The Foreign Office needs to grasp the world has changed

This morning we learn the new Foreign Secretary has been booked to go to Washington, and we are assured he will shortly thereafter be visiting Paris and Berlin.

If they wanted to show they understood how the world is changing, Foreign Office officials would buy him a ticket from Washington to Delhi,and then on to Beijing.

The UK needs to build a deeper and stronger friendship with India, the world’s largest democracy. It must be good news for the UK that India has a fast growing market of 1200 million people, in a country where English is the second language of many.

The Uk needs a good relationship with China, its bank manager and supplier of so many goods. As the Coalition government understandably plans to take time to cut the deficit it needs to know the views of the world’s main creditor who will be needed to buy some of the debt.

Economic power is shifting and will shift dramatically. There are 300 million consumers in Europe, in a very slow growing area of the world with substantial debt and currency problems. There are 2500 million consumers in India and China, with a combined growth rate of almost 10% per annum. China has $2 trillion in the bank. The UK’s commercial future lies more in Asia. If we are to earn our present living standards and grow them faster we need to go east.

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43 Comments

  1. Peter van Leeuwen
    Posted May 14, 2010 at 8:37 am | Permalink

    It's a bit strange to suggest that relations with neighbouring countries are less important than with countries on the other side of the world.

    • John Hatch
      Posted May 14, 2010 at 1:55 pm | Permalink

      I don't find it strange at all. For about three hundred years, we did pretty well by ignoring or fighting France and focussing on overseas opportunities. Then, in the 20th century, we allied ourselves with France. So far, this has not produced especially happy outcomes (e.g. having bombs dropped on us from 1940-45).

      One of the most shameful episodes in our recent history was our shabby treatment of New Zealand to placate the French and join the (then) Common Market.

      Does Peter van Leeuwen think it strange for us to trade with the USA?

      Historically, India has been hugely important to us. China could also be very important (if we desist from being drug dealers, this time).

      • Peter van Leeuwen
        Posted May 15, 2010 at 11:05 am | Permalink

        "Abroad" starts at the border. I don't mind at all relations with USA, China, India etc. Neglecting one's neighbours (out of whatever sentiment) is not what I would advocate

  2. Insider
    Posted May 14, 2010 at 8:49 am | Permalink

    Spot on.

    WH reportedly received a surprisingly positive response when he addressed his new staff for the first time. But what signal does the appointment of David Lidington give?

  3. Richard
    Posted May 14, 2010 at 9:20 am | Permalink

    Don't worry, Baroness Ashton is taking care of them……

  4. alan jutson
    Posted May 14, 2010 at 9:38 am | Permalink

    I see from reports in the press today that our month on month balance of payments deficit has widened again.

    Once more we are sucking in imports, and exports have yet to pick up the benefit of a lower currency, if we can find markets for our products.

    East is where the growth is, and has been now for a decade or more.

    Clearly we still need close relationships with our old friends and partners, but we should not forget our Commonwealth contacts and those in the middle and far east.

    We should forget/scale down our World police type role, it has caused too many problems, with too many countries for UK PLC in recent times.

    Never know if we get our act together we may just be able to improve our relationships with many countries, and even have a chance of winning the Eurovision song contest again !.

  5. david
    Posted May 14, 2010 at 9:57 am | Permalink

    I do hope John you'll be commenting on the sidelining of Mark Francois, start of the, 'Night of the Long Knives' do you think.

    I'd fill in that UKIP membership now, why wait?

    Back in the heart of Europe.
    http://www.independent.co.uk/news/uk/politics/fir

    Not a happy ship methinks.

  6. Sally C.
    Posted May 14, 2010 at 10:20 am | Permalink

    Completely agree with your analysis. To be fair, I'm sure William Hague also realises this. Given the amount of debt that the Eurozone nations have just saddled themselves with, we clearly cannot rely on them for growth and we do need to look after our own interests.
    Due to our reluctance (correctly in my view) to stump up more money for a Greek bailout, we have definitely made more enemies in Europe. We need to be able to protect businesses that are part and parcel of the City without having to worry about more EU regulations or outright bans.
    Re RBS, shouldn't we be looking for a foreign buyer, possibly from Asia or the Far East, to buy at least part of it to reduce our exposure to any future losses.

  7. Mark Sutton
    Posted May 14, 2010 at 10:23 am | Permalink

    Emphasising the importance of China is spot on, however last time I looked Europe was our largest trading partner and therefore currently more important. This commentary is, I'm afraid, coloured to strongly by your anti-European sentiment and disappointing when compared to your other insightful economic posts.

  8. English Pensioner
    Posted May 14, 2010 at 10:43 am | Permalink

    I can understand why the Foreign Secretary needs to go and visit various countries upon his appointment.
    But can someone explain why our Prime Minister needs to go to Scotland to visit Alec Salmond? I thought David Cameron was Prime Minister of the UK, surely people like this should come to see him.

  9. Javelin
    Posted May 14, 2010 at 11:25 am | Permalink

    India and NOT China offers the best platform for profits.

    Companies are allowed to cut costs in China – but not make profits.

    **That should always be remembered about state capitalism**

    The Indians (lord knows why) still look to the UK for guidance on a lot of issues. On the down side India is a Continent in its own right and we can't open the door to them – immigration and business onwership should be ONLY done on a reciprocal basis. The Indians are also very traditional and not very innovative or creative.

    I think this Government need to learn how to compete with a large continent of well educated traditionalists by expanding concepts like enginereing degrees with creative aspects. For example mixing engineering degrees with and art, design or music courses.

    • John Wrexham
      Posted May 15, 2010 at 12:41 am | Permalink

      Is this the same India that invented the Indian Premier League in cricket that is one of the most profitable forms of the game? They do value tradition, know the real value of education and aren't tempted to go at the speed of the slowest boat, but they can be innovative as well.

      Despite our treating the Indians like muck between 1857 and 1947, we should use our cultural links with India rather than ignore them as I am sure we can learn from them and India will become a big market for someone and a more accessible one than China.

    • G.A.B.Edwards
      Posted November 19, 2011 at 11:07 am | Permalink

      You view seems to me to be absolutely valid & based on real experience .thank you GRAHAM

  10. Neil Craig
    Posted May 14, 2010 at 11:52 am | Permalink

    Quite right.

    One of the many impressive things about Sarah Palin is that, on leaving Alaska her first major foreign policy speech was made in Hong Kong before an audience of capitalists there.

  11. Frugal Dougal
    Posted May 14, 2010 at 12:11 pm | Permalink

    I agree, but we need to be very careful about whom we get into bed with, especially China – look at their population-control program, or their incipient colonisation of Africa.

  12. Michael Lewis
    Posted May 14, 2010 at 12:52 pm | Permalink

    Compltely agree, given the anti-British sentiment of Obama and Co, I'm a bit suprised the Foreign Secretary isn't off to Beijing or Dehli first.

    We can perhaps ask our new Business Secretary to stop worrying about 'casino banking' and ask our American pals why the rhetoric over BP, when it seems BP, Transocean and Haliburton have a collective responsibility.

    Since he's going there, maybe the Foreign Secretary can put that question for him. It needs asking.

  13. Cameronite
    Posted May 14, 2010 at 1:04 pm | Permalink

    If you Google "GDP" and look at China's GDP, you will see something quite remarkable.

    1990 China – $ 357B – UK $1.01T – USA $ 5.76T
    2008 China – $4.33T – UK $2.67T – USA $14.6T

    Which means:-

    China's GDP has grown at 15% compared to 4-6% growths for UK, US France and Germany.

    At these growth rates China's GDP will overtake the US in 2022, when they will be $30T. This will be about double that of UK, France and Germany COMBINED.

    I suspect that either China's growth is unsustainable or that the figures are misleading. However, it is clear that China is a major player in the world economy.

    • John Wrexham
      Posted May 15, 2010 at 12:34 am | Permalink

      People made the same comments about the massive expansion in the Soviet Russian economy during the 1920s and 1930s and commentators fell over themselves to see the communist world as the future. I reckon it pays to be a little sceptical about the Chinese economic miracle. Of course, it has always been so much easier and certainly cheaper running an economy and a society if in effect you treat most of your population as slaves.

  14. Ian Jones
    Posted May 14, 2010 at 1:06 pm | Permalink

    Soon the UK will discover it cannot afford its current spending and lifestyle, hard work and welfare cuts will be necessary. India and Chinese workers will work twice as long for half the pay.

    • John Wrexham
      Posted May 15, 2010 at 12:35 am | Permalink

      Have you asked your boss for a 50% pay cut, he or she would be very pleased especially if you agree to double your hours as well!

  15. Alistair Kelly
    Posted May 14, 2010 at 1:12 pm | Permalink

    Absolutely right about the importance of India/China – maybe add in Brazil and Africa as well. However, Europe is close to catching fire and makes sense to speak to the main players (Berlin and Paris). India/China may be where our economic future lies but we shouldn't ignore the lessons of European history and let the current economic crisis become a social/political crisis otherwise we risk paying far more than money (again!).

  16. Marlene Booth
    Posted May 14, 2010 at 1:35 pm | Permalink

    Very well put.

  17. adam
    Posted May 14, 2010 at 1:48 pm | Permalink

    Why was the international aid budget ring-fenced. Do these countries really need any of our money.

    And lets not forget what kind of place China is. Their people have no rights. My brother lives there and they search through everything he sends in the post, for example.

  18. Nick
    Posted May 14, 2010 at 1:52 pm | Permalink

    Just so. It puts into context our obsession with being subservient to the EU.

  19. Uncle Bob
    Posted May 14, 2010 at 6:11 pm | Permalink

    I think we need to go back to some good old fashioned trade missions in Asia. We were once the greatest trading nation on the planet, it's in our own best interest to attempt to reclaim that status.

  20. Julian
    Posted May 14, 2010 at 7:25 pm | Permalink

    We should not be trading with China. We should only trade with democratic countries. Absolutely we should be strengthening ties with India.

  21. Martin
    Posted May 14, 2010 at 7:29 pm | Permalink

    I guess the point you are hinting at is that the UK (while improving our exports to the rest of the EU and North America) needs to really up its very weak export performance to India and China.

  22. ps
    Posted May 14, 2010 at 7:33 pm | Permalink

    I completely agree John.

    Can you point this out to William Hague & DC. I would also suggest while they are on walkabout they could visit Brazil, Indonesia, Canada, Australia and other fast growing far east economies.

    I am sure they will get a friendly reception and it will help them realise first hand the importance for UK of refocusing our trade with partners who have a growing demand for our goods and services.

    The other hope is they can pick up tips on how to reduce red tape and engender a business friendly environment for UK, so we too can become a growing economy with the benefits this brings to everyone.

  23. G.A.B.EDWARDS
    Posted May 14, 2010 at 7:50 pm | Permalink

    The world has indeed changed and India [more than china]represents a much better partner to SMEs with so much of UKs knowledge-base in technology-focused innovation.The importance of Indias recognition of UKIntellectual-property and Chinas reluctance so to do demands pressure and cooperation from UK government. Since the world has to increase its food production [Double-It]by 2050 and Indias 650 million farmers have to be twice as good[doubling by 2025],the subject of Farm mechanisation and UKs world-leading agricultural-scientists & technologists has to be considered as being useful to the world.The imagination that UK once had in the 70s seems to have become lost in the miasma of domestic-focused bureaucratic little englanderism.No longer is there a ministry of Agriculture [UKs Largest Employer says Daily Telegraph] and a related Developing-world-foused DIFID/ODA which considers the system of MARKETING our Brilliant knowledge & experience of farming & food-production.The reconstruction of our world view and technological leadership is badly needed in general but in worldwide food production issues it is critical for Indians ,Africans and the Chinese —-when the latter is forced to behave .GRAHAM

    • Tedgo
      Posted May 14, 2010 at 9:45 pm | Permalink

      What knowledge and leadership, our local farmer recently bought a cheap Indian Massey Ferguson tractor. We aren't even capable of making products like that anymore, we sold the plant and design years ago for a song.

      • G.A.B.EDWARDS
        Posted May 17, 2010 at 1:51 pm | Permalink

        Our company is in the farm tractor industry and had to close its UK factory when the product had a UK supply chain that began to disappear in 1986-1990 period.Our technology was and is far ahead of the convention in energy-usage & productivity.
        The cheap Massey-Ferguson was an old farm tractor model and the MF-company licensed older models to TAFE-Amalgamations in Madras.They are now made in high volumes in Tamil-Nadu.
        The sale of the whole Massey-F. company to AGCO of USA was conducted many many years after the MF-company licensed older products to India,Yugoslavia,Poland etc.
        Tractor technology moves on and its progress is much faster in the developed world than the developing one.
        Not only this but changes have taken place in farm mechanisation ,the use of Hydrogen Fertilisers and in spreading and spraying systems.
        Whilst crop-yield has increased dramatically, the finite-soil has been damaged by a combination of these modern practices
        The oil[diesel]price has risen dramatically and the population is growing so that twice as much food will be needed in 2050.
        These combined effects and situations give rise to serious challenges and one of the most serious is that Conservation & Sustainable Agriculture will require farmers to substantially reduce or ABANDON Ploughing.
        Direct-drilling in dry-lands & min-tillage in temperate conditions will follow.
        What this means is that new and different kinds of farm tractors & implements will need to be designed ,developed and used so that up to 40% less fuel will be used in farming.
        Having started with £100 35 years ago and working continuously on the theme of "more efficient farm transportation" we are now in the very fortunate position that Conservation-Ag.brings to the table.
        As buses, aeroplanes, cars,trucks etc seek to become lighter and more fuel-efficient…..we have a British-owned package of significant technology for w-wide AG.
        We promise not to give it away too cheaply and we will do our level-best to retain its uk-ownershio through those kind of J.Vs,licensing agreements that allow us to develop our technology in Uk,retain what we can in a horrendous [for innovative SMEs]British Banking and financial environment, where imagination and manufacturing are unmentionable ,dirty words. GRAHAM

    • Tedgo
      Posted May 15, 2010 at 12:06 am | Permalink

      You raise an interesting point about Intellectual Property. Some years ago India did not recognize IP on drugs. Naturally this upset the USA and they prevented India getting benefits under the WTO agreements. I not sure what the current situation is with India regarding IP and drugs but it seems to me like a good idea.

      IP is about creating monopoly's, perhaps the UK and Europe should not recognize IP on drugs so that they can be manufactured by many companies. We would then have real competition and cheaper drugs for the NHS, I do not believe drug development costs as much as the companies claim.

      Even today a million pounds will buy 15 man years, to suggest that drug development costs hundreds of millions or billions is fanciful.

      • david b
        Posted May 15, 2010 at 6:38 pm | Permalink

        And who will pay for the R & D in this scheme? IP is copyright. No-one will invent anything without patent or copyright protection. The problem with places like China is that they copy other people's ideas. The west will be beggared and once the Chinese make absolutely everything, we will all be the poorer. Socialism was already tried, it was found wanting.

        • G.A.B.EDWARDS
          Posted May 17, 2010 at 2:34 pm | Permalink

          Honourable business behaviour is certainly important,even in this modern,global-focused world.

          It is vital to know that most of UKs innovative technology is created by SMEs.
          The SME that wishes to protect itself by taking out patents needs to know that it is not an inexpensive activity.!!!
          The presence of a patent is also most interesting to any firm[like ours] that entered discussions with a much better financed company.The actual presence of a patent can prove enormously helpful to those wishing to find a way around it.
          Probably the most central issue to those SMEs seeking protection is that the costs ,to a company that has put all or most of its energy & funding in to design,of defending the patent can be way beyond the financial resources of the SME.
          The only way that China & India can be persuaded to behave honourably is if our UK-Government is behind our business dealings.
          Currently,I do not see that we have a suitable system in place in UK.Additionally,our commercial staff in our Embassies & High Commissions will need some instruction and some balls,if our technology is to enter the global market in partnership with Indian & Chinese firms.Graham

  24. Lindsay McDougall
    Posted May 14, 2010 at 10:16 pm | Permalink

    It goes almost without saying that this new foreign policy can only be pursued if we are not obliged to share a common foreign policy with slow growth Europe.

  25. Mark
    Posted May 14, 2010 at 10:49 pm | Permalink

    Maybe Cameron is trying to work out whether green policy really matters or whether it is just a tax device before deciding how to deal with India and China.

    If he believes all that stuff, then logically he should try to convince China and India to take it seriously, and restrict their development in a green manner for the sake of the planet. Could be a tough sell though, because plainly the Chinese aren't believers, merely seeing events like Copenhagen as opportunities to secure their economic future ahead of the West.

    If he doesn't believe, then he needs to explain to the Indians that we'll re-open Redcar and they can't have the carbon credit cash for closing it, so we keep jobs in the UK and substitute for imports or maybe even manage some exports, generate some wages, profits and taxes, and enhance our economic prospects. Of course, that means we'd be in competition, rather than in capitulation.

    Perhaps we could persuade them to be our bankers and give us a few loans to tide us over while we get it all sorted. There's a shortage of loan capital here, and too many of or own bankers have proved to be poor judges of risk- maybe they'll do that better than us.

    Which message would you have Hague deliver?

  26. John Wrexham
    Posted May 15, 2010 at 12:07 am | Permalink

    You have hit the nail on the head there, john. However, I expect the Foreign Office is waiting for Tony Blair to hand over some of his frequent flier air miles so we can afford to send our new foreign secretary to some rather more distant countries. Of course, we do employ a large diplomatic service who should (you'd have thought! fingers crossed) be able to do a better job than any politician.

  27. Kevin Peat
    Posted May 15, 2010 at 1:01 am | Permalink

    I think the US ought to take out a pre-emptive strike against China whilst they still have the military superiority.

    Reply: Unprovoked aggression would be both unjustified and bad for the world.

  28. Robert George
    Posted May 15, 2010 at 4:25 am | Permalink

    I have had something of a Damascene conversion. I am more optimistic about the EU than I have been for years. I think that in the recent Greek bail out negotiations we have seen (if we look closely ) the beginning of the end of this experiment. For years I have made the error of thinking UK might take the initiative to get out of the EU but that ain't gonna happen at least in the next 5 years.

    However, this deal was only stitched up by the French, the Italians and the Spanish ganging up on Merkel and giving her a thorough kicking.

    Merkel is angry, (more so with her electoral losses in North Rhine Westphalia) the German people are furious that their prudence is bailing out the idle wastrels to the south and , best of all, we are now seeing the emergence of a new generation of German politicians. This new German generation is different, untroubled by historical guilt they are confident in themselves and sick to the back teeth of the EU and what it is costing.

    The Germans will either break Europe to their own economic model and discipline or break it up altogether. The latter will be the likely result but it will take time.

    France will eventually rue the day that Sarko bailed out the French banks in Greece by bullying the Germans.

    Given that context JR is even more right for placing emphasis on India and China.

  29. Rob N
    Posted May 15, 2010 at 9:38 pm | Permalink

    agree 100%

  30. Keith
    Posted May 17, 2010 at 5:44 am | Permalink

    "I believe it is time for Britain and India to forge a new special relationship, to meet our shared challenges in this new era of international affairs."

    -David Cameron in 2006
    http://www.guardian.co.uk/commentisfree/2006/sep/

  31. john c
    Posted May 17, 2010 at 12:46 pm | Permalink

    John, do you support the importing of half the subcontinent to compete with native I.T workers.

  32. G.A.B.Edwards
    Posted November 21, 2011 at 12:41 pm | Permalink

    Dear John., The world has indeed changed.One of the changes concerns the loss of UK manufacturing with some of it impossible to be re-created.
    Because of the relatively large sums of investment capital needed for UKSMEs,with innovative technology to enter worldwide markets ,NOT being available in UK [largely because of short term thinking] the operations of SME-directors & owners have to be of quite a different kind.
    The modern SME has to locate a country overseas that is interested in growing its manufacturing by entrance to global markets.
    It is also necessary to locate a Joint-venture partner company that has the kind of manufacturing equipment necessary for making the UK-designed innovative product technology overseas & the salesmanship to assist.
    Whilst the UK-system is helpful to SME`s, by providing the small sums from RDA`s & now through Technology Strategy Board[TSB], the UK system is not at all focused towards assisting with the linkages necessary to create the Joint-venture potential that is vast & world-focused.
    It is of course quite insulting & inconsiderate to SME`s that the FCO has introduced the OMIS scheme ……………….as a means of ensuring that UK company`s contribute to the expenses of FCO……………………..disgusting is a better word !!
    Now that we are begining to understand that the private sector has to be the growth-part & the public sector has to help the private sector,should we not be addressing the value of FCO Embassy & High Commission activities at home & overseas?
    If the career path for FCO-civil servants is political , to be successful, should we not consider how to introduce the business support system [particularly for the key-collaborative nations like BRIC] from BERR to help innovative SMEs create joint-ventures of significance to the UK economy. Can we not move business overseas work in to BERR?

    For developing countries, the presence from DIFID of a Pre-Investment Study[in which 50% of assistance was available ,as with the excellent Export Market Research Scheme] is a model that could easily be transferred to assist innovative SME`s at this time.
    My personal view is that projects that are very significant and need at least £5million to be successful joint-ventures should be able to obtain 75% -85& of the investment needed for pre-investment studies [of a size of £250,000 -£350,000] from any government that is serious about creating a UK-leadership[Through technological competence & project proposals that address key world issues like that explained in earlier comment here] in overseas joint-ventures that benefit UK & the country/company abroad.
    Some of the work of UKSME`s is particularly relevant to world-issues and it makes sense to take a leaf from the book of the Royal Academy of Engineering and create a sensing-system that assesses projects of a kind that the new world of green issues badly needs.There are SMEs that have projects & proposals for countries such as Jordan,Malaysia,India,S.Africa,FSU that have been grounded because the investment capital community has appeared to be too clever by half as well as needing returns in 20 minutes!
    We have to have an understanding in UK that relates to the recent book from UNIDO “Agro-Industries for development” which explains [for the food-production/farmers sector] that overseas countries need to create jobs and must therefore industrialise their economies.Our UKSMEs have to be seen to be helpful to that industrialisation by providing innovative technology of relevance to them and through them to reach new markets.
    These ideas are not new as the UKT&I Global partnership at the Royal Show[that was] was designed & developed to suit these needs.The form may not have been the best one as it was NOT based on funding for such investments.It did help to sell the ideas but government did not then see the relevance of providing funds for excellent Projeects.
    Change is now required as the significant projects do now require pushing forward to fruition with government assistance………………………..unless,of course the investment capital community can change from their short termism .G.A.B.EDWARDS

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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