetings to address numerous questions about its trade policy, from alleged price manipulation on the raw materials used in the steel, chemicals, airplane and automobile sectors, to government measures that apparently limit Chinese imports of foreign-made cosmetics, pharmaceuticals and other products.
Mandelson said Europe and the United States can also "legitimately expect" Russia, the only major economy outside the 151-member WTO, to open up to foreign investors.
The United States does not recognize the entry of Ukrainian territories into Russia. Such a development will seriously complicate prospects for a diplomatic settlement