A new trade era: What it means for Asia and the UK
From someone who vigorously campaigned for the UK to remain in the European Union, Alok Sharma now finds himself on a rather different kind of pitch as the Foreign Office Minister charged with Asia. His post-Brexit appointment led to a flurry of visits to Asia to deliver Prime Minister Theresa May’s “Brexit means Brexit” message.
Many commentators call this century the Asian century. For historians, though, the reality is that the economic centre of gravity is merely returning Eastward. In the 1700s Asia’s share of global GDP was nearly 60 per cent. Today it is just under 30 per cent and rising.
And most forecasters predict that this will grow to over 50 per cent by 2050. Some think we will reach that point much earlier, perhaps as soon as 2030.
So whether you are a commentator on the present, a historian focused on the past, or a forecaster predicting the future, the message is clear: Asia was, is and will remain one of the most economically dynamic regions of the world.
That is why we want to continue to strengthen our engagement in Asia. We want to reinvigorate existing relationships. And we want to reach out to new partners who have not always received the attention they deserved.
In June the UK voted to leave the European Union. This was the biggest democratic exercise we had undertaken in a generation. I campaigned for the UK to remain in the European Union. And, like any politician who loses a vote, I was obviously disappointed on the 24th of June when the result was announced. But the sky has not fallen in.
In fact the UK economy continues to grow – and more strongly than expected. Our business environment remains highly regarded – the World Bank ranks us seventh globally in the world in terms of ease of doing business – one place above the US. The World Economic Forum also ranks us seventh in terms of global competitiveness. We have a respected system of contractual law, as well as the lowest corporation tax in the G20 – clear proof that the UK remains open for business.
And since my appointment as a minister in July, I have travelled throughout Asia, to China, Japan, India, Indonesia, Australia and New Zealand, and there is more travel to come before the year ends. My immediate priority has been to reassure key contacts about the immediate implications of a result that few had expected. In my meetings with government ministers and business leaders, while the first question may have been about Brexit, the second one has almost always been about boosting bilateral trade and investment.
The Prime Minister’s first bilateral visit outside Europe was to India. That speaks volumes about her commitment to enhancing Britain’s relations across Asia. More travel to Asia by more members of the Cabinet, more trade missions and more engagement by every part of government is planned for next year to have those conversations about the future and the opportunities it presents. I find people increasingly positive about both.
On a practical level, we are also looking forward to the opportunity to engage in different ways with Asia once we are outside the EU, for example through the Regional Comprehensive Economic Partnership and ASEAN. And we have established trade working groups, including with Australia, New Zealand, China, Japan and India.
And businesses continue to be attracted to the UK. Softbank’s £24.3-billion acquisition of ARM, including a commitment to double the number of employees, shows that Britain has lost none of its allure to international investors. Chinese Developer ABP will invest £320 million in Phase 1 of the £1.7 billion London Royal Albert Docks project. There’s also Nissan’s recent commitment to build the next generation of Qashqai and Xtrail in the UK, upgrading their factory to a ‘super plant’.
As the Minister for Asia, I am part of wider government effort working hard to intensify and enhance UK-Asia trade. I work closely with the Prime Minister’s Trade Envoys.
We work closely with Chambers of Commerce too. We support the work of the UK India Business Council, the China British Business Council and the UK ASEAN Business Council. All three are membership organisations who offer tailored support to large corporations and SMEs that are looking to expand their trade with or attract investment from the region. Government supports their work through annual grants.
And the data is positive. Total UK exports to China have grown 57 per cent in the last six years. More than 1,000 Japanese and over 800 Indian companies base themselves here, employing a quarter of a million people, in a wide range of sectors. India is our third largest foreign investor, with more Indian companies investing in the UK than in the rest of the EU combined.
I recognise that there is something of a debate at the moment about the merits of free trade. So let me be clear about the UK view. The Prime Minister recognises the overwhelmingly positive impact of liberalism and globalisation. That these twin forces have lifted millions out of poverty, broken down barriers between nations and people and strengthened the rules based international system on which we all depend for our security and prosperity.
Of course we must acknowledge that there have been downsides. That while the tide of globalisation has carried many with it, it has also left others trailing in its wake. It was their voices that could be heard in the results of the EU referendum and the US Presidential election.
As the Prime Minister has said, we must listen to their voices, but our response should not be to reject global trade or to retreat into protectionism.
So the UK will carry on being a vocal champion for free trade. And the UK will continue to champion the benefits of globalisation. But we must also recognise that some things have to change. We must preserve what works and adapt what does not. We believe that, once outside the EU, the UK has a great opportunity to lead the world into this new era. To be the strongest advocate for free markets and free trade. To support successful businesses while at the same time encouraging them to support a successful society. A society that works for everyone.
And as the Prime Minister said, our approach is not going to be about propping up failing industries or picking winners – we will leave that to free market competition. What it will be about is creating the conditions, through our new industrial strategy, for business to thrive, to the benefit of all.
So I want to reassure you that the UK will not be stepping back from the world, as some people seem to fear. Quite the reverse: outside the EU the UK will be free, flexible and agile. We will play a global role – in foreign policy, international security and development, as well as trade. We will be an independent nation working alongside the traditional trading blocs and trading freely with others – in our best interests and theirs.