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East Asia

I congratulate the hon. Member for Ilford, South (Mike Gapes) and his Committee on a comprehensive report. Indeed, it is so comprehensive that only bits of it have been covered in this debate. I intend to cover some bits, but I obviously cannot cover all of it. I was a little confused by the title of the report, ““East Asia””, which I take to mean the 10 countries in the Association of South East Asian Nations, plus China, Japan, the two Koreas and Hong Kong. Perhaps a direction should be given to all Select Committees to state their terms of reference at the beginning of each report. I respectfully suggest that that would solve the sort of problem that arose in our discussion about Hong Kong, because we would then all know precisely what we were discussing. May I also respectfully suggest to the Committee that although about 80 per cent. of the report covers China, the figures for trade with the UK show that those ASEAN countries, plus Japan and the Koreas are far more significant in terms of trade than the whole of China? The figures for China, including Hong Kong, show that it exports roughly £6 billion and imports about £19.5 billion, whereas the other group that I mentioned imports £22.5 billion and exports £10 billion. Incidentally, the trade gap with those other countries is less than it is with China. The trade gap with China is something that we should be concerned about, principally in terms of the amount of exports that we make to China. Before I get into the meat of my speech, I should like to deal with a relatively minor matter. Paragraph 423 of the report says:"““We conclude that the Government’s decision to increase the numbers of its personnel””—" that is, FCO personnel—"““in China is welcome, but we recommend that the Government consider establishing smaller posts or nodes for diplomatic activity in other parts of China””." The stark fact that the table in the report shows is that we have only five embassies and consuls in the whole of China, whereas we have 30 in the whole of the United States, yet the US has about one quarter of the population of China. The Foreign Office will need to address that fact very carefully indeed if we are to increase our diplomatic and cultural efforts and our humanitarian and trade lobbying in China. As the report makes clear, we all support the idea of free trade, but we particularly support the successful conclusion of the Doha round. I am sure that China, as a new member of the World Trade Organisation, supports that successful conclusion. Will the Minister say what he has done to lobby Commissioner Mandelson to ensure that we secure a successful conclusion? The fast-track negotiating facility in the United States is fast running out and we must now be at the 99th hour of securing a successful conclusion. Starting at paragraph 65, the report makes it clear that our trade effort with China is not good enough. As one witness said:"““Whilst Germany has a positive trading balance (with China) the UK is in deficit in a ratio of approximately 4:1 in visible trade and is underperforming even on invisible trade””—" that is, financial services, the so-called strength of our country. The witness continued:"““Over the past five years the UK has underperformed in both goods and services. Only 1.25 per cent. of UK total exports are to China and what is more the UK share of the … total market has fallen””" As Lord Powell said, in paragraph 66:"““Our market share is 1.3 per cent., which is obviously inadequate—China is Britain’s sixteenth export market. Here is the world’s fastest growing economy on course to be the third largest before very long and it is our sixteenth market.””" The figure for our balance of trade in November was one of the widest ever, at £7.2 billion. That is a significant figure that ought to be of concern to the Government. Although I am pleased to observe that UK exports to China grew at a healthy rate of 16 per cent. last year, there is still considerable ground to make up on many of our international competitors, notably the French. The French Government and French firms have been particularly successful in gaining access to Chinese markets. Stephen Phillips of the China-Britain Business Council told me that one of the reasons for that was that French top officials visit and liaise with their Chinese counterparts better. Indeed, President Chirac has visited China several times and is reported to have built a strong relationship with Chinese officials, which has helped to secure substantial market access for France in China. In comparison, the British Government have unfortunately been far slower to realise the benefits of regular high-profile visits to China, and have therefore secured considerably fewer benefits for British business and trade. I hope that the Minister will tell the Chancellor that it is high time he made high-profile visit to China, having just made an important visit to one of the UK’s other most important trading partners. Paragraph 70 quotes a witness as saying:"““There is no Whitehall China trade strategy.””" We need to sort out our act—at the top of Government. As was mentioned in the written answer quoted by the hon. Member for Ilford, South (Mike Gapes), we were far too late in taking up the Chinese invitation to take part in the 2010 Chinese world trade expo. It was not until considerable probing from me that the Government eventually decided that they would take part. In a written answer to me on 26 January, the Minister announced that £3.5 million would be given to the project. It will be the largest expo in the world. As I said, it will involve 20 million people, more than the number going to the Olympics. That is a considerable and prestigious world trade window, and we ought to have been in at the ground floor. We have an arbitrary strategy towards our trade relations. Investment and trade are generally governed by several regions—not one or two, but all of them, in conjunction with the UKTI—so there can never be a joined-up strategy on our trading relations. I hope that the Minister will reassure us that he will take action to avoid such damaging, duplicating efforts towards our trade in China. Starting from a base of almost nothing five years ago, the value of Indo-China trade is now bigger than the UK’s entire trade with China. I certainly endorse the Committee’s view that the Government must take action in future to ensure that all Departments recognise the importance of such events to British industry and seize the opportunities. Why did the Minister and his Government colleagues leave the organisation of our role in the expo episode so late? In paragraph 80, we see all too clearly that the Government have no clue about what business wants. From her words in that paragraph, it seems that the Foreign Secretary is not living in the same world as the rest of us. As the report states:"““one consequence of this system is that businesses operating in China have to join several organisations, adding costs and complexities to their efforts to enter the Chinese market.””" We should bear in mind that face-to-face relationships with China are crucial as a mode of business; the duplication only adds further complication. The report goes on to state:"““The presence of the United Kingdom’s Regional Development Agencies adds to the confusion. Yet the Foreign Secretary defended the arrangement when we asked her about it. She said:""‘I can understand … in the business community there is a tendency to want … one kind of simple channel, but China, as you have seen for yourselves, is a large and very complex place and what we have at present is not a plethora of bodies but we have a number of different bodies, each of whom play a role which is slightly distinct … It appears to me … there is a quite good working, constructive relationship. They are not competing with each other.’””" With respect to the Foreign Secretary, I have yet to understand the difference between a ““plethora”” and a ““number”” of different bodies. What does she imagine the UKTI and RDAs want to do? They want to encourage business for the UK. If businesses would prefer one channel to pursue their operations, why does she not let them have it? Why complicate the issue? Again, if she believes that the RDAs do not compete against each other for Chinese contracts, she genuinely needs to meet the staff on the ground involved with China to see what they want. I wholeheartedly agree with the following statement in paragraph 10:"““the Government must seek to ensure that lines of responsibility between UK Trade and Investment, the China–Britain Business Council, the British Chambers of Commerce and Regional Development Agencies are clear and that there is no duplication of work, so that smaller businesses seeking to ‘take the China challenge’ do not face duplication of costs and services provided by the range of organisations.””" I suggest to the Minister that he should consider contracting out all the work done by the UKTI in China to the China-British Business Council and put the savings back into that council. The UKTI could then be the funnel to the regions in this country—if, indeed, the Government wish to continue to use the fragmentary arrangements of the regions to try to encourage inward investment into this country. I must move on, as time is passing rapidly and I want to give the Minister time to reply. I should like to mention a lot of other issues mentioned in the report. I wholeheartedly endorse the Committee’s views on education in respect of good will, foreign relations and doing more trade with China. It is essential that we encourage as many Chinese students as possible to be educated in this country. I ask the Minister to consider what is often cited to me: the cost of British universities and UK visas, which is a deterrent to ordinary families in China. Many Members have mentioned Chinese foreign policy in respect of trade, and I also mentioned it in my intervention. In doing trade, China does not help the human rights situations of various countries. Zimbabwe is mentioned, for example, in paragraph 97; paragraph 98 quotes the Foreign Secretary as saying that"““there has been a…recognition by the international community that it is not in anybody’s interests…to see this appalling governance””" go on. Sudan has been mentioned, and the Chinese do business with other countries such as the DPRK, Iran, Venezuela and Myanmar that have appalling records. My right hon. Friend the Member for Tonbridge and Malling (Sir John Stanley) mentioned the DPRK and the six-party talks. He declared his visit to that country, as I do mine, and I join him in welcoming the resumption of the six-party talks later this month. I have no doubt that in that instance the Chinese are playing a positive role, and that is to be warmly welcomed. Nobody in this debate has mentioned Japan. Our relations and trade with that country are extremely important, although often not mentioned or not mentioned enough. We should strengthen those relations. I slightly disagree with the report in this respect, because my understanding is that, particularly since the election of Prime Minister Abe, relations between Japan and China are improving. For example, the war graves issue has now been dropped. I note what the report says about the disputed islands—that dispute still goes on, and we will surely do all we can to encourage both countries to resolve it—but I welcome the general improvement of relations between China and Japan. My right hon. Friend also mentioned Taiwan. Paragraph 114 states that Chinese military expenditure is increasing by 10 per cent. a year. That figure is probably dwarfed by the military expenditure not included in the official figures, as the report makes clear in paragraph 115. The issue is not often talked about; one wonders why the Chinese need that huge build-up of military expenditure and whether the recent destruction of a communications satellite by a Chinese rocket was a little more significant than they would have us believe. We need continually to monitor China’s build-up of military expenditure in future, particularly in respect of Taiwan. I note the report’s conclusion in paragraph 173, which states that the Chinese military build-up across the Taiwan straits has altered the military balance between those two countries. Again, I urge both Taiwan and China to concentrate on what builds good relations—travel, cultural exchanges, trade—and try to reduce the tensions, and I am sure that the Government would urge the same. It would be a tragedy for all involved if the relationship were to spin out of control, as has been posited by some. I shall conclude, as I want to give the Minister plenty of time to respond. The Committee has done an excellent job in pointing out one of the parts of the world to which we need to pay ever-greater attention in respect of trade, diplomatic relations, human rights and cultural exchanges between our two countries. The more that we can understand about China, the less suspicious it will become of us and the better it will be for both countries.