Emerging Economies

Jeremy Browne Excerpts

Monday 14th June 2010 Commons Chamber

[The Minister of State, Foreign and Commonwealth Office (Mr Jeremy Browne)]

I beg to move,

That this House has considered the matter of emerging economies.

I am delighted to have this first opportunity to speak from the Government Benches, and even more delighted to serve for the first time under your chairmanship, Madam Deputy Speaker. I trust that the high-preference vote that I gave you in the ballot will mean that you will look favourably on me if I go astray.

[Madam Deputy Speaker (Dawn Primarolo)]

The hon. Gentleman joins a long line of Members who have said exactly the same; I will, of course, be even-handed with everyone.

[Mr Browne]

I did not doubt that for one moment.

I welcome this opportunity to debate the new Government’s policy on the emerging economies. Strengthening the UK’s relations with the fastest-growing areas of the world economy is one of the key foreign policy objectives of the coalition programme for the next five years. That was explicitly stated by my right hon. Friend the Foreign Secretary when he opened the foreign affairs debate on the Queen’s Speech and observed that

“we live in a world where economic might is shifting to the emerging economies”—[Official Report, 26 May 2010; Vol. 510, c. 174.]

In the House, we all recognise the ongoing importance of Europe and north America to our foreign policy goals, but we must also be clear about where new opportunities increasingly lie. That means elevating our links with the emerging economies and expanding powers in other parts of the world as part of a distinctive British foreign policy. That is why, only a few days after the Government were formed, the Foreign Secretary and I were meeting counterparts from Mexico, Chile and several other emerging powers at the EU-Latin America-Caribbean summit in Madrid. The following week I also held talks with Foreign Ministers from Vietnam and Singapore, among others, at the EU-south-east Asia summit, which was also held in Madrid. I give an undertaking that I will be making our relations with emerging economies my biggest priority, with visits to several key partners, in the coming months.

Why is the issue so important? We live in a time of fundamental change, both economic and political. The last decade of the previous century saw a shift from the bipolar, cold war world that we had all become familiar with. The first decade of this century has seen another shift, just as dramatic, from a G8 world to a G20 world. Global economic decisions were once made by a grouping of European and north American nations in conjunction with Japan, but today such decisions are increasingly taking place within the G20—not only a much bigger group, but one that represents a much broader range of countries from every continent of the world. The UK strongly supports the G20, which reflects the economic realities of the 21st century and recognises the rise in the strength of powers such as China, India and Brazil. The next meeting of the G20, in Toronto a few days from now, will be an important opportunity to take this work forward.

It is impossible to get through one of these discussions without a barrage of fascinating statistics that people can take home, and I have a few to run past colleagues on both sides of the House. It is important to remind ourselves of how dramatic the change that we have lived through in recent years has been. In the past decade, China’s economic growth has averaged 9.9% a year, while the UK’s has averaged just 1.7% over the same period. India’s growth over the same period has averaged 7%. In 1980, China’s proportion of world GDP was just 2.6%; by last year, that had risen to 8.5%. According to some predictions, China’s economy may well equal that of the US as early as 2027, and by 2050 the Indian economy may well be bigger than the five largest European economies added together.

[Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)]

My hon. Friend talks about the statistics for China. It is important to realise how much of that growth is needed just for its economy to stand still. If growth falls below about 8%, then unemployment starts to rise. When we look at the Chinese economy from outside, we have to understand what a challenge it faces.

[Mr Browne]

My hon. Friend makes a very good point. Huge levels of growth, by European standards, are necessary to take the Chinese economy forward and to realise the aspirations of an enormous population, hundreds of millions of whom still live in absolute, as well as relative, poverty.

It is easy to characterise these debates as being about China, India, Brazil and other countries with large populations, but there are also regions, particularly in Asia, that are developing at a fast rate. The Association of Southeast Asian Nations countries—the south-east Asian bloc—have, between them, a larger population than that of the European Union. Over the past decade, they have had an annual growth rate of 5.7%— not as high that of as China, but still very high by European standards, albeit having started from a much lower base. If we think of groups of countries that are increasingly willing and enthusiastic about the prospect of working together as single blocs in that way, their relevance will be obviously apparent to everyone in this House.

[Mr Tobias Ellwood (Bournemouth East) (Con)]

My hon. Friend mentions China and the huge steps forward that it has taken in its growing economy. Its gross domestic product now stands at about 9.5% or 9.6%—growth that compares quite favourably with ours. Is it therefore right that we continue to provide that country with Department for International Development funds to the tune of—I may stand corrected—about £30 million a year?

[Mr Browne]

An interesting evolution in the power balance in the world is taking place, with these huge emerging countries. Although China’s GDP is slightly greater than ours, it is worth reminding ourselves that their population is 25 times higher, so their GDP per capita is very much smaller than ours. Hundreds of millions of people in China have yet to benefit from the huge advances that that country has made over the past decade or two. At the moment, we have this slightly strange situation whereby many of the emerging economies are the new powerhouses and yet still have millions of people living in absolute poverty. I think that there will be an evolutionary period in which they are apparently two slightly contradictory things simultaneously: they will require aid and assistance while becoming increasingly significant economic and political players. Over time, that balance needs to be reflected in the contributions that we make in aid.

[Mr Iain Wright (Hartlepool) (Lab)]

I welcome the hon. Gentleman to his post; I think that he will make a very fine Minister.

Developing the argument somewhat, in the next 20 years or so we will see growth in the middle classes across the emerging economies the like of which we have never seen before, with huge untapped potential that British companies can access in selling goods and services to them. What steps will the Government take to ensure that British companies can access those future market opportunities?

[Mr Browne]

I am grateful to the hon. Gentleman not only for his flattering comments but for his intervention. I will deal with that point as I proceed through my speech.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

What attitude does the hon. Gentleman take to emerging economies in what the European Union calls its near abroad? It seems to be keen to devote a portion of its aid—to which, of course, we donate royally—to those countries, whereas Britain’s philosophy, through DFID, has been that our aid should go to countries that are impoverished.

[Mr Browne]

I do not want this debate to be just about aid, because the emerging economies are important in many different ways, not only as recipients of our largesse. Let me proceed with some of the points I was going to make, not least those relevant to the comments of the hon. Member for Hartlepool (Mr Wright). If I do not cover them to the satisfaction of the hon. Member for South West Wiltshire (Dr Murrison) and others, perhaps we can return to them later.

There has been a truly transformational shift in economic and political power. That is a change that will have enormous consequences for Britain and about which we cannot be complacent. Although it is a challenge that may, in some ways, pose difficulties for us, it is also a great opportunity. It is worth saying—this is relevant to the point about aid—that about half a billion more people have been taken out of poverty as a result of these changes taking place around the globe: a figure that could not possibly ever have been achieved through international aid and generous donations from our country. It is a phenomenon that has transformed the life chances and opportunities of millions of people who previously lived in a state of destitution.

The World Bank has estimated that the global middle class is likely to grow from 430 million people in 1999 to more than 1 billion people in 2030, and most of that growth will be in the emerging market countries. That increase in middle class consumers is equal to the total population of the European Union, in the course of just three decades. If we are to see Britain’s economy growing strongly again, which must happen if we are to tackle the UK’s deficit and raise the prosperity of our own citizens, we must tap into these vast new markets.

We have huge economic advantages in this country. Britain is home to many of the leading global companies in the energy, retail, financial and communications spheres. We are an outward-looking and open country ranked by The Economist as the best place in Europe to do business. London is a global city and Britain is increasingly a global hub. Ours is a multicultural nation with connections across the world. We will use those connections to build and intensify our commercial, cultural and educational links. The English language is the most widely spoken in the world. It is the common language not only of international business but of science, academic research and the digital world. There are today more English language students in China than there are people in the United Kingdom, and English is the common tongue for business in India. This can only be good news for British businesses wanting to tap into these giant markets.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

Following the intervention by the hon. Member for Hartlepool (Mr Wright), will the Minister join me in paying tribute to people from these countries—not only those from India, who have historically been very proactive, but those from the Chinese public and private sector, and from Brazil and elsewhere—who are working hard in this country to ensure that we understand not only the opportunities for them, but the opportunities for us in their countries, in a way that they were not even beginning to do 10 years ago?

[Mr Browne]

I strongly agree with my hon. Friend. It is notable that, in many international companies and other organisations in which the management and the work force are drawn from right around the world, talent has become a global phenomenon. Many talented Chinese, Indian, Brazilian and other people work in London and throughout the United Kingdom and contribute to companies with British leadership and to the prosperity of our country.

[Mr Ellwood]

My hon. Friend mentions the importance of the movement of people with regard to China. Does he know that France and Germany attract around 500,000 visitors every year? I am afraid that we compare badly, attracting only 100,000. That is because it is far simpler for the Chinese to apply for the Schengen visa, which gives them much greater access to Europe. They are deterred from coming here because of the complexities and the distance that they must travel to get a visa. Would my hon. Friend consider Schengen plus, which would allow a bolt-on to the Schengen visa system to allow Chinese visitors to come to the UK?

[Mr Browne]

That is a matter that I may wish to bring to the attention of Home Office colleagues. I am sure that they will take my hon. Friend’s wider point seriously, and I want to deal with it in the remainder of my speech. It relates to the importance of not just Government-to-Government or even business-to-business relations, but of engaging on a person-to-person basis with many countries.

The economic shifts that we are witnessing are no less significant politically. I have already said that after the second world war we had a political settlement, which was essentially the cold war settlement based on Europe and north America. That is emphatically no longer the case. Of course, we must be careful about getting ahead of ourselves. The United States is still the dominant power in the world and likely to remain so for a considerable time. Gross domestic product per capita in the EU is still vastly higher than in China or India. However, the direction of travel is obvious.

Britain can and should be confident in our ability to succeed in the new order. We remain a respected global player. We are at the core of international decision making: we are a major player in the EU, the Commonwealth, the United Nations and NATO. We have a network of diplomatic and other missions that reaches into every corner of the globe, while maintaining the ability to exercise hard power when necessary.

Along with Britain's economic and political assets, our so-called soft power can also play an important role in ensuring that we retain our influence and prosperity in future. We are globally influential in subjects ranging from architecture to science and popular culture. We have global sporting connections, including the world’s most followed football league. The UK will be at the centre of world sport when the Olympics come to London in 2012 and the Commonwealth games to Glasgow in 2014. We have a unique asset in the BBC World Service, while the British Council connects millions across the globe to Britain’s culture and education.

The changing world order should not be seen just in terms of a GDP league table. As important, if we are to win the debate on important matters such as climate change and human rights, is our ability to lead on ideas. Just as we must lead in that competition of ideas, we must likewise provide leadership in the debate on fundamental values.

I have spoken in meetings with Foreign Ministers from around the world about not only our economic interests but the balance between the role of the state and the individual, and argued that economic growth was not the only measure of human well-being, but that civil rights were central, too.

[Mr Iain Wright]

rose—

[Mr Browne]

I will take the hon. Gentleman’s intervention, but I may be less generous afterwards.

[Mr Wright]

I thank the Minister for giving way; he is being most generous. Before he moves from economic power to soft power, let me say that resource constraints are an inherent risk in the movement eastwards of the world’s economy. I am concerned that the 21st-century equivalent of the scramble for Africa, in which emerging economies lock in trade deals with African nations to get commodities such as iron ore and oil, will compromise our ability to compete as a nation. What steps will the British Government take to ensure that British companies have access to hard-pressed resources and commodities in future?

[Mr Browne]

The hon. Gentleman makes another excellent point, about how we ensure that there is a global architecture of decision making and responsibility, which means that resource allocation and other political decisions are made in a framework of law and consensus. That is our foreign policy objective and why our foreign policy has to evolve to match reality. We cannot sit, King Canute-like, and try to cling on to the G8 and European-north American-centric architecture. We need a decision-making framework, which reflects the change in the status of different countries and allows us to make decisions in concert with them as we proceed with economic growth and political decision making in the decades ahead.

Much of the analysis that I have shared with the House is widely accepted if under-appreciated by some in our national discussion. We must now ask how we respond to that and what the consequences are for our policy making. Let me suggest three overlapping subjects as a framework for our debate in the next hour and a half or so. First and perhaps most important, we must make the case—and win the argument—for keeping global markets open to foreign trade and investment. A resurgence of protectionism in any of the markets about which I have spoken would be a far greater risk to the UK economy than the rise of those markets. We must also have a dynamic, outward-looking economy—this point was made by my hon. Friend the Member for Bermondsey and Old Southward (Simon Hughes)—that is not burdened by unsustainable levels of Government debt.

Secondly, we will significantly increase our cross-Whitehall effort to engage not only with the obvious, big emerging economies, but with the medium-sized emerging economies. We must also build on our solid co-operation with Japan, which remains the second-largest economy in the world. All of that will mean working with business to reap the opportunities in countries and regions whose cultures and languages may be less familiar to many of us, and getting the official dialogue right, including through more structured relationships at Government level with many such countries.

Thirdly, we must continue to invest in our political as well as our economic effort. The rise of emerging economies will make the world a more prosperous place, but it will also make it more complicated. A more multilateral world will require us to engage on key security issues with a wider cast of global actors, which will put an even higher premium on ensuring that we are all bound by the same international rules-based system. Upholding that will be the key task of our diplomacy in its widest sense in the years ahead.

That places a heavy burden of responsibility on the Foreign and Commonwealth Office. One FCO priority will therefore be to look at how we can best use our diplomatic network and shape our resources to ensure that we have the capability to make the most of the new world that is being brought about by the emerging economies. We are already being innovative in our representation overseas. I do not claim that such innovation started magically a month ago—it has been undertaken for a period of time—but I hope that we will accelerate it and give it extra momentum. We are using regional networks of experts and so-called laptop diplomats, among other innovative measures. In a difficult resource climate, we must ensure that our language training, including in Mandarin, Spanish and Arabic, is focused where we need it most. We will look at how to resource stronger UK engagement with the Governments, peoples and societies of emerging economies in the forthcoming spending round.

If we are to retain our influence in the new global, economic and political world, we will need to change and adapt. Our diplomatic effort will be focused where it is needed and adapted to the new realities, but our efforts must go beyond discussions between diplomats in capital cities. We must inspire business and community leaders throughout Britain to build relationships with their counterparts in the emerging powers. That task is not only for the FCO and the Government: I am emphatic in my view that that task is for our country as a whole and all the people who live in it. Everybody in our country needs to step back for a moment and ask themselves, “Are we able to think and act globally in a way that reflects the new realities of the world? Are we seeking better to understand and engage with the emerging global players? How does the UK media cover the rest of the world? How does our educational curriculum meet our global needs? How well can our major businesses reach out beyond our borders to the markets of the future?” The Government should and will provide leadership, but our national outlook needs to adjust to the rapidly changing global landscape.

[Dr Murrison]

That is all very well, but what do the Government plan to do to combine Government offices abroad? In particular, does the Minister agree that it makes absolutely no sense to have Department for International Development offices and FCO offices in the same capital? Surely to goodness if we are to have the joint working to which he refers, we need co-location.

[Mr Browne]

My hon. Friend makes an excellent point that echoes one made by my right hon. Friend the Foreign Secretary and others. How can we best concentrate our resource in countries and avoid duplicating Government functions or Departments in the same location? There is a wider point: although it is important for the FCO to give intellectual leadership and momentum to our policy making overseas, our policy is not simply about relationships between the FCO and other Foreign Ministries. Rather, it is about Britain as a whole visiting China, India or Brazil, which includes the Department for Business, Innovation and Skills, the Department of Energy and Climate Change and right across the board. We should not see emerging markets policy as a bolt-on, extra function of the Government that is divorced from our other deliberations in the House. Rather, it is a key function of the Government. It is led by the FCO, but it involves many Departments.

[Malcolm Bruce (Gordon) (LD)]

To take up the point that my hon. Friend has just made, in some countries our engagement is a development relationship, but we have both a high commissioner and a head of DFID. Are the Government prepared to consider whether those roles could usefully be combined? In some cases high commissioners or ambassadors have told me that they are only there to wave the flag because the only people that the host nation wants to talk to are those from DFID. Would it not be sensible to combine the two?

[Mr Browne]

I am grateful for my right hon. Friend’s expertise as the Chairman of the Select Committee. It is important that when we engage with countries, especially those that are substantial recipients of British aid, we have a joined-up approach in which the aid is not divorced from the wider discussions that we have with them. I do not mean that the aid should come with strings attached, but it is bizarre—when resources are stretched—for us to have competing Government offices in one capital, potentially with competing agendas, when there is scope for the money to be spent more efficiently and effectively.

It is possible to overstate the existing scale of the change. Britain’s GDP per capita remains high, our absolute prosperity—rather than our relative prosperity—remains high, and our economic, political and cultural leadership in the world remains very strong. But as a country and even as a continent—not just as a Government or Parliament—we cannot afford to be complacent. The world is changing rapidly. We need to engage constructively and energetically in that process of change so that we can shape it to ensure that Britain benefits as much as the new emerging economies from the opportunities that their rise undoubtedly offers. This task will be central to our future prosperity in the decades to come. We are already embarking on turning that goal into action.

[Chris Bryant (Rhondda) (Lab)]

Thank you, Madam Deputy Speaker. It is a great delight to see you in the Chair. I shall not reveal how I voted, but I did nominate you. This is the dawn of a new parliamentary era. [Hon. Members: “Oh!”] I apologise to the House for the quality of that remark.

I also welcome the Minister to his new responsibilities. He will be backed by a fine team of people, some of whom used to work to me. The quality of the advice provided in the Foreign Office is second to none, not only in relation to other Departments in this country but in relation to other foreign departments in other countries. I hope that the Minister lives up to them.

I have been looking at the Minister’s campaign website, which includes an interesting list of endorsements. Indeed, they have something of a theme. There is one from Janet, who lives in Taunton. She says:

“Jeremy is clearly the best candidate. He will be supported by former Conservative voters.”

Jez, also from Taunton, says:

“I’m afraid the idea of Mark Formosa”,

who sounds more like a plant than an animal—I mean, candidate—

“as an MP terrifies me! He is worryingly extreme.”

And Lavinia, from Wiveliscombe, says:

“Why is Mark Formosa so negative and nasty? I’m a natural Tory but I’m not supporting him!”

It is clear that throughout the election campaign the Minister had his eye on a Conservative-Liberal Democrat coalition. It was seated in his mind. It is little wonder that, with him in his new job, the Tory Back Benches have as many noses out of joint as the England rugby team—

[Mr Browne]

And the Welsh team.

[Chris Bryant]

No, we tend to specialise in ears.

The Minister is the first Liberal in the Foreign Office for some 60 years, so I did a little research into previous Liberal Ministers there. Captain Neil Primrose, who was one of the last four, lasted less than five months—

--- Later in debate ---

[Chris Bryant]

Yes, but I think that one of the things that has changed over the past 30 or 40 years is that whereas French used to be the most useful language because it was, for the most part, the diplomatic language around the world, that is certainly no longer the case. The most useful languages to speak at present are Mandarin, and Spanish and Portuguese because of Latin America, and we need to focus on Arabic as well.

My biggest concern is that the effortless British superiority with which we stride around the economic world means that all too often we are the only country that presents business people in other countries who do not speak even the rudiments of a foreign language. That is a big problem. [Interruption.] The Minister of State refers to the Deputy Prime Minister, and it is a delight that he speaks so many foreign languages, but I just gently say that it is important that the Government focus on this.

We did not get it right, and ever fewer people in the UK are learning foreign languages. My experience in the Foreign Office was that the number of people who spoke foreign languages has diminished, and the number who can confidently speak them is pretty low.

[Mr Jeremy Browne]

I am grateful to the hon. Gentleman for giving way as I wish to find a point of consensus with him. It is important not only that the Foreign Office trains to a high standard a sufficient number of diplomats who can engage with the emerging economies in the language spoken in each of those countries, but that we appreciate the wider challenge to our country, which I posed, of the educational curriculum and how well suited we are, not only within the Foreign Office or the Government, but as a nation, to deal with the emerging changes in the world.

[Chris Bryant]

Well, indeed.

The third thing that we need to do to enhance UK growth relates to students from emerging economies. In all, some 48,000 overseas students study in the UK and they are vital to the UK’s universities, as they bring in fees, ideas and an international perspective. Ever since Wong Fun graduated as a doctor from Edinburgh in 1855 there has been a large number of Chinese students in the UK. Their number has grown significantly in recent years, with nearly 5,000 starting new courses in 2008, along with 1,581 students from India.

The Conservatives were direct about this issue during the general election campaign, saying that

“our student visa system has become the biggest weakness in our border controls.”

They said that they would

“insist foreign students…pay a bond in order to study in this country, to be repaid after the student has left the country at the end of their studies”

and

“ensure foreign students can prove that they have the financial means to support themselves in the UK”.

By contrast, I note that the coalition agreement simply says that the Government will introduce new measures

“to minimise abuse of the immigration system, for example via student routes”.

I hope that the Minister will be able to tell us precisely what the Government’s intentions are. Will a bond be payable? Does he expect that this will cut or increase the number of students coming to the UK from emerging economies? Has the Foreign Office been consulted on this process? In particular, what plans does he have for the Chevening scholarships? The Chevening website already says that this year’s places cannot yet be confirmed, which means that people who have been offered places do not know whether they will be coming. When will the review be completed? How many students will be studying this year and for the next three years, and from which countries will they come?