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 Brexit, Trump and China’s Trade

Insights Column, 见地

Vince Cable

The Rt Hon Sir Vince Cable was Secretary of State for Business Innovation and Skills and President of the Board of Trade (2010-2015). He was Member of Parliament for Twickenham 1997-2015; deputy leader of the Lib Dems 2007-2010 and shadow chancellor 2003-2010. From 1966 to 1968 he was Treasury Finance Officer for the Kenya Government. He worked for the Foreign and Commonwealth Office as a first secretary in the Diplomatic Service (1974-76). He was then appointed Deputy Director of the Overseas Development Institute, which included a period working for the then Secretary of State for Trade and Industry, John Smith. From 1983 to 1990, he worked as special advisor on Economic Affairs for the Commonwealth Secretary General. In 1990 he joined Shell International taking up the post of Chief Economist in 1995. He is currently a visiting professor at the London School of Economics.

1. There are arguments put forward by both sides for this issue. One side argues that now that Britain has left EU, London as the No.1 financial centre in Europe is compromised by Brexit, hence they will give China some advantages. The other side argues that Britain can find new good negotiation opportunities and build a brand new and win-win relationship with China. What are your views towards these arguments?

VC: I think both are possible. They are not mutually exclusive. I think that the City of London will be weakened as a result of Brexit, and other places like Frankfurt, Dublin and Paris will benefit to a certain extent. But this is a relative, not an absolute situation. I think for all sorts of reasons, the City of London is going to remain Europe’s leading financial center because this position is not something that has emerged overnight, and therefore will be destroyed overnight. There will be many variables, which will remain largely the same in terms of the rules. Overall, even though some people will have to move their jobs into someplace else, the quality of human capital will not be swept out. The fact is that London will always be open for international business, and soft power issues like the English language used here which is the most widely spoken international language. You know, the schools where people would like to place their children, the geographical location where we combine the Asian markets, European markets and American markets. All these things will not go away, but there will need to be political will on the part of British government to fashion a win-win solutions because what we see, in my opinion, in Theresa May’s negotiating style at the moment, it’s all about her saying what we want, but to actually get a deal, you have to think about not only what we want, but about what the other side is preparing to give and what they want. So there needs to be a step change in mental attitude. And because there is actually no alternative to it, I think we will get that step change in mental attitude, the problem is how much of this unpleasant mental attitude do we have to go through until we get there.

2. If this ends at what we call a hard Brexit, the relationship between the rest of EU and Britain might be a little bit sour for a while. How would that cause any political challenges to China in terms of dealing with EU and Britain separately? How do you think China will change its economic and political strategies?

VC: I think that first of all, China is actually quite good at being able to maintain good relation with various countries even when these countries are at bad terms with one other. For example, China has good relations with every Arabic country even though some of these countries are fighting with one another, e.g. Iran & Saudi-Arabia. So if you look at China’s techniques, styles and ability there, although the negotiations between Britain and the EU can be quite acrimonious, I don’t think anything is a reliable situation, but I think if China can manage that situation, then it can also manage this situation, but it requires some in-depth foot work. And you see that when China ask some of these questions like in Foreign Industry Press Conference, you can see that China wants an excellent relation with Britain. China respects British decision about leaving the EU, and that’s position is very clear what we want to see a very strong and united Europe. So in a way, these two statements can be contradicted, but they have to pursue both of these angles. It is nothing about China cannot handle, but it introduces an area of complexity into China’s policies and behaviour of this particular part of world that wasn’t expected to deal with, because I think China expected Britain to vote to remain in EU, which is not a criticism because most of us expected this. That is the surprise that all of us have to face. China will have to combine very active engagement with United Kingdom in terms of promoting the Economic relationships, but not appearing to offer United Kingdom something that is not prepared to offer the EU. That is on the other hand, although China’s policies have always been in favour of European integration and China always supported EU, and on the whole the EU and China ‘s relationships are good, but there are issues. It is good, but not probably free. For example, two things, one the EU has not agreed to give China the market economy status which China should be entirely cruel after completing this period of WTO membership; and of course, there are also continuing arms embargo which are EU face to China 1998. On one level of people might say that China has made a lot of weapons themselves, why arms embargo matter? I think the arms embargo matters in two levels. One is the psychological thing, which states that China is somehow not a responsible member in the international community. The other aspect is that so many things more than most people realise that get to be defined under the falling of arms embargo. Many things, many of which are not necessarily from the military use at all, but what we called dual use of technologies even if it is not wanted for military purposes, but it does have potential military applications and therefore, there include in the arms embargo. These are two main things among China and EU, which Britain might take a different view on when it comes out of the EU. Both because Britain tends to be more positive than most of the European countries on the whole, but also Britain might be on a relatively weaker position after Brexit. It might find itself is in a position which might need more concerns to other questions. I think that might be a potential benefit to China.

3. There are some issues about China-EU relations are different from China-UK relations, and one of them is for example, the Hong Kong. How do you think the traditional disagreement between China and UK towards Hong Kong issues might be?

VC: Well, I think the issues about Hong Kong has been a bilateral issue. I don’t necessarily see it overly is influenced by Brexit. I think it is a standard-low issue, and has a whole different dynamics. What I should say is that coming after the EU, Britain needs to have friends and therefore it needs to think more carefully before it complicate

4. I also think another area, have potential difficulties when moving to the UK side, the United State might be an unexpected, as voting for president Donald Trump. President Donal Trump, even before coming to the officer, has made a very clear claim that he actually supports the Brexit, and makes Britain at the very front other than the very queue of American European negotiations. And if in the coming year, Trump claims a very hard standard to be against China, and suddenly China-US relationships become very intensive. Would that be a serious challenge for the UK to think about keeping a balance between these two very strong powers? And what are the potential consequences?

VC: I think it is a very difficult question, and I think we’d better first prefex it that we don’t know what the future China-US relations might be. I think that from Theresa May’s point of view which seems to me that she wants to have these trade agreements with as many people as possible to compensate for coming out the single market. The problem is what a kind of arrangement with one country can affect your relationships with another country. Even in the trade issue, Donald Trump has said that Britain will be the front of the queue. Donald Trump’s idea about trade agreement is about all the benefits to the United State, and this would have, for example, this would mean the kind of things America will be pressed for, including the ability for American companies to invest and take over parts of our national health service. It would mean …. Environmental health and safety which safeguards built in British legislation, for example, what kinds of chemicals can be fed to animals in meat industry and therefore exports.

5. Just one final question, we have seen that the 48 Group has been run for a long time, and it has met a great contributions over decades to this very financial relationship for both China and UK, and I know that 48 Group has some great initiatives, for example, the young ice breakers. As one of the leaders of 48 Group, what are some new ideas or thoughts for 48 Group to further strengthen its position as a premium platform of exchange between the UK

VC: First of all, the topics we have been discussed here indicate that the need for something like 48 Group still exists. Although we have something like ice breakers in the early 1950s, and sometimes everything appears to be very well which seems that we do not really need ice breakers any more, we still might find sometimes we actually do. If you look back, when 48 Group was started in 1950s, to the early 1980s. In order to deal with China, most people need to have some kinds of trusted intermediary, but nowadays anyone can contact with China diretly. So I think what 48 Group really needs is to build a deep understanding between the two sides. Obviously, our main responsibility is towards people in Britain to have actually a deep understanding for both a potential relationship with China, and also to understand why China thinks the way it does. Every child in the school in the China knows, like Opium wars or other important issues, but these things are not taught in any British school, so a lot people just don’t know, and they may feel Chinese are so sensitive, but actually British people can also be sensitive. It is important to know the reasons, so it is not enough just to trade with China, if you want to get the best relationship, and allow the relationship to get through difficult periods, you have to work with young people. People will get old and die, and if an organisation is not given to young people, that organisation will also eventually die. The young people can take forward the relationship with China, in ways that other people don’t know much about social media, e-commerce and things like. I think it is important to give these orientations to young people.

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