China: Security and Trade (IRDC Report)

Lord Bethell Excerpts

Thursday 20th October 2022 Grand Committee

[Lord Bethell (Con)]

My Lords, it is a great privilege to follow the noble Lord, Lord Hannay, who speaks with such wisdom and experience in these matters. I thank my noble friend Lady Anelay, the chair of the committee, for bringing this remarkable report. I echo my noble friend Lord Howell in saying that it was always a hard-hitting, wake-up call of a report, but it is even more relevant today. While the delay is regretful, this debate could not be more timely.

I completely agree with those speakers who have noted the failure by the Government to publish a clear China strategy. The noble Baroness, Lady D’Souza, was quite right when she said that that is a big mistake. My area is that of innovation and I just want to talk about what the implications are of that mistake in that area of innovation.

I saw for myself as a Health Minister during the pandemic the critical importance of trade and scientific dialogue with China. When the supply chains collapsed, I was on the phone trying to rustle up PPE from suppliers literally standing on the tarmac at Hong Kong airport. I had a role in the £3.5 billion-worth of LFDs that have been bought off China and which have been incredibly important in our battle against Covid. I also gave ministerial oversight to the development of new therapeutics and diagnostics, often with Chinese academic partners and suppliers involved. So I am in no doubt about the value of Chinese scientists to some of the great challenges of our time, including fighting disease and climate change.

However, we are entering a period where the CCP has outlined a clear manifesto for technological supremacy in a number of strategic fields—fields that we have a very keen and important interest in. Launched in 2019, as many noble Lords know very well, the Chinese Government’s “Made in China 2025” programme is a highly sophisticated state-led industrial policy, which has a clear purpose of making make China dominant in global high-tech manufacturing. This is, I am afraid, an example of China turning in on itself, making preparations in case there is a confrontation with its rivals. We would be absolutely foolish to ignore this. We should take this 10-year plan seriously as a piece of hard-edged industrial strategy with key metrics and a ruthless approach to success.

We know a lot about China’s approach. Beijing’s hybrid innovation system blends academic collaboration, industrial partnerships, cyberespionage, direct investment and influence operations to enhance China’s comprehensive national power and, in particular, to acquire modern technologies. I can report that it is absolutely working: China is making remarkable strides towards realising its dream of technological self-sufficiency. Chinese companies have caught up and even surpassed western firms in key strategic industries such as 5G, genomic science, AI, quantum computing, space and aerospace electronics. This does not necessarily contribute to the sum of human happiness because, unfortunately, China is at the same time becoming a competitive, authoritarian, imperial power, not necessarily apt to share its technological advantages. We will suffer if it dominates strategically important industries.

We should not give up in this battle for technology. We know that we have keen advantages still in important areas. The area of vaccines is one area where we have demonstrated the strength of our science. That is why I welcome the change in rhetoric from “golden age” to “global threat”. But the implementation of the Government’s new thinking is worryingly slow, as many noble Lords have noted, and I want to give two illustrations of the problem.

Let us take for instance the area of medical devices, an industry that we have very strong capabilities in, and one of the strategic industries identified in “Made in China”. China lacks technological leadership in this area, and it is therefore a valuable market for European and American companies, as China imports over 70% of its medical devices. Given the importance of this sector to the resilience of the health system, the Chinese Government have worked on a five-year plan to make at least six companies in China reach the top 50 globally from pretty much a standing start. It is going very well for them. During the pandemic, as my noble friend Lady Anelay pointed out, Chinese firms boomed. Off the back of that success, in the last few months, Chinese ministries and commissions issued notices prohibiting all public medical institutions from procuring imported medical equipment without approval. Overseas firms are being pressured into technology transfers. Many are backing off trade and production in China, with an impact on jobs at home. Meanwhile, Chinese medical technology firms are beginning to use their domestic market power to drive down costs.

We have already seen in fields such as telecoms and solar energy how Chinese companies can use domestic market power to dump product and crush our businesses. If we do not have a thoughtful fight-back, we can lose technological advantage in an industry that protects our people, provides jobs and is critical for a better life. That is why it is worrying that Chinese investors have such a strong presence in the British life sciences sector, embedded as investors, vendors and suppliers. For example, Tencent, China’s leading investment house, is an absolutely remarkable investor that takes bold creative investments in some of the most strategically important growing companies in the world, including British companies such as Oxford Nanopore and Congenica. Some British firms would not have flourished if Tencent had not got involved. But we should be worried if British investors cannot make the same investments in similar Chinese firms.

We should review our laissez-faire attitude to Chinese investment, now that the CCP has picked up its pace for dominance in this key life sciences sector. Whatever Tencent’s current governance arrangements, we have seen how the CCP can apply coercion on Chinese companies. How would we feel if, say, China invaded Taiwan, international relations deteriorated, and an investor with considerable China-state connections owned stakes in some of the most strategically important companies in the UK? This is a really important question, and I do not have the answer, but it is a question that the Government need to answer, and I do not know who is going to provide that up-to-date answer that reflects the latest events.

Secondly, we should be aware of the strategic threat around some of these industries—for instance, the genomics industry, which has grown massively after Covid-19. The value of health data now represents a new battlefield for parliamentarians, regulators and national security protectors. The CCP sees genetic data and genomics as a priority industry to target as part of its “Made in China” programme. It is acquiring and exfiltrating huge datasets to power its AI machinery for global surveillance, political control, mass disinformation and military strategic advantage. These datasets and the AI machinery will be key to future warfare and therefore have huge implications for our national security.

Allies in America, Australia and Europe recognise this threat and have sought to control the risk, including by blacklisting Chinese genomics companies, such as BGI Group, in response to human rights concerns and, possibly, participation in the persecution of Uighur Muslims. In the UK, BGI has links to British universities, companies and institutions on a grand scale, for instance with the University of Birmingham, the University of Exeter, the University of York, the University of Plymouth, Cardiff University and Newcastle University.

My fear is that we just do not understand the risks involved in commissioning genomics firms with close ties to the Chinese state—firms that have demonstrated the capability, resources and intent to misuse genetic data gathered from around the world. We do not understand what is being done to help keep this data safe. We seem to be relying on GDPR, and we are ignoring Article 7 of China’s famous national intelligence law, which states that

“organisations and citizens shall support, assist, and cooperate with national intelligence efforts”.

As the noble Lord, Lord Alton, rightly reminded us, we are at risk from Chinese Government-linked companies, and have sanctioned, for example, Huawei, Beijing Infinite Vision Technology and Hikvision. However, despite calls from MPs, noble Lords and campaigners, in the more sensitive area of human genomics the UK Government do not seem to show the capability to take even minimal action.

There is progress. The Procurement Bill and the National Security Bill present vital opportunities to address the UK’s one-dimensional approach to national security and plug the serious gaps in our coverage. I pay tribute to the Government for statements from the Prime Minister—as she was—and the appointment of Ministers such as Tom Tugendhat and Nus Ghani.

However, the noble and gallant Lord, Lord Stirrup, is right: there is no sign of implementation behind that intent. Even if the powers are now on—or heading for—the statute book, I do not see the implementation plans, the resource building, the institutional infrastructure or the expertise recruitment to tackle these complex issues. When I was a Minister and had concerns about national security, I was met with a fuzzy and unclear response, and I am not sure that has changed.

My specific concern is that, despite the warnings of Ken McCallum at GCHQ about tech theft, there is no mechanism for answering the Tencent or the BGI questions. Where is that China policy that should provide the strategic direction? Who are the people who should be thinking through these risks? Which office at BEIS or elsewhere should be responsible? Where is the risk assessment published? The noble Baroness, Lady Blackstone, emphasised the engagement with risk assessment, but who will actually do that risk assessing?

Speeches and laws are all very well, but our relationship with China is changing very quickly and we need agile, expert trade infrastructure so that we can walk the very delicate line that maximises valuable global trade and protects our national interests against a formidable threat.

That is why recommendation 56 in the report is so important. I join the committee in calling on the Government to publish a detailed plan for implementation of the National Security and Investment Act, to provide confidence for overseas investors and to help us understand how investment will protect British interests.

I support recommendation 57, calling on the Government to conduct scenario planning on supply chain vulnerability and identify where action is needed to mitigate the risks. I support recommendation 63 calling on the Government to conduct an impact assessment of the potential consequences of increased political tensions between the UK and China on British businesses or Chinese investment.

We have a lot on, but I urge the Minister that there is not much time to put in place this implementation so that we can avoid the inglorious scramble we saw when Russia invaded Ukraine—and that was a much less important trading partner.

Taiwan

Lord Bethell Excerpts

Thursday 3rd March 2022 Grand Committee

[Lord Bethell (Con)]

My Lords, I am extremely grateful for the opportunity to speak after the noble Baroness, Lady D’Souza, who has put the challenge extremely well. I endorse much of what she says.

When I was a junior Minister during the pandemic, extraordinary things happened, and I broke a great many ministerial precedents. However, one thing that I did not manage to do was put a call through to my opposite number in the Taiwanese department for health. Officials were extremely hesitant to make that happen and, despite my best efforts, I never made that telephone call, even though Taiwan had a huge amount to teach the British response to the pandemic. That is a personal example of an outdated, cautious approach to our dealings with Taiwan, one of the world’s most important democracies. That strategic ambiguity and climate of caution around our country’s engagement with Taiwan is suddenly looking out of date and dangerous. In the interests of time, I will not go into the details but we all know what I am talking about.

I echo the noble Baroness, Lady D’Souza, and recommend five of my own easy-to-take measures with which the Government could demonstrate their commitment to Taiwan—commitments that might cause a small amount of discomfort but are essential for demonstrating the strong alliance between our two countries.

First, it is time that a Cabinet Minister went to Taiwan. We have had junior Ministers there since 1994, including the noble Lord, Lord Adonis, and my noble friend Lord Strathclyde. I pay tribute to Greg Hands, who has been three times—once by cyberspace—but he is just a junior Minister. The USA has made Cabinet-level visits since 1994—I remember Alex Azar going, and he made a big impact. Michael Mullen, the former chairman of the US Joint Chiefs of Staff, flew to Taipei on Tuesday. I should like to see someone such as Sajid Javid go to Taiwan in the very near future to talk to the Taiwanese about public health; it is the kind of measure from which we could learn a lot and would show our friendship.

Secondly, I pay tribute to the Minister and ministerial colleagues in the FCDO and elsewhere for their support for Taiwan’s membership of international bodies. But they are often blackballed by China and we therefore need to be creative. I recommend to the Minister that we look at the G7, at which Australia, India, South Africa and South Korea are invited guests, and the D10, where Indonesia, Poland and Spain are invited guests. Inviting Taiwan to attend those sessions is not within our gift but the British Government should certainly be pushing actively for that.

Thirdly, on security, the integrated review recognises that coercive economic measures are a real threat. I note the commitment in the recent communiqué with the Australian Government to work together to ensure that when coercive economic measures are put in place, Britain and Australia are linked together to support each other. We should be working equally hard with Taiwan in putting together the protocols to protect each other, particularly for Taiwan, and to bring about a deterrent for anyone thinking of trying it on.

Fourthly, I echo the points made by the noble Baroness, Lady D’Souza, on CPTPP. Further expansion of the existing investment treaty into a bilateral investment treaty would be good. That should, in time, be expanded to a free trade agreement along the lines we have with New Zealand.

Fifthly, and lastly, on defence, the situation in Ukraine has shown that when NATO members such as Germany and Poland are affected, we are all affected. We know that the USA’s Taiwan Relations Act makes for the USA very strong commitments but we are not clear about the consequential commitments for the UK. I do not think we should be shy of thinking through those consequential commitments. In fact, there are very real benefits from having an earnest and documented discussion of that.

These are five tangible steps which are well within the gift of the Government. I would be enormously grateful if the Minister could commit to all five of them by the end of this Parliament, in order that we have a clear programme of activity to show our support to Taiwan.