Foreign Affairs: Global Role, Emerging Powers and New Markets

Lord Howell of Guildford Excerpts

Thursday 6th December 2012 Lords Chamber

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.

--- Later in debate ---

[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.