Foreign Affairs: Global Role, Emerging Powers and New Markets

Thursday 6th December 2012 Lords Chamber

Motion to Take Note

11:39

Moved By

[Lord Howell of Guildford]

That this House takes note of the United Kingdom’s new global role, emerging powers and new markets.

[Lord Howell of Guildford]

My Lords, it is an honour to open this debate, and I am particularly delighted that our energetic Trade Minister, my noble friend Lord Green, will respond to it.

After 11 years of dealing with foreign affairs issues from the Front Bench in this House, and the past two-and-a-half years as Minister, this is my first chance to thank your Lordships most warmly and properly for tolerating so generously my often inadequate and, I fear, repetitious answers to your Lordships’ penetrating questions. In fact, my wife claims that more than once she has heard me murmuring in my sleep and sitting up in bed, saying, “We are deeply disturbed by the deteriorating situation in Wonderland. We urge all parties to enter into constructive dialogue”. However, that period is past and I would now like to use my time to put forward a few propositions about our situation in this nation, which I hope will gain your Lordships’ support.

My first proposition is that in the past few years the international landscape has totally and utterly changed. Huge new markets have emerged, and new economic powers and new centres of political power have arisen. The ongoing task has been to reposition Britain in this transformed milieu. It is in these new markets that our economic destiny lies—and I was very glad to have a small part in helping this repositioning process. Of course, in this new scene are some familiar old elements. The United States remains our close ally, although possibly more as a partner than as a leader and lone superpower. Europe remains our location, in which we must find a settled position in a reformed and modernised European Union. We will be debating that more fully in 10 days’ time, although it will no doubt come up in this debate. Meanwhile, most of the world’s economic growth in the next decade will be outside the West and the north Atlantic area, with the exception of the very dynamic Canada, which I have just visited.

I do not want to exaggerate the shift to Asia and Africa, which a lot of people talk about. Most of the emerging powers, while growing at envy-making rates, are of course starting from extremely low levels. While sections of the Chinese population, particularly in the coastal cities, are as rich as anywhere in Europe, the average per capita income in China is still less than $5,000—miles behind the comparable figures of $48,000 dollars in America and $38,000 here. A lot of the fashionable talk about the so-called BRICs is highly misleading, because Russia and Brazil have little in common with India and China, or South Africa. Anyway, a new wave of fast-growing economies is overtaking them—countries such as Mexico, Turkey, Korea, Vietnam, Thailand, Indonesia, Malaysia, Bangladesh, Azerbaijan and the Caspian powers, and a new wave of African states whose prospects have been immeasurably enriched by the third energy revolution now unfolding, due to horizontal drilling and hydraulic fracturing. The UK must adjust if we are to survive, let alone prosper. Most of this was obvious anyway 20 years ago, but the commentariat, having been pathetically slow to grasp what was happening, has now just about cottoned on. Better late than never, I suppose.

My second contention is that these new markets are going to be conquered by, as much as anything, networking and soft power, as my right honourable friend the Secretary of State, William Hague, has repeatedly reminded us in his speeches from when he first took office. By soft power, I do not mean just the British Council and the BBC World Service, although they are of course extremely important. I mean the whole network of relationships that we luckily possess, but hopelessly underuse, with the Commonwealth countries, which now contain many of the world’s fastest-growing states. Foreign direct investment into the Commonwealth nations, which cover a third of the world’s population, has quadrupled in the past decade.

More than that, several of them are generating the sovereign wealth fund that we need to finance our own infrastructure improvements. That is a complete reversal of what we were taught in our school books and what history tells us—that we provided the capital to the developing world. It is now the other way round. Many of the access links that we have into the Commonwealth network—which, incidentally, in turn provides a gateway to even bigger markets beyond—lie below and outside government-to-government relations. By that I mean not just a common language but an amazing criss-crossed web and flow of common practices and standards in everything from the law and judicial administration to accountancy, medicine, education, the arts, architecture, museums, science, chartered surveying, local government systems, school links and, of course, growing business flows between Commonwealth countries.

I think that there is a great longing in this country, as in other leading Commonwealth countries such as Australia and Canada, as well as in the smaller island states, especially in the Caribbean, to make much more of these common Commonwealth soft-power links. At one stage, I called this the “necessary network” of the 21st century, by which I meant that it was necessary for such a thing to emerge in the new internet age. I am very grateful to my right honourable friend the Secretary of State for giving me the chance to contribute to its strengthening and development. Of course, it is not the only route into the emerging markets but it is certainly one which ought to give us a major advantage, as our competitors keep enviously noting from time to time.

My third contention is that here at home we have to adjust our institutions and practices to these new conditions still further. For a start, we have to upgrade our trade and export machinery. Later this evening, your Lordships will hear from my noble friend Lord Heseltine on his proposals for reform in this area. He points out—and I strongly agree—that we need a far stronger system of chambers of commerce in this country with enhanced legal status as a basis for a far stronger overseas impact, particularly for small and medium-sized businesses. The typical German chamber of commerce has 30,000 members; our biggest ones have 5,000. The German branch chamber in India has 6,000 contacts; we, as the report of my noble friend Lord Heseltine says, have no chamber in India at all. As for Whitehall adjustment, I can testify to your Lordships that the Foreign and Commonwealth Office is a fine machine, where, for me, it was a privilege to work and where there have recently been great changes. However, it, too, needs to move further forward. I think it is wrong that our Commonwealth connections, which are so vital to us, are bundled in with other international institutions in the Foreign and Commonwealth Office. There should be a separate Commonwealth division and, of course, a separate Minister, as there used to be.

A month ago in New York, Commonwealth Foreign Ministers signed a kind of new Magna Carta—I call it a “Maxima Carta”—reasserting the commitment of member nations to human rights, the rule of law and democratic principles in all their varied and developing forms. It is a new type of commitment in the internet and cyber age. I believe that this charter, once endorsed by Heads of State, should be validated in both Houses of Parliament. I shall certainly do my best to see that the values in this new charter thrive and are reflected in practical actions and pressures by and on the Commonwealth nations—all 54 of them—as well as on those aspiring other states, of which, interestingly, there are quite a few, which want to join the new Commonwealth. For them, the magnet equation—the obvious beckoning, if you like—is that the Commonwealth badge equals, and leads to, jobs, investment and prosperity, and that is increasingly obvious.

Finally on the institutional front, dare I suggest that your Lordships’ House might do a bit of adjustment as well? There are huge new areas on the international scene which the Commons Foreign Affairs Committee, which I had the privilege of chairing for 10 years, does not have the time either to get round to or to follow up. I have in mind aspects such as the rise of Chinese investment and political activity across the globe, especially around the Indian Ocean, or the detailed reinforcement or latticework of Commonwealth connections, which I have already referred to and on which the Foreign Affairs Committee in the Commons has just reported. We badly need an international affairs committee in your Lordships’ House to make our contribution to this new scene effectively.

My fourth contention is that a new international pattern has also led to and created a new Middle East. Regional powers such as Turkey, Saudi Arabia and Egypt, if it can stabilise itself internally, and maybe eventually Iraq—the same—have arisen, are struggling to arise or are already playing a central role as new partners in addressing the intractable issues of the area, such as the Syrian horror, the continuing deadlock on the Middle East peace plan, the Islamic civil war raging across the whole area and how to contain Iran. A point much missed is that the bulk of hydrocarbons exports from the Middle East and the Gulf in fact go east to the rising powers of Asia, not to the West at all. This means that China, Japan and others in the Asian-Pacific area have just as much of a stake in preventing Middle East chaos as have the western powers, perhaps even more so. They will have to be involved constructively in seeing that the whole Arab spring does not turn sour or spread further instability, and in ensuring that Iran is diverted from its mad nuclear path. Their interests are at stake just as much as those of the West, and we need to remember that.

Energy factors are playing a huge part in transforming the Middle East and global politics. The Levant basin, with trillions of cubic metres of gas, is promising Israel a new energy resource and it may yet benefit Cyprus and even hard-pressed Lebanon as well.

My fifth and final point is that the latest energy revolution, driven by already mentioned shale technologies and the approaching self-sufficiency in gas of the US leading to it becoming an exporter before long, looks set to bring benefits all around the world and the prospect of enrichment to a stream of countries from Ukraine to Indonesia, Poland, Greece, Mozambique and Tanzania—both Commonwealth states—and even to Argentina and Japan, which has found some shale gas offshore. In short, vast new energy-related markets are opening up, all of which we can help to develop with our own immense oil and North Sea gas experience. We are uniquely well placed as a good customer for gas supplies, both piped and shipped. Norway wants to sell us much more. Russia would like to pipe gas directly to us, although we have to be careful about the volumes. Numerous new suppliers of frozen LNG lie ahead all round the world in addition to the ones we have already. We also have our own North Sea supply, which is by no means finished, quite aside from whether we decide to develop our own onshore shale gas.

All this gives us a valuable stepping stone to low carbon—gas being cleaner than coal in CO₂ terms—as well as a path to lower and not higher energy bills, which we need to compete and to create more competitive industries and exports, and therefore more jobs. As we were reminded in yesterday’s Autumn Statement, we cannot afford to be left behind and ignore tumbling energy costs and rising competitiveness on the other side of the Atlantic. In the long run, nuclear power and, we hope, cheaper renewables are the only ways to decarbonisation and improving on the weakness of the present low-carbon strategies, which are not working very well, plus vastly increased energy efficiency. Japan’s and Hitachi’s support for our own nuclear programme is very welcome but we can also play a global role in new nuclear-power building, working, for example, with South Korea, which I have just visited and which is tooling up to build a string of new nuclear stations round the world. It is already building one of the world’s largest in the UAE.

Our nation is talented and it is innovative. In some surprising areas we are doing increasingly well—for example, as part of the global motor manufacturing supply chain. Our exports to the growth economies have doubled in the past two and a half years. But overall, frankly, we are not doing well enough. Europe is our neighbourhood, with which we must work and make the single market prosper; America is our ally and our friend; but the Commonwealth is our family and where our best economic hope lies. I conclude that we should spend more time with our family.

11:54

[Lord Anderson of Swansea]

My Lords, I begin by formally proposing the noble Lord as chairman of the possible international affairs committee. I had the privilege of following him as chairman of the Foreign Affairs Committee. I have enormous respect for him and the work that he did on the Front Bench, when he was always courteous and on top of the subject. He always answered questions, which is not always the case with those on the Front Bench. I fondly welcome him to the Back Benches.

Lest this should appear to be an obituary, I detected at least one blind spot in the noble Lord’s analysis, on which I shall focus. I agree with him that we need to seek markets for our goods and services worldwide and to be ever ready to respond to global trends. However, I stress that our core area is our own region here in Europe, which accounts for 50% of our trade. It is manifestly not a case of either/or. Recent surveys predict a slower growth of our exports into the European market. Clearly the dominance of the City of London—which can, I hope, look after itself—has recently been challenged by the governor of the Bank of France, which is the penalty of our choosing to be outside the euro. Of course we need to increase our exports to the BRICs and elsewhere but there is evidence of slower growth in those markets. For example, the projected growth for Brazil this year is just under 1%; the projection for India in the financial year 2012-13 is 5.5%—the lowest for a decade; and in the third quarter, growth in Russia fell to 2.9% and in China to 7.4%.

Our starting point is surely the wisdom of the Oracle at Delphi: know thyself. We need a realistic, not a nostalgic, analysis of our strengths and weaknesses and the global environment in which we trade—know thyself. Of course, as the noble Lord said, we emerged with many advantages from our history, not least of which is the English language, our centres of excellence, our military, our diplomacy and our universities. However, the Government should be worried about the self-imposed threat to our economic prospects posed by the sharp decline in student applications from India.

Our history has made us members of key international organisations: the UN Security Council, NATO, the EU and the Commonwealth. The last, in my judgment, is surely the blind spot of the noble Lord's presentation. I consider myself a Commonwealth man, having chaired the UK branch of the Commonwealth Parliamentary Association for four years, but I do not recognise the picture painted by the noble Lord. Recent CHOGMs have raised hopes of deep institutional change, but Commonwealth institutions are now in some considerable disarray. Successive Governments in the UK have worked hard to develop relations with India, a key emerging market. Frankly, however, India has little interest in the Commonwealth and is very hard-nosed on commercial matters, as we have seen on the Typhoon purchase.

In a lecture on 19 June 2007, the then Commonwealth Secretary-General, Don McKinnon, gently but effectively undermined much of the thesis of the noble Lord. I certainly do not accuse the noble Lord of this, but some in his party use Commonwealth enthusiasm as a cover for their anti-Europeanism. The Commonwealth that they favour is mainly the old dominions. That leads to symbolic and often silly gestures such as the recent agreement on the co-location of embassies with Canada at a time when our foreign policy formulation is increasingly based on close working relationships with our European partners. This is on a par with the threat by former Defence Secretary Liam Fox to leave the European Defence Agency, with its pooling and sharing—happily, the Government now appear to be rethinking this—as well as with the severing of relations with their natural allies in Europe, the European People’s Party.

An audit of relations with the EU has been ordered by the Foreign Secretary in an effort to placate anti-Europeans. I understand that the Foreign Office recently met Professor Sejersted of Norway to discuss the methodology and conclusions of his similar audit in Norway. He concluded that Norway’s relationship amounted to integration without representation—hardly a model for others.

Of course the EU may now develop a tighter inner core. We are likely to find ourselves, albeit with variable geometry, on the exterior. However, our policies seem designed to lose good friends such as Poland. Surely the Government should recognise that to leave the EU or to seek unrealistic objectives would be a major blow to our trade, not only with the EU but with third countries. I cite the recent reply in the European Parliament given by Commissioner De Gucht, who said:

“The Commission takes the view that if a Member State were to leave the European Union it would no longer benefit from preferential arrangements included in EU trade agreements. In such circumstances, a Member State would not be subject to the Union’s common commercial policy and could no longer benefit from agreements negotiated on that basis. Moreover, a third country offers concessions to the EU on a reciprocal basis, expecting market access to the Union as a whole. Third countries would be unlikely to offer as generous concessions to a Member State which has activated Article 50 that could only offer access to its own market”.

We should quite properly look at a free trade agreement with the US. There will be better prospects for that after the likely failure of the Doha round. We should remember that it is the European Union which will negotiate on our behalf as I hope we move step by step towards a free trade agreement. If any state were to leave the European Union, it would lose bargaining power and would receive less generous concessions from third parties.

My conclusion is that we should seek to boost trade throughout the world, both in the Commonwealth and elsewhere. In the debate on the future of the EU we have natural allies, but currently the Government seem to be doing their best to irritate them. Even very strong Anglophiles such as Mario Monti publicly state their exasperation and despair at UK policies. He says, in effect: “Make up your minds. Do not marginalise yourselves by your actions, which will make planning more difficult for us”. In short, we should know ourselves and avoid ideological illusions.

12:03

[Lord Alderdice]

My Lords, I, too, thank my noble friend for securing this debate, and for the great service that he gave to your Lordships’ House, to the Government and to the country during his time in government. His answers were always thoughtful and conscientious. They were a service to your Lordships’ House and we all appreciated them. He continues that service not only by securing this debate but by pointing us to the kind of strategic thinking to which your Lordships’ House is particularly suited. I am privileged to participate in the debate and to follow him and the noble Lord, Lord Anderson.

My noble friend pointed to the fact that we are experiencing an extraordinary period of global change. We discussed this briefly in a debate earlier this week. He is absolutely right. The enormity of the change has scarcely been understood, partly because the implications are so great that people are panicking in their response to it rather than thinking reflectively. This is an opportunity for us to do so.

We are moving into a series of centenaries over the next few years, including the centenary of the commencement of the First World War. The changes that we are undergoing now, while of a very different type, are of a similar order to those that took place in the early part of the previous century, where empires that had been profoundly significant and powerful subsequently dribbled away over a period of years. Indeed, the role, power and significance of our own country in that regard, moving from being the centre of the largest empire that the world had ever seen, which is still the case, gradually found that empire being unzipped over a period of years. Some of us in Ireland think that that started with the partition of Ireland.

During that period there was a great struggle for our country to come to understand what its new possibilities and opportunities were. Many other countries that in the past had been the centre of great empires simply had a long period of subsequent decline over many decades, and sometimes centuries. Some people have taken a similar view in respect of the United Kingdom, which is misguided and unnecessary. I will explain why.

During that first period of time there was the remarkable development of the Commonwealth. That so many countries that had been colonies wanted to remain in relationship with the United Kingdom is remarkable and largely unprecedented—I will come on to talk about the Francophonie later. My noble friend has referred to this extraordinary development, and perhaps we could have made rather more of it over the years.

Then we came to the period after the Second World War and the European Union moved into the field. It was a peace process; it was an attempt to ensure that Europe did not again return to the terrible disasters of the First and Second World Wars. Now, though, we have a generation arising—my generation and certainly those coming after me—who do not really think of the European Union in that way. They think of it in economic and political terms. Indeed, most of the political leaders of Europe do not see the European Union in terms of ensuring that there is no war: they see it as a platform for themselves, their parties and their countries to play a global role.

That is a serious mistake. I do not think that that is what the population of the European Union think is the function of the European Union. The population do not particularly want to rival China, the United States and other powers; they want to get on with having a productive, peaceful, stable and prosperous life. That is what our people want.

That has led to disenchantment—a big split between the elite of Europe and its populations. It is not what the European Union was for or about. Instead, our world has begun to change further, with extraordinary developments in technology. There are some who think that the key things for us to aim for are size—to be part of somewhere that is big—and resources—that is, to have access to commodities. If we look around, though, the evidence shows that mere population size, market size or access to commodities do not by themselves provide power, influence and significance.

Last night I listened to a Member of your Lordships’ House, as I know some other colleagues did, talking about how size mattered. Of course that is true, but it is not the only thing that matters and it is not even the decisive thing. Many countries are much larger in population and in geographical terms than this country, and have greater access to resources that this country. The continent of Africa has an extraordinary resource base, but that has not made it politically powerful, significant or a leading place.

It seems to me that it is much more about our culture. I do not mean the expressions of our culture in terms of art, drama and so forth, although they are important, but the way of being that we have as a country and a community. I mean the values, principles, the things that drive us and give us a sense of confidence, our history and background, our language, our educational system and the way that we encourage our young people to think for themselves and search out the truth of the way that things are, rather than merely totting up the number of degrees that happen to be passed at universities.

That culture is something that is appreciated by every other country in the world when they look at us. We did not become powerful in the past because of size but because we looked at what we needed to do in the context of the time. Now we have a new context and we can play a significant role. Just look at how well we did with the Olympic Games—not only in organising them but in competing in them—not because we were big but because we focused and had confidence. We should be able to have that confidence because this country is not frightened by a global world. It does not feel intimidated by the fact that we have to have relationships, not just in our local area in the European Union, but right across the world. That is what we have always done, not just in trading but in relationships. Our language is a global language.

As we look to the future, we should not be saying to our young people, “Let’s look at the inevitable decline of our country”, but rather saying with confidence, “Let us look at what we and our country can contribute in a leading way to our new world order”.

12:11

[Lord Thomas of Swynnerton]

My Lords, I, too, express my regret at the passing of the noble Lord, Lord Howell of Guildford, who has given a good example to us all; of passing from power, that is to say. I think I first met him 50 years ago in Washington at the time of the missile crisis. I cannot now remember whether it was before or after 13 October, but it was certainly at that time.

I sometimes think that we would all be served if the Government were obliged to make an annual statement on foreign policy, along the lines of the command papers characterising our defence, which for many years we looked forward to receiving. The Foreign Office would have to consider carefully exactly what it was doing and why. The statement would point out, perhaps, that Britain’s foreign policy is the experience of someone who has membership of about six clubs. No other country in the world, not even France, has such a diversity of loyalty.

We are members of the UN and of course of the Security Council. We are the essential brooch in the chain of the Commonwealth countries. We are a member of NATO, whose charter was drafted by British public servants. Fourthly, we are a member—if now a rather reluctant member in many cases—of the European Union, which promises to turn eventually into something like a federal state; a new Holy Roman Empire. As the noble Lord, Lord Owen, pointed out in a fine speech in October, that likely development demands careful consideration as to our right course by both sceptics and by enthusiasts such as myself. Fifthly, we have separate, deep friendships with a number of countries: the United States of course, France, Portugal and many countries of Latin America, which very often glow with enthusiasm at the thought of us, because of the assistance we gave them during the 19th century. It is true that we fought Argentina in the late 20th century, but it remains in most people’s minds as:

“The purple land that England lost”,

in the words of the great writer WH Hudson. That we have to balance so many commitments partly explains our occasional difficulties. There are moments when that balance seems impossible, such as when Mr Blair decided to support the United States in the war in Iraq.

We know that our membership of all these great clubs assists us in selling our products but there is one aim in foreign policy that is probably more important than anything else, as the noble Baroness, Lady Williams, has pointed out on several occasions. That is to control the proliferation of nuclear weapons and, if we fail to secure that, at least ensure that they are not used. What we are currently seeing in respect of the civil war in Syria perhaps gives some lessons as to how we should conduct ourselves. The use of nuclear, not chemical, weapons—horrible though the latter undoubtedly are also—would lead to a catastrophe of unprecedented dimensions, and there is no more important aim facing humanity than to prevent such a thing at all costs.

A third preoccupation, naturally, is to prevent local problems such as might occur at any time in the near East or Middle East from becoming a war that could draw us in, either by the extension of terrorism or by some ramification of it.

Fourthly, we should promote the emulation of our democratic political system, as opposed to the oriental despotism that still characterises so much of Asia and Africa, although the experience of Germany in 1933 shows that the rule of law is just as important as the right to vote.

Fifthly, we should tell the world that the only economic system that works well, in our opinion, is one where the state leaves a lot of economics to itself. That is what Hernando de Soto, the brilliant Peruvian, preaches in his famous book, The Other Path, as well as what was done by the noble Baroness, Lady Thatcher, all her life.

Sixthly, we should recall—and not be shy about it—that our literature is overall our greatest export, especially, I think, our poetry. Once the governor of Oaxaca in Mexico asked for my approval in advance for a speech that he was about to make at a lunch in honour of the noble Lord, Lord Carrington. The governor wanted to say, “We admire England for two reasons: Portland Cement and John Milton”. “Yes,” I said, “but put it the other way around”. “You are right,” said the governor, and he did so.

12:16

[The Lord Bishop of Worcester]

My Lords, I am grateful to the noble Lord, Lord Howell of Guildford, for securing this debate. I will concentrate my remarks on an aspect of Britain’s role in the emerging world order, which I believe to be extremely important.

In July, the Foreign Office Minister, Jeremy Browne, gave a speech to Chatham House on how Britain should respond to the rise of emerging powers. He spoke powerfully about what had enabled Britain to become great, pointing out how remarkable it is that a nation with less than 1% of the world's population should have such continuing influence. What was implied in his speech but was not articulated is that it is not just our wealth that has made us great in the past; it is our values, as the noble Lord, Lord Alderdice, has reminded us. In looking to the future, it is important, it seems to me, that we should of course look towards becoming more effective in our trade and have an eye to our prosperity. However, we should not neglect that other side of what made this country great.

The noble Lord, Lord Sacks, has written that we have at our disposal a resource of unparalleled power with which to confront the problems of a new age, and that resource, neither mysterious nor difficult to understand, is morality—specifically, the Judaeo-Christian tradition. That is not to underestimate the importance of other faiths, but it is to say that the values that derive from the Judaeo-Christian tradition are the bedrock on which our wonderful culture is built. At the centre of that tradition is the belief that all are created equal in the image of God, with inherent dignity and infinite worth. That tenet, I suggest, should continue to be at the centre of what informs our actions on the world stage.

We live in a world of unprecedented wealth, and yet, despite all our technological advances and the vast resources at our disposal, the scourge of extreme poverty remains humanity’s most pressing challenge. Today 1.4 billion people suffer from the injustice of extreme poverty. During the course of this year I have visited diocesan links in Peru and Tanzania and met just a few of those suffering terribly. I witnessed, too, the magnificent work of the Anglican Church to address their suffering. Poverty robs people of their dignity and denies them access to their rights of shelter, food, healthcare, education, safety and a life of fulfilment. It renders them powerless, unrepresented, oppressed and vulnerable to harm and abuse. In his excellent book Good Value the noble Lord, Lord Green, has reminded us that as long as we are involved in injustice, exclusion and exploitation we are under judgment. I am delighted that the Chancellor yesterday recommitted Her Majesty’s Government to the 0.7% proportion of GDP to be directed towards aid, but for the sake of the poor we need to address the following key challenges as well.

First, we need to listen to the voice of the poor. As economic and political power shifts from the US and Europe to the nations of the east and south, and as the shift in power from the G8 to the G20 goes on, it represents a broadening and diffusion of power. The addition of South Africa, Mexico, Brazil and India to the G20, in theory at least, brings the voices of millions of the poorest to the table. While there remain serious questions about the legitimacy of such self-appointed bodies, I suggest that the UK should look to exploit the opportunities of new political and economic configurations to champion a pro-poor discourse in new global interactions, identifying progressive allies and seeking greater inclusion of the voices of the poor.

Secondly, there is inequality. Almost all societies are becoming much more unequal as the world economy expands. Simplistic talk of the rich north and the poor south no longer makes any kind of sense. The majority of people living in poverty today are in middle-income countries such as Brazil and India; it is in such countries that we are also seeing the greatest increase in inequality. As we confront the new age, we should confront also long-standing forms of inequality and discrimination that continue to blight the lives and opportunities of billions.

Thirdly, there is caring for the environment. With the World Bank predicting progress towards more than 3 degrees of global warming on current global policy, levels of climate unpredictability, constraints on water resources and increased extreme weather are inevitable and,

“tilted against many of the world’s poorest regions”.

At the centre of what we do should be an argument for and an insistence upon sustainability, resilience to climate change and fair rights over resources. Those things should underpin our nation’s engagement in global affairs.

Fourthly, we need to pay attention to the effects of global connectivity. That can create new and wonderful opportunities for people all around the world but it can also squeeze cultural diversity, with an individualistic consumer ethic taking the place of traditional collective values. Many of these changes potentially threaten the ability of vulnerable communities to claim their rights while, at the same time, many can be exploited to help in the battle against poverty. Technology is transforming the way we interact, trade, create communities and build political movements. Geography matters less; online access more. We need to pay attention to the serious divide opening up between digital haves and digital have-nots.

All global actors are seeking to adapt to this changing environment but we are very well placed to do so by virtue of our traditions and culture, and the values that underpin them. The continued impact of the UK’s development co-operation will rely on tackling the above challenges and seizing the opportunities presented. Success will depend on building a wide range of partnerships that have the leverage to make a major impact on the scandal of mass poverty in the rich world, as well as in the poor world. Only if we do so will we continue to have that soft power—that moral authority—for which this country is rightly celebrated.

12:24

[Baroness Morris of Bolton]

My Lords, with the fast-moving world of political and economic change in which we live, there is a great need for the United Kingdom’s experience, not least our well developed soft powers, as my noble friend Lord Howell so powerfully observed. Soft power was the subject of an excellent debate in your Lordships’ House last year, led by my footballing friend, the noble Baroness, Lady Taylor of Bolton, and answered by my noble friend Lord Howell of Guildford. Then, as today, my noble friend Lord Howell demonstrated why he is such an effective advocate of the role the UK must play in an ever more complex and competitive world. I, too, thank him for all he has done in the service of this House and our country and, in particular, for this important debate today.

It is clearly true, to pick up on the point made by my noble friend Lord Alderdice and the right reverend Prelate the Bishop of Worcester on size, that as a country, we punch above our weight across a range of diverse areas—from language and education to culture and arts. As has already been mentioned, the roles of the BBC World Service, the British Council and other organisations are rightly credited for the part they play in our international prominence.

This soft power, however, is becoming increasingly hard in its impact. The continuing growth of English as an international language has not only cultural significance but real value for British companies. The standing of British universities in the top rank of worldwide higher education league tables and their excellence in research and teaching have real value that can provide competitive advantage to British companies. I declare an interest as chancellor of the University of Bolton, which is one of the world’s leaders in teaching and research in advanced materials. In fact, if you fly anywhere in the world on any aircraft that has a seat made of cloth, the fire-retardant property of that cloth is the intellectual property of the University of Bolton.

The global popularity of our culture and the arts has a realisable value. British films are now not only critical and artistic successes but worldwide commercial successes as well, as we have seen from the latest James Bond film, “Skyfall”. In another branch of entertainment, another quintessentially British product—“Doctor Who”, which is 50 years old next year—has become a growing commercial success for the BBC. It has been sold around the world and last year topped the American iTunes chart for the most downloaded TV series.

Our heritage, rich countryside, diverse cities and unique visitor attractions, including the one that accommodates your Lordships’ House, are iconic symbols of Britishness that draw in visitors who contribute to a tourist economy worth more than £100 billion a year. In seeking to illustrate the monetary value of these things, some may think I am fulfilling Oscar Wilde’s definition of a cynic. The point I am making, however, is this: the things that make the UK such a great place to live and to visit are also the things that help us strengthen our international role and take advantage of new markets.

I was honoured last month, along with other parliamentarians from across the political divide, to be appointed one of the Prime Minister’s trade envoys. My responsibilities are Jordan, Kuwait and the Palestinian territories—countries with which we have strong links and long-standing friendships but where the changes they are undergoing present great opportunities for British businesses. I am looking forward greatly to working with my noble friends Lord Green and Lord Marland, UKTI and the Foreign and Commonwealth Office to help promote the UK and our commercial sector.

I also see it as our job, however, to promote the virtues of trade itself. Promoting trade is a British tradition. As an island nation, our prosperity and global influence were built on commerce and exploration. That prosperity has never been limited just to us. Opening up economic relations benefits both sides of the transaction; many countries have benefitted hugely from opening themselves up to new markets. Free trade also serves as one of the most effective ways to build trust and co-operation between countries and underpins the development of civilised, peaceful relations between them. Since markets require fairness and the rule of law to function properly, the existence of significant trading relationships provides a powerful incentive to root out corruption. The pacifying and benevolent effects of trade have been espoused by many in this Chamber and in the other place over the past two centuries, with the anti-protectionist Richard Cobden among the most prominent. He once observed:

“The progress of freedom depends more upon the maintenance of peace and the spread of commerce and the diffusion of education than upon the labour of Cabinets or Foreign Offices”.

In truth, the efforts of government should advance those aims and in doing so, we can make a lasting difference, securing the benefits we all want to see for British companies while supporting the development of peace and good will with and between our friends overseas.

12:30

[Lord Judd]

I join noble Lords who have paid tribute to the noble Lord, Lord Howell, not only for having introduced this debate so well but for the terrific contribution he has made on international relations throughout his political life. Forty years ago, I was working with him and with young politicians from the United States on facing up to the issues that then faced us in the global context, particularly the fears about Africa and the Middle East. I formed a very high regard for the noble Lord, Lord Howell, which has stayed throughout my political career. There have been big differences between us, irreconcilable differences sometimes, but there has always been respect for his wisdom and his approach.

The noble Lord, Lord Howell, was right to start by challenging us to face up to the realities of change over recent years and the situation that we now face. He is right that one of the biggest challenges is that the centre of economic and political power is increasingly moving to Asia, in particular to south-east Asia and China. That is a terrific challenge which we must meet. He was also right to emphasise, as he always does, interdependence. I always put it that the first reality of life is that we are born into a situation in which we are totally interdependent with people right across the world. As I have said before and will say again, I am convinced that we as a generation of politicians will be judged by history by the success we make of belonging to that international community, contributing to its strength and understanding the challenges of being part of an international community. Neurotic insularity will do us no service whatever. We must engage and we must belong, and by being seen to engage and to belong, we will bring our influence to bear. Of course we want efficiency and cost-effectiveness in all the institutions, not just in Europe, but in the UN and elsewhere, but we bring greatest influence in achieving that if we cannot be questioned in our commitment to international co-operation and in our belonging to those institutions. The trouble is that we too often play to a short-term populist gallery in trying to suggest that somehow we are battling for little England—little “England”, too, very often—against the real awful world out there instead of realising that it is by making a success of international work that we will look to the long-term interests of the British people. I thank the noble Lord for having introduced this theme and I apologise if I have expanded it a little emotionally in a way that he might not have done.

I know the Commonwealth is dear to the heart of the noble Lord, Lord Howell, and it has a part to play. It is a family in the best sense. It has evolved. When it meets, it is usually a meeting of friends, but in this context my noble friend Lord Anderson is right that we have to face up to the fact that the Commonwealth has been overtaken in a lot of the real cut and thrust of making a success of international relations and global security.

I always listen with fascination to the noble Lord, Lord Alderdice. He is right to have reminded us of the value of the underlying psychological dimensions of our part in the world. They are crucial. We have to face the fact that when you have been an imperial power, it is difficult to adjust. We have to play the game of influence. It is no good playing a power game. Our game is a game of influence, and that relates to my point about being seen to belong and to engage.

This affects the work of the Foreign Office. I am getting a bit worried that when I go anywhere, one of the first things in an introductory talk from the ambassador or the high commissioner is a long, rather defensive speech about all they are doing on trade. In the economic realities we face, trade is, of course, vital and our missions have a part to play on trade, but in this highly complex world, we should not throw away the baby with the bath water. We need expertise, insight and analysis to understand the situation in which we are operating and advice to inform the quality of our decision-making. Sometimes it may get a bit marginalised in the constant pressure to put trade first. It is not either/or. We must treasure that traditional role of the Foreign Office and make sure that it is nurtured.

I feel strongly that soft diplomacy, as it is sometimes called, is crucial. That is where we cannot emphasise often enough the role of the BBC and its Overseas Service. We must not let that become diluted. When changes take place, I sometime worry. The quality of news in this country is improving because we are getting more international input into ordinary news broadcasts. That is good for British people to understand the issues, but it must not be at the expense of the expertise, depth of knowledge and analysis that used to be in the old Overseas Services. Sometimes what we are beaming to a country with a very small audience may have disproportionate significance because that small audience will be crucial in the future building of that country and its stability and well-being. We have to keep that role of the BBC in mind.

I have time for two more observations. First, in our debates about universities and overseas students, I get exasperated at the way we talk about them in terms of what they mean to the British economy now and in the future. What matters is the quality they bring to the higher education experience. I do not understand how you can have a relevant, world-class university if it is not a thriving, vibrating international community. You need that international mix in the quality of the education that is taking place. That matters in every discipline. We have not been taking that point seriously enough. The other issues are, of course, very important—I declare an interest as someone involved in education—but that essence is the crucial quality.

Finally, as we go into the year ahead, we should all make a resolution that we are going to lead the country in understanding interdependence and in determining that this country is to be second to none in constructive internationalism instead of insularity.

12:30

[Lord Maclennan of Rogart]

My Lords, it is a privilege to follow the noble Lord, Lord Judd, with whose views, not unusually, I find myself in complete agreement. I, too, express admiration and gratitude to the noble Lord, Lord Howell, for the work he has done over decades in promoting international communication. His wisdom has assisted this country. I do not entirely agree with him in giving primacy to the Commonwealth in the time we are living in.

My first experience of politics when I was elected to the House of Commons was as the Parliamentary Private Secretary to the last Commonwealth Secretary, Lord Thomson of Monifieth. Consequently, I am much more familiar with Commonwealth countries than I might have been. The late Lord Thomson later became one of our first European Union commissioners. That was not in any sense a demotion. He was a most enlightened man who promoted development within the European Union and saw from the beginning that Britain could play a more effective and powerful international role if we were closely integrated with that body of countries that are not just neighbours but have shared our history through hundreds of years—a history we should not forget.

I know that there is wisdom in my noble friend Lord Alderdice’s view that the public are more aware of the present demands than they are of the history of warfare. I do not dissent from that but we have to recognise that mankind does not change entirely. The political situation may change but the impulse to use force to promote a country’s interests is still a danger. In my humble judgment this country has a global role, which can best be exercised by playing a constructive part in the work of the European Union. That was manifestly missing in the World Trade Organisation discussions at Doha and the climate change discussions in Copenhagen. I believe that we did not act as a union on those two occasions, and as a result we have seen great delay and inadequate responses to these very big challenges.

We also have a second role to promote the values that this country holds and which it has translated into a way of life. In that respect, we should particularly regard our history of adherence to public international law as something of which to be proud. I was somewhat dismayed the other day when the noble Baroness, Lady Warsi, would not disclose her view about the public international law situation with respect to a pre-emptive strike against Iran. If we are to expect others to follow the rule of international law, we must animadvert to it in the context of international disputes.

Our other attractive values, mentioned a great deal in this debate, include education, the development of science and technology and our adherence to human rights. I must say again that I find it appalling that there has not been an instinctive positive response to the judgment of the European Court of Human Rights on the right of prisoners to vote in our elections. If prison is to be seen as a reformatory, being instructed in citizenship and the purpose of voting must be helpful to that end.

We have had remarkable cultural achievements, and many in our country have recognised this, in promoting our wide global view of culture. The British Council is probably a more effective organisation in promoting Britain’s interests than those who control immigration. That is something that we should certainly build on. I would like to see the budget of the British Council strengthened and increased.

Our identity is clear, and is not put at risk by being members of European Union. It is now time that Members of Parliament and members of the Government began the task of explaining the crucial importance of the integration of the European Union and why that is not inconsistent with our identity and with playing a global role, and that indeed the two are absolutely tied to each other.

12:46

[Lord Bilimoria]

My Lords, at the outset, I apologise to the noble Lord, Lord Howell, as I was not in the Chamber when he started this debate. It is such a pity that he is no longer a Minister because he did such a brilliant job at the Foreign and Commonwealth Office and it is the Government’s loss and ours that he is no longer there.

Just over six decades ago Britain had the largest empire the world has ever known. Today, that empire has gone and yet this tiny country of just 60 million people, making up not even 1% of the world’s population, is still one of the 10 largest economies in the world. It still sits at the top table of the world and still holds great influence. All this is despite the dramatic rise over the past three decades of countries such as China, and more recently India as an emerging global economic superpower. There, at the other extreme, we have two countries that together make up one-third of humanity.

Looking ahead, we will not be able to compete with these countries head on. We can only compete on our strengths, many of which are historic. We have amazing institutions in every field, whether it is in the City of London, cultural institutions such as the British Academy and the Royal Society of Arts or the traditions that are part of this nation’s fabric. There are the traditions of our Armed Forces expressed through the esprit de corps—which is amazing—and the traditions of the Royal Family, shown so marvellously in Her Majesty’s Diamond Jubilee this year, and in the traditions of this Parliament and in our very Chamber here, which is the only self-regulating Chamber in the world.

Then there are institutions such as Lloyd’s of London and our great universities, with Oxford and Cambridge being more than 800 years old. The noble Baroness, Lady Morris, spoke about our creative industries. Our design firms are the best. The designer of Apple, the most valuable company in the world, Sir Jonathan Ive, is British. Our law firms are the best of the best, as are our courts and, although only 7% of our children attend them, our private schools are the best in the world. The BBC for all its recent problems is, as the noble Lord, Lord Judd, said, a source of soft power, in particular the World Service.

The noble Lord, Lord Howell, spoke powerfully about the Commonwealth. It is such a huge asset and we are at the centre of it. There is even the possibility of a free trade zone within the Commonwealth, from the tiny islands at one extreme to a 1 billion population country such as India at the other. The Commonwealth has done so much with so little money. Just imagine how much more it could do if it had a proper budget. Can the Minister say that he will encourage this to happen?

The City of London is still the world’s leading financial centre. We still have a flexible and open economy that welcomes foreign investors such as the Tata Group. It is an economy where we will now have a Canadian as the governor of our central bank. Despite the awful cuts that have been made to our Armed Forces, where we temporarily lack aircraft carriers and the number of our troops has fallen to critically low figures, we still have one of the highest levels of defence spending in absolute terms in the world. We talk about soft power but soft power cannot exist without the hard power to back it up.

In tourism, we have one of the most attractive destinations in the world, with London being the greatest of the world’s great cities despite our awful weather, particularly this year. However, it dismays me when we talk about trade. As founding chairman of the UK-India Business Council, I regularly speak to business audiences around the country and I ask them how many of them do business with India. To this day, among hundreds of people, only a few hands go up.

I am delighted to hear that the Government have increased funding to UK Trade & Investment. We need constantly to encourage businesses to look abroad because the potential of emerging markets is phenomenal and we are just scratching the surface. However, while we talk about emerging markets, we must recognise that our principal international partner will be, and always has been, the United States. It always will be one of the most powerful nations in the world and we have stood side by side for more than a century, and that will not change.

Partnering with countries means working together not just on a business level but within our civil services, the Armed Forces carrying out exercises together, and in research and development. I chaired the Cambridge University India Partnership Advisory Board and we are working more closely with India. The UK-India Education and Research Initiative has been so successful, with hundreds of research interactions between the UK and India. We need to encourage this and to do a lot more of it. Importantly, to maintain our influence we must maintain our competitive edge. I do not think that we are investing anywhere near enough in research and development. We invest a fraction of a country such as the United States as a proportion of our GDP.

Most importantly, as a country, we must always be seen to be fair and just. Historically, as a nation, we have never followed the herd. We have always led our own way and done our own thing. Even in Europe, where we are, whatever anyone says, one of the most prominent members of the EU, we sensibly stayed out of the euro. Despite everything that is going on, we are still seen by many businesses around the world to be the gateway to Europe.

Again, importantly, our role in the world will be based on respect and trust. We have to continue to earn that respect among nations today. Despite all our economic woes, we need to be ahead of the game. We need to be best friends and partners to countries such as India, Indonesia, Brazil, South Africa and Turkey, quite apart from our longstanding partners such as the United States, which I have mentioned, Canada, Australia, New Zealand and Singapore. These emerging markets cannot switch on in an instant, or even in a few decades, the competitive edge that this country has built up, as well as its institutions, over the centuries.

As the noble Lord, Lord Alderdice, said, our foreign policy must be based on the confidence that we can maintain this competitive edge with integrity through mutual trust and respect. In that way, we will be able to bring mutual benefit and security to our economies as countries partner together. To conclude, our foreign policy, our global role and our global influence go hand in hand with our competitiveness. We cannot have one without the other.

12:52

[Lord Bates]

My Lords, it is a privilege to take part in this debate and I join many others in paying tribute to my noble friend Lord Howell for securing it. Many years ago, I had to complete an essay question which was to explain the difference between a politician and a statesman, and to give examples. I often think that had I known the noble Lord at that point, my answer would have been so much better illustrated. Undoubtedly, he is one of our great statesmen and it is a privilege to continue to hear him dispense his wisdom from the Back Benches.

Another thing I learnt from essays was that you are supposed to look at the question before answering it. I note that the noble Lord has been very careful in choosing the title for this debate. He has used the word “new” twice and the word “emerging” once, thereby suggesting that there is a passage from an old order, an old world view, to something new. I very much share the view of my noble friend Lady Morris of Bolton and the noble Lord, Lord Bilimoria, that in going into that new world we should have great self-confidence and self-belief.

We are very much in a global race, as the Prime Minister illustrated and set out in his speech to the CBI last month. I would contend that we are not so much in a single global race but that we are in a number of global races for key markets and that we are engaging with key powers. In my time today, I shall focus on one of those new markets—China—and will make the argument that we need to engage in some fresh, new thinking and to shift from an old paradigm view of Chinese conduct in the world to a new view. I do so with some trepidation, knowing that one of the foremost authorities on these matters, my noble friend Lord Green, will respond to the debate. I look forward to hearing his response.

The scale of the Chinese miracle has been well rehearsed but it bears repeating for a few moments. First, China has not gone through a period of boom and bust, as some countries have. In fact, it has delivered 30 years of uninterrupted growth, averaging 10% per annum. When people talk about the Chinese miracle perhaps beginning to slow, they are talking about it slowing to 7.5% per annum for the next decade. It is the second largest economy in the world. By the end of this decade, it will be the largest economy in the world.

What is more interesting is what China has used that new wealth for. It has invested in infrastructure. Before 1988, it had no motorways whatever. By 2010, it had 74,000 kilometres of motorway. China has more kilometres of high-speed rail lines than the rest of the world put together. In the three years that it has taken us to debate whether we should have another 200 kilometres of HS2 in this country to be completed by 2026, China has added 8,000 kilometres of high-speed rail lines. Sometimes, we need to have a little sense of humility as to what people are doing and how they are going about it.

Secondly, we should look at what China has done for its people. It has lifted more people out of poverty than any country in history. According to the World Bank, 600 million were lifted out of poverty between 1981 and 2005. A new self-confident middle class is emerging, the numbers of which are open to some debate but roughly settle around the figure of 200 million people. There are 400 million internet users and 700 million mobile phone users in China. The Chinese savings rate is one of the highest in the world at 38%, compared to 7% in this country.

China’s foreign currency reserves dwarf anything in the world at $3 trillion. They are the largest in the world and amount to three times those held by Japan. In that sense, China is keeping the global ship afloat. China has 20% of the world’s population but only 7% of the land mass. Therefore, it is heavily dependent on importing commodities from around the world. That has led it to have a—some would say paranoid but others would say very natural—national interest in developments around the energy-rich waters of the South China Sea. Its defence budget is growing dramatically. It is already the second largest in the world and will overtake the United States in another 20 years.

However, our approach to China has often been characterised by a degree of suspicion and perhaps even a little distrust. When we look at some of the agreements that we have had, such as the transfer of powers over Hong Kong, most people would recognise that those undertakings given in 1997 have largely been honoured and adhered to. Hong Kong retains a distinctive and vibrant economy and a large degree of autonomy. Of course it is right to raise human rights concerns but I would argue that that should be done in proportion.

How do we respond to China? We need to respond by recognising that there is a great market out there. When Wen Jiabao visited this country last year a target was set to increase bilateral trade to $100 billion by 2015. When Wen Jiabao went on to visit Germany, he and Chancellor Merkel announced that they were going to increase their trade to $284 billion. If we are engaged in a global race, let us start racing with our friends in Germany to tap into that market in China. Yes, we are in a global race, but it is one not only with China but also for China, so we need to engage in some fresh thinking.

The current policy document which underlies the UK’s approach to China was published in January 2009 under the previous Government. Perhaps it is time that we looked at that again. When we approach China and try to encourage it to take a new and constructive role as a major global superpower, let us recognise that we need to engage with it not only with a new policy but with a new mindset and, more importantly, with a new relationship.

13:00

[Lord Parekh]

My Lords, I thank the noble Lord, Lord Howell of Guildford, for securing this debate. It was really nice to see him shed the constraints of office and reflect creatively and independently on some of the larger issues of the world today. As he rightly pointed out, the international landscape is undergoing profound changes. It is undergoing profound changes at a superficial level in the sense that there are more economic, political and military players than there used to be—China, India, Brazil, possibly Indonesia and Turkey, and a few others. I would suggest that, although this is an important change, it is not a decisive one. A really decisive change is taking place at a different level; not just increasing the number of players in the game of international politics, but the way in which the game is going to be played. In other words, the real change is taking place not simply in terms of how many players there are, but how power is acquired and maintained and what is the nature of that power. I want to say something about it because the subject has been largely neglected.

All over the world there is a very profound change taking place in the sense that people are extremely suspicious of the political class and the way it has dominated and tried to monopolise political life. People want to make their own decisions and to assert themselves. The Arab spring is only a tiny footnote to history; there are lots of things like this, even in China. Through the Communist Party and through independent sources, hundreds of protests are taking place every week in China, with people wanting to assert themselves and questioning the official line on a number of issues. All this seems to indicate a groundswell of enormous, popular, raw political energy, wanting to take control of the world. They do not trust the political class, they are tired of the way in which the political class has made a complete mess of the world around them, they want to form their own opinions and, having formed their opinions, they want to make their impact felt. They have formed these opinions on the basis of a variety of sources, thanks to the internet, thanks to global connectedness, thanks to the fact that they are able to link up with powerful forces all over the world and form a global opinion within a local context. That is a profound change.

This means that if we really want to acquire power, we will have to influence how people think and how their opinions are formed. In other words, political power today does not lie in military weaponry, although that is important in times of crisis. If it were that important, Syria would not have got out of control and Iraq would have been brought under control a long time ago. Economic strength by itself does not take us very far either. I suggest that power is changing in a profound way because, once people begin to want to take control of themselves, power really consists in our ability to shape their thinking.

This is sometimes called soft power. The inventor of soft power, Joseph Nye, is a friend and I have debated this concept with him. I told him that I think it is a hazy concept. Soft power is simply a softer version of hard power and that is how it has sometimes been understood, the assumption being that what military weaponry has obtained, we will now obtain by softer means. Soft power is no longer soft, because once you are able to grip people’s imagination and shape their thinking, your hold is far firmer than military weaponry would give you. I would rather talk in the language of moral authority.

A country is able to shape other people’s thinking if it carries a measure of moral authority in the eyes of the world. Moral authority comes from two sources: the belief on the part of others that this country is forming its views independently; and that it is a country which is worth emulating and admiring. In other words, moral authority comes from intellectual and moral sources and that is what our foreign policy should be aiming at. Unfortunately, if we look at all the documents from the Foreign and Commonwealth Office, the emphasis is almost entirely on commerce and trade. Important as these are, I do not think that the Foreign Secretary was right to say that he should turn the FCO into “a commercially focused” organisation. I think the Economist rightly called it a form of zealous mercantilism. We should rather be thinking in terms of acquiring the kind of moral authority that I am talking about. We once had it, but we lost it—or at least weakened it—partly because of the second war on Iraq, partly because of the way we behaved in Libya, saying one thing and misrepresenting what the UN resolution was about, and partly because of actions such as abstention in the recent United Nations vote on the Palestinian demand for observer status.

If we really want to acquire moral authority and influence the way the world thinks about us we will need to do a number of things. I want to mention, in the minute I have left, four important points. First, our foreign policy will have to be principled and value driven. I am not talking about an “ethical foreign policy”—we know how we got into trouble—I am talking about a foreign policy which is seen by the world as giving voice to sanity and justice and representing independence and impartiality. Secondly, we need to be more hospitable to students coming from the rest of the world. These are the people who will go back to their country and shape their part of the world. Remember, this is how the United States acquires its power. It is very striking that 73 current and former prime ministers and presidents in the rest of the world were educated in American universities.

Thirdly, we will have to think of the BBC as a central vehicle through which our views are circulated. Although cuts might have been necessary, we need to be careful that it is not required to cut down its audience or its programmes. Finally, we need to play to our strength. We have succeeded in this country in building a fairly cohesive multicultural society. The rest of the world is moving in that direction and we have something to tell it. We appear to be very resentful about our multicultural society. We appear to be carping in our criticism. It is very important that we present a profile to the world such that we are seen as a society at ease with itself. This will mean more senior diplomatic staff drawn from ethnic minorities. As of now, I do not think that this numbers more than 1.5% to 2%. It also means that we should be saying more about how different religious and cultural groups can live together and what lessons can be drawn from our experience.

13:08

[Lord Dykes]

My Lords, it is always a great pleasure to follow the very wise words of the noble Lord, Lord Parekh, and his enlightened expression of the need for countries, particularly those going through very severe periods of austerity, as we are and as are other countries in Europe and elsewhere, to maintain civilised values in their external links with the outside world. It is also a pleasure to follow the equally wise words of my noble friend Lord Bates and his justified idealism about the need for a proper definition of politician and statesman. He did not have time to elaborate but I hope that he will not mind that I mention a rather cynical definition of a politician. Fifty years ago, a former US Defence Secretary, whose name I have forgotten, said to one of his friends, “Listen, honey, I’m a politician. That means that when I’m not kissing babies I’m stealing their lollipops. Never forget it”. I thought that rather harsh working definition of a politician should have been overtaken by events—and indeed that has proved to be the case in certain countries, and in Britain, too, which unlike the United States has a gentler view of the important requirements of a capitalist economy, but a modern, welfare capitalist economy, as the Germans have been so adept in creating, and the French in their own way.

I declare an interest, as I live in France. It does not mean that you have to be emotional and bombastic about your own country. We are all European countries, and we can be proud of every single level of our attachment, down from the individual street to the village and town, the county, zone, region and country. I am intensely patriotic about Britain, but I see plenty of faults here as well, as one does in other countries. But I am even keener that we resume our place as a legitimate and modern member of the European Union. I thank particularly the noble Lord, Lord Anderson, at the beginning of the debate, and the noble Lord, Lord Judd, who also referred to this in very strong terms. There is a need for this country to resume and reattach itself to its political maturity, of which we were very proud for many decades. Why have we become so insecure and immature about our European link, a very precious thing that we negotiated with great pain and difficulty over many years? We took 12 years to get in because of two French vetoes, then two years afterwards the then Labour Government decided that they wanted to renegotiate a substantial portion of the terms. No wonder our colleagues, patient as they are, begin to get very exasperated sometimes with our EU membership, particularly with the antics of what is admittedly still quite a small minority of Conservative MPs in the other place. They are going through a charade, partly because of UKIP but also for other reasons, of attachment to a pretend sovereignty that no longer exists in any country—not even in the United States, in the end, a country that is regarded by some people as being in decline.

I thank warmly the noble Lord, Lord Howell, as others have done, for launching this debate. It is always a great problem when you are talking about the whole world, but he did it very effectively, because he focused quite rightly on a number of things, particularly the Commonwealth. You can sound like one of those terrible travelogue films from the cinemas in the 1950s, which would say at the beginning, “As the sun pulls away from the jetty and the ship sinks in the east, we say goodbye to such and such a territory”. He did not do that; he focused on some of the modern requirements in this country in the sense of the Commonwealth, which is a very important body in every way. It is developing, as someone said, with an inadequate budget—but I hope that that will be changed in future. I appreciate, and have always been glad about, the attachment of the Commonwealth entity into the Foreign Office, as it is a more modern position and configuration for the modern world.

I, too, praise, as the noble Lord, Lord Howell, and others have done, the Foreign Office for the work that it has done over the years. I have always been distressed at the demoralisation of the Foreign Office by what is coming up to 15 years of cutbacks in expenditure, budgets and so on, in two or three phases. Yet another phase is now threatened by the Treasury, which is not so keen so often to cut back its own establishment in physical terms, as it lectures other departments on cutting back theirs. The Foreign Office has put up with this for many years. It does dent morale if people constantly say to diplomats, representing this country overseas with great pride, that they must just think about trade and commerce and nothing else. That is not the job of a diplomat; it is an important component, but it is not the exclusive job of a diplomat, and I think that other noble Lords have alluded to that.

I endorse the views expressed on the role that Britain can play in the Middle East, as a particular example of where we need to exert ourselves more. There was an incipient sign of this recently, but then it became rather gentle again, with the usual obfuscations that personally I find very depressing and unnecessary. This country needs to assert itself, with others, including Germany, which has always had that problem after the nightmare of the Third Reich, in dealing positively vis-à-vis the Palestinians in the search for a proper, genuine and just settlement between Israel and Palestine. It is a most important issue. The present Israeli Government are not a particularly attractive Government—and I am sad to say that, because I am a great admirer of Israel. It is a wonderful country, with many outstanding achievements. But to some extent the geopolitical wisdom of yesteryear, as with the United States, has left it a bit at the moment, and I regret that. Israel needs to understand that it cannot be defiant all the time, so that in the end the Palestinian territory is the only one in the world without civic and voting rights as a genuine entity and country. The UN charter cannot allow that. Therefore, that would mean the end of the Zionist state as we know it. I personally would prefer there to be two states, side by side, including a Zionist state with perhaps not too much religion—because a lot of Israelis are a bit worried about that as well—but an adequate, normal or normative amount. Then they could reach that solution with Palestine that would mean shaking hands and getting on. I was an official observer for the EU Commission in the South African elections, and the day after you saw the scales fall away from people’s eyes as the nonsense of apartheid was demolished and destroyed—although not immediately. It takes time. But it has happened, and it can happen between Israel and Palestine. If any two countries can work together in future, it is those two, and it is up to Netanyahu and Lieberman to see that, I hope with the advice in future of the British Government, who have been a little too hesitant.

If the United States is in decline and ceasing to be a leader of the western world, it must at least in this coming period, working on the global basis that the noble Lord, Lord Howell, has advocated for this country, make sure that it reaches the solution necessary in the Middle East. It would be the greatest tribute that there could be to Barack Obama. He was given the Nobel Peace Prize in advance of this achievement. I hope that that prize was justified.

13:16

[Lord Hannay of Chiswick]

My Lords, I very much welcome today’s debate, and the initiative of the noble Lord, Lord Howell, in securing it, not just because it is the first occasion that the House has had to conduct a wide-ranging discussion of foreign policy issues since the debate on the Address in May but because it offers an opportunity for me to continue a dialogue with the noble Lord about some aspects of the Government’s external policies, which was cut short on that occasion through lack of time—even if his own position has changed, to my regret.

I have to say, and I hope that the noble Lord will forgive me, that I will remain completely baffled as to the significance of the phrase “network world”. In the interim, I have reflected a bit and am reminded of the character in the Molière play who said that he had some difficulty in distinguishing between poetry and prose, but who was assured that prose was what he had been talking all his life. I think that I have been doing networks all my life; it is not something that has been discovered in the past three or four years.

If the debate also reminds us of the lacuna that exists as a result of our not having a foreign affairs committee, or an international affairs committee, in this House, which could periodically report to the House on key issues, it will have served a genuinely useful purpose. Before addressing a few general issues, I just wish to say how deeply I regret the Government’s decision to abstain on the UN resolution giving the Palestinians a modestly enhanced status at the UN. It was the noble Lord, Lord Carrington, who in 1980 first persuaded the European Community, followed some years later by the United States, to back a two-state solution. I believe that we should have followed that logic in voting for the resolution, not have pursued some non-negotiable conditions to give ourselves a quasi-alibi for an abstention. It may have seemed ingenious, but it was certainly not principled.

The general criticism that I would make of the Government’s external policies are that they are a little too narrowly focused on the cultivation of bilateral relationships and are a little too mercantilist in their approach to trade policy. The Foreign Secretary’s actions to strengthen and extend our bilateral diplomatic network and, in particular, to build up our representation in the main emerging powers, is to be applauded. However the objective should not be exclusively to promote British exports and inward investment, but every bit as much to influence the policy decisions of countries whose increasing role in the major multilateral organisations will make them essential partners in shaping a rules-based set of solutions to the global challenges that we all face, whether in trade policy, climate change, development, nuclear disarmament and non-proliferation or in nurturing peace and security more generally. That second part of the narrative often seems to be missing.

Then there is the mantra du jour that we are in a “global race”. There is some sense in this as a means of galvanising the energies of business and of bringing home the fact that we live in a highly competitive world where we have fallen some way behind our main competitors, but it misses out totally the concept of international co-operation which is every bit as important a dimension of a world in which Britain, a middle-ranking power which needs partners and allies to achieve its objectives, can hope to thrive. There is a real risk that the aftershocks from the great financial and economic crisis of 2008 will undermine the gains made since the end of the Cold War in international co-operation, and that the major multilateral organisations such as the UN, the IMF, the WTO, the G20, NATO and the EU will lose political backing, be underresourced and decrease in relevance. If that were to happen, I believe Britain would be one of the main losers. So by all means let us pursue strong bilateral relationships but not at the expense of those multilateral, rules-based organisations in which we have hitherto invested so much effort with some considerable success.

Nothing is more difficult than achieving coherence in a Government’s external policies and in one important sector I believe the UK is currently falling far short of that. I do not imagine anyone will dispute that the higher education sector in this country is a world leader and that over recent years it has been a rapidly growing source of invisible exports of great benefit to our universities and to the country as a whole. Incidentally, it is also a hugely growing source of employment in many parts of this country where that is lacking. The potential for even greater benefit in both ways in the years ahead is there but the Government’s own immigration policies are putting all that at risk. Last week we had the Minister for Immigration at the Home Office, Mr Mark Harper, rejoicing at the latest immigration statistics, which showed a sharp drop in net migration, the lion’s share of which was attributable to a substantial reduction in the number of students coming here. These are not people coming to take jobs but people coming with ready cash to purchase services which our colleges and universities can provide, people who in future years, when their studies are completed, will often become a part of that worldwide network of bilateral contacts which the Government are trying so hard to build up. What on earth is going on? What are the Department for Business, Innovation and Skills, the Foreign and Commonwealth Office and the Treasury doing about this truly aberrant state of affairs? I hope that the Minister, whose work in encouraging British exports, both visible and invisible, I very much admire and support will have something to say on this when he replies to the debate.

I have one final point. A debate on this subject would not be complete without a word on the European Union and the European dimension of Britain’s external policies, although we will have an opportunity to discuss that more fully before the Recess. If Britain’s influence in Brussels becomes marginal—even more so if we were to withdraw from the European Union—our influence worldwide in Washington, Beijing, Delhi, Brasilia and elsewhere would suffer too. We should have no illusions about that. Nor would our exports or our inward investment benefit—quite the contrary. It is, after all, not membership of the EU which can explain why our exports to China in recent years have developed so much less buoyantly than those of Germany. So we need to take a more imaginative, constructive approach to that European dimension than we have done recently, and to regard it as an essential and integral part of our external policies, not something that dare not speak its name.

13:23

[Lord Naseby]

My Lords, I concur in congratulating my noble friend on the initiative of holding this debate. I do not want to embarrass him but, frankly, he is the best Foreign Secretary that we never had. I couple that with the role that the noble Lord, Lord Marland, plays as part of the team with the noble Lord, Lord Green. He is probably the most energetic ambassador for British trade and commerce overseas that I have ever witnessed. I saw him in action in Sri Lanka in April and that visit was a whirlwind success. I do not know how many other countries he visited on that occasion but I congratulate him and the team behind him.

Forty-five years ago I wrote a pamphlet for the Bow Group entitled Helping the Exporter. I was one of three authors, all of whom had worked overseas for two or three years prior to writing that pamphlet. It was based on the fact that in the previous 10 years this country’s percentage of world trade had dropped from 20% to 13.5%. That is what prompted us, as young men aged around 30, to take an initiative and try to move the then Government to think creatively about how we should export and how we could improve our exports. We looked particularly at what the Government of the day did and at the agencies that were quasi-government at that time. One of the areas that we looked at was the Plowden committee report, which was basically about part of the structure of the Foreign Office at that time. I venture to suggest to my noble friend Lord Green that he should dust down that report and have another look at its conclusions. I had a look at them and many of them are very valid today, as they were then.

I shall pick out two of the 28 recommendations in the pamphlet. One concerned the Queen’s Award. If I am absolutely frank, I think that it is pretty tired at the moment. Here in this jubilee year we have a wonderful opportunity to relaunch that award, and I venture to suggest that we might look at that creatively. Secondly, the personnel within the Foreign Office that I meet overseas are, frankly, too young in terms of trade and business. They are too inexperienced and do not have the relevant knowledge, depth or contacts. That needs to be looked at.

I turn to the other half of the Motion: the United Kingdom’s new global role. We should be realistic: we do not really have a global role. We do not have enough of a defence facility and we do not have enough stretch in terms of contact on the ground. Therefore, we have to prioritise and select. We have to be brave enough occasionally to say no to certain ventures that we might morally think we should be involved in but do not have the resources to do properly. With regard to the Arab spring, north Africa and that area, we thought that Tunisia had undergone a relatively easy transition. However, demonstrations are now bubbling up, mirroring what is happening elsewhere. The recent murder of the US ambassador in Libya brings into question whether we were right to intervene there. I thought from the beginning that we were not, and I question whether the £1 billion or thereabouts that we spent on that venture was good value for money.

It has taken the Muslim Brotherhood some 84 years to get power in Egypt. Those of us who know Egypt a bit need to reflect on that. Are we confident that we backed the right side in getting rid of Mubarak if we end up with the Muslim Brotherhood? I am not at all sure. Jordan, you could say, is another country, but we are very silent on Jordan. As for Syria, I ask myself why we are backing anyone. It never was our sphere of influence; it was a French one. Why did we not leave it to the French? Who are we really backing? We have formally recognised a group but the stretch of the power base of that group is pretty illusory and does not seem to have too much basis as far as I can see. I ask myself: is the real risk that we are going to change from the Ba’ath Party autocracy to the Islamic jihadist movement? Certainly, we need to reflect on that. That is why two weeks ago I wrote to the Prime Minister, which I rarely do, saying that in my judgment there was absolutely no case for the British military to go in on humanitarian grounds; that is the role of the international Red Cross. Those of us who work in and know those areas should not forget that there is also the Red Crescent, which is as powerful and objective as the Red Cross, and it is a facility for some, but not all, of the UN agencies.

I turn lastly to an area that I know well, south and south-east Asia. I have lived and worked in three of the countries there: India, Pakistan and Sri Lanka. I think that I have visited every other country in that region with the exception of Burma. Today, apart from in India, the infrastructure and influence in that region is Japanese and Chinese—and now we have the Obama vision moving into that part of the world. As the noble Lord, Lord Bilimoria, said, that part of the world used to be very close to us but, whether we like it or not, over time we have alienated many of the countries there for all sorts of reasons. Even today we sometimes show little understanding of them.

When the then Foreign Secretary, Mr Miliband, went to India in 2009, he drew the allusion that the problem of Mumbai terrorism was associated with Kashmir. Not only was that wrong—in fact it was categorised as a diplomatic disaster—but so were the nuances that went with it. I shall quote from the Independent, which said:

“To make matters worse, he”—

Mr Miliband—

“kept addressing India’s septuagenarian Foreign Minister by his first name and putting his arm around him”.

There are certain traditions and methods of greeting and understanding people in that part of the world that are very different from what we do in the United Kingdom, and it is no credit to any of us if we forget that.

With the Commonwealth conference coming up next September in that part of the world, in Sri Lanka, which is greatly welcomed by the rest of the Commonwealth countries, we should remember Kipling’s epitaph, which states:

“A Fool lies here who tried to hustle the East”.

13:32

[Lord Soley]

In endorsing the comments about the contribution of the noble Lord, Lord Howell, to this House, I would simply add that he is a great loss to the Government’s Front Bench. I also thank him for the way that he introduced the debate. However, following his description of the “repositioning”, as he called it, of the world, I have had to reposition my speech very slightly and adjust it accordingly. The essence of what he said is that whereas we used to live in a unipolar world, and prior to that a bipolar world, we now live in a multipolar world—and that will last for a long time. He linked that to the emerging powers and new markets. It is about that issue that I want to say a few words.

When the phrase “British Empire” is used—it has been used only a couple of times today—we then talk, quite rightly and with some pride, about the Commonwealth. However, I sometimes think that the phrase “British Commonwealth” holds up a distorting mirror to Britain’s past. It was of course an empire but it was actually the world’s first power that, because of the industrial revolution, had a global reach. It is that which makes the difference. It was that global reach that resulted in the English language being the world’s premier language. It is that, together with a whole range of other things—including education, rule of law and the BBC; I could name them all—that forms the basis of our influence today. Notwithstanding the insightful comments of the noble Lord, Lord Parekh, about the nature of soft power and how it trips over into hard power, we have to build on what we have here, because it is important.

I want to talk about how we link up these things in relation to the “new markets”, which is the other phrase that the noble Lord, Lord Howell, used in introducing this debate. It is an area in which I have recent personal experience. I had great help from the noble Lord when he was a Minister, and I continue to get such help. I hope that I will continue to get it, not only from his successor in the department but from the Minister who will answer this debate, because it relates to this issue. I felt some time ago that Britain had an enormous contribution to make in terms of soft power. It was not just the BBC, education and so on; it was also that this country is seen as important in terms of the rule of law and good governance.

I must declare an interest because I set up the Good Governance Foundation, a not-for-profit organisation—which is just as well because it does not look like it will make a profit at any time soon—which is designed to use our experience and knowledge with emerging countries, which is the other issue that the noble Lord, Lord Howell, put in the title of his debate. As the result of an argument that I had with the authorities in Abu Dhabi about the treatment of a Palestinian family in 2010, I said to those authorities, “If you do not do something about the rule of law you will have big problems”. To my surprise and, I must say, my pleasure, they asked whether we could help in some way. The result, as some noble Lords know—the noble Lord, Lord Howell, certainly knows of my work there—is probably the first postgraduate course of law at Zayed University in Abu Dhabi. I was over there the other weekend and was introduced to probably the first two female judges in the Middle East. I was suitably impressed by their confidence, ability and training. I have yet to check whether any other Middle Eastern country has a female judge, but I have not heard of any yet.

In May this year I gave the first annual Sheikh Zayed Memorial Lecture on the rule of law. Initially I proposed setting up the annual lectures to promote the idea of the rule of law but I was then also asked to give the lecture, and I did. We hope that, as a result, the late Lord Bingham’s book on the rule of law will be published in Arabic. It is in this sort of area where we are able to do far more. I have now talked to about half a dozen other countries about this sort of approach.

The Minister may know—the noble Lord, Lord Howell, certainly knows, because he has been helpful on this—of the work that I am currently doing with Burma, which is sometimes known as Myanmar. There is an argument within Burma as to which name to use, but I will use Burma for the moment. We are now talking to Burma about similar options on the rule of law. The opportunities are therefore great. We in this House underestimate our strength which we can use in conjunction with such efforts. I am currently trying to arrange for people with suitable experience to go to Burma to help form good governance because, too often, that country receives visits from people from all over the world who will look at what the Burmese need and then go back to their own country and talk to other people there. We need a more in-depth and continuing involvement.

We have in this House people who have run the Civil Service, others who know about the relationship between a Secretary of State for Defence and the armed forces and police force, and, above all, people who know about the rule of law. We have many ex-Lord Chancellors in this House and, indeed, more lawyers than I can count. I hasten to add that I am not a lawyer. However, the depth of the contribution that we can make is far greater than we envisage, and we should have a structure to do it. That is what I am trying to do, particularly in Burma. Zayed University in Abu Dhabi is already involving us in more areas, and I want to continue and expand that process. We rightly talk of our use of soft power, but many of the emerging nations mentioned in the title of the debate also represent a vast opportunity as new markets—because the new market is for good governance. However you dress it up, good governance is a very wide phrase. It is not just the law or the relationship between the armed forces and a government; it is also education, health and a host of other areas where people are willing to learn from what we have done. It is not a case, nor should it be a case, of us telling them what to do. It is a matter of us working with them to deliver that change. I hope the Minister will address that in his comments.

13:39

[Lord Kerr of Kinlochard]

My Lords, I thank the noble Lord, Lord Howell, for securing this debate. I also congratulate him on the style and stamina that he showed on the Front Bench, sometimes under grave provocation—sometimes from me. I thank him very warmly.

I had intended to say a word about China but my fox has been elegantly shot—it could not have been better shot—by the noble Lord, Lord Bates. I shall therefore say a word about Korea and make one general point.

Korea is the world’s 12th largest economy—larger than the whole of ASEAN. Last year, it grew faster than any other OECD country and it has the greenest growth strategy in the OECD. It is a major inward investor here. It is a country that the Minister knows very well and, as he knows, Korean markets are now more open to British exports than ever, thanks to the free trade agreement that has come into force.

I need to declare an interest. I am the UK president of the UK/Korea Forum for the Future—a role I inherited from the noble Lord, Lord Richard, when I came to this place. I had inveigled him into doing it when I was Permanent Secretary at the Foreign Office, and the moment I arrived here he passed the role to me with all the dexterity of a Welsh fly-half. In that semi-official capacity, I congratulate the Minister on the Opportunity Korea initiative, in connection with which events will take place in Birmingham, Manchester, Edinburgh, London and Bristol in February. Creating greater interest in this country in the Korean market and in Korean culture is an extremely good idea.

In that context, I hope that the Minister can persuade his colleague, the Foreign Secretary, that it is high time that a British Foreign Secretary visited Seoul. The last British Foreign Secretary to visit Seoul was Douglas Hurd—now the noble Lord, Lord Hurd of Westwell—who did so 20 years ago. Frankly, that is not good enough when we are talking about a relationship with a country which takes us as seriously as the Koreans do, which has such a difficult political environment in its immediate neighbourhood and which is such an important market for us.

People in Korea have a real respect and affection for this country. The foundations of that are partly historical, with the valour of British forces 60 years ago, and partly due to recent partnerships, such as the fact that in Brussels the British were the most powerful supporters of the Commission in securing the free trade agreement. The Koreans know that. They would be delighted if we took more interest in them but they would be disillusioned if we took less interest in Brussels and therefore were able to exert less influence on behalf of the interests that we have in common. Therefore, the last point that my noble friend Lord Hannay made today was very important. I know that Koreans are puzzled at our present stance on the European Union.

I was in Australia last week. Friends there also expressed some puzzlement about our stance on Europe but I was not able to provide an explanation. They asked me why, alone with the Czechs, we chose from the outset to play no part in new EU mechanisms to reinforce the very fiscal discipline which the Chancellor was again preaching yesterday, even though no intra-EU fiscal transfers were envisaged. They have noted that this time we alone—without even the Czechs—chose from the outset to stand aloof from proposed arrangements for improved banking supervision in Europe, arguing that they were relevant only for eurozone member states, even though all other non-eurozone member states will be arguing this week in the European Council for arrangements that will permit them to join and even though our self-exclusion is causing real concern in the City. Noble Lords will have noted the important article by Gerry Grimstone, chairman of Standard Life and TheCityUK, in this week’s FT. I quote:

“British practitioners, politicians and officials need to engage more at the European level and to do so at an earlier stage—building alliances, and proactively informing and shaping the EU … agenda. Whether it is on banking union or on particular markets directives, we need to be at the table with an open, constructive and thoughtful approach. The UK voice needs to be firmly but constructively heard”.

That is the authentic voice of the City, unlike what the mayor was telling us this week, although his motives may be slightly different. He may have personal ambitions rather than the ambitions of the City at heart, and I do not want to go into any piffle.

I now want to make a half point and will then make my final point. My half point is about our global role and the fact that rhetoric is no substitute for resources. What one needs for a global diplomacy is diplomatic boots on the ground: local knowledge, linguistic skills, a real understanding of local markets, and sensitivity to national customs and history. It would be an illusion to pretend that one can be global on the cheap, yet I fear that that is what the Foreign Secretary is being asked to do. If the noble Lord, Lord Howell, were ever to bump into the Chancellor of the Exchequer—as I suppose is conceivable—this is a point that he might want to make to him.

My bigger point about our global role is as follows. When I was a young member of the Diplomatic Service, I witnessed daily battles between the advocates of a blue water diplomacy based on the United States and the Commonwealth and the advocates of being at the heart of Europe. By the time I became head of the service, the battle was long over. All had recognised that the dichotomy was false. It was accepted—not least because our American and Commonwealth friends had gently and persistently reminded us—that we best advance the interests that we have in common with them when we exert maximum influence in the EU. The obverse, by the way, is also true. When in Washington, I discovered that we are heard with greater attention there when it is thought likely that we will be able to deliver EU support for deals that we strike with the Americans.

We do not have to choose—indeed, we must not choose—between a blue water and a continental strategy. They are mutually reinforcing and we need both. If we punch above our weight—in the uncharacteristically belligerent words of the noble Lord, Lord Hurd of Westwell—it is not because of any innate diplomatic skills but precisely because our foreign policy is woven from the twin, mutually reinforcing strands of worldwide reach and continental heft. That is why I can give only two cheers for talk of a new global role. It will deliver among emerging powers and new markets only if they perceive that we are at the heart of all key Brussels debates, building alliances in support of common, and Commonwealth interests, and that we are set to remain their natural influential and permanent point of entry into the 500 million-strong EU market. If we lose influence in Europe, we shall find it hard not to lose influence with them; and if we lose interest in Europe, we may find that they lose interest in us.

13:47

[Lord Selsdon]

My Lords, I have always had great respect for my noble friend Lord Howell because he was head boy at my prep school, where he exercised a certain amount of soft power when we stepped out of line, as the noble Lord, Lord Fellowes, whom I see in his seat, may well remember. Apart from that, as I have listened to him, he has taught me many things over time. He has a quiet approach, behind which lies greater knowledge than I could ever wish to have.

In preparation for speaking to your Lordships today, I have taken advantage of my position as a member of the Information Committee by asking the Library to produce a really good note on this debate, and it has done so. If your Lordships are going home for the weekend and cannot find a suitable newspaper, the report that it has provided is quite remarkable, although I shall not quote from it today.

I was always in trade and I sat below the salt, as I have pointed out. I love the Pink Book and I love the balance of payments. I look at the £100 billion deficit that we have on visibles and at the fact that with every country of the EU we have a deficit that grows and grows. We have a surplus of £6 billion or so with the United States and a surplus with Ireland, much of which is in trans-shipments. Therefore, in visible trade we are failing dismally, whereas in invisible trade or services there is a balance of about £200 billion on each side. However, it is our role in the world that we need to think about.

I was brought up in the Navy as a navigator. I was very junior and therefore I always had the middle watch. I would look at the stars and try to study and learn. I found that as you look at the world, you ask, “What is it?”. I think of it geographically. One of my heroes is Harrison, with his connection to chronometers, Greenwich, 0 degrees and the centre of the Earth. With a globe, it is quite difficult to look laterally, so you need Mr Mercator, who produced the Mercator projection and the flat chart, so wherever I have been in all my time dealing with trade, I have put the United Kingdom right in the middle and looked to the left or the right.

Some 70% of the earth is water. Is that blue-water policy? The remaining 30% is land. What has this got to do with trade? Well, our trade was always maritime and 20% of all vessels floating on the surface of the earth have a Commonwealth flag. Everyone these days is nervous about piracy but the Navy will say that 80% of all our trade comes by sea. These statistics may not seem relevant but they have a relevance to me. It is all about the water. Take the economic exclusion zones, where each territory has a 200-mile limit around it. That makes the UK pretty big. In fact, with the Commonwealth it is enormous—36 million square kilometres. That constitutes more of the sea than the area round the whole of the United States, the rest of our NATO allies and the next biggest zone, France.

Does that matter, though? Looking over land and sea, we see natural, or God-given, resources and we forget that most of our own development involved the exploitation, if that is not an unacceptable word, of those natural resources through fishing, mining and agriculture. The Sudan was to be the bread basket of the Middle East and still could be. It is in this field of soft power and knowledge that the United Kingdom can play a great role. I think of the term “common wealth” not so much politically but as describing the combined natural resources of these countries and any skills that they may have which can be applied elsewhere—for example, the mining skills of Australia and the fishing skills of some of the smaller territories. Look at how the world has begun to become global in thought and concerned about energy, power and natural resources.

I have always been a great friend of the Commonwealth. One of the things that I was made to do in earlier days was to be able to recognise the flags of the world. The only value that has given me is as secretary and treasurer of the House of Lords Yacht Club, which of course carries a certain influence. Your Lordships will be aware that every vessel floating on the face of this earth that has a British flag has the right to the protection of Her Majesty’s plenipotentiaries—ambassadors’ ships or whatever they may be. We are a maritime nation; we are also British.

I have a feeling that the debate today will have done a bit of good, but I now turn to the noble Lord, Lord Green. After the last debate I wrote him a nice letter and gave him the history of the Board of Trade, which I had rewritten. He did not reply because he was busy on his travels and his footfall was extending everywhere from Everest down to the Antarctic, but his officials swiftly rang me up and said, “What about the other three volumes?”. I said, “Could we get rid of this word ‘BIS’, which is what my dog does?”—although I must not mention dogs’ business. Anyway, I got no reply. Then I thought I would go on in the same vein and say, “Let us look at the priorities”. I thought I would see if I could have soft power.

I was not going to mention this but I am obliged to because I have to declare an interest. I have pointed out before to your Lordships rather light-heartedly that if no one else would do it, I would launch my own satellites for surveillance. I have done that twice and declared it in the House. The company has now been formed. It is a limited company and I am told that I have to point out that I am the sole director. It is called Evening Star; it has the greatest satellite technology the world has ever seen; and it was all started by the university of the city where my noble friend Lord Howell was a Member of Parliament.

13:53

[Baroness Warwick of Undercliffe]

My Lords, I congratulate the noble Lord, Lord Howell, on the timeliness of this debate. Yesterday’s Autumn Statement sets a powerful context for it. There is no question that we have to develop a strategy for growth for the short term in the light of disappointing economic prospects, but the longer-term challenges are far more profound, as the wise and comprehensive introduction to this debate by noble Lord, Lord Howell, underlined.

In a recent speech, referred to earlier by the right reverend prelate the Bishop of Worcester, Jeremy Brown MP talked about the revolution taking place in the world order and of the scale of the task facing the UK if we are to preserve anything like our current level of influence in the world. I am grateful to the Library for drawing this speech to my attention. It had several interesting themes and I enjoyed it. He pointed out that we have a very strong position on which to build. Our history of openness and the strength of our cultural, diplomatic and educational ties go towards giving us a great advantage in emerging economies. But he also pointed out the dangers of complacency. Just because the UK has been in the lead in the past two revolutions—the industrial and the information revolutions—that is no reason to assume we will remain in the forefront of the next. He said:

“Britain needs a big wake up call. We have no pre-ordained right to be wealthier, more successful and more influential than other countries. We earned that status in the past through invention, adventure and enterprise, and we need to earn it again for the future”.

In describing this competitive advantage, he said,

“No part of our Government or public life should be exempt from this national task”.

I will restrict my comments to one issue that I see as a real competitive advantage. We are a major force in the provision of international higher education. I declare an interest as a member of the council of UCL. The Government should be congratulated on identifying higher education as a key strand within its industrial strategy. Doing so recognises that universities play an increasingly important role in the UK’s export success. This role is both direct and indirect. In direct terms, as this House is well aware, universities earn the UK £8 billion a year as a result of their recruitment of EU and non-EU students and the number of globally mobile students is growing rapidly, so projections suggest the UK’s export earnings in this sphere could rise to £17 billion by 2025.

But universities also support other aspects of UK international trade. Their international character contributes to the education of UK-domiciled students who have the opportunity to learn alongside students from the countries which will, in future, be of the greatest economic importance to the UK. International graduates clearly make an important contribution to UK business, through language skills and contacts as well as their professional competencies. Our own Science and Technology Committee, chaired by the noble Lord, Lord Willis, has drawn attention to the importance of international students in STEM disciplines, but it is important to point out that the links we are building are important across the whole range of subjects.

The creative industries are one of the sectors of the economy where we have the strongest potential for future growth. Our cultural and creative output is one of the great draws for talent to this county—one of the reasons good people will move here to work, and therefore one of the reasons major multinational companies will locate here. It is likely to be the foundation of many of our export successes in the future. I think there is an argument that our strength in these areas flows from our inter-connectedness, our openness to new influences and ideas, the exchange of cultures and histories which takes place in all our major cities, and our intellectual culture of challenge and criticism, which is not innate in all cultures. So I would argue that, although there may be particular issues about our dependence on international postgraduates in certain STEM disciplines to maintain the viability of these areas, there is no doubt that we should look to encourage the international character of all our higher education. This will be obvious to those in this House who have been involved in international diplomacy, and I warmly endorse the contribution of the noble Lord, Lord Hannay, in this respect.

As others have said, the UK occupies an enviable position in terms of its soft power. An annual survey recently published by Monocle magazine put the UK first, ahead of the US, based on a methodology which includes the UK’s attractiveness to business. The international links our universities help us to build are, I believe, critical to our future success in emerging markets where we have traditionally performed poorly. It is not surprising, then, that a couple of weeks ago CBI supremo John Cridland joined a growing chorus of business leaders in saying that Britain was losing a massive business opportunity with a policy that was turning away the brightest foreign students. Four Select Committees have recommended that the Government change their policy on student visas. The noble Lord, Lord Hannay, is also leading an inquiry which has touched on this issue. All the serious newspapers have supported the call for international students to be removed from the Government's net migration target.

The Prime Minister has said:

“We must support all sectors of the economy where we have a comparative advantage”.

I believe that the Government, in many ways, have done that in respect of higher education, except, that is, in their immigration policy. Here, there is a fundamental inconsistency between the Government's desire for short-term and long-term economic growth, and a policy that few outside the Home Office support.

In conclusion, I ask the Minister what steps he is taking to advance the cause of international students in his discussions with colleagues. Will he personally ask the Prime Minister, on behalf of the many of us in this House who feel strongly on this issue, to reconsider their policy on net migration to exclude explicitly international university students and support growth in this hugely important area?

14:00

[Lord Williams of Baglan]

My Lords, like others, I thank the noble Lord, Lord Howell, for his initiative in calling this debate. I also pay tribute to his contribution to discussions on international affairs in this House, in the House of Commons and in other institutions over many years. Just over a month ago, we were together at one such institution—Wilton Park, in Sussex—for a conference looking at the enormous changes now taking place in Burma. One thing that we discussed, and that I hope we can see in the future, was that Burma might take its place in the Commonwealth. After all, it is one of only two former British colonies—I think the other is South Yemen or Aden—which did not join the Commonwealth on its independence.

The noble Lord, Lord Howell, spoke of the reform of the EU. I think we all wish to see a more efficient and modernised EU, but I caution that we need to take care. Many foreign companies from the United States, Japan, China, Korea and India have invested in the United Kingdom because they see the UK as one of the most liberal countries in Europe and as a gateway to Europe. We can ill afford to lose their investments, economically and politically. We also need to take care in talking about reform of the EU in the wider sense of reform of international institutions. This country has a great stake in the United Nations, in the IMF and in the World Bank. After all, we are one of only five countries in the world with a permanent seat on the Security Council, despite the fact that we are a nation of 60 million souls, whereas India is a country of more than 1 billion. Talk of reform needs to be taken forward with great caution as regards discussion of international institutions.

To my mind, the heart of change with regard to global affairs lies very much with the rise of Asia, China, Japan, Korea, India and Indonesia, whose president, Bambang Susilo Yudhoyono, was here as a state guest only a month ago. We have to recognise these realities and think whether we would do better to deal with them in the EU or decoupled from the EU. President Obama has made it clear where he thinks the United States’ future direction should be. Just over a year ago, he spoke of the US’s pivot towards Asia and we need to be mindful of endeavouring to intensify further our relations with such an important part of the globe. If the US saw a UK decoupled from the EU, and France and Germany more dominant in the EU, I believe that that would accelerate US involvement and commitment to Asia at the expense of its longstanding commitment towards Europe.

In the debate, much talk has been made of soft and moral power, concepts with which I always feel a little uncomfortable. However, there is no doubt that such things have been critical over the years, over the decades and perhaps over the centuries to Britain's international role. Here I declare an interest as a trustee of the BBC and as a trustee responsible for the World Service. I appreciate the concerns expressed in the debate about the World Service. Like the rest of the BBC and like all British institutions, the World Service has suffered from diminished budgets in recent years but I can assure noble Lords—

[Baroness Northover]

I apologise for interrupting the noble Lord but I would like to remind him that those who are given permission to speak in the gap have, at most, four minutes, so he might wish to conclude his speech.

[Lord Williams of Baglan]

I can conclude by assuring noble Lords of the robust and rude health of the World Service. We broadcast in an array of languages, from Azeri and Burmese to Persian and Uzbek. In all those countries we still have an impact and a reach that is much greater than anyone else.

14:05

[Lord Liddle]

My Lords, in speaking for the Opposition in response to the debate, it is a pleasure to welcome the noble Lord, Lord Green of Hurstpierpoint, to the Dispatch Box for one of his relatively rare appearances here. I do not say that in any spirit of criticism; all sides of the House appreciate the huge amount of work that the noble Lord does on behalf of UK trade promotion around the world. He brings to mind a conversation I had with Chris Patten, as he was then, when he was in Brussels. I asked him what life was like as a European Commissioner and he said, “I spend all my life expensively circulating the globe”. I am sure that the noble Lord, Lord Green, does a lot of circulating but I hope that, in the age of austerity, he does not do it too expensively, although I am confident that he does it productively. It is good to welcome him to the debate.

I also thank the noble Lord, Lord Howell, for introducing the debate. I will not join in the obituaries because there is plenty of life left in the noble Lord yet. However, I regret that he is no longer on the Front Bench. As a new boy to this place, I found him one of the most reflective of our Ministers, who always tried to deal very conscientiously and carefully with points made to him. In that sense, he is a loss.

I agreed with the vast majority of what the noble Lord said in his introduction. He told us about the great transformation in the world, which the noble Lord, Lord Bates, illustrated very well in his speech when he spoke about China and its huge pace of transformation, which is something that we all neglect. I agree with the noble Lord that we should make the most of our networks. I am rather more with the noble Lord, Lord Howell, than I am with the noble Lord, Lord Hannay; I think that networks matter in this world, and the UK is fortunate and well positioned in that. I only wish that the Government paid more attention to the higher education network, about which the noble Baroness, Lady Warwick, spoke, because it is key to our future. I also agree with him about the chambers of commerce, as recommended in the excellent Heseltine review. I agree that the Lords should do more in international affairs; I would love the Lords to have a proper foreign affairs or international committee.

The points that he made about the Middle East and energy are very valid. I also agree about the strengthening of Commonwealth ties. I support what my noble friends Lord Judd and Lord Anderson, and the noble Lord, Lord Maclennan, have said. I think that the soft-power ties of the Commonwealth are very important but that it will not act as one as a political and diplomatic force—at least, I do not see that happening very much—still less as a single economic unit. I know that the noble Lord, Lord Bilimoria, was not talking about going back to a world of imperial preference but I see very little prospect of a kind of free trade arrangement within the Commonwealth. The interesting thing about the Commonwealth is the way in which its economic interests have moved away from those of the United Kingdom. One of the most striking things about the emerging world is the growth of south/south trade, as opposed to south/north, between Commonwealth countries.

The fundamentals of what the noble Lord, Lord Howell, said, were right. Trade with the emerging world is crucial to our success in what the Prime Minister and Chancellor rather irritatingly refer to as the “global race”. However, the danger in such talk is that we convince ourselves that there is some great choice to be made between the rest of the world and Europe. As my noble friend Lord Anderson said, it is not a case of either/or—and as the noble Lord, Lord Kerr, said, it is not a case of a blue-water strategy or a continental one. There was a lot of hullabaloo recently about the fact that for the first time we were trading more with the rest of the world than with the European single market. That is a perfectly natural development, given the pace of growth in the rest of the world. It should not become a political point.

Membership of the single market remains crucial to our ability to compete with the rest of the world because of its size, its proximity and its relative stability. It is highly integrated. The noble Lord, Lord Alderdice, and I were at a dinner last night where a Foreign Office official made the very good point on the subject of exports to China that France includes Airbus exports in its figures but 17% of each Airbus is made in the UK. We benefit from our partners’ success as well as our own.

Size matters. Being part of the EU single market gives us clout. On trade with China we worry about intellectual property challenges or the dumping of solar panels, but we try to secure fair competition and open up markets. Having that clout behind us is much better than being the United Kingdom on our own because—I think that I am right in saying this—the UK is smaller than the smallest Chinese province.

Europe matters a lot—and it matters in another sense. When the rest of the world thinks about us, it thinks about us not as Britain but as part of Europe. It thinks of Europe as an entity in the world. Britain has great strengths of its own—many noble Lords talked about them—such as the BBC, the World Service and the British Council. However, Europe, too, has strengths in this emerging world. It is regarded highly for its culture, civilisation, science and engineering. The European model is greatly respected as one in which we have achieved democracy and the rule of law, and a model of capitalism that combines innovation and dynamism with social justice. The European model is a strength for us, and in this multipolar world it will matter even more.

[Lord Spicer]

How long can we go on trading at a loss with Europe?

[Lord Liddle]

The question about our competitiveness applies not just to Europe but to the whole world. The House will debate later the excellent report of the noble Lord, Lord Heseltine, which addresses these issues. The problem is not with Europe but with UK competitiveness.

In the new world, Europe matters more, not less. Trade policy matters. There is a very ambitious EU trade agenda, as well as a transatlantic agenda and an agenda for trade with the Mercosur countries, with India and now with Japan. I would like to hear from the Minister about these possibilities. There seems to be a tremendous route to opening up more growth potential.

If we want to be an effective force, we have to put more emphasis on our European commitment. We should look at how the Chinese are buying up Africa; at how Europe has been ineffective in dealing with Russia on energy questions; at how as a continent we do not seem to be taking advantage of the opportunities of the Arab spring. Together, the European Union could do so much in these areas that it is not doing.

The biggest risk that this country faces is that we give in to the pressures for a pared-down Europe—the kind of pressures that Boris Johnson talked about this week—and end up sleepwalking towards our exit from the European Union when it is our membership of the EU that will be our strength in this emerging world.

14:16

[The Minister of State, Department for Business, Innovation and Skills & Foreign and Commonwealth Office (Lord Green of Hurstpierpoint)]

My Lords, I thank my noble friend Lord Howell of Guildford for initiating an extremely important debate that has attracted a great deal of interest. My sense is that we have covered an enormously broad range of issues. I assure the noble Lord, Lord Liddle, that although I travel a lot around the world, I hope I travel economically. I turn right, not left when I get on a plane. I do not know what the travel policy is in Brussels.

Many issues have been raised. I hope noble Lords will appreciate that if I do not succeed in responding to every one of them, I will write in respect of the issues that I do not cover. I start with the point laid out by my noble friend Lord Howell that we are in a new era. The context is worth rehearsing briefly. One could argue that there have been only two periods in human history when there was a single global superpower. One was between 1815 and 1871; the other was between 1989 and about now. We are entering a phase where there is no longer one global superpower —or indeed two—but a series of actors on the world stage.

We are also moving out of a period of history that was unusual in the wider context of human experience. For most of human history, a country’s share of global output roughly equalled its share of the world’s population. In 1800 the second largest and largest economies were those of China and India. We are moving towards a situation where that sort of balance of economic output on the world stage will be true again. We all know what happened in the mean time. The industrial revolution enabled Britain, then other European countries, then America and—after the war—Japan to move ahead and take up a far larger share of world output than their populations would support in terms of their share of the world market. That time is now receding and we have to get used to a position in the world where a number of actors on the world stage are competing with us. In that sense there is indeed a global race.

Over the past 20 years or so we have seen the opening up of China, with the extraordinary consequences that my noble friend Lord Bates sketched out for us, and substantial reform in India. It does not always seem that India’s economy is very open, but the reforms introduced in 1992 by the present Prime Minister launched it on what is now, by its earlier standards, a significant growth path. We have also seen the collapse of the Soviet Union. These three major changes brought some 3 billion people into open markets and more into the financial and economic mainstream of the world. That has now spread through other continents as well. We have seen the emergence of powerful economies in Latin America, the Middle East of course, as the supplier of hydrocarbons to so many of those emerging powers, and now Africa. It is worth reminding ourselves that six of the 10 fastest growing economies in the world over the past five years are African. Ghana, Nigeria, Ethiopia and Mozambique are all growing at more than 8% a year.

The G20 is a key sign of this change. Global institutions are evolving in response. The G7/G8 has a role to play, but its central role in determining the economic issues of importance to the world as a whole has essentially now been taken over by the G20, which is a much better balanced grouping of nations to reflect the state of the world’s economy in the 21st century. This reflects the macroeconomic reality of today, which is that the global centre of gravity has shifted from west to east and from north to south, and that change is irrevocable.

The growth performance of China is remarkable. The numbers are extraordinary: anything times 1.3 billion looks like a very large number. It can be compared to the performance of Japan in the 1950s, 1960s and 1970s. If we look at Japanese growth rates at that time, they were not dissimilar to the extraordinary performance that we have seen in China in the past 20 years. That tells us that as countries go through the process of urbanisation, growth rates take off at a remarkable rate. This is a reminder that this transformation is only halfway through, or thereabouts. China's level of urbanisation now is at about 50%. India's is at about 30%. It will probably move up in both cases to something like 80% over the next generation.

The year 2008 marked the point at which more than half the world's population lived in cities. By 2050, that will be at least three-quarters, maybe 80%. Never before have the two largest nations of the world been urbanising at the same time and at such a pace.

All of this poses substantial challenges for us in this relatively small country. I am not sure whether we are indeed smaller than all the provinces in China, but I am sure that we are smaller than most of them. I am not sure whether “punch above our weight” is the right phrase, but at the moment we certainly have a larger share of output than our population would support. We are at about 3% to 3.5% of world output and our population is slightly less than 1% of world output. We must reconcile ourselves to the inevitable implications of that for market share over time.

We also face many other challenges, which indeed the world faces collectively. The implications of all the development that we have been referring to and the urbanisation that I have alluded to for such matters as climate change, environmental impact and claims on water resources, food and energy are all profound. Greater prosperity and a burgeoning middle class in so many of these countries do not translate straightforwardly into greater peace and harmony on the world stage.

However, this rebalancing neither can nor should be reversed. We must recognise that in the energy markets of the world we will be competing for sources of energy that are reliable, affordable and sustainable. We will have as a country to mobilise significant investment to deliver energy to the economy and to our consumers. We will have to play our part in ensuring that the world’s institutions of governance evolve in a way that makes sense in this new era that we have been talking about. But I want to focus most of my remarks on the direct commercial challenge for the UK. I want to persuade the House that I see the commercial challenge as extremely important to us, but as one that goes inevitably and inextricably with a positive cultural engagement.

I begin with the raw matter of trade. We have had some rather disappointing statistics this morning on the trade account for last month. Overall, the Office for Budget Responsibility report yesterday showed that trade was a drag on growth in the first three quarters of this year. This is a disappointment to us and a reminder of how far we have to go. What is absolutely clear is that, as we work to rebalance our economy, trade has to play a central role. It is not in my view a matter of mercantilism: it is a matter of understanding where growth will come from on a sustainable basis in this economy.

We must engage effectively with the international markets if we are to pay our way in the 21st century and find sustainable growth. That growth has to be based, as the noble Lord, Lord Bilimoria, reminded us very importantly, on competitiveness. We have a lot of work to do on that and I believe that trade itself is an important driver of competitiveness. There is ample evidence that particularly smaller companies that get into the international markets become not marginally but quite significantly more efficient, and quite quickly too. The more that we are successful in engaging more companies in the international markets, the more we will strengthen the backbone of our own economy.

We should recognise the importance of the European Union. A number of noble Lords drew attention to the importance of the single market. It is an affluent market of 500 million people. It may not be growing significantly at the moment, but half of our exports go to the European Union. We need to remind ourselves that, if you look at incremental import demand over the next few years, Europe will produce as much incremental demand as China. I could put that point around the other way of course: China will produce as much incremental demand as will Europe over the next few years. The real point is that, as a number noble Lords stressed, this is not an either/or issue between the EU and the rest of the world or between the EU and the Commonwealth. This has to be both/and. We cannot afford to turn our backs on any of the important markets, whether the rich ones on our doorstep across the channel or the Atlantic, or the fast-growing ones further afield in Asia, the Middle East, Africa and Latin America.

We need to recognise that the emerging markets will be the main drivers of growth for the next generation. This is not a flash in the pan. People talk about the slowing down of some of the key emerging markets in the past year or so, in Brazil, India and China. But, first, the slowdown is clearly relative. Slowing down to 7.5% in the case of China is a growth rate that anyone in Europe would rejoice to have. Secondly, we should certainly not see this as an implosion. The best central forecast is that they will continue to grow significantly for the next generation because there is quite a long way to go in the transformation, urbanisation and social transformation underway there.

This is important to us for all sorts of reasons. One is that their growth paths will not be automatic. It is very clear that as these countries grow and as their middle classes develop in number and spending power, we discover that they want the same things that everyone else wants. They want air conditioners, fridges and mopeds first and then cars, fashion, overseas travel and good healthcare. The opportunities from the emergence of these countries with significant purchasing power are tremendous for international suppliers. The opportunities are there for Britain as they are there for all our obvious competitors.

As I mentioned, in terms of our own economic needs, we have no choice but to engage internationally and to do so competitively and energetically. That is why we set a challenge last year of getting 100,000 more companies into the international markets over the next few years and focusing more on the non-traditional markets for British business. The fact is that our current market share in these newer markets is disappointing. We have lost market share in virtually all of them. We have not merely lost market share to newer competitors such as China and Korea; we have lost market share to our more obvious competitors just across the Channel in the shape of Germany, France and Italy.

Specifically, we have a minimal market share in many of the 19 priority emerging markets for UK Trade and Investment—that is to say less than 2% in 12 of them. We are behind Germany, France and Italy in 12 of them and we have lost market share in 18 out of the 19. We have work to do in order to encourage and support British business into these markets.

The good news is that we have the underlying capability. I think I have mentioned this to the House before, but I repeat it because I go on rediscovering it. I travel not only around the world but around this country. In every region of the country and in every sector of the economy, you find businesses of all shapes and sizes—traditional and high-tech, old and new—that are taking on the world. They are aggressive, entrepreneurial, dynamic, growing and engaging internationally. The second piece of good news is that our brand, if I can use that phrase, stands in very high regard around the world, not only for our reputation for integrity in the way business is done—the Bribery Act is widely admired—but for the quality of the products and services that we offer. The boost provided by the Olympics to that brand is of incalculable value.

The Government need to do the best possible job of promoting this endeavour. We need to do it through active work on trade liberalisation, which takes me directly to the very constructive engagement with the Trade Commissioner in Brussels, as the Commission has the competence for the negotiation of free trade agreements. As the noble Lord, Lord Liddle, mentioned, the agreement to start discussions with Japan is important. We should not be naive about how smoothly those discussions will go or how quickly we will reach a conclusion but the obvious point is that a serious opening up of the Japanese markets, not merely in terms of tariff barriers but, almost more importantly, of non-tariff barriers, will have a huge and healthy impact on Europe as a whole and on the UK in particular. The US and the EU pushing forward next year, if we can, on the negotiation of a transatlantic partnership will be even more significant. There is a large agenda, quite apart from the existing work on an Indian free trade agreement and with Canada, Singapore and now Morocco. In terms of looking at the impact, and showcasing, I thank the noble Lord, Lord Kerr, for drawing attention to the importance of the Korean free trade agreement.

We will keep at this. The importance of the trade agenda in Brussels cannot be overestimated; nor, as an aside, can the importance of the single market. One of the things that we have to achieve as a major member of the European Union is a full-blooded implementation of the single market, and there is clearly work to be done on that. Out of 12 dossiers currently on the table under the Single Market Act I, only one has been fully implemented. In particular, with the services directive, digital broadband and the digital single market, there is a huge terrain of activity that will bring significant benefits to the whole of the European Union, including Britain.

However, trade liberalisation, crucial though it is, is only one prong of any meaningful strategy. Trade promotion, through UK Trade & Investment, UK Export Finance and posts around the world, is critical. I note that some noble Lords have reminded us not to throw the baby out with the bathwater and that our posts have other roles to play, but I believe that nothing they do is more important than promoting British commerce in their respective markets. We need to ensure that they are trained and equipped with the right kind of people, with energy, competence and experience. We will continue to work on that.

Furthermore, trade is a major driver of economic development. Turning to the comments of the right reverend Prelate the Bishop of Worcester, I am pleased to be able to report that we have reaffirmed the 0.7% of GNP target and indeed have committed ourselves to getting there next year—the first G8 country to do so. Within the commitment on development finance, I draw particular attention to trade facilitation, in which we now invest about £1 billion a year. The gains from effective trade facilitation, particularly in the continent of Africa, will be very significant indeed to the Africans—which is of course a great good in its own right—but also have resonances for opportunities for British businesses. We will continue to be very active in trade facilitation through the work of the Department for International Development.

There is one other crucial point. However well the Government do trade facilitation and trade promotion work among British businesses, and however well we prosecute the case in Brussels for open trading relationships between the EU and the rest of the world, it is very important that there is lively, active support for businesses both here and overseas. The House will be having a short debate later, introduced by the noble Lord, Lord Heseltine, on his report. I am working with chambers of commerce around the international markets to upgrade the support that we provide for businesses, particularly incoming smaller businesses into these markets. There is also a good deal of work to do domestically. As we would all recognise, the quality of business support for business is very varied around the country, and is certainly very varied around the world. This is a major agenda item for the next number of months.

Finally—I apologise that I am coming under some time pressure—I stress the importance not only of trade but, in that context also, of what we have variously called moral authority or soft power. A number of noble Lords have drawn attention in particular to the importance of education. I strongly believe in the importance of education, both as a significant earner in its own right but, equally importantly, as an indirect supporter of British relationships for generations. If you get that right, at the right stage of people’s lives, you build relationships that last a lifetime with people who become the leaders in their societies. We have a great story to tell in many respects with strong universities—and a strong higher education sector in general—many of which are actively engaging around the world. I note, as one example, the work of the Open University in Vietnam and also fully endorse the comments made by more than one noble Lord about the importance to British students of the internationalisation of our domestic higher education offering. That is a strength that is very hard to put any meaningful value on.

The whole House will be aware that student visas are part of a wider issue where there is a difficult circle to square. We have a commitment to reduce the amount of net migration into the country but we want to remain open for business. I believe we have a good story to tell on inter-company transfers and entrepreneurial visas. It is worth noting that there is no limit on student visas for those that pass the tests, including the English-language test, and where the institution is a sponsoring institution. We are looking at the way student numbers, and ins and outs, are monitored. If I may, I will write to noble Lords with more details on that.

I stress that we have a warm welcome around the world. Soft power is very much about education, the role of the British Council and the role of the BBC. It is also about well recognised brands and is, as I mentioned earlier, about the Olympics. Which other country in the world could have made fun of itself, in a gentle way, on the opening night ceremony by having Rowan Atkinson send up “Chariots of Fire” and by having Her Majesty the Queen accompanied into the Olympic Stadium by James Bond? I can promise the House that this was noted and appreciated all around the world. We have a great brand to build on but have a lot of work to do. Finally, I thank my noble friend Lord Howell for such an important and interesting debate.

14:38

[Lord Howell of Guildford]

My Lords, it remains for me to thank your Lordships for your kind remarks and my noble friend Lord Green for his excellent and realistic summing up. We have had one Kipling quotation so I will just end with another:

“Let us admit it fairly, as a business people should”,

that over the past five years of financial crisis,

“We have had no end of a lesson”.

Let us hope that over the next few years,

“it will do us no end of good”.

Motion agreed.