China: EU Committee Report

Lord Clement-Jones Excerpts

Wednesday 9th June 2010 Lords Chamber

[Lord Clement-Jones]

My Lords, I declare an interest as vice-chairman of the All-Party China Group and as a partner of the law firm DLA Piper with responsibility for international business relations in China, Korea and the Middle East. As a very regular visitor to China, I think that this is an extremely welcome and thought-provoking report. I congratulate my noble friend Lord Teverson on his opening speech and him and his colleagues on an extremely well put-together report.

The report quotes Vice-Minister Zhang Zhijun and Dr Kerry Brown and, as China watchers will know, that means that the report is balanced and authoritative and gives two interesting sides of the equation. The report is right to treat China as a major EU priority in foreign and trade policy. China has swiftly returned to double-digit growth and will overtake Japan later this year to become the world’s second-largest economy. Essentially, this is seen from the Chinese perspective as a rightful re-establishment of China’s position in the world, as I am sure many noble Lords will know. In terms of bilateral relations, the report rightly concentrates more on what the EU should do than on what China should do. There is nothing worse than preaching at China, as a number of noble Lords have said.

Seen from the Chinese perspective, China faces many major issues, which are inherently difficult and full of paradox. They include: keeping the value of the renminbi competitive in the face of a massive surplus and rising costs, because the future of the Chinese export economy is at stake; the recent suicides at the major supplier Foxconn; and the Honda strike in China, which will have an impact on labour costs. Many other factors may lead to higher costs, particularly in the east of China. There is a desire in the Chinese Government to move from an export-led economy to a more consumer-based economy, while controlling domestic inflation after the success of the economic stimulus package, but that will not be easy with double-digit growth.

There is a need to grow and create a massive number of jobs each year just to cope with new graduates, while improving the protection of the environment and moving to a low-carbon economy at the same time. How can the Chinese extend local autonomy at county and provincial level, as they wish to do, and satisfy demands for more human rights generally—and in Xinjiang and Tibet in particular—while maintaining political stability, one of the cardinal objectives of Chinese policy? In the education system, how can China deal with the dilemma of encouraging greater creativity in the face of a traditionally prescriptive teaching method at all levels? How can it ensure proper intellectual property protection without, as it sees it, overpricing legitimate consumer expectations? How can it ensure Chinese influence over natural resources, particularly in Africa, without being accused of employment malpractice?

In many of these areas, we want China to do more to satisfy western government expectations, but China rarely responds to external pressure. It is much more sensitive nowadays to domestic public opinion, particularly as it is expressed through the internet. Much will depend on the relationship that we manage to build over time and on whether any move meets the essential criterion, which I repeat, of retaining and delivering the cardinal virtue of political stability.

The relationship will have its ups and downs and, in the past year in particular, there have been quite a number of downs. What do the Chinese Government seek to derive from their relationship with the EU? Of course they want trade, technology transfer and investment. These are a cornerstone, as is the education link, but crucial to real progress, in China’s view, is support for market economy status for China and lifting the arms embargo.

On the market economy status, China still thinks that the West is not playing by the rules and is adopting double standards. Why should Russia have market economy status but not China? Why have some 97 countries given market economy status to China, while major economies such as the EU, the US and India have not? China also considers that it has been subject to an unjustified barrage of anti-dumping cases. Above all it believes—the report makes this quite clear—that the EU speaks with different voices. Chinese leaders express genuine frustration at the multiheaded European leadership structure and the lack of a single voice. This, I believe, is genuine and, like the committee, I do not accept the Fox/Godement thesis mentioned in the report that China is intent on playing one EU country off against another or, indeed, that there really has been a practice of unconditional engagement on the part of the EU.

China sees the US/China interface as much preferable, because it can get answers and decisions that stick. Unless we are to play second fiddle in every case to the US, the EU needs, as my noble friend’s committee’s report points out so eloquently, to get its act together. One of the questions is whether Europe takes a lead or simply follows the US. This is particularly acute in respect of both the arms embargo and the MES. I shall be interested to hear what my noble friend has to say on this subject at the end of the debate.

There is much to be done, but the Lisbon treaty has improved matters somewhat. I have great respect for the EU’s High Representative for Foreign Affairs and Security Policy, our colleague the noble Baroness, Lady Ashton, whose trip to China earlier this year was well received and made the Chinese Government feel that progress was possible with the EU. I am therefore optimistic that we can make progress.

At the end of the day, there is the question of what we can expect from China as a superpower. The former ambassador, Madam Fu Ying, was fond of talking about how the Chinese see China from the inside as a mouse, whereas we on the outside see it as an elephant. Of course there is a big gulf between the way in which China is perceived from the inside and the way in which it is perceived from the outside. There is growing evidence of a more actively interventionist approach, but China still lacks the confidence that it really is the superpower that we think it is. There was greater engagement at Copenhagen, even if it was not seen as satisfactory from an EU point of view. As the noble Lord, Lord Anderson, mentioned, the agreement over Iran sanctions could prove extremely important. Above all, I believe that the role played by China at the G20 last year was extremely constructive. In the EU we should not be afraid to bargain. If that is done coherently, we can exploit our technologies, our creativity, our education and our research quality. In key areas such as trade policy and climate change, we need to agree strategies within the EU and to speak with one voice, which is the welcome message of this report.

What of Britain’s role? As my noble and learned friend Lord Howe pointed out, there is a long history between us, which is still regarded as important by the Chinese. Our ambassador is one of only five vice-ministerial ambassador posts. Ambassador Liu Xiaoming continues this pattern. I recognise the achievements of the previous Labour Government in having established relationships with China on a firm footing. I believe that the successful Hong Kong handover had a major impact and was beneficial for our relationship. I also welcome the desire of the coalition to have closer relations with China, as set out in the coalition agreement.

However, both our parties are a relatively unknown quantity to the Chinese Government. I hope that a high-level visit by the Prime Minister or the Deputy Prime Minister will take place soon, perhaps coinciding with the close of Shanghai Expo. The Chinese have many matters in common with Britain. Belief in free trade above all is the link, as well as an admiration for our higher education system. None the less, Britain is still underperforming in trade and investment flows. France and Germany in particular outperform us in energetic trade promotion. However, perhaps our salesmanship is entering a new era. Out cultural diplomacy seems to be improving by leaps and bounds. The Shanghai Expo pavilion is evidence of that. The Chinese are taking genuine pleasure in the success of the pavilion designed by Thomas Heatherwick and have taken very much to heart what they call the “Dandelion”. UKTI deserves huge credit for having the imagination to deliver a strikingly original symbol of British creativity at Expo. I hope that we will celebrate the way in which Britain can help the EU’s objectives in its relationship with China.