RELATIONS WITH CHINA

The return of the former prime minister David Cameron as Foreign Secretary has caught almost everyone by surprise. We are to understand that Cameron is a big hitter, a good communicator, and well connected. He is also an ardent globalist. His attitude towards China has attracted some concern. In The Ponzi Class, I wrote:

‘The government’s attitude towards China was demonstrated by David Cameron’s trip to China in December 2013, when he wrote in a Chinese magazine:

“Last year China became the world’s largest trading nation. Next year China is set to become the world’s largest importer of goods and later this century it will become the world’s biggest economy. We should be clear that there is a genuine choice for every country over how to respond to this growing openness and success. They can choose to see China’s rise as a threat or an opportunity. They can protect their markets from China or open their markets to China. They can try and shut China out – or welcome China as a partner at the top table of global affairs. Britain’s answer is clear. We want to see China succeed.”

David Cameron proposed a free trade deal between the EU and China, and undertook to be China’s strongest advocate in the West. The Global Times, owned by the Communist Party People’s Daily newspaper, immediately responded: “The Cameron administration should acknowledge that the UK is not a big power in the eyes of the Chinese”, and continued, “We’ve discovered that Britain is easily replaceable in China’s European foreign policy. Moreover, Britain is no longer any kind of ‘big country’, but merely a country of old Europe suitable for tourism and overseas study, with a few decent football teams”, and concluded, “We wish Prime Minister Cameron and his delegation a pleasant visit to China”. In a subsequent article, the newspaper said: “China and the UK hold divergent views in terms of human rights, democracy and freedom because of different development phases, political systems and ideologies. But this should neither dominate bilateral ties nor overshadow the momentum for cooperation”.

The craven attitude of Britain to China is despite the comprehensive counterfeiting of British goods. In November 2014, a Chinese firm Landwind launched its X7 vehicle at the Guangzhou motor show which was identical to the Range Rover Evoque, costing in excess of £40,000; the X7 was priced at £14,000. China has further counterfeited the Mini Cooper and also the Rolls Royce Phantom (priced at £350,000 compared to the £30,000 Geely GE copy). A whole range of British goods are counterfeited and even exported back to the West, from Vivienne Westwood shoes (copies priced at £15 compared to £120 for the genuine item), menswear, cigarettes, Burberry cashmere coats, (copies priced at £60 compared to £2,500 for the genuine item), designer handbags (copies costing £150 compared to £700 for the genuine items), and a variety of high-street brands. China’s patent laws are favourable to local firms and it is almost impossible to get the Chinese courts to uphold Western firms’ patent rights. Even when British firms, and hence the wider economy, are damaged by these Chinese trade practices the British government is unwilling to defend British interests. For the British ruling class, globalization, encompassing free trade, is the new religion. Defending the national interest is so passé.’

As it happens, last Saturday another former prime minister, Boris Johnson (BJ), wrote an article in the Daily Mail, in which he set extolled the purported benefits of trading with China. BJ wrote:

‘The simple reality is that the U.S. and the Chinese economy are physically knitted together like Siamese twins. What would happen if we were really to try to banish China from our supply chains — in the UK as well as the U.S.? There would be a massive destruction of value and a huge inflationary pressure. It would be a disaster.’

He concluded:

‘Yes, of course we must be wary of China, and we went too far, in the “Golden Era”, in allowing China into our nuclear and other critical sectors such as 5G telecoms. But this is emphatically not the time to end economic interdependence between China and the West. It is autarky that leads to aggression, and free trade that leads to peace and prosperity; and what’s good for Walmart is probably good for America and the world. Remember the 1930s.’

As can be seen from the contemptuous response to David Cameron’s grovelling, the Chinese do not see themselves as being interdependent upon the West. They have adopted a mercantilist trade policy (a more aggressive form of protectionism) and do not share the UK’s free trade fixation. The USA has always been more protectionist than the UK, which is merrily running substantial trade deficits with both the EU and China. Those trade deficits are highly damaging to the UK economy.

BJ invites people to ‘remember the 1930s’. He does not explain what he means by that. The 1920s were an economic disaster for Britain, stemming primarily from Winston Churchill’s decision, as Chancellor, to rejoin the Gold Standard at pre-war parity. Churchill was a devoted free trader. The result was an economic depression. The introduction by Neville Chamberlain (as Chancellor) of a floating exchange rate and of tariffs in 1931 and 1932 (like all other leading nations) returned Britain to growth, rising living standards and rapidly falling unemployment. Britain enjoyed the fastest rate of growth since the industrial revolution.

Indeed, we should ‘remember the 1930s’.