A New Beginning or More of the Same?: The European Union and East Asia After Brexit [1st ed. 2021] 9811598401, 9789811598401

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A New Beginning or More of the Same? The European Union and East Asia After Brexit Edited by Michael Reilly · Chun-Yi Lee

A New Beginning or More of the Same? “A timely collection of studies about a highly topical issue, and one that is not likely to lose its salience any time soon. The authors have rich experience, both in the region and in academia, which helps shape their contributions in ways which are pragmatic, well informed and admirably focussed.” —Kerry Brown, Professor of Chinese Studies and Director, Lau China Institute, King’s College London “This is a timely book on an important subject that is overlooked. Some of the thoughtful insights shared by former policy makers and sharp academic analysts in this work raise important questions on how relations between Europe and North East Asia will unfold.” —Steve Tsang, Director, SOAS China Institute, SOAS University of London

Michael Reilly · Chun-Yi Lee Editors

A New Beginning or More of the Same? The European Union and East Asia After Brexit

Editors Michael Reilly Taiwan Studies Programme, School of Politics and International Relations University of Nottingham Nottingham, UK

Chun-Yi Lee Taiwan Studies Programme, School of Politics and International Relations University of Nottingham Nottingham, UK

ISBN 978-981-15-9840-1 ISBN 978-981-15-9841-8 (eBook) https://doi.org/10.1007/978-981-15-9841-8 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover credit: Alex Linch shutterstock.com This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Acknowledgements

This book, and the conference from which it arose, would not have been possible without the participation of all the contributors, their thoughts, ideas, criticisms and above all their papers. We are grateful to all of them, not least for their readiness to comply with the demands or expectations of the editors. If they ever found these unreasonable, they were far too polite and tolerant to say so. Nor would it have been possible without generous financial support from the Taipei Representative Office in London, on behalf of the Ministry of Foreign Affairs in Taiwan, and the Research Committee Fund of Nottingham University’s School of Politics and International Relations. Special thanks are due to David Lin, the former Taiwanese Representative in the UK and Ya-hui Chen for arranging the first of these, and for their enthusiastic support for the project from the beginning. Mandy Felton gave unstinting and all-important administrative support from the outset, ensuring the conference proceedings all went smoothly, while Mark Murphy fulfilled a similarly important role in later stages, his meticulous and patient attention to detail proving invaluable in the final editing and review of contributions. Last but by no means least, we are most grateful to our spouses and families for their encouragement and patient understanding throughout the exercise.

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Contents

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Introduction Michael Reilly and Chun-Yi Lee

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The USA-East Asia and the Struggle to Reform World Order: What Role for Europe and the UK After Brexit? Richard Higgott

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The European Union and North-East Asia: Recent Historical Context Rod Wye

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US and EU Perspectives and Responses to China’s Strategic Challenge Robert Wang

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Imagining Brexit: The UK’s China Policy After the Referendum Tim Summers The Japanese Government’s Response to Brexit David Warren

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The Impact of Brexit on East Asian Security: A Taiwanese Perspective Corey Lee Bell and Andrew Yang

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Brexit, Supply Chains and the Contest for Supremacy: The Case of Taiwan and the Semiconductor Industry Robyn Klingler-Vidra and Yu Ching Kuo

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The Impact of Brexit on the Relations of UK Universities with East Asia Pei Hsi Susan Lin

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Towards a New World Trade Order? The EU, Brexit and North-East Asia Michael Reilly

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Index

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Notes on Contributors

Corey Lee Bell received a doctorate degree from the Asia Institute of the University of Melbourne, Australia. He has lived and worked in East Asia for many years, and has written and translated a number of articles for academic and media publications that focus on that region’s religious thought and moral discourse, diplomacy and international relations. He is currently an associate researcher at Taiwan’s National Chengchi University’s Centre for Southeast Asian Studies, a postdoctoral researcher at the Chung-Hwa Institute of Buddhist Studies and an editor of the Taiwan Insight digital magazine. Richard Higgott, FAcSS is a recovering academic after 10 years as a senior university manager. He is now Emeritus Professor of International Political Economy at the University of Warwick and in the new Brussels School of Governance at the Vrije Universitiet Brussels. Among other appointments he has been Professor of International Relations and Director of Graduate Studies in Foreign Affairs and Trade at the Australian National University and Professor of Government at the University of Manchester. 2021 will see the publication of States, Civilisations and World Order and (with Kate Coyer) Sovereignty in an Age of Digitalisation. Dr. Robyn Klingler-Vidra is Senior Lecturer in the Department of International Development at King’s College London. She is the author of The Venture Capital State: The Silicon Valley Model in East Asia

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(Cornell University Press, 2018). Her research focuses on innovation, entrepreneurship and venture capital in East Asia and has been published in leading academic journals, including International Affairs, Journal of Development Studies, New Political Economy, and Socio-Economic Review. Prior to joining King’s in 2014, Dr. Klingler-Vidra was a Senior Research Fellow, in charge of venture policy, at the Coller Institute of Venture at Tel Aviv University. She received her B.A. from the University of Michigan, was a visiting scholar at the National University of Singapore Lee Kuan Yew School of Public Policy and obtained her M.Sc. and Ph.D. in International Political Economy at the London School of Economics & Political Science (LSE). She is a Senior Fellow of the UK Higher Education Academy. Dr. Yu Ching Kuo was a postdoctoral policy researcher at the Science & Technology Policy Research and Information Center (STPI), National Applied Research Laboratories (NARL) in Taipei. She received grants from the Ministry of Science and Technology (MOST) of Taiwan to conduct policy research for the White Paper on Science and Technology (2015–2018) and the National Science and Technology Development Plan (2017–2020). She currently works in the private sector and as a freelance writer. Chun-Yi Lee is Associate Professor in the School of Politics and International Relations and Director of the Taiwan Studies Programme at the University of Nottingham. Her first book, Taiwanese Business or Chinese Security Asset was published in 2011. From 2011 to 2014, she worked on an ESRC funded project: ‘Globalisation, national transformation and workers’ rights: An analysis of Chinese labour within the global economy’, followed by a research project entitled ‘Chinese Investment in Taiwan: Challenge or Opportunity for Taiwan’s Industrial Development’, funded by the Chiang-Ching-kuo (CCK) Foundation in Taiwan. This project finished in December 2016. Currently, Chun-Yi is developing a public policy research project, to compare the Taiwan and British governments’ strategies to counter COVID-19. Pei Hsi Susan Lin is currently working as Partnership Development Coordinator at the University of Bedfordshire. She formerly worked as a Project Officer in the International Project Group at UK NARIC, which is the national agency managed on behalf of the UK Government, under contract to the Department for Education (DfE). It provides information,

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advice and opinion on academic, vocational and professional qualifications and skills from all over the world for the UK and overseas governments, agencies, professional bodies and educational institutions. She received her Ph.D. in history from Nottingham Trent University in 2016. Michael Reilly is a non-resident Senior Fellow of the Taiwan Studies Programme at Nottingham University. A career diplomat for 30 years, he worked extensively on UK policy towards East and South East Asia, culminating as Director of the British Office in Taipei from 2005 to 2009. He subsequently spent 4 years in China representing a major international aerospace company. He has a Ph.D. in economic history from the University of Liverpool and has published books and articles on EU and Taiwanese trade policy and on Taiwan’s minor railways. His latest book, The Great Free Trade Myth: British Foreign Policy and East Asia Since 1980, was published in 2020. Tim Summers is a non-resident senior consulting fellow on the AsiaPacific programme at Chatham House and a lecturer at the Centre for China Studies, The Chinese University of Hong Kong (CUHK). He is the author of three books, China’s Hong Kong: the Politics of a Global City (2019), China’s Regions in an Era of Globalization (2018) and Yunnan—A Chinese Bridgehead to Asia (2013), and journal articles on subjects including the Belt and Road initiative (BRI), China’s maritime disputes, China and global governance, and Hong Kong. As well as presenting and speaking on developments in China at numerous conferences, he has given evidence to the UK parliament’s foreign affairs committee and been interviewed extensively by media. His current research looks at China in the context of wider shifts in the global political economy, including the Belt and Road Initiative, Europe-China and UK-China relations, and Hong Kong. Robert Wang is a Senior Associate with the Center for Strategic and International Studies and an adjunct professor at the Georgetown University School of Foreign Service. He was a career Foreign Service Officer in the US Department of State from 1984 to 2016. He last served as the US Senior Official for APEC from 2013 to 2015 and as the Deputy Chief of Mission at the US Embassy in Beijing from 2011 to 2013. Dr. Wang was Deputy Director of the American Institute in Taiwan from 2006 to 2009. He has served abroad in Tokyo, Hong Kong, Shanghai, Singapore and Beijing, and as Cambodia desk officer at the Department.

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Dr. Wang earned his Ph.D. in political science at the University of Iowa in 1976. Prior to joining the Foreign Service, he was an Assistant Professor at Whittier College in California (1977–1984). He was also a Diplomat in Residence at the University of California. David Warren served three times in the British Embassy to Japan during his Foreign and Commonwealth Office career, culminating in four and a half years as Ambassador from 2008 to 2012. He retired from the Diplomatic Service in 2013 and is now an Associate Fellow at Chatham House as well as an Honorary Professor in the Department of East Asian Studies at the University of Sheffield. He is a member of the Council at the University of Kent (and was Chair from 2014 to 2020), a non-executive director of Aberdeen Japan Investment Trust and a Senior Adviser to Montrose Associates. Rod Wye is an Associate Fellow with the Asia-Pacific Programme of Chatham House. He worked for many years as a research analyst in the Foreign and Commonwealth Office specialising in China and East Asia. He served in the British embassy in Beijing in the 1980s and 1990s and was Deputy Head of the FCO’s China Hong Kong Department in the early 2000s. He retired from government in 2010. Andrew Yang received an M.Sc. in Economics from the London School of Economics and Political Science in 1981 and spent four years as a Research Associate in Political Economy at Wolfson College, Oxford University (1981–1985). He was the Senior Advisor at the National Security Council of the Republic of China (2015–2016), and previously Vice Minister for Policy, Special Appointment Rank, then Minister of National Defence from 2009 to 2013. He has been both the Executive Secretary and a Research Associate with the Sun Yat-sen Center for Policy Studies at National Sun Yatsen University in Kaohsiung since 1986. From 1997 to 2000, he was the Head of International Collaboration and Exchange at National Sun Yatsen University. He is Assistant Professor at the General Studies of National Sun Yat-sen University. He has been Secretary General of the Chinese Council of Advanced Policy Studies (CAPS), from 1991. CAPS primarily focuses on studying and analysing the strategic and security aspects of the PRC’s domestic and international situation, particularly cross-strait relations.

Abbreviations

ADB ADIZ AI AIIB ASEAN AWO BRI BRICS CCP CEE CETA CGDGC CLCS CoC CPTPP ECFA ECTS EEA EFTA EHEA EPA EU FAC

Asian Development Bank Air Defence Identification Zone Artificial Intelligence Asian Infrastructure Investment Bank Association of South East Asian Nations American World Order Belt and Road Initiative Brazil, Russia, India, China and South Africa Chinese Communist Party Central and Eastern European Countries EU-Canada Comprehensive Economic and Trade Agreement China Academic Degrees and Graduate Education Development Centre United Nations Commission on the Limits of the Continental Shelf Code of Conduct Comprehensive and Progressive Agreement for Trans-Pacific Partnership (see TPP ) Economic Co-operation Framework Agreement (between China and Taiwan) European Credit Transfer System European Economic Area European Free Trade Association European Higher Education Area EU-Japan Economic Partnership Agreement European Union Foreign Affairs Committee (of British Parliament) xiii

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ABBREVIATIONS

FCO FDI FOIP FONOP FPDA FTA GDP HESA ICT IPEA IPR ITRI JSPS KEDO KHDI MES MoU MRC NATO NBA NGO NSCR NSFC NTBs OCD P5 PLA PLAAF PRC RimPac RoK RQF SOE STEM TNE TPP TRA TSMC TTIP UK UKRI UMC

Foreign & Commonwealth Office Foreign Direct Investment ‘Free and Open Indo-Pacific Strategy’ Freedom of Navigation Operations Five Power Defence Arrangements Free Trade Agreement Gross Domestic Product Higher Education Statistics Agency Information and Communications Technology International Professional Engineer Agreement Intellectual Property Rights Industrial Technology Research Institute Japan Society for the Promotion of Science Korean Peninsula Energy Development Organisation Korea Health Industry Development Institute Market Economy Status Memorandum of Understanding Medical Research Council North Atlantic Treaty Organisation National Basketball Association (USA) Non-Government Organisation National Security Capability Review Natural Science Foundation of China Non-Tariff Barriers Overall Defence Concept Five Permanent Members of the UN Security Council (China, France, Russia, UK, USA) People’s Liberation Army People’s Liberation Army Air Force People’s Republic of China Pacific Rim Republic of Korea (South Korea) Regulated Qualifications Framework State-Owned Enterprise Science, Technology, Engineering and Mathematics Transnational Education Trans-Pacific Partnership (see CPTPP ) Taiwan Relations Act Taiwan Semiconductor Manufacturing Company Transatlantic Trade and Investment Partnership United Kingdom UK Research and Innovation United Microelectronics Corp

ABBREVIATIONS

UN UNCLOS UNCTAD UNHCR UNSC USA USTR WTO WWII

United Nations United Nations Convention on the Law of the Sea United Nations Conference on Trade and Development United Nations High Commission for Refugees UN Security Council United States of America United States’ Trade Representative World Trade Organisation World War II

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List of Figures

Fig. 9.1

Fig. 9.2

Income of Higher Education providers by category and academic year (£millions) 2009/2010 to 2018/2019 (Source The Higher Education Statistics Agency (HESA)—Publication Archive—Finance of Higher Education Providers, https://www.hesa.ac.uk/data-andanalysis/publications, accessed March 2020) Student enrolment on undergraduate and postgraduate (taught and research) programmes, including full-time and part-time from the EU, the People’s Republic of China (including Hong Kong & Macao), Japan, South & North Korea and Taiwan plus international students from the rest of the world (Source The Higher Education Statistics Agency (HESA). ‘HE Student Enrolments by Domicile and Region of HE Provider 2014/15 to 2018/19’. HESA, last updated February 2020, https://www.hesa.ac. uk/data-and-analysis/students/table-11)

207

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List of Tables

Table 8.1 Table 8.2 Table 8.3 Table 9.1 Table 9.2 Table 9.3

Table 10.1

Leading Taiwanese semiconductor foundries Taiwan’s market share and ranking of global semiconductor industry Summary of long and short-term impacts on Taiwan’s semiconductor industry Acceptances from East Asian Countries from 2016 to 2019 Tuition fees and education contracts by domicile Annual average exchange rate of GBP, USD, AUD and CAD against RMB between 1 June 2014 to 31 March 2020 UK trade with select economies, 2000–2018. Figures are in US$ million

187 188 196 211 212

213 238

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CHAPTER 1

Introduction Michael Reilly and Chun-Yi Lee

We should start this book with a caveat and explanation: it is not about Brexit, or even what the impact of Brexit may be on East Asia. Both topics have already been covered, Brexit itself exhaustively, and its implications for East Asia in a previous volume of one of the co-editors.1 A title such as Europe, East Asia and the rise of China, or perhaps Europe, China and the USA might have been equally appropriate. Nor is it primarily about trade, even though both during and after the 2016 referendum debate in the UK, Brexit was often portrayed as an opportunity for the country to ‘free itself’ from the rest of Europe and trade freely with the rest of the world as if this had somehow not been possible previously. It is also too early to say what the long-term impact and consequences of Brexit will be—in years to come, as historians look back at the aftermath of the consequences of the Covid-19 pandemic of 2020, US foreign

M. Reilly (B) · C.-Y. Lee Taiwan Studies Programme, School of Politics and International Relations, University of Nottingham, Nottingham, UK e-mail: [email protected] C.-Y. Lee e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_1

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policy after President Donald Trump or Chinese influence and expansionism in East Asia under Xi Jinping, Brexit may merit little more than a footnote. Substitute ‘Brexit’ by ‘Xi Jinping’, or ‘Chinese assertiveness’ or ‘Donald Trump’ or ‘the rise of populism’ and much of the analysis presented here would require little, if any, change. However, at the time of writing Brexit has happened, even if the future relationship between the UK and its erstwhile partners remains to be settled, whereas the other subjects remain very much in progress. For better or worse, Brexit forms a clear point on which to place analysis of the changing state of relations between Europe and East Asia, North-East Asia more specifically. It is common to see these overwhelmingly in commercial terms. British Government ministers have certainly done so, both during the Brexit referendum debate and subsequently. The British Government’s ‘Global Britain’ strapline reflected this, even if it was more ingenious than persuasive, in the words of one of our contributors. Nevertheless, setting aside Brexit-related rhetoric, since the end of the Korean War in 1953, commercial interests have been to the fore in European relations with the countries of East Asia. From the late 1950s, the region as a whole embarked on more than five decades of almost continuous rapid economic growth, led first by Japan, then the ‘four tigers’ of Hong Kong, Singapore, South Korea and Taiwan, and since the turn of the century by China. With four, geographically small, exceptions—Brunei, Hong Kong, Macao and Timor-Leste—by the early 1970s the formerly extensive colonies of European powers in the region, embracing Malaysia, Indonesia and Indo-China, had all achieved independence. With no security interests of any note to defend, it is perhaps not surprising that European countries therefore saw the region overwhelmingly in terms of the commercial opportunities it offered, while the often painful process of de-colonisation served as a warning to them to avoid being drawn into the Vietnam War. Occasionally, they cooperated in the face of common challenges to their commercial interests, most clearly in the 1970s and 1980s as they sought to protect domestic industries from the full force of Asian competition, notably in the textile, electronics and automotive sectors. More usually, they competed fiercely between themselves to win business for their ‘national champions’ in the region or, more recently, to secure inward investment from it. At least one influential European think tank has criticised European states for fighting among themselves for Chinese contracts and finance, prioritising these over broader foreign policy

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interests. Meanwhile, the post-Brexit British Government has shown it pays scarcely any more attention to American concerns in this respect.2 For good measure, when European countries have acted together on non-commercial matters in their relations with East Asia, their interventions have not infrequently been failures, or worse, counterproductive, as Rod Wye argues in Chapter 3. Undoubtedly, the biggest such failure in recent years was the abortive plan to lift the Arms Embargo on China in 2005. Advocates of lifting the embargo argued that it was an unnecessary irritant in the burgeoning relationship with China and that lifting it would be of only symbolic importance, as exports would continue to be circumscribed by existing export license regulations. They suggested replacing it by a strengthened European Union (EU) code of conduct providing greater clarity over what arms sales could be permitted. With hindsight, what was so striking about discussion of the proposal was the near-total failure on the part of European foreign ministries generally to consider the likely reaction in other countries. That matters reached this stage was widely seen as a reflection of the EU’s lack of strategic interest in or understanding of North-East Asia, its member states seeing the region only in terms of commercial opportunities which, cynics would say, lay behind the proposal to lift the embargo in the first place. Only after this near debacle did the EU attempt to bring greater coherence to its East Asian strategy, agreeing in the second half of 2005 common guidelines ‘designed to provide a broad orientation for the EU’s approach to East Asia, across the full range of its activities’.3 Against this background, the countries of East Asia have not infrequently viewed the European Union and its members with a mixture of wariness, irritation and frustration: Europe offers none of the security guarantees provided by the USA, and while fears of ‘Fortress Europe’ that surrounded the creation of the Single Market in 1986 may have diminished over time, the EU is still often seen as protectionist, while European ‘preaching’ on human rights or other values has frequently been seen as heavy-handed, or unwelcome interference in countries’ domestic affairs. For all these reservations, the outcome of the 2016 referendum, in which the UK electorate chose by a narrow majority to leave the EU, still came as a shock to most East Asian countries. China’s Global Times newspaper was perhaps most outspoken in its reaction, but also very probably spoke for other countries in the region with its headline of Britain steps backward as the EU faces decline once the result was known. It felt the outcome signalled a more general decline in Europe and would make

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it easier for the USA to influence European foreign policy decisions, to China’s disadvantage.4 Four years later, the rest of the world has largely moved on from the referendum shock, often because of bigger shocks or uncertainties since, which pose more direct threats to their own interests. For East Asia, the first of these came less than five months after the Brexit referendum. Donald Trump’s election as the 45th president of the USA heralded a very different approach to US foreign policy, in which he seemed as ready to castigate allies such as Japan or EU states as he did adversaries with whom, by contrast, he often sought to cultivate a warmer relationship, as exemplified by his meetings with North Korea’s Kim Jong-un. Given his unpredictable attitude and failure to win re-election in 2020, the Global Times ’ fears about increased American influence over European foreign policy now seem over-stated. Notwithstanding Trump’s on-off relationship with Kim, however, his foreign policy will undoubtedly be best remembered for antagonism towards China, initially over trade, then increasingly over technological supremacy, as touched on by Robyn Klingler-Vidra and Yu Ching Kuo in Chapter 8, and exacerbated still further by his war of words in 2020 over blame for the Covid-19 coronavirus pandemic. The increasingly acrimonious dispute sucked in other countries in the region, none more than Taiwan, which is increasingly like the proverbial shrimp caught between two whales in this growing contest for supremacy. This is all the more so as Hong Kong finds itself falling ever further under the direct control of Beijing. Still, other countries in the region also have to factor into their policy-making the increasingly assertive behaviour of China under Xi Jinping. Japan, South Korea and Taiwan all have security guarantees of one form or another from the USA, yet look to China as their leading trading partner, while also facing security challenges or threats from it. Potential problems for them arising from Brexit were therefore of a decided second-order category, even before the advent of the Covid-19 pandemic. In these circumstances, the countries of the region could be forgiven for overlooking their relations with the EU and its members. While EU states may not provide the ‘hard’ security guarantees of the USA, however, they do not lack clout and influence of their own, nor is this inconsequential: two of the five permanent members of the UN Security Council are European, as are four of the members of the G7—plus the EU which is a member in its own right although not formally counted

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as one—and trade and investment with the countries of the EU are of major importance to East Asia. Furthermore, Japan, South Korea and Taiwan share with the EU an adherence to democratic principles, respect for human rights and a belief in the rule of law. Given the background of wider global uncertainty, it can only be natural for the countries of East Asia to be assessing the likely future of their relationships with the EU following the UK’s departure from it and what role, if any, the UK itself might play in their future relations. There are many within the UK, in its government especially, who argue that no longer bound by the supposed constraints of EU membership, the country will have a freer hand to pursue its own interests in East Asia. Cynics within the EU would doubtless argue that EU membership has rarely hindered the UK from pursuing its own interests, even when these might have been to the detriment of wider European policy. They can point to several recent examples of the UK’s dealings with China in support of their case, although Tim Summers suggests in Chapter 4 that British policy towards China is also shifting.5 Equally, there are those within the EU who see the UK’s departure from the bloc as an opportunity. Shorn of a heavyweight, influential but, in their eyes, frequently disruptive and arguably mercantilist member, the EU should be freer to pursue a more openly values-based diplomacy towards the region than has hitherto been the case. However, the wider world, East Asia especially, is hardly standing by patiently waiting to see how the EU and UK manage their future relationship. The American-led, liberal world order created in the aftermath of the Second World War is under threat, less so now, perhaps, from an isolationist and unpredictable American president, but from a rising and increasingly assertive China, which under Xi Jinping appears increasingly eager to reshape the order more to its liking. Not surprisingly, China’s neighbours, Japan, South Korea and Taiwan especially, view this with concern, increasingly worried that they may be forced to choose sides in their hitherto carefully managed relationships with China and the USA. How the EU, and to a lesser extent the UK, will respond thus becomes of greater interest to them. Will the countries of the EU continue to prioritise their commercial relations with China? Moreover, will the UK, especially, further irritate its usually steadfast ally in Washington in its quest for commercial advantage in Beijing, or will the EU seek to shore up or revitalise the current world order? How the EU responds will influence decisions taken in Tokyo, Seoul, Taipei and Beijing too.

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In November 2019, academics and former policy-makers with extensive involvement in East Asia came together under the auspices of Nottingham University’s Taiwan Studies Programme to discuss and examine these issues and to consider what relations with East Asia will look like for both the EU and UK in the post-Brexit world. This book is the outcome of their deliberations. Contributors were invited because of their experience or professional knowledge, and to represent as broad a range of views as possible, not on the basis of their individual views on the merits or otherwise of Brexit. They were asked to take this as the starting point or catalyst for a potential broader change in relations as part of wider changes in the world order, rather than to consider the impact or outcome of Brexit per se on those relationships. Although trade perspectives were not explicitly excluded, given that these have been the focus of much of the work to date on post-Brexit relations, contributors were asked to consider diplomatic and security perspectives, as well as wider issues such as the possible impact on educational and research links. One of the depressing aspects of the Brexit debate—and sadly increasingly prevalent elsewhere too—has been the way in which objectivity has increasingly been supplanted by ideology in policy-making. In many areas, not just trade policy, a grasp of key policy issues seems to count for less than ideological zeal. Given this, there will doubtless be some who will rush to dismiss the broad findings and conclusions here as too pessimistic. The contributors were asked to make their assessments as far as possible based on how they saw reactions from within the region, however, not from within the UK or within the EU. The findings also reflect the three years of indecision and policy hiatus within the UK that followed the referendum, which inevitably influenced the views of others. The following chapter, by Richard Higgott, encapsulates this apparent pessimism, painting a gloomy picture of the current state of the liberal world order. He sees this as decaying and parlous, arguing that the American-led order is over and that the successful development of a new world order that is driven by cooperation and consensus, rather than conflict, is far from assured, especially given the growing conflict between the USA and China, which he sees as the key players in shaping this future order. He worries about the current febrile state of relations between the two, which he sees in turn as one of the key obstacles inhibiting the prospects for the reform of the world order. Pessimistic it may be, but developments since the chapter was first drafted—for example, President Trump’s decision in April 2020 to suspend US financial contributions

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to the World Health Organisation (WHO) in response to its alleged failings in responding to the outbreak of the Covid-19 pandemic, or China’s imposition of a draconian national security law on Hong Kong two months later—surely reinforce his argument. Higgott then considers what role the EU might play in shaping the world order after Brexit. He sees Brexit as a symptom of the dilemmas of the current order, not as a determinant. Now that it is out of the EU, the role of the UK as a major international player will become increasingly irrelevant. It will remain secured by its formal presence as a member of the Security Council, the G7 and G20 and other ancillary international institutions, but its ability to influence and affect the debate over the structure of the world order will be greatly diminished. If his analysis risks being dismissed as typical of a disappointed ‘Remainer’ or frustrated European intellectual, Higgott himself would argue that his aim was primarily to stimulate discussion and consideration of the issues rather than risk seeing a new order emerge almost by default—a risk surely, given the current (autumn 2020) lack of consistency or clarity in American policy. In Higgott’s eyes, such a new order would be led by China; unless that is, the EU can work with like-minded countries such as Japan to replace or shore up American leadership. This broad view is supported by Rod Wye in Chapter 3, who sees it as a consequence of President Trump’s ‘America first’ policy, which has opened up opportunities for China to put itself forward. Furthermore, while Higgott calls for the EU to show a lead and create a ‘Third Way’ in global leadership—neither China, nor the USA—Wye cogently sets out the limitations to this. He argues that European countries have tacitly encouraged China’s new global assertiveness, not least through their poor track record in dealing with it on sensitive issues, where the EU not infrequently ends by extracting the worst outcome, not the best. He cites human rights, the Arms Embargo, Market Economy Status in the World Trade Organisation (WTO) and latterly the role of Chinese company Huawei in supplying 5G telephone technology as examples. These examples have depressingly similar elements, namely the ease with which European consensus can be broken up and how the lure of commercial advantage with China tends to subvert positions of principle. Robyn Klingler-Vidra and Yu Ching Kuo consider the ‘Huawei factor’ further in Chapter 8, but the company’s investment in the UK’s telecommunications industry could be seen in Wye’s analysis as a metaphor for the UK’s wider relations in the post-Brexit era. Now that it has left the EU,

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the UK no longer needs to be bound by the EU’s value and models, so would a future UK Government allow human rights, a constant issue in the EU’s dealings with China, to impede relations? In contrast to the fears expressed by the Global Times editorial writer in 2016, mentioned above, Wye concludes that the UK’s departure from the EU is unlikely to have any significant bearing on China’s relations with either. While he agrees with Higgott that there is scope for the EU to be more engaged, the ease with which European consensus on dealing with China is broken (or the difficulty of reaching a consensus) leads him to think that any changes of substance will be limited. Too often, he argues, European policy has been opportunistic or ad hoc. The contrast with EU solidarity in handling Brexit negotiations is intriguing—could this yet be a model for the bloc in handling its wider foreign policy objectives? Of greater significance in Wye’s view than Brexit, or the rise of China, is that increasingly EU member states, and the UK outside it, along with Asian states such as Japan and South Korea, are going to be forced to choose between China and the USA in their relationships, a choice that most would prefer not to have to make. The theme of the contest between the powers (USA, EU and China) is continued in Chapter 4 by Bob Wang. In contrast to Higgott, however, and perhaps not surprisingly from an experienced former US diplomat, Wang does not argue for a ‘Third Way’. Instead, he directly addresses Wye’s question of ‘What side are you on?’ He argues that China’s policies are now threatening the fundamental values of the liberal international order and that the EU, the UK and USA must work together to prevent this, and do more to support democracies and promote universal human rights in the face of China’s growing threat to the maintenance of these values. Higgott’s frustrations with the ‘America First’ transactionalism of Donald Trump are not ignored by Wang, who recognises that a rebuilding of trust in trans-Atlantic relations is a necessary precursor to a more collaborative approach in facing China. Nor do most European countries share with the USA the same ‘very immediate and tangible’ concerns over China’s regional ambitions. And like Wye, he recognises the difficulty of getting the EU to act in concert towards China. Wang’s suggested approach, therefore, is to create discrete ‘coalitions of likeminded’ to tackle the specific challenges posed by China on a standalone basis. These could start by working with human rights NGOs to document and publicise more widely China’s human rights violations, to raise

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public awareness and highlight deteriorating human rights conditions in China for the world to see. Senior US and European officials also need to speak out publicly against Beijing’s increasingly repressive measures at home, as well as express support for democracies and the individual rights and freedoms of people around the world, including in Hong Kong and Taiwan. Wang’s policy recommendation—more cooperation between the USA and EU—may be the opposite of Higgott’s ‘Third Way’ but the underlying premise of both is the same: the trans-Atlantic relationship needs to be repaired, and the onus must be on the USA to do this. In this regard, his recommendations might almost serve as a manifesto for the incoming Biden administration in Washington. Significantly, neither Higgott, nor Wye, nor Wang see any distinct role for the UK in the formulation of a new approach, whether it be Higgott’s ‘Third Way’ or Wang’s return to trans-Atlantic cooperation. All see any role for the UK as essentially a supporting one, in whatever approach might emerge. Prudently, all steer clear of suggesting whether post-Brexit the UK will stick with its European neighbours in a separate policy approach or cleave to the USA. On paper at least, another option is open to the UK: that of eschewing both its main security ally and its former partners and aligning itself more closely with China. It is not a facetious suggestion. At the time this was written in the summer of 2020, relations between the two were decidedly cool, following China’s imposition of the National Security Law on Hong Kong and the British Government’s reversal of its earlier decision to allow the limited use of equipment from China’s Huawei in the rollout of its 5G telephone infrastructure. In these circumstances, it is easy to forget that in recent years the UK was willing to risk the ire of the USA in its enthusiasm to be the first Western country to join China’s Asian Infrastructure Investment Bank (AIIB) and again in its initial willingness to accept a role for Huawei. And in marked contrast to Germany, which has continued to take high profile political refugees from China, notably Liu Xia, widow of imprisoned Nobel laureate Liu Xiaobo, and two young Hong Kong activists, Ray Wong and Alan Li, British Chancellor of the Exchequer (finance minister) George Osborne pointedly visited the sensitive region of Xinjiang in 2013, shortly after a Chinese court had sentenced the moderate Uighur academic Ilham Tohti to life imprisonment for advocating peaceful dialogue between Uighurs and Han Chinese.

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Tim Summers shows in Chapter 5 that the likelihood of such an approach is probably remote. He identifies three broad schools of thought about how Brexit might affect UK-China bilateral relations: first, that Brexit is an opportunity for Britain to develop deeper ties with China, in particular, to benefit from economic opportunities, including through a free trade agreement (FTA); second, that after Brexit the UK will no longer have the policy options given by EU membership, such as the ability to engage in multilayered policy, the safety in numbers on difficult issues and the stronger lobbying clout that the EU enjoys. It will, therefore, be weaker and more vulnerable to Chinese lobbying on political issues, especially given the likely desire for Chinese investment or British access to its market; and third that the impact of Brexit is neutral, with policy towards China shaped mainly by structural trends, especially its rise, by the attitudes of ‘like-minded’ countries, including former EU partners, and by the preferences of British politicians and the domestic debate about China. (It is surely relevant in this context that Canada and Australia, two countries with which the UK has aligned itself on foreign policy statements since its departure from the EU, have both experienced the unacceptable face of Chinese diplomatic behaviour in recent months, with arbitrary trade embargos and citizens taken hostage). Summers considers these scenarios in the context of China’s muchpublicised ‘Belt and Road Initiative’ or BRI, and the commercial opportunities this supposedly offers. With so much uncertainty surrounding British foreign policy-making since the Brexit referendum, his conclusion is, not surprisingly, tentative and cautious. Nevertheless, it should still provide some reassurance to policy-makers outside China, for he argues that Britain’s policy towards China is likely to continue to be driven primarily by developments in China itself and the way these are interpreted in the UK. On its own, Brexit is unlikely to have a significant impact on this. With relations cooling since—especially as concern has grown in the British government over Chinese moves on Hong Kong—it seems quite possible, even likely, that the ‘golden era’ in bilateral relations, which characterised the period of transition from David Cameron to Theresa May as prime minister in London, will prove to have been both transient and something of an aberration in otherwise customarily cool relations. With the USA and China increasingly engaged in a battle for supremacy, and the position of both the EU and post-Brexit UK still to be defined, it is easy to overlook China’s neighbours, none more

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so than Japan. Yet Japan is the world’s third-largest economy and has gone through its own difficulties in its relations with the USA, albeit largely confined to the economic and financial sphere. Today, few Americans recall the controversy that surrounded Sony’s purchase of Columbia Pictures for $3.4 billion in October 1989, or Mitsubishi’s acquisition of a controlling share in New York’s iconic Rockefeller Center the following month.6 These investments came near the peak of the bubble in Japanese asset prices following the Plaza Accord of 1985. The bubble burst soon after, to be followed by Japan’s ‘Lost Decade’ of deflation and low or no growth.7 Arguably, this experience has left Japan more sensitive to the stability of the global economic and trading system and the consequential risks to it from them, as David Warren explains in Chapter 6. Like Wang, Warren is a former senior diplomat, in his case a one-time British ambassador to Japan, and therefore writes from personal experience acquired over many years when he explains the impact of the 2016 referendum on bilateral relations, particularly on the close trade and investment relationship that had developed over the past 30 years. He points out that Japan—like China and the USA under President Obama—had made no secret of its preference to see the UK remain within the EU. Japanese concerns were driven very much by fears about the impact of Brexit on the considerable Japanese investment in the British economy since the advent of the European Single Market. The scale of this investment meant Japan stood to lose more from Brexit than did any other country in East Asia. Japanese fears went beyond this, however, with concerns too about the potential impact on the global economic system. Despite this, Warren argues that Japan’s response to Brexit is mainly pragmatic. He says the country will remain committed to its ‘strategic partnership’ with the UK but will want to take all appropriate measures to guard against any negative impact on the multilateral trading and global economic systems, on collective global security through any weakening or unbalancing of the European voice in this area, or on the ability of the global community to uphold shared values. Japan attaches high importance to global stability, it remains concerned about Brexit as a destabilising force, and it will support all attempts to manage the process so as to avoid this. If Summers’ conclusion suggests that Brexit is unlikely to lead to any major change in the UK’s relations with China, nor presumably those of the EU, then Warren’s analysis provides further balance to the pessimism

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of Higgott and reassurance to Wang. He suggests that Japan remains committed to the current world order and will make efforts to sustain this, engaging the UK, and presumably the EU too, to do so. This is a theme which is explored further by Michael Reilly in the final chapter. Any decline in the current world order is likely to be of even greater concern to Taiwan than it is to Japan, given Taiwan’s dependence on the USA for its security, arguably even for its very existence in the face of ever-growing pressure from China. Taiwan, therefore, finds itself on the front line of the growing contest for influence between the two, an issue considered by Corey Lee Bell and Andrew Yang in Chapter 7. Their argument is both intriguing and a counter to the—sometimes gloomy—assessments of some other contributors. They argue that far from being merely a sound bite or fanciful PR branding, the post-Brexit ‘Global Britain’ concept has seen rhetoric followed up by actions, in this case an increasing commitment to security operations in the western Pacific and South China Sea. Although the resources devoted to this have been modest, by acting in partnership with allies, notably Freedom of Navigation Operations in conjunction with the USA and France, and growing cooperation on defence and security matters with Japan, the overall impact is much greater. While these activities neither involve Taiwan nor are directed at its defence, Bell and Yang argue that the increased security commitment and cooperation will be of benefit to it, not least because of the importance for it of open sea lanes through the South China Sea. While the USA has until now played a pivotal role in managing the cross-strait equilibrium, activity like this by its allies suggests that Wang’s call in Chapter 4 for the ‘liberal democracies’ to do more to help Taiwan is already being heeded. Bell and Yang also appear to recognise that there is little likelihood of a more explicit commitment to Taiwan’s security by either the UK or the EU. Nevertheless, they suggest that more could be done without breaching any ‘red lines’ of Chinese (or British) sensitivities over the status of Taiwan, proposing that the UK and Taiwan should try to establish an institutionalised track-two security dialogue mechanism to encourage more regular and effective exchanges. Notwithstanding justified concerns about the steady Chinese militarisation of the South China Sea, as Wang mentions, the battle for global supremacy is increasingly being fought in the field of technology. Nowhere is this better demonstrated at present than by American efforts to restrict the use of 5G telecommunications equipment produced by

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China’s Huawei, and to prevent Huawei and other Chinese companies from using the latest American components. As the world’s leading producer of ICT components, Taiwan finds itself in the middle of this battle. Its major companies such as TSMC are in an awkward position, dependent on both Chinese and American customers but also having offshored more and more of their production to China to benefit from the greater economies of scale possible there. As with Japan, the UK and the EU in the security and political field, they increasingly fear being asked to choose ‘whose side are you on?’ as Robyn Klingler-Vidra and Yu Ching Kuo explain in Chapter 8. It is also a field in which European countries, by contrast, are primarily niche players. As reflected by Klingler-Vidra and Kuo, such a position could prove crucial, what with innovation being a crucial driver of productivity and growth, and a key arena where states can flex their international security muscle as Trump’s embargo on Huawei demonstrates. However, there are some notable exceptions to this general position, none more so than UK-based, but now foreign-owned, Arm Holdings, that designs processors for 95% of the world’s smartphones. Arm and other exceptions are sufficiently important to have generated a significant interdependence between Taiwan and Europe in the semiconductor industry. Klingler-Vidra and Kuo, therefore, examine what Brexit might mean for this interdependence. British politicians should take some comfort from their conclusion on this point—although they do emphasise the importance of educational links between Europe, including the UK, and Asia in fomenting these links—something explored in more detail by Pei Hsi Susan Lin in the following chapter. And they do warn that uncertainties arising from Brexit in terms of access to talent, ability to do business, and short-term trade complications pose substantial risks to manufacturing and trade in what is a highly important, and globally organised, industry. Perhaps not surprisingly, however, Klingler-Vidra and Kuo see the potential impact on the industry of the rumbling US-China conflict as being of greater import. They show that while the conflict has affected European companies in the sector, Arm Holdings included, it is Taiwanese companies, notably TSMC, who are on the metaphorical front line. Contrary to what might be assumed, and to some early expectations, however, they conclude that to date, far from having to choose sides, Taiwan’s semiconductor industry appears to have benefited from the US-China trade dispute. Perhaps this comes from years of experience

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for Taiwan of having to balance itself between the USA and China. If so, it may suggest that the island will continue to do so and carefully avoid having to take sides if it can. Until negotiations between the UK and EU on the nature of the post-Brexit relationship started in earnest in early 2020, studies of the impact on specific economic sectors had been relatively few and concentrated mainly on the sectors thought most likely to be affected: finance, automotive, agriculture and fishing. As Pei Hsi Susan Lin explains in Chapter 9, most analysis of the impact on the education sector has followed a similar pattern to these studies, in that it appears exclusively to concern the involvement of UK universities with the EU, its member states and its market. By contrast, the impact of Brexit on the relationship of UK universities with East Asia has been barely discussed. Yet this is an important market for the UK’s higher education sector, contributing almost as many students to British universities as the EU, but representing a significantly more important source of funding for them given their freedom to set their own fees for non-EU international students. While the number of EU students is likely to fall as a result of Brexit, if only because they will no longer be eligible for the same fees charged home students, those from East Asia are likely to continue to rise. This increased dependency on East Asian students—especially those from China—is likely to have wide-ranging implications for the universities. Evidence suggests that these have not been thought through, including by the government. Hitherto, officials seem to have been all too willing to accept without question the assertion that overseas students spending time in the UK will return to their home countries infused with British ‘values’ and a respect for, and deeper understanding of, the country. The controversy in late May 2020 surrounding the alleged involvement of a high profile, Cambridge educated, Chinese TV journalist in the broadcasting of forced confessions inevitably casts doubt over such trite assumptions.8 This dependency may also have consequences for the British Government’s foreign policy towards the countries concerned, including China. Will the government be willing to criticise China, for example, and risk a backlash through falling student numbers? In the final chapter, Michael Reilly considers some trade-related issues arising from the changing world order post-Brexit. He starts by showing how the free trade rhetoric of many ‘Leavers’ in the UK has failed to take account of the country’s heavy dependence on foreign direct investment—as one contributor put it, recent British trade ministers have not

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shown a high level of policy literacy—but that it will ignore this at its peril as it seeks to develop new trading relationships, as experience with Japan has shown. More generally, the rhetoric also shows a failure to understand the complex nature of modern trade with its extensive and extended supply chains, the vulnerabilities of which have been highlighted first by President Trump’s trade war with China and then by the impact of the Covid-19 pandemic on global trade. In contrast to the pessimism of Richard Higgott in Chapter 2 and his view that the shape of the world order is essentially a binary choice between American and Chinese leadership, with the former failing, Reilly shows that an alternative vision is possible. He explains how Japan has responded to the rise of American protectionism and isolationism under Donald Trump and his withdrawal from the Trans-Pacific Partnership (TPP), not by reluctant acquiescence but by going ahead with a version of the TPP without the USA as a member, the Comprehensive Programme for Trans-Pacific Partnership, or CPTPP. However, Japan has gone still further: it responded to Brexit by moving quickly to agree a free trade agreement with the EU, and has since proposed that this agreement could be incorporated into the CPTPP, thereby creating what would be the world’s largest free trade area and supplanting, in effect, the World Trade Organisation. As with Taiwan’s response to the rise of Chinese companies in advanced technology, this suggests that China’s neighbours are alive to the new challenges they face, not just from China’s rise but also from America’s relative decline. The agreement of several Asian countries, including China, South Korea and Japan, on the Regional Comprehensive Economic Partnership (RCEP) trade agreement as this volume was being finalised, surely reinforces this. Far from a binary choice between the USA and China, a modified world order seems possible, even probable. It will be a messier one, in which the USA will no longer be able to take its supremacy for granted but also one in which China will face growing resistance to attempts to assert itself. The EU has an opportunity to help shape this modified order. However, as Rod Wye explains, in the absence of a consistent European strategy towards China—much less towards North-East Asia generally— the EU response is likely to remain ad hoc, and in consequence, it will continue to react to events rather than help shape and influence them. The same is even more true of the UK. ‘Leavers’ can take comfort that the country will remain an important trading partner for the countries of East Asia. Nevertheless, it is far from being a strategic partner for them.

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An increased security role might help it make up for a loss of influence within the EU, but that is unlikely to happen. Even before the impact of Covid-19, the UK was struggling to fund its existing security obligations and aspirations. East Asian countries would have preferred to see it remain inside the EU and exercise its influence there, not go it alone outside, where they expect both its voice and that of the EU to be weaker. Insofar as Brexit offered an opportunity to both the UK and EU to reassess their relations with East Asia, it is thus most likely to be a missed one. Concerns about the rise of China and the decline of the USA notwithstanding, future relations appear most likely to be more of the same.

Notes 1. David W.F. Huang and Michael Reilly, eds., The Implications of Brexit for East Asia (Singapore: Palgrave Macmillan, 2018). 2. ‘ECFR’s Scorecard: Asia & China,’ European Council on Foreign Relations, 2016, https://www.ecfr.eu/scorecard/2016/china, accessed 15 April 2020; ‘Donald Trump “Apoplectic” in Call with Boris Johnson Over Huawei,’ Financial Times, 6 February 2020, https://www.ft.com/con tent/a70f9506-48f1-11ea-aee2-9ddbdc86190d. 3. ‘Guidelines on the EU’s Foreign and Security Policy in East-Asia,’ Policy Doctrine (Brussels: Council of the European Union), accessed 13 July 2016, https://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressd ata/en/misc/97842.pdf. 4. ‘Britain Steps Backward as EU Faces Decline,’ Global Times, 25 June 2016, http://www.globaltimes.cn/content/990440.shtml. 5. ‘European Foreign Policy Scorecard,’ European Council on Foreign Relations, 2016, https://www.ecfr.eu/scorecard, accessed 28 May 2020. 6. ‘Japan Buys the Center of New York,’ The New York Times, 3 November 1989, https://www.nytimes.com/1989/11/03/opinion/japan-buys-thecenter-of-new-york.html. 7. From 1965 to 1985, Japan’s annual average rate of growth of GDP was 5.67%. From 1990 to 1999, it was 1.52%. The precise start of the ‘Lost Decade’ is open to debate but in the two decades from 1991 to 2010, the annual growth rate exceeded 3% just once, in 1996. World Bank Data Bank, https://data.worldbank.org/indicator/NY.GDP. MKTP.KD.ZG?end=2019&locations=JP&start=1961&view=char, accessed 11 August 2020. 8. ‘WHO Reviews China-Based News Anchor’s Global Ambassador Role,’ Financial Times, 28 May 2020, https://www.ft.com/content/0ec81a70b121-434f-9533-7e7fa0a3fdb8.

CHAPTER 2

The USA-East Asia and the Struggle to Reform World Order: What Role for Europe and the UK After Brexit? Richard Higgott

Introduction The purpose of this paper is threefold: firstly, it provides a stocktake of the current (parlous) state of the decaying, and so-called, liberal world order. Secondly, it identifies the key obstacles inhibiting the prospects for the reform of that order. Both decay and the obstacles to reform are exacerbated by the Covid-19 pandemic. Especially, it looks at the equally parlous relationship between the USA and China, as it has unwound in recent years and asks how the future development of the US-China relationship will determine the reform of world order over the next five to ten years. Again, a question profoundly influenced by Covid-19. Thirdly, the paper asks what role the EU1 might play in the debate over, and practice of, the reform of world order after Brexit. Before developing the substance of the paper, let me set out in point form the paper’s conclusions.

R. Higgott (B) Vrije Universiteit Brussel, Brussels, Belgium e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_2

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(i) The future of world order is fraught. The American-led world order is over. The successful development of a new world order that is at the cooperative and consensual end of the cooperationconflict spectrum will be determined by a number of factors in what I shall describe and explain as the growing conflict, between states and civilisation states in general and the USA and China in particular. (ii) There will, of course, be important players other than the USA and China in this process of reform: notably Russia, India, some BRICs and—depending on how it responds to its self-proclaimed “existential crisis”2 under the 2020 Commission of Ursula Von der Leyen—the EU. (iii) Brexit, as a reflection of the populist-nationalist zeitgeist, is a symptom of the dilemmas of modern world order but it is not a determinant factor. The role of the UK as a major international player, now out of the EU, will become increasingly irrelevant. For sure, its international role will remain secured by its formal presence as a member of the Security Council, the G7 and G20 and other ancillary international institutions, but its ability and influence to impact the debate over world order will be diminished. So, UK plays little role in this essay except to the extent that it has implications for the EU’s behaviour. By way of caveat, this essay acknowledges that not everyone shares my working assumption that Brexit does not presage a new age of UK influence in international relations rather than seeing it as but a delusional fantasy tied to the psychological legacy of empire: what Bernard Henri Levy in his London stage play Last Exit Before Brexit calls not a “national rebirth but a plunge into the void.” And as Phillip Stephens in the Financial Times , perhaps in less polemical terms, describes it, “British exceptionalism has reached the end of the road.”3 But, interestingly and in sharp contrast to my view, yet another prominent French analyst notes, Brexit is not a nativist project rather than a rational exercise rooted in British historical and philosophical traditions and likely to prove a pragmatic success once it extracts itself from the naively utopian club that it is the EU.4 One is tempted to ask, what has Monsieur Roche been smoking? Nothing in the contemporary economic and political order suggests anything other than that the temper of the times

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is not propitious for his optimistic reading of the UK’s future as a major international actor. (iv) We must expect the dialogue over world order to be at best attenuated and at worst non-existent while the world’s major players are still ruled by so-called “strong man leaders” exhibiting narcissistic and authoritarian personalities: notably, Xi Jinping, Putin and Modi; the lesser strongmen of the likes of Orban, Erdogan, Bolsonaro and Duterte; and the “wanna-be” strongmen such as Trump and his junior partner Johnson still (for the time being) constrained by their democratic institutional settings. (v) The future of world order will exhibit one of at least five alternative trajectories (further precision would not be prudent at this stage): a. A partially revived semi-liberal, but post-hegemonic, order of the kind envisioned by US and European liberals.5 This order would keep much of the diplomatic and institutional infrastructure of multilateralism, but with a greater role for other major states. In this order, negotiable reform is possible provided some accommodation can be found for Chinese and the other emerging big power interests. No system is viable if major powers do not feel some ownership of it. This will depend more on US flexibility than Chinese. b. Not dissimilar to the first scenario is what Amitav Acharya calls a “multiplex” world order in which reform is negotiable but increasingly limited to dialogue between consolidating and manageable regional structures like the trans-Atlantic, East Asia and Eurasian structures. It will be a global order of regions.6 Both these first two scenarios will be reliant on the growing hybridity of non-state actors in international relations to substitute for the increasingly limited influence of international institutions. We might call both eventualities “reformist transformations,” which are not as strongly revisionist as trajectories c-e below. c. An increasingly nationalist, antagonistic, great power contested order with US and China competition at its core (see also Wang in this volume). This scenario can be found in the writings of US realist scholars and analysts.7 Prospects for negotiated reform in this scenario are equally, if not more so, as limited as the

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first two scenarios—especially as long as we are in the era of hyper-realist “strongman” politics. d. An Asian (China) dominated world order as envisaged most prominently by pundits such as Kishore Mahbubani and Parag Khanna.8 While economic, political, and social trend data would suggest this is a most likely scenario, a question mark still hangs—and will continue to hang—over the wider attractiveness of the Chinese model for the future of that order. Resistance in Asia to Chinese political influence is much stronger than resistance to China’s growing economic position. e. New interest in civilisational dialogue suggests that a multicivilisational world order is not impossible.9 Not unlike the nationalist model (scenario c), this suggests an irreconcilable ideological standoff and polarisation amongst the major competing “civilisations” with the prospect of negotiated reform highly improbable. This paper revolves around an implicit, and at times explicit, backdrop of the arguments for and against these competing scenarios of world order. Part 1 provides an aperçu into how we (should) think about world order in the contemporary era. Part 2 takes a more detailed look at the US-China relationship and its implications for world order. Part 3, in keeping with the theme of this volume explicitly at Europe and elements of its relationship with Asia as a factor in the shaping of the post-liberal world order.

Part 1: Three Ways of Thinking About the Changing Nature of World Order Scholars and practitioners have traditionally used two sets of distinct lenses through which to analyse world order: the politico strategic and the economic. For too long, these lenses have been used separately. This separation is no longer appropriate. Moreover, we must now also use a third set of lenses, which can be called cultural and civilisational (for a full elaboration of this proposition, see my report, Civilisations, States and World order: Where are we? Where are we heading?).10 The increasing recourse to the language of the “civilisational state” by China, India, Russia and Turkey especially—but not exclusively—necessitates the

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importance of this third set of lenses. It recognises that the pursuit of three distinct and separate roads to analysis is no longer useful. Thus, what Albert Hirschman calls a necessary exercise in cross-disciplinary “trespassing” becomes crucial.11 This is, of course, messy, but it reflects the threefold complexity of the modern world order identified below: (i) The changing nature of the political world order: Put boldly, we have never had a liberal world order. Notwithstanding the use of that nomenclature for over 50 years, we have only ever had a geo-spatially partial and selectively liberal American World Order (AWO)12 underwritten by an occasionally “self-binding US hegemony.”13 This AWO is challenged now more than at any time since 1945. It is not an exaggeration to talk about the end of a US-led liberal order. Challenges to a US-led liberal order are multi-dimensional. In point form only, they are reflected in: • The emergence of a “populist-nationalist zeitgeist”14 ; • The emergence of the new “Great Game” in Asia and Eurasia; • The backlash against economic globalisation and international economic openness; • US assistance in the challenge to its own order over time through poor domestic and international policy choices. It is worth noting here that the internal US challenge to the liberal order did not begin with Donald Trump. While Trump was an accelerator, he was not the original instigator; he was a symptom, not a cause. A growing US froideur towards a genuine liberal openness had been emerging throughout the administrations of the previous four presidents (Bush Sr., Clinton, Bush Jr., Obama). (ii) The changing nature of international economic order: The international economic order is in as much trouble as the political order. The changing theoretical context casts massive policy shadows. There are, of course, genuine questions to be raised about the lasting relevance of comparative advantage as a theory of international trade in the contemporary era. To what degree do its principles remain relevant when trade in services (at 70% of world trade) exceeds trade in goods and where ideas and data flow freely, and most recently digital services are provided remotely? Its universal applicability in sectors built on digital

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platforms and reliant on cross-border networks for their success is now constrained.15 Comparative advantage as a state-based theory of trade has further suffered from the denationalisation of trade and the de-location (“offshoring”) of manufacturing from the G7 (from 2/3 to less than 50% of global total) to the fastest-developing countries (notably China) and the development of global value chains.16 Data also support the argument that de-globalisation, or certainly the slowing of globalisation, has picked up the pace; the global trade regime has exhibited gradual shrinkage and protectionism since the global financial crisis of 2008.17 In this context, four factors are important: • The political implications of this change in economic theory are politically profound. In an era when trade is principally conducted through complex supply chains, opposition (often rabid and hysterical) to an open, liberal trading regime has become the favourite weapon of populist politicians actively encouraging an era of “new mercantilism.”18 • US international economic policy has undergone a major change in both theory and practice. The theory, discourse and practice of multilateral trade diplomacy have given way to a discourse and practice of securitised, bilateral, transactionalist economic warfare.19 This has put major stress on the international economic system. The effects of changes in US policy are not restricted to the US-China relationship alone. Allies and third parties are equally affected. • The utility of international economic institutions as vehicles for collective action problem solving and dispute resolution, especially but not only the WTO, is increasingly challenged. • The international financial system is fragile, and the prospects of a currency war between the USA and China are growing. (iii) The changing nature of international cultural order: Contest at the international level has moved beyond geopolitics and geoeconomics and now also reflects a growing contest around issues of a cultural and civilisational nature. This is reflected in a number of factors, five of which should be mentioned here:

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• The growing resistance to the assumed universalism of “western values.” • The re-assertion of the historical traditions of the great civilisations, notably China and India but also Turkey and others. • Renewed talk of the prospects of a “clash of civilisations” of the kind initially envisaged by Samuel Huntington20 and increasingly underwritten by seemingly politically irreconcilable narratives emanating not only from the historical civilisation states such as India and China but even the USA. • The USA is not immune from this trend. Its position is captured in the words of Donald Trump: “The West will never be broken. Our values will prevail. Our people will thrive. And our civilisation will triumph”21 and Kiron Skinner, a former Assistant Secretary of State, who saw the Cold War with Russia as “a fight within the Western family” while China, by contrast, was the “first great power competitor that is not Caucasian.”22 • The rise of “quantum politics”23 in which digital communication, social media and atomised, individualist online activity (invariably aggressive and self-feeding) have revolutionised the nature of politics, both domestically and internationally.24 In sum, the ways of seeing international order are multiple; the major challenges to the future of the international order are equally multiple. The future is not certain. As Robert Kagan pointedly notes, “jungles can grow back.”25 Above all, it is the deteriorating relationship between the USA and East Asia in general and the USA and China in particular over the last several years that has provoked the most concern and which will be the major factor shaping the future.

Part 2: The USA, China and World Order It has become clear that the negative US trade imbalance in the US-China relationship is merely a second-order problem that has become the rationale for a much bigger contest for global ascendency. This is a contest to be the global leader in the development of advanced technology, artificial intelligence, cybersecurity and indeed ideas. We are witnessing not merely a rhetorical securitisation of US economic policy discourse but a more intense and direct economic and political response to economic globalism in general, and the ascendency of China as a rival global economic and

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political power in particular. Geopolitical rivalry now appears to be a more significant driver of international commerce than the principles of trade theory. Section two reflects on these challenges for world order reform. (i) From Trade War to Strategic Competition: Why was President Trump so convinced the USA could triumph in his contest with China? One answer came via Twitter: Trade wars are good, and easy to win. Example, when we are down US$100 billion with a certain country and they get cute, don’t trade anymore — we win big. It’s easy! 26

But Trump’s political economy is not good. The US trade deficit with China exists because China exports four times more to the USA than vice versa, while the US deficit on goods trade with China turns into a surplus when services (70% of US GDP) are taken into account.27 And, as economists have pointed out ad nauseam, the US deficit is homegrown mainly on the back of tax cuts, low savings and high spending.28 Yet it was always a brave assumption that China would converge on a Western model. As a consequence, US strategy has, and is, undergoing change leading us to ask to what extent is a US aggressive nationalist and transactionalist bilateral strategy in the economic domain securing Chinese adjustment as opposed to simply fuelling a growing ill-will and competitiveness between the two powers with all the attendant negative consequences for the wider geostrategic relationship? As John Mearsheimer in a classical realist argument has asserted (and it is an assertion, not scientific analysis), China will rise but is unlikely to rise peacefully, and US strategy is now one that goes further than trade.29 It is trying to disrupt China’s rise across the major policy domains of security, economy and technology rather than simply securing a deal that lowers the temperature in the trade domain. This strategy can now be documented in several official and semiofficial venues. In the broadest geostrategic context, the US National Defense Strategy released in January 2018 treats China as a “revisionist power” actively competing against the interests of the USA. The strategy sees an unambiguous “threat… to US security and prosperity… [with]… the potential for these threats to increase in the future.”30 The document, somewhat breathlessly, argues that the USA could lose a future war against Russia or China as it loses its competitive edge and its military advantage erodes, while rivals innovate and blend conventional, cyber

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and non-military capabilities in key strategic regions of the world. As one Brookings analyst’s reading of this document suggests: “US military superiority is no longer assured and the implications for American interests and American security are severe.”31 The USA argues that China has made its way to its position as a global superpower at the expense of, and on the back of, the USA. It has mocked US assumptions of the post-Cold War (or more precisely post-Nixon) era that China could and would smoothly integrate into the global economy as a cooperative, rather than competitive, rising power. In so doing, it has come to challenge US prosperity and longer-term security to which the USA must respond. Strategies of engagement pursued by previous administrations (both Bush and Obama) have not seen China become the open political economy that such strategies were expected to lead to after China had been welcomed into the WTO. Previous administrations, as Campbell and Ratner note, had always over-estimated a US ability to steer China in the direction it wanted.32 As it emerged over 2018, the real US targets were not trade imbalances but China’s unique model of capitalism (especially its approach to government support, intellectual property and technology transfer) and its extensive networks of global supply chains. The tariff war is turning out to be but the initial stage in a process in which the USA would like to see a wider decoupling of China from the global economic order. This attempt at decoupling represents a reversal of 40 years of US policy of trying to incorporate China into the global order as a good citizen. But it is a battle that will probably fail given the width, depth and level integration of the global supply chain economy and China’s centrality to it. China, because of its infrastructural and industrial base and the sheer size of its educated workforce, is central to most of the world’s major global manufacturing chains. No other country can match it. The specifics of the Chinese economic challenge to the USA are further revealed in other investigations. The USTR identifies the discriminatory elements of the practices central to China’s economic model, especially in technology and intellectual property.33 This investigation identifies the US intent to roll back China’s activities. Specifically, the USA argues, not without foundation, that China’s technology transfer regime exhibits inter alia (i) unfair foreign ownership restrictions; (ii) non-transparent and discriminatory licensing systems and review processes; (iii) restrictions on joint venture partners’ abilities to protect their intellectual property in contrast to the unfair structural support given to the Chinese partners to

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acquire the technology. In addition, as part of a strategy for technology transfer, China gives targeted government support for its outward investment regime in key “encouraged” strategic industries (especially IT and AI) and investment acquisitions (manufacturing capacity, power generation, high-speed rail). By contrast, investment by US companies in China, the report argues, is extremely difficult to reciprocate. Taken together, these activities are argued to have three adverse effects for the USA: (i) they threaten the competitiveness of US industries in strategic sectors; (ii) they undermine US abilities to lead and sustain innovation; and (iii) China also gains from cyber intrusions and theft. As the USTR report says “Chinese state-sponsored cyber operators continue to support Beijing’s strategic development goals, including its S&T advancement, military modernisation, and economic development.”34 China, of course, argues that US complaints about its technology transfer are exaggerated. It argues it complies with both the norms and practices of the WTO, especially with regard to intellectual property. With regard to technology transfer, it argues that this is a logical part of a development strategy with a strong historical pedigree in the history of the industrial policies of other now developed countries and simply reflects the strategic interests and relative bargaining power of the counterparties to any deal. The nurturing of new technologies and innovation are central to legitimate development. Further, the Chinese Government argues its intrusive industrial policy is diminishing over time as it becomes more market-focused (and importantly for our understanding of world order, it sets itself as a champion of multilateral agreements and lowering of trade barriers), and also moves to open up the Chinese economy to foreign investors. As Xi said at Davos: “As globalisation deepens, the practices of ‘law of the jungle’ and ‘winner-take-all’ are a narrowing road that leads to a dead-end… Inclusion and reciprocity, win-win and mutual benefits is the widening and correct path.”35 This Chinese rhetoric is not, of course, always matched by its deeds. It has, since the time of its membership, always played fast and loose with the principles of the WTO. But the game has changed in two fundamental ways in the last two years—(i) the contest has now become a full-blown economic and politico-strategic contest between the two powers and (ii) the Covid-19 pandemic has exacerbated this contest.

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Firstly, the USA now wants more than simply the balanced trade relationship that Trump was demanding at the beginning of his administration. The USA wants key elements of global supply chains reclaimed from China and back in the USA. The USA wants significant changes in Chinese domestic policy, notably a dramatic decline in, if not the end of, domestic subsidies and other protective activities such as patent and technology acquisition from foreign partners in return for contracts. In short, the USA wants an end to China’s Made in China 2025 strategy. The USA also wants to rein in Chinese cyber technology that advances Chinese technological industries at the expense of the USA. Indeed, according to the FBI, Chinese corporate espionage is now a critical national and security threat as Beijing exploits American technology to develop its own economy.36 An aggressive approach towards containing Chinese technological advance is one of the few policy areas that has secured a robust bipartisan consensus in the USA. Indeed, there is evidence that a wider consensus towards an increasingly adversarial approach towards China is gaining considerable support amongst the wider US population too.37 Even some of Trump’s most high profile and trenchant critics, such as George Soros, worry that he was not focused directly enough and behaving hard enough towards China.38 In a similar vein, the US Chamber of Commerce and the American Chamber of Commerce in China in their joint Priority Recommendations for US-China Trade Negotiations, see the major concern as not trade imbalances but the systematic violation of intellectual property rights, forced technology transfer and direct state intervention into the economy.39 The difference between the chambers and the administration is that the chambers, in contrast to the administration, are keen to multilateralise outcomes of the bilateral negotiations.40 Secondly, political differences between the two countries get progressively more fractious as the zero-sum nature of the relationship escalates as they both search for their Covid-19 scapegoat and the ideological high ground. Both the USA and China have suffered blows to their international standing and prestige arising from Covid-19—the USA for its incompetence in handling the virus and China for its widely understood duplicitous cover-up. They have both made and continue to make obvious mistakes. China has practised the sin of overreach and the USA the sin of abdication and under-commitment. The future battle between them

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in a post-Covid-19 containment era will be different from those of the pre-Covid-19 contests. Conflict will be less about traditional sources of conflict in the domains of security and deterrence (although traditional security contests do exist in the Indo-Pacific). Instead, the future contest will be about securing primacy in the principal global systems of exchange: to see who will control the networks, standards and platforms. It is a zero-sum competition in which both are battling to establish suzerainty over global digital, cyber and AI technology, but in which neither is likely to predominate. If the trend continues, and the USA continues to lose international ground, it will lead to a more China-centric world. But China’s path to global supremacy is not without obstacles. No agreement on the shape of a new world order is likely to come about between the USA and China given the contemporary mood in Washington. For many influential figures in the Trump administration, China is an existential threat to the USA, similar to how Japan was perceived in the 1980s. Combating long-term competition with China (and Russia) by all means short of war was identified as a strategic priority.41 It was captured in late 2018 in what the media called Vice President Mike Pence’s “Churchillian Iron Curtain speech” to reset the US relationship with China by halting its growing influence over both the international economic and geo-politico-security regimes.42 The USA might talk of transforming China but what it really means is halting its further rise with attendant implications for globalisation and the current structure of world order. This contest has been identified as at the heart of an emerging new “Cold War” as these powers battle for control of the new technologies, especially AI and robotisation. If the end of the first Cold War kickstarted a surge in global economic integration, the beginning of any new Cold War between the world’s two largest economies could have the reverse effect. It could produce division and fragmentation in, and disrupt the operation of, the global economy. Both the global trade and financial system could unravel. Any ensuing geopolitical tensions would also damage technological innovation as technology transfers and cooperation decline. Talk of a “new Cold War” might be overhyped and not the appropriate historical metaphor. Yet the clash between the world’s two major powers could be even more damaging than the original Cold War. Notwithstanding US-China antagonisms, the two countries are dramatically economically interwoven in a way that the USA and the Soviet

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Union never were. As Martin Wolf notes, the USA cannot damage China without damaging itself.43 The preceding discrete discussion of the current US-China standoff is appropriate given its salience as the principal actor in how we might, or might not, reform the world order. It allows us to identify the respective competing visions of world order of the two chief protagonists. The USA, under the presidency of Donald Trump, was an economically revisionist but politically status quo power. Its economic record on globalisation is mixed: while massive benefits have been secured for and by US cosmopolitan and corporate elites, other sections of the US community have suffered disastrously negative distributional consequences as inequality has grown. This is especially the case in those manufacturing communities that have undergone de-industrialisation. Politically, the USA has not coped well with its declining global status; notwithstanding that much of its difficulty is self-inflicted by bad policy choices and was rapidly exacerbated after the arrival of Donald Trump. Hence, the USA wants a revisionist bilateral, transactional and mercantilist economic world order which puts China back in its place through a process of decoupling. But in the political order, it wants a status quo, which sees it remain as the unchallenged global political leader. By contrast, China and indeed India are economically status quo powers and politically revisionist powers. Both great powers have benefitted massively from economic globalisation and are, not surprisingly, invested in the reform of globalisation, not its overthrow. They are more wedded to more comprehensive, dare one say multilateral, international economic reform than the USA. But they are keen on the revision of the international political order where they want a greater share in the global decision-making processes than they have had in the past. They want no repeat of past historical humiliations, be it the Opium Wars for China or the legacies of British imperialism in India. They also want recognition of their great historical and civilisational standing as well as their great power status. Any new world order must reflect their interests. Even if a trade deal with the USA is possible, some Chinese leaders are now asking, “why bother?” And they have grown more aggressive in the Covid-19 era. The depth, breadth and difficulty inherent in the growing US-China conflict do not lend themselves to the prospect of serious dialogue on how to fix the global order. Expectations of Cold War are rising. Some argue both sides are looking for a fight, and Covid19 has given them one. A significant problem is that policy on the US

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side is short-termist. Driven by the recognition that it can do China real economic damage in the short term (1–5 years), the USA under President Trump seemed less concerned with the longer-term implications. The Trump administration made it clear that it had embarked on a more adversarial position towards China. Perhaps it is better, in China’s view, to cut its losses now and get ready for the next Cold War. However, nationalism is not just a factor in Trump’s America. It is also a factor in Xi Jinping’s equation as well. Bolstered by a reading of Chinese history of the last 100 years, Xi is determined to shed any signs of weakness.

Part 3: Europe in the Reform of World Order and the US-China Relationship: A Role? Europe is something of an outlier in the current debate over world order when contrasted with the centrality of the USA, China and to a lesser extent Russia. This is a pity. The EU is an unambiguous supporter of an international order underwritten by liberal principles and multilateralism built upon the practices of collective action problem solving via international institutions. With its lingering love for an idealised multilateral order that never really was, the EU is what I would call a status quo yet reformist (rather than revisionist) power. Yet its effectiveness as a policy actor has been curtailed by its self-acknowledged “existential crisis”44 of the last five or so years. The five elements to the crisis— the Greek debt crisis; irregular arrivals of migrants and asylum seekers from wars in Afghanistan, Syria and Iraq; heightened terrorism in major European cities; Brexit; and the growth of populist-nationalist identitarian politics throughout large parts of Europe that have rocked the European project—are well understood in policy circles.45 What is less well understood and articulated is the adverse effect that this existential crisis has had on the EU’s ability to play a positive role in the reform and stabilisation of international order. While the EU should be a major player in any reform process, it currently engages in little more than what we might call the politics of “muddling through” in the face of US policy over which it has little or no impact. The best recent example of EU vulnerability to US pressure is the impotence shown in the face of Trump’s unilateral withdrawal from the Iran agreement and the pressure that the USA has put on the EU to conform to its sanctions policy. This has characterised not only the EU

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response to its own crises but also the worsening state of the international order over the last few years. But while this could be simply read as the first act of a play where the USA tries to force Europe to come into line with its policies towards China and Russia, this is not, in my judgement, likely. There is a sharp divergence of EU thinking with that of the USA on issues of global order and especially relationships with China and Russia. The EU, while cognisant of the downsides of Chinese international policy—especially its penchant for intellectual property theft46 —is more pragmatic than the USA and strives hard for a strong relationship with East Asia and an accommodation with China as the trans-Atlantic relationship deteriorates. The more Donald Trump saves some of his choicest critiques of trade policy for European allies—even to the extent of describing Europe as “almost as bad as China”47 —the more nervous the EU becomes. Classic here has been the Trumpian absurdity that European (read German) auto imports represent a threat to American national security, thus offering the opportunity for the USA to respond with tariffs. Increased tariffs in the wake of the adverse October 2019 WTO finding on excessive EU Airbus subsidies can be expected to further exacerbate tensions in the relationship. Notwithstanding the size and depth of the economic and politicosecurity partnership and people-to-people links between the USA and Europe, the negative impact of Trump’s rhetoric and practice on US-EU relations, on both sides of the Atlantic, may not abate quickly even after he leaves office.48 While his anti-China campaign generated a growing bipartisanship on China competition in the USA, his anti-European rhetoric has, conversely, undermined traditional US bipartisanship on Europe. As of late 2018, only 47% of Republicans, as opposed to 78% of Democrats, still favoured the NATO alliance.49 Similarly, positive European views of the USA are dipping dramatically as the EU finds itself—keeping in mind that Europe does e400 billion trade with China a year—caught in the middle of the US-China standoff. To be precise, the EU explicitly rejects a Trumpian view of world order, especially his bilateral-cum-transactional hostility to multilateralism. So, the question for this chapter is to ask what role the EU might play in helping reform the international institutional order, and especially help mitigate the standoff between the USA and China? Any answer will be as variegated as multilateralism itself is variegated according to issue area. Multilateral activities in the domains of climate change and sustainable

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development—evinced by Paris and the Conference of Parties (COP)— operate differently from in the domains of trade, like the WTO. The EU knows what it does not like about the current international order, but it lacks a coherent current strategy to secure what it does like. It risks becoming a pawn rather than a player in the new “Great Game,” or as the European Council on Foreign Relations calls it, the “chessboard on which great powers compete.”50 The EU does not think like the other geopolitical powers and currently has an underdeveloped voice in the debate over world order. Some analysts have argued that the EU should strive for geopolitical equidistance between the USA and China, a situation in which it develops a strategic autonomy and attempts to reform and secure an international order absent the participation of the two major protagonists.51 Indeed, France and Germany, sans consultation with its trans-Atlantic ally, have recently launched The Alliance to Support Multilateralism.52 Others argue that equidistance is not an option.53 Notwithstanding its economic strength, the EU lacks the joined-up clout to contest US, Chinese and even Russian political-strategic power. As normatively persuasive as the EU might be—or thinks it might be, noting that it sets considerable store by its normative power54 —this on its own would be insufficient to attract adherence to its way of thinking from other states in the system when pitched against US and Chinese political-strategic influence. Moreover, the paucity of the current trans-Atlantic relationship notwithstanding, the ties across that ocean, both political and economic, are still determinant factors in European political security thinking and practice (especially in the absence of a European deterrent force) and European economic well-being absent its own champions in the domains of technology and AI comparable to those of either the USA and China.55 The difficulties of securing joined-up cooperation with the USA in key policy areas should not be under-estimated. The problems stem not from the unwillingness of its allies to cooperate with the USA but from the US insistence on pursuing its own approach and expecting partners simply to fall into line. It is not just on Iran that the USA under Trump warned the EU to bring its policies into line with those of the USA. Trump’s Secretary of State Mike Pompeo warned the EU that failure to freeze out Huawei from next stage (5G) telecommunications in Europe would have a negative effect on the trans-Atlantic relationship. The EU and the other major actor Japan have effectively been given a “take it or leave it” proposition to cooperation by the USA vis a vis China

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rather than the opportunity to develop a collective strategy. For example, the putative EU-Japan-US initiative developed by Japan in 2017 to coordinate legal action against China at the WTO on technology transfer was dismissively relegated to second place behind US direct unilateral action against China. While Europe and Japan had worked hard to coordinate their trade strategy, both were concerned not to get caught in the crossfire of an exacerbating, long, wide and deep US-China conflict which has now become about more than just trade imbalances. But in what amounts to a sign of the times, both appear equally as concerned not to alienate China as the USA. A strategy to avoid choosing sides in the face of the US-China conflict should logically see a Europe-wider East Asia partnership—especially with Japan, South Korea and Southeast Asia—continue to grow. And, on close inspection, the foundations for a common approach by Europe and Asia in support of a sound, rules-based multilateral trade regime exist. It can be found in the surprisingly strong similarities of philosophy and practical policy approaches towards trade regulation found in the Comprehensive and Progressive Agreement for the TransPacific Partnership (CPTPP) on the one hand and Europe’s recent agreement with Canada (CETA) on the other.56 Rather than being passive recipients of US bullying, the two regions of the world that represent 31% of global GDP and 40% of global trade could, as Zaki Laidi et al. note, send out an important message in support of multilateral principles.57 Perhaps the final factor in an understanding of EU policy towards a wider global cooperative endeavour is its relationship with Russia, along with the degree to which the development of a Eurasian geopolitical sphere will affect its relationship with East Asia in future—whether it is post-Brexit or not is irrelevant. The key issue is whether Russia will act as a buffer or a conduit between Europe and Asia. While it is easy to suggest that the infrastructural development of the BRI across central Asia is clearly facilitative, the politics of the process may be less so. Russia is not an easy issue for Europe. It has been less a beneficiary of economic globalisation and, as a consequence, is less economically and politically invested in international economic and political reform in the way that the EU is. While clearly a revisionist power in its attitude to the current world order, Russia’s aims are more limited but no less strongly held. Politically, it wants a restoration of prestige lost in the collapse of the Soviet

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Union and the expansion of NATO into what it considers its legitimate orbit after the end of the Cold War. It wants to reassert its own sphere of influence. But its internal problems are as great, if not greater than those of Europe. The issue for the future is the degree to which its governing economic and political elite, deeply concerned with system maintenance, are, in the words of Anders Aslund, capable of ensuring the survival of the Russian “kleptocratic state.”58 Can, in this context, Russia move from being the “spoiler” that invaded Ukraine and annexed Crimea to a positive contributor to world order reform? It is powerful enough to cause trouble. But does it (read Putin) have the ability and strategic vision to contribute to world order reform? The answer will turn on (i) how its rapprochement with China proceeds in the geoeconomic and geopolitical space that we now think of as Eurasia, and (ii) how the relationship with the USA develops post-Donald Trump.59 Clearly, Russia is becoming more strategic in this space than when it looks westwards and across the Atlantic. The USA by default (or Trumpian design) is making it easier for Russia to play a greater international role and greater China-Russia closeness is clearly developing on the basis of strategic pragmatism, not, as in the past, ideology. The level of economic integration is not, to date, great. But US pressure is proving an important external catalyst for closer economic cooperation between Russia and China. Practically, this cooperation could take place through enhanced cooperation between the Chinese BRI and Russia’s Greater Eurasian Partnership. It is, for example, not impossible that in the longer term, the two powers will move away from the use of the US dollar for their trade transactions. Indeed, initial steps to bypass the US dollar in their trade relationships have been taken with the introduction of a mechanism for mutual settlements envisaged by 2020.60

Conclusion This chapter has tried to assess the attitudes and roles of the major players towards the reform of world order. It is not an optimistic paper. What was once known as the global rules-based order might now be better called a “Fight Club.”61 This reflects a great power rivalry not dissimilar to that of the nineteenth century with all the potential to create a bifurcated global order built on the equally long-standing concept of spheres of influence.62 But this growing antagonism between the USA and China could offer space for China to lead in the area of international reform. Given that the

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USA is increasingly reluctant to invest in the infrastructure of a multilateral world order, and to the extent that China is prepared to make positive and serious gestures—as opposed to its Covid-19 “mask diplomacy”—in the direction of a multilateral order, then there is the opportunity for easy diplomatic wins for it. The USA cannot berate China for playing fast and loose with the rules and norms of the international system at the same time that it is disinvesting from it, especially given the role of the USA in developing and shaping these norms and rules in the first instance. As former Australian PM Kevin Rudd pointed out, Trump’s tough trade rhetoric bolstered Xi Jinping’s hand at a time of difficulty for the Chinese economy. Moreover, it allowed Xi to make patriotic, nationalist appeals to resist US pressure with the attendant effect of hardening negotiating positions rather than encouraging dialogue.63 China is increasingly playing to its strengths not only as a super-sized global economic power of 1.4 billion people but also as a civilisational state with an unbroken history and culture of many components, but one dominant (Han) culture. Moreover, China’s current domestic troubles notwithstanding China will, later if not sooner, replace the markets and suppliers that have been lost in the USA. And it has to do nothing but sit back and watch global trust in the USA among both its economic and political partner, including long-term allies, continue to decline. To the extent that China is seen to stand up to US “bullying,” this enhances its global image.64 In this context, international relations can go in one of the two directions. But for China to lead, it needs more than just economic success. It must also continue to provide a “story of attraction.” China, says Professor Danny Quah, Dean of the Lee Kuan Yew School of Public Policy, needs a better “soft-power story.” This relates especially to the battle of ideas vis a vis the USA if it is to have a major influence on the reform of the international order.65 A positive Chinese input into the constructive reform of the liberal order would enhance its soft power. It is not even beyond imagination to see China support the expansion of some of the liberal elements of the international economic order in the face of US opposition, especially in the trade and investment regimes. On balance, further integration into an expanded and reformed liberal order seems to be China’s currently preferred strategy to that of creating a parallel order with the primary objective of confronting liberal norms with all the aggravation that entails. But the implications of the rise of the civilisational powers for traditional Western liberalism are not trivial. Competition among great powers has

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returned. Great power rivalries are unlikely to ameliorate until a new order that reflects all interests emerges. For the mitigation of great power rivalry to happen, it may well mean liberals need to prioritise lower-order goals such as the preservation of international openness rather than the continued propagation of universal values.66 The crusade for liberal universalism is seriously curtailed. From a Western perspective (on both sides of the Atlantic), the maintenance of global openness might be a best-case strategy. But the achievement of openness is no simple matter for the USA alone. Fortunately, China has an interest in openness, especially international economic openness. China, along with Russia and India, is also intent on securing a more equal political order.67 Indeed, the rapprochement between China and Russia is, in part, explained by “the inability to construct an inclusive world order that accommodates all major players after the Cold War.”68 If this reading is correct, then to directly address the theme of this volume directly—“Europe and East Asia: new opportunities or more of the same after Brexit”—then prospects for closer cooperation in this reform process between China (and East Asia generally) and Europe should not only be possible; they are also desirable. The determining factor from the European end is not the departure of the Brits. That has been factored into EU foreign policy thinking. The EU has, for the last two years or more, been thinking “beyond Brexit.” For sure, in terms of impact on economic size and military capability, the UK departure will be a considerable loss to the EU. But in terms of solidarity and cohesion among the remaining 27 members and the ability to pursue a joined-up foreign policy, it could prove to be a boon. There will be outliers within the 27, with the prime examples being Hungary and Poland. But they will be easier to manage without the UK’s presence, and the EU is showing a higher resilience than many of its detractors appreciate. The factor that will cast the major shadow over policy is the ability of the Commission to reset the course of European foreign policy. The EU should be at the centre of a debate over the reform of world order. It should—to the extent that it can do so without being drawn excessively into China’s political orbit—be able to cooperate with it. But should does not always translate into will. Although the High Representative for European Union Affairs, Josep Borrell, is committed to engagement and cooperation towards China, the travel of policy will be determined in Paris and Berlin as much as Brussels.69

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It is fair to say that the timing overall has not been, and is not, Europe’s best friend. Its new Strategic Vision Statement , rolled out in 2016, could not have come at a less propitious time—at the height of populist fervour, the time of the Brexit referendum and on the dawn of Donald Trump’s presidential electoral success. This was unfortunate, to say the least. But the EU cannot now simply jettison the strategy and start again. And nor should it. There is much in the strategy that is sensible and worthy. But Commission President Ursula Von der Leyen and Borrell are trying to have it both ways by pursuing a contradictory set of actions: voicing a more forward-leaning strategy for a “Geopolitical Commission” in keeping with fundamental geopolitical trends in international relations, while at the same time continuing to espouse its multilateral discourse.70 In the context of these new dynamics, propelled by the vagaries of Trumpian logic (sic) the EU-East Asia relationship cannot be separated from the trans-Atlantic relationship. Assuming residual vestiges of transAtlantic mutual regard remain, the EU must use its good offices to work with the incoming administration of President Biden to mitigate the changes in US thinking and practice towards East Asia under President Trump. To be precise, the state of the trans-Atlantic relationship has a direct bearing on European relationships with East Asia. The imperatives for enhanced EU cooperation with East Asia, if any are needed, grow as those across the trans-Atlantic deteriorate. But the EU-East Asia relationships are impacted by the poor state of affairs in the relationship between the USA and East Asia. This was especially the case when the USA had a president so easy to take offence at the behaviour of allies if he felt that their policy ran counter to his own, invariably quixotic, approach. Nowhere was this more so the case, with the exception of Iran, than with China where allies such as Japan, South Korea and the EU were not expected to contribute to collective policymaking but to simply “fall in line” with the US approach to policy. Preserving, let alone enhancing, the EU relationship with East Asia in the era of Donald Trump required deft, indeed at times impossible, diplomacy. How the High Representative and indeed the Commission in general (especially Trade and Competition Policy) will fare in this task with the Biden administration is yet to be determined. More important still is how the EU generally deals with the wider structural changes besetting the reform of world order at the end of the second decade of the twenty-first century. Great Britain, in or out of the EU, has no bearing

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on the six major obstacles to world order reform discussed in the paper and captured in point form below: • The negative impact of the rise of “quantum politics” and the changing nature of political dialogue the world over. • The rise of the civilisational state and the negative impact of enhanced civilisational and cultural difference that is enhancing conflict and coercion at the expense of consensus and cooperation. • The weakening and growing strain on the venues and agents of dialogue. Specifically, we are seeing a decline in diplomacy in its traditional role as both an institution and a set of practices and a decline in multilateral institutions as venues for diplomacy and collective decision making.71 • Growing disillusionment with (liberal) democracy as an instrument of “voice.” • The role in international politics of “strong man leaders” of major powers, practising a leadership characterised by narcissistic and authoritarian personality traits. • The under-representation of women in leadership roles. A dialogue excluding more than 50% of the world’s population is inevitably destined to be limited and lacking legitimacy. And here the European Union is something of a beacon light in otherwise bleak terrain. Creating a meta-narrative of culture and civilisation required for world order reform, despite being several millennia in the making, has not and will not come about overnight. As one observer has noted, Moral narratives have enabled humanity to extend their cooperative units from the family to the tribe to the village to the city-state and from there to empires and nations. We now require narratives that enable us to extend our social and political boundaries to address the global problems arising from our global economy.72

Our genetic and cultural evolution has not yet extended to cooperation to reform global order. It has to be the next step. But the paradox of organisation and atomisation fuelled by “quantum politics” and social media far outweighs humanity’s capacity for cooperation, let alone its ability to build a global civilisational dialogue. The possible rise of Huntingtonian “clashism”73 and irreconcilable civilisational narratives—the

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third way of looking at global order identified in this paper—perhaps as much if not more so, than geopolitical and geoeconomic conflict, is emerging as the major problem facing global order. We need an as yet unsecured system of cross-cultural discursive and negotiating practices that operate across multiple levels if we are to progress the debate over the reform of world order.

Notes 1. While the paper uses ‘EU’ and ‘Europe’ interchangeably, it specifically means the 27 members of the EU. 2. ‘From Shared Vision to Common Action: The EU’s Global Strategic Vision,’ EU Policy Doctrine (European Union, 2016), https://eur opa.eu/globalstrategy/en/global-strategy-foreign-and-security-policy-eur opean-union. 3. Philip Stephens, ‘British Exceptionalism Has Reached the End of the Road,’ The Financial Times, 13 May 2020, https://www.ft.com/con tent/32b7fc68-952f-11ea-abcd-371e24b679ed?emailId=5ebcee73c2d6 940004a7af36&segmentId=2f40f9e8-c8d5-af4c-ecdd-78ad0b93926b. 4. Marc Roche, Le Brexit Va Réussir (Paris: Albin Michel, 2019). 5. Daniel Deudney and John Ikenberry, ‘Liberal World: The Resilient Order,’ Foreign Affairs 97, no. 4 (2018), https://www.foreignaf fairs.com/articles/world/2018-06-14/liberal-world; Edward Luce, The Retreat of Western Liberalism (Boston: Little Brown, 2017); J. Ikenberry, ‘The End of Liberal International Order?,’ International Affairs 94, no. 1 (2018): 7–23. 6. Amitav Acharya, The End of American World Order (Cambridge: Polity, 2017). 7. Graham Allison, Destined for War: Can America and China Escape the Thucydides Trap? (New York: Houghton Mifflin, 2017); John Mearsheimer, The Great Delusion: Liberal Dreams and International Realities (New Haven: Yale University Press, 2018); Robert Kagan, The Jungle Grows Back (New York: Pisces Books, 2018). 8. Kishore Mahbubani, Has the West Lost It? (London: Penguin, 2018); Parag Khanna, The Future Is Asian: Global Order in the 21st Century (London: Weidenfield and Nicholson, 2019). 9. Christopher Coker, The Rise of the Civilisational State (Cambridge: Polity Press, 2019); Gideon Rachman, ‘China, India and the “Civilisation State,”’ The Financial Times, 4 March 2019, https://www.ft.com/ content/b6bc9ac2-3e5b-11e9-9bee-efab61506f44.

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10. ‘Civilisations, States and World Order: Where Are We? Where Are We Heading?,’ DOC Research Institute, 2019, https://doc-research.org/ 2019/09/civilisations-states-and-world-order/. 11. Albert O. Hirschman, Essays in Trespassing: Economics to Politics and Beyond, Cambridge (Cambridge University Press, 1981). 12. Acharya, The End of American World Order. 13. Lisa Martin, ‘Self-Binding: How America Benefitted from Multilateralism,’ Harvard Magazine, 2004, https://harvardmagazine.com/2004/ 09/self-binding.html. 14. Richard Higgott and Virginia Proud, Populist Nationalism and Foreign Policy (Stuttgart: Institute Fur Auslandsbeziehungen, 2017), https:// www.ifa.de/wp-content/uploads/2019/05/ifa_study_Higgott_Proud_P opulist-Nationalism.pdf. 15. Alan Deardoff, ‘Comparative Advantage in Digital Trade,’ in Brazen Unilateralism: The US-China Tariff War in Perspective, ed. Simon Evenett and Johannes Fritz (London: CEPR Press, 2017). 16. Richard Baldwin, The Great Convergence: Information Technology and the New Globalisation (Cambridge, MA: Harvard University Press, 2016). 17. ‘Civilisations, States and World Order: Where Are We? Where Are We Heading?’ 18. ‘Civilisations, States and World Order: Where Are We? Where Are We Heading?,’ 32–36. 19. Richard Higgott, ‘From Economic Diplomacy to Economic Warfare: The International Economic Diplomacy of the United States Under President Donald Trump,’ Real Instituto Elcano Royal Institute, 2019, http:// www.realinstitutoelcano.org/wps/portal/rielcano_en/contenido?WCM_ GLOBAL_CONTEXT=/elcano/elcano_in/zonas_in/wp10-2019-hig gott-from-trade-diplomacy-to-economic-warfare-international-economicpolicy-trump-administration. 20. Samuel P. Huntington, ‘The Clash of Civilisations,’ Foreign Affairs 72, no. 3 (1993), http://www.foreignaffairs.com/articles/united-states/ 1993-06-01/clash-civilizations. 21. Trump Donald, ‘Twitter Post,’ Twitter, 6 July 2017, https://twitter. com/realdonaldtrump/status/883012994145280000?lang=en. 22. Steven Ward, ‘Because China Isn’t “Caucasian,” the U.S. Is Planning for a “Clash of Civilizations.” That Could Be Dangerous,’ Washington Post, 4 May 2019, https://www.washingtonpost.com/politics/2019/05/04/ because-china-isnt-caucasian-us-is-planning-clash-civilizations-that-couldbe-dangerous/. 23. John Thornhill, ‘The Moment You Stop Learning, You Die—An Interview with Armen Sarkissian,’ Financial Times, 14 June 2019, https:// www.ft.com/content/d110fbba-8b69-11e9-a1c1-51bf8f989972.

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24. Cass R. Sunstein, #Republic: Divided Democracy in the Age of Social Media (Princeton: Princeton University Press, 2017). 25. Kagan, The Jungle Grows Back. 26. Trump Donald, ‘Twitter Post,’ Twitter, 2 March 2018, https://twitter. com/realDonaldTrump/status/969525362580484098. 27. Laura Tyson and Susan Lund, ‘The Blind Spot in the Trade Debate,’ Project Syndicate, 2019, https://www.project-syndicate.org/commen tary/advanced-economies-services-trade-surpluses-by-laura-tyson-andsusan-lund-2019-03?utm_campaign=coschedule&utm_source=twitter& utm_medium=TheIHS. 28. Douglas Irwin, ‘Understanding Trump’s Trade War,’ Foreign Policy, 2019, https://foreignpolicy.com/gt-essay/understanding-trumps-tradewar-china-trans-pacific-nato/. 29. John Mearsheimer, ‘China’s Unpeaceful Rise,’ Current History 105, no. 690 (2006), https://mearsheimer.uchicago.edu/pdfs/A0051.pdf. 30. Jim Mattis, ‘Summary of the 2018 National Defense Strategy’ (Washington: Department of Defense, 2018), https://dod.defense.gov/Por tals/1/Documents/pubs/2018-National-Defense-Strategy-Summary.pdf. 31. Mara Karlin, ‘How to Read the 2018 National Defense Strategy,’ Brookings, 21 January 2018, https://www.brookings.edu/blog/order-fromchaos/2018/01/21/how-to-read-the-2018-national-defense-strategy/. 32. Kurt M. Campbell and Ely Ratner, ‘The China Reckoning,’ 16 April 2020, https://www.foreignaffairs.com/articles/china/2018-0213/china-reckoning. 33. ‘Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974,’ USTR Executive Summary (Washington: The White House, 22 March 2018), https://ustr.gov/sites/default/files/enforcement/301Inv estigations/301%20Draft%20Exec%20Summary%203.22.ustrfinal.pdf. 34. ‘Findings of the Investigation into China’s Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation Under Section 301 of the Trade Act of 1974,’ xi. 35. ‘China’s Xi Jinping Hits out at “Law of the Jungle” Trade Policies,’ The Financial Times, 5 November 2018, https://www.ft.com/content/34e 388ee-e0af-11e8-a6e5-792428919cee?segmentId=080b04f5-af92-ae6f0513-095d44fb3577. 36. Dustin Volz and Aruna Viswanatha, ‘FBI Says Chinese Espionage Poses “Most Severe” Threat to American Security,’ Wall Street Journal, 12 December 2018, sec. US, https://www.wsj.com/articles/senate-sifts-evi dence-of-chinese-cyberespionage-11544635251. 37. Richard Wike and Kat Devlin, ‘As Trade Tensions Rise in 2018, Fewer Americans See China Favorably,’ Pew Research Center’s Global Attitudes

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CHAPTER 3

The European Union and North-East Asia: Recent Historical Context Rod Wye

Introduction This chapter is intended to outline the historical context for the European Union’s (EU) current relationship with North-East Asia. It is not so much a blow-by-blow account of how the EU’s bilateral relations with the countries of the region have developed, but rather an examination and highlighting of some of the events and trends that have helped shape the ways in which Europe views and reacts to North-East Asia and vice versa, and which continue to be of significance in the development of these relationships. The starting point is the Global Financial Crisis of just over ten years ago, which was a shattering blow to the self-esteem of the Western capitalist world and of the EU. It fundamentally changed how Europe interacted with East Asia, particularly China. It also marked the emergence of China as a major power in East Asia, and, increasingly, beyond. At the same time, the EU has responded by seeking a more structured and multifaceted approach to its relations with North-East Asia and with China in particular.

R. Wye (B) Chatham House, London, UK © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_3

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There have been longer-term trends in operation, most notably the increasing globalisation of the world economy and latterly the questioning of the value of that globalisation and a rise in populism and nationalism affecting countries in both Europe and North-East Asia. The increasing competition between the United States and China has come to dominate the strategic economic and political scene, and looks like it is becoming a permanent element in the politics and economics of the region, presaging long-term changes in regional dynamics. The aftereffects of the coronavirus epidemic will contribute to further significant strategic and economic realignments. Similar historical trends have affected Europe, but the experience and perceptions of at least some of these significant issues have been very different in Europe and North-East Asia. In its strategic outlook, Europe still looks much more to Russia as its primary strategic/security challenge and has been slow—at least from the perspective of the US and Japan and Korea—to recognise the extent of the challenge that China poses. While the financial crisis and its aftermath, together with other trends such as the rise of populism and nationalism, have done much to undermine Europe’s traditional links with the United States, it still tends to see North-East Asia as a second-order challenge, in contrast to the United States which clearly puts China in first place. Secondly, since the financial crisis, the EU has been heavily preoccupied with internal matters concerning the future of the EU. The EU like, but much slower than, the United States, has begun to shed its optimistic hopes that engagement with China would gradually lure China into acceptance of, and committed participation in, the existing international liberal system, and maybe even evolve towards a more democratic system domestically. The concept of encouraging China to become a “responsible stakeholder” in the international system, initially articulated by Robert Zoellick the US Deputy Secretary of State in 2005, gained significant traction in both the US and Europe. However, as time went by, the US felt increasingly irritated by China’s slow take-up of its presumed wider global responsibilities.1 The EU has always remained firmly committed to the international rules-based order but is becoming a bit of an outlier in this respect as the world’s two biggest economies, the US and China, seem ever more set on variously undermining, withdrawing from or reshaping that order.

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Free Trade Agreements One of the priorities of European diplomacy has been to establish a network of Free Trade Agreements (FTA), especially given the size and importance of the economies in the region and the commercial focus that the EU had always maintained in its relations there. Even so, this process is relatively recent and has moved comparatively slowly as genuine political constraints are operating in the region. This issue is also addressed by Michael Reilly in Chapter 10. It was, however, given a new boost in 2015 with the publication of the EU’s Trade for All policy. The introduction set the boosting of trade explicitly in the context of helping the EU emerge from the recession of the Global Financial Crisis: “Following a drawn-out and painful recession, the challenge for the EU is now to boost jobs, growth and investment. The Commission has placed this at the top of its political priorities. Trade is one of the few instruments available for boosting the economy without burdening state budgets.”2 In NorthEast Asia, FTAs have been signed with the Republic of Korea and with Japan. The Korean FTA3 was signed in 2009 and was formally ratified in December 2015, after being provisionally applied from 2011. It was the first FTA signed with an Asian country and was seen at the time as going much further in lifting trade barriers than the EU had gone before. Its comprehensive nature was a powerful spur to Japan to negotiate an FTA of its own with the EU. Negotiations began in 2013, and the agreement, which had been upgraded to an Economic Partnership Agreement and thus something more than a simple FTA, was signed in 2018 and entered into force in February 2019. At the time, it was the most significant FTA in terms of combined GDP and was promoted as a powerful defence of multilateralism and the international rules-based trading order.4 It was in part also a response to the US withdrawal from the Trans-Pacific Pact and the administration’s much wider suspicion of the international trading order. An FTA with China would be a very different proposition and is beset with political problems, most obviously the problem with Market Economy Status (discussed below). Even the lesser object of a Bilateral Investment Treaty has proved intensely problematic, despite repeated affirmations in principle of its importance. Negotiations began in 2013 but it was only as this book went to press that an agreement appeared to have been reached. Any thought of a wider FTA remains highly aspirational and would need a major change of political will on both sides. This is unlikely to be forthcoming. The other major economy in the

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region is Taiwan, again, for political reasons relating to China’s antagonism to Taiwan’s conclusion of international agreements, any substantial movement towards a formal FTA is unlikely.

A Strategic View of North-East Asia The EU has traditionally concentrated far more strongly on its commercial relationship with North-East Asia and with China in particular. Latterly, as the geopolitical map has changed, particularly through China’s rise, the EU has nourished ambitions to play a greater diplomatic and political role in North-East Asia and the region more generally. In 2016, the EU produced its first strategy paper on China in which it outlined the need for: “its own strategy, one which puts its own interests at the forefront in the new relationship; which promotes universal values; which recognises the need for and helps to define an increased role for China in the international system; and is based on a positive agenda of partnership coupled with the constructive management of differences.”5 Nevertheless, it was in the business of developing what it saw as strategic relationships with North-East Asian countries before that, and the idea of strategic partnerships, though only hazily defined, became one of the key elements of European diplomacy not only with Asia but more widely.6 In North-East Asia, a strategic partnership had been initiated with China as early as 2003, when the two sides agreed on a description of the relationship as a comprehensive strategic partnership. There was clearly a congruence of language as China had been engaged on a busy programme of setting up a variety of strategic partnerships with a wide range of partners (and would continue to do so7 ), and the idea of a strategic partnership suited the EU at the time. However, the concrete results have been relatively limited in any normal sense of the word strategic.8 There were clearly limits to a partnership where, despite some commonalities, there was a fundamental difference in world view. With more like-minded partners, there has been more success. The first of a series of political/strategic documents was signed with the Republic of Korea in 2010 and came into force in 2014.9 This was a wide-ranging attempt to move away from a purely commercial relationship—the preamble noted “the accelerated process whereby the European Union is acquiring its own identity in foreign policy and in the field of security and justice” indicating the direction the EU saw itself moving. The word strategic was not explicitly mentioned in the text. However, there was much emphasis

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on the shared values between Korea and the EU, and it contained a provision for an ongoing political dialogue covering a multitude of issues, both bilateral and multilateral. The strategic relationship with Japan was slower to develop but has probably become more comprehensive and inclusive than any other. It is presented very much in terms of shared values. An EU parliamentary briefing paper on the Strategic Partnership Agreement, then still under negotiation, summed up the commonalities: “The EU and Japan share the same basic values, including on democracy, market economy, human rights, human dignity, freedom, equality, and the rule of law. They are both civilian powers that refrain from the use of military power as a means of achieving their goals. They share an interest in setting high standards in trade and labour rights. They are both in favour of nuclear disarmament.”10 The Strategic Partnership Agreement entered partly into force on 1 February 2019, the same day as the Economic Partnership Agreement. For obvious reasons inherent in the difficulty of establishing any form of political relationship with Taiwan, especially one enshrined in a formal document, there has been no similar attempt to engage in a formal strategic relationship with Taiwan. The EU has seldom been able to deliver to the level of its own expectations and rhetoric. In reality, strategic relationships within East Asia, especially those with any serious security content, tend to revolve around China and the United States, and there is little room for a distinctive European approach. Nevertheless, it is essential to note that ambitions remain. The then President-elect of the Commission, Ursula von der Leyen, told the European Parliament on 27 November 2019 that: “Countries from East to West, from South to North, need Europe to be a true partner. We can be the shapers of a better global order…This is the geopolitical Commission that I have in mind, and that Europe urgently needs.”11 How this will square with China’s ambitions to shape a new global order remains to be seen.12 The Chinese have become increasingly dissatisfied with the existing international order and, in particular, have objections to the Western values on which they feel it is based. This can be seen most clearly in their efforts to undermine and redefine concepts of human rights. Much of this is antipathetic to the values espoused by the European Union. And herein lies much of the difficulty in establishing a meaningful strategic relationship with China, in contrast to the shared values forming some of the building blocks of the strategic relationship with Japan and, to a lesser extent, Korea.

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Global Governance Issues The post-Second World War settlement and the institutions established have been coming under increasing pressure as they fail to cope adequately with the new challenges faced by the world. The rulesbased international order—so beloved of Europeans—does not have the attraction it once did, and international bodies and organisations are increasingly being side-lined in an era where great power politics and interests seem to be taking the fore. In particular, the decline of the liberal rules-based international order and of liberal values more widely is regularly commented upon, together with a rise in populism and nationalism in many states, leading to a feeling that the Western-inspired international order is under threat. The new concept of “Westlessness”13 embodies this with great clarity, lumping together all that is seen as wrong with the failures of the liberal international order and globalisation. There is a general feeling of malaise affecting the West following the challenges to and dissatisfaction with globalisation. This has opened up opportunities for China to put itself forward. In the light of President Trump’s “America first” policies and its withdrawal from or side-lining of international institutions, China early on seized the opportunity to present itself as a new champion of globalisation14 in contrast to the increasing isolationism of the United States. This issue is also discussed by Robert Wang in Chapter 4. Indeed, on both globalisation and on climate change— where China was once seen as the villain of the piece, following the collapse of the negotiations at Copenhagen—China was able to seize the moral high ground and becomes the perceived defender and promoter of sensible, beneficial policies as opposed to the increasingly anarchic and autarkic behaviour of the United States under the Trump administration. This new confidence about China’s position derived in part from the fallout from the Asian Financial Crisis of 1997 and particularly from its role in the global financial crisis. In both cases, China managed to be seen as a centre of stability and reliability when things were crashing down around it. China, unlike some of its neighbours such as South Korea, emerged relatively unscathed from the Asian Financial Crisis. Moreover, its interventions on behalf of the Hong Kong dollar were seen as stabilising and beneficial at the time. This was well before China had become such an important player in the world economy as it is now, but even then, it did stand apart from the international financial institutions in the generally positive and supportive way in which it reacted. Nevertheless, it

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was the global financial crisis of 2007/2008 that really changed things for China. While Western institutions struggled to be effective in the light of the crisis, much international agenda-setting seemed to shift away from groupings such as the G7 industrialised nations to the G20 where China was playing a central role. China’s substantial domestic investment programme and the stimulus it gave to China’s economy were widely seen as one of the key factors in keeping global GDP positive and avoiding world recession. In response to these new circumstances, some commentators in the United States began to float the idea of a G2 whereby China and the United States, which were by then the two largest economies in the world, could somehow work together to provide leadership in dealing with the manifest problems affecting the world in the aftermath of the financial crisis. The suggestion made some sort of superficial sense in that China as the rising power had been seen to provide much-needed reassurance to the global system. Moreover, if those economies worked together, the force of their example would be an immensely powerful one. The idea did not appeal in either Washington or Beijing, but the underlying idea of the overwhelming joint influence of the United States and China has stuck and resurfaced both in its original form from time to time. It has also been adapted to suggest that China and the EU might make a more beneficial G2 given the apparent withdrawal of the US into a more isolationist stance. In its anti-matter state, that of consistent rivalry between China and the US, it is now seen as one of the fundamental elements affecting the current international situation. At the same time as China was being lauded for its contributions to stability, the effect of the twin crises and especially the aftermath of the global financial crisis were seriously undermining both to the international financial institutions and the credibility of the European Union itself which found itself enmired in crises affecting the Eurozone. The heady optimism of the EU’s expansionist phase when the Europeans were able to believe that they had a model of governance that had much broader potential applications and attraction gave way to the processes of self-doubt and more seriously a lack of credibility in East Asia that led to the “Westlessness” diagnosis. Europe is seen as very much as part of the Western alliance and Western mindset when it comes to North-East Asia. Two of the US’ most committed allies, Japan and the ROK, are in North-East Asia. Europe both contributed to and benefitted from the current international order and feels strongly committed to it. The EU itself is an institution born of the reordering of the world after the Second World War. For China,

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and to a lesser extent Japan, the current order is outdated and in need of revision. The classic instance of this is the Permanent Membership of the UN Security Council, which clearly no longer reflects the geopolitical realities of the modern world. Japan has long aspired to a permanent seat.15 Reform of the UN Security Council is confined to the too-hard box for many complex reasons, but China has made it clear that it is strongly opposed to Japan getting the seat it desires and that has effectively consigned the whole reform project to limbo. China sees some value in the current international system as one which can help protect it by mitigating the power of the US to act unilaterally. It has undoubtedly benefitted considerably from its engagement with the international order and at the same time views it as a construct of the US and its allies in which China had little or no say and is all too often exploited by them to China’s detriment. Joining both the United Nations—and more recently, the WTO—was a long and traumatic process for China which has contributed to its suspicion of international institutions. A particular example might be the debate over Market Economy Status in the WTO which China believed should have been granted by the EU as a sign of political goodwill (as Australia and others did at a relatively early stage) and anyway should have been awarded automatically in 2016 under the terms of its accession agreement. As has often been the case with contentious issues handled by the EU, some EU politicians, seeking to improve their national standing with China, appeared to promise their good offices in support of China’s position. This has still failed to materialise despite various senior EU politicians pledging their support for the principle. For example, the UK Prime Minister David Cameron promised in 2010 that he was prepared to lobby on China’s behalf for preferred status within the European Union if it further opened its borders to trade with British and continental European companies.16 Angela Merkel, the German Chancellor, also expressed her support in principle for Market Economy Status17 on more than one occasion. This issue is also discussed in Summers’ chapter. Nonetheless, to China’s disappointment, this has not so far materialised, and China eventually backed down from a WTO case that it had lodged against the EU and the United States on the issue. Member States and the Commission have regularly taken the view, largely on technical grounds, that there is no justification for describing the Chinese economy as a market economy. However, while the EU sees MES as a technical and commercial matter, the Chinese—though clearly

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having strong economic motives in seeking MES—choose to see its withholding as largely a political manoeuvre whereby the EU and the US seek to constrain China and prevent the resumption of its proper place in the world. In East Asia, the post-war settlement signally failed to deal clearly with several territorial issues following the defeat of Japan. The major territorial disputes in which China has serious claims: Taiwan and the South and East China Seas, were not adequately addressed at the time, and all remain areas where China pushes claims that have at best a flimsy foundation in international law and practice. Particularly in the case of Taiwan, this is behind the position long taken but no longer openly acknowledged by some Western states that the status of Taiwan is undetermined. Similarly, Japan’s long-standing dispute with Russia over the Northern Territories dates back to the end of the Second World War. As the old order begins to unravel, many of these questions are assuming a considerably higher profile than they did in the past, and China, in particular, is taking more and more assertive action to further its claims, contributing to a wider sense of instability in the region. In recent years, China has begun to take a much more activist role in the development of international institutions and norms. Particularly under Xi Jinping, with his long-term project of the revival of the Chinese nation, China has been readier both to air more criticisms of international institutions (particularly the international financial institutions) and to seek to gain greater influence within them. China has been successful in getting Chinese nationals appointed to a significant number of UN bodies and has been particularly effective in the Commission for Human Rights in pushing a Chinese view of human rights in contrast to the Western one. In the Asian context, the Chinese initiative to set up the Asian Infrastructure Investment Bank was seen by some as an attempt to set up a Chinese alternative to international financial institutions. The UK was quick to sign up to it, and this spurred on other Europeans to participate, despite US antipathy to the new institution. In practice, the AIIB was not such an innovation as feared and has tended to behave and be constituted in a very traditional fashion.

The Influence of Competing Visions of History North-East Asia is obsessed with its history and competing interpretations of that history. Differing interpretations of and understanding of history are one of the cornerstones of the complex relationships between Japan,

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Korea and China. Much of this centres on issues relating to Japanese colonialism and its war guilt. Nevertheless, it is by no means confined to Japan. Chinese historical claims affecting the Korean peninsula have been equally inflammatory. Neither the European Union nor Europe more widely figure largely in these narratives which are concerned mainly with inter-regional interactions, certainly in the context of post-Second World War developments. Nor does European colonialism, which impinges on much of Europe’s relationships with other parts of Asia, have such a prominent place in European relations with North-East Asia, where it is the legacy of Japan as the colonial power that still has the greater resonance. There are no obvious outstanding questions left over from history for the Europeans—with Hong Kong as a prominent exception. In contrast, the historical roots of most of the current security flashpoints in Asia (Taiwan, the Korean Peninsula, Chinese ambitions in the East and South China Seas) are still very much part of the currency of contemporary debate. Europeans were involved, on both sides, in the Korean War and its aftermath, but that does not weigh heavily on current perceptions of any role that Europeans might play in future and does not appear to have severely affected Europe’s relations with the Republic of Korea. The big exception to this is China with its narrative of the 150+ years of humiliation at the hands of foreign powers, primarily European and first among them the British. While this forms part of the learning that every Chinese schoolchild imbibes, it also informs official Chinese attitudes to its interactions with Europe and the West more generally. There remains a tendency for China to view Western actions through the lens of this history and to ascribe to them deeper historical motivations or processes. Even apparently insignificant actions such as the wearing of poppies by the British Prime Minister’s party in Beijing, which for the British side were a natural and proper marking of Armistice (Veterans’) Day, were seen in China as deliberate provocation harking back to the Opium War. Hong Kong has become a particular point of interest in 2019 with the ongoing protests against perceived Chinese involvement in the political life of the territory and manifest incompetence of the Hong Kong Government. The years after the handover in 1997 had seen a generally successful implementation of the “One Country, Two Systems” formula for the governance of Hong Kong with Hong Kong apparently enjoying the high degree of autonomy it had been promised. Successive British Government reports on Hong Kong until recently all concluded

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that, with perhaps some qualifications, “One Country, Two Systems” continued to function well.18 However, this has become much more questionable recently. Moreover, China has made it clear that in its view developments in Hong Kong are a purely internal matter and that no foreign country (in particular the United States and the United Kingdom) has any right to comment on them. That being said, the colonial ghosts are never far below the surface. The protestors who invaded the Legislative Council (LegCo) in July 2019 draped the colonial Hong Kong flag over the LegCo podium. This was probably not nostalgia for the past but a deliberate attempt to infuriate Beijing. Chinese official sources have regularly used the colonial meme in defending the Chinese Government’s position and criticising the UK and US governments’ interventions. In a press conference Liu Xiaoming, China’s Ambassador in London, said pointedly that “Hong Kong was an internal affair of China. It is not what it used to be under the British colonial rule.”19 Europeans are required by the countries concerned, particularly China, to take a stand on some of these historical questions. The most obvious is Taiwan, where any country or organisation seeking to have formal diplomatic relations with the PRC must sign up to a form of the PRC’s interpretation of Taiwanese history and current status, a “One China” policy in some form or other. Moreover, it is not just governments that are subject to these requirements; companies and international organisations are increasingly being pressured to observe the niceties of the PRC’s “One China” position over Taiwan. As China has become more powerful and confident, it has been prepared to push its interpretation and its demands that others follow them or face retaliatory consequences. More directly, even though most Europeans have scrupulously avoided taking any formal position over competing sovereignty claims in areas such as the East and South China Seas, the nature of those claims does sometimes have more wide and immediate effects. The most obvious of these are the implications of the PRC’s island-building in the South China Sea for the international law of the sea and freedom of navigation, both of which are important to Europeans in different ways. Moreover, there is a European historical dimension in case of the South China Sea islands, both France and the UK once had their own claims in the region, and these can still form part of the historical arguments supporting the various claims.

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Security Issues The Cold War solidified the security arrangements in North-East Asia, particularly after President Nixon’s opening to China in 1972 where common hostility to the Soviet Union provided a foundation and rationale for a decade and more of cooperation, including with China. North Korea was increasingly left out of consideration (before it started developing a nuclear capability) and the economic development that followed, especially after China’s reform and opening up of the early 1980s became for Europeans the principal motivating factor in developing relations in the region. Europe is seen as very much as part of the Western alliance and Western mindset when it comes to North-East Asia. Two of the US’ most committed allies, Japan and the ROK, are in North-East Asia. Europe both contributed to and benefitted from the current international order and feels strongly committed to it. The EU itself is an institution born of a similar reordering of the world after the Second World War. For China, and to a lesser extent Japan, the current order is outdated and in need of revision. China sees some value in the international system as one which can help protect it by mitigating the power of the US to act unilaterally and at the same time views it as a construct of the US and its allies in which China had little or no say and is all too often exploited by them to China’s detriment. Joining both the United Nations, and more recently, the WTO, was a long and traumatic process for China, which has contributed to its suspicion of international institutions. Fundamentally however it is becoming clear that China is seeking substantive changes in the international governance structures that better reflect its voice and position. The EU Arms Embargo caused much heart-searching in the early 2000s as the EU came under enormous pressure from China (and internally) to lift it—on mostly political grounds—and from the US to refuse to do so—on security (and political) grounds.20 Various attempts by the EU to strengthen existing arms control measures were viewed as unsatisfactory by the US. Eventually, the EU dropped the matter, partly because of tensions over Taiwan, along with the passing of China’s Anti-Secession Law. This gave the EU a graceful ladder to climb down from what was becoming an awkward position to maintain. Thus, the embargo remains in place to residual dissatisfaction on the part of the Chinese. At a practical level, the Arms Embargo itself had comparatively little effect and was

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anyway subject to interpretation by the Member States to act on it as they saw fit. Member States continued to sell military equipment of various kinds to China (though China’s big purchases during this period were from Russia). But the whole issue has had a lasting effect on EU relations with China where China continues to nurse disappointment over this (and over Market Economy Status) where it feels that the EU has failed to demonstrate proper consideration of or respect for the Chinese side’s position and has, under the excuse of technical problems, taken what was actually a clear political decision to disadvantage China. The technical problems are none the less real. The whole issue of an appropriate arms control regime remains both a necessity and a matter of considerable contention within the EU, not just for China but globally.21 As late as 2012, the Chinese Prime Minister Wen Jiabao was continuing to lament the failure to lift the embargo. China’s disappointment was compounded by the intervention of senior European politicians, most notably President Chirac of France and Chancellor Schröder of Germany who had both indicated to China that they were in favour of lifting the ban. The Chinese felt strongly that the embargo was discriminatory and treated China on a par with countries like Zimbabwe which were also subject to EU Arms Embargos, and China was the only P5 member subject to such an embargo. They had a point, and the decision to continue with the embargo, while it was doing no more than reaffirming what was actually the status quo, was taken very much more on political than technical grounds. There are some similarities to the Arms Embargo in the way the Huawei’s involvement in 5G is being handled in Europe. There has been considerable pressure from the US for Europeans and others to preclude Huawei’s involvement in the construction of their 5G networks. Nevertheless, the outcome so far has been rather different than in the Embargo case. Europeans have proved less susceptible to US pressure, partly because of their feeling of a lack of consistency in the US policymaking process and their reluctance to be drawn too overtly into what they might see as a manifestation of the US trade war with China. But there is in some cases a dangerous mixture of belief in their ability to avoid any threats to security through technical means (the British leading in this), and a desire still to be seen as good friends to China at a political level. The EU has remained on the whole cautious and not fully committed either way, but it is clear that it is not willing to take US urgings that seriously, despite growing evidence of the seriousness

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with which the US is taking the issue both in statements from the US Government and in US pressure on Chinese telecoms companies in their operations in the United States. For China, the willingness of the UK (mainly because of its close intelligence and security relationship with the United States—the so-called Five Eyes relationship) to break ranks with the US is a valuable lever. The early 2020 decision by the UK government to allow Huawei into “non-core” elements of the network was gratefully received in China. But the decision faced a potential challenge in Parliament, when the House of Commons Defence Committee announced an enquiry into the security of the UK’s 5G network and Huawei’s involvement therein, and under continued pressure from the US government, London later changed its stance.22 The Chinese applied their usual mixture of carrot and stick. There were explicit threats from the ambassador in London, Liu Xiaoming, that Britain would lose out if the decision went the wrong way, and there was then the coincidental Chinese decision to buy British Steel, no doubt much to the relief of the UK Government in terms of the preservation of jobs. The deal was announced in November 201923 but not confirmed until after the decision on Huawei had been announced. The deal, of course, illustrates the continued openness of the UK in the Brexit era, but it was also perhaps related to the discussions over Huawei which was being reviewed by the British Government at the same time. In an article in the Sunday Telegraph in January 2020, Liu Xiaoming suggested that if the UK did not go with Huawei in its 5G network, then “The image of Britain as an open and inclusive partner for cooperation would also bear the brunt. So would the confidence of foreign investors and the cooperation between China and the UK.”24 In a similar vein, he was quoted a month later saying that Britain can only “be great when it has own independent foreign policy. I hope the Prime Minister will stay with the decision because I think it’s in interest of the UK and maintaining Britain’s image as most open and free-market economy in the world.”25 In terms of hard security, Europe has comparatively little to offer in the East Asian context. UK and French warships have conducted Freedom of Navigation exercises in the South China Sea after China’s island-building push. But otherwise, Europe is mostly absent from any serious involvement in the key flashpoint issues in the region. There was a limited involvement by Europe in supporting the long-defunct Agreed Framework for the reduction of North Korea’s nuclear capabilities, as Europe joined KEDO (the Korean Peninsula Energy Development Corporation)

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in 1997 and agreed to provide 75 million ECU over five years to support the project (roughly equivalent to the US input).26 But it all came to nothing, and KEDO was disbanded in 2005. The EU was not a member of the subsequent 6 Party Talks on the Korean peninsula and has not had an active role in the North Korean nuclear issue since then. Nonetheless, the EU has been careful to maintain a position on the issue.

Values and Models The promotion of values, particularly relating to criticism of China over human rights issues, took a decidedly secondary position in the early years of engagement with post-Mao China. This changed after 1989 with the fall of the Soviet Union changing much of the security rationale behind the relationships, and particularly the Tiananmen crackdown in China which brought human rights briefly right to the forefront of Western diplomacy with China. The EU Council in Madrid adopted six measures in response to the action of the Chinese Government, including the Arms Embargo. Most of the measures fell quite swiftly by the wayside as governments sought to re-establish commercial and political relations with China. But human rights remained comparatively high on the agenda, and perhaps because it was determined to be more fully accepted in the international community, China was willing to be open to discussions on human rights. For several years, the EU sponsored a resolution in the UN Human Rights Commission criticising China’s record. This was usually defeated by a procedural no-action motion but came to a formal vote once where it was narrowly defeated. But the lack of progress in the HRC led to a growing feeling that it was ineffective as a means of putting pressure on China to change its ways and was serving only to alienate the Chinese. Meanwhile, the Chinese were pursuing a new strategy of offering regular dialogues on human rights both with the EU and bilaterally with a number of European nations. These seemed to offer the governments concerned a useful means of climbing down from positions of principle at the UNHRC while demonstrating that they were not only taking human rights and values issues seriously but were developing effective means of promoting them in China. Sadly, as China became stronger and more confident in the ensuing years, its interest in the dialogues, which had primarily been to use them as a method for deflecting criticism, waned, and consequently, the dialogues themselves petered out into occasional affairs with little substance. Rights and values

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remain important rhetorical issues for Europeans and have been highlighted once again by the EU’s declared support for the democratic aims of demonstrations in Hong Kong. Still, practically very little is done to confront the Chinese Government over such issues. This, in turn, has contributed to the increasingly dismissive way in which China responds. Perhaps the most egregious example at present is the behaviour of the Chinese in Xinjiang, presented to the outside world as a defence against terrorism, where the Chinese have mainly managed to escape criticism. It is by no means unique to the China context, but the ability of the EU to deliver consistent messages on human rights is limited. There remains a strong and constant tension between the desire to be seen to be standing up for the democratic and human rights values on which the EU is founded, and commercial pressures and the desire to cultivate improved political relations with Beijing which are generally considered to be incompatible with too outspoken a position on human rights. Another crucial new element which has been thrown into the mix has been China’s promotion of its Belt and Road initiative. This has been billed as mainly a developmental programme concentrating on investment in infrastructure, and in some ways, it has appeared consistent with the EU’s stress on building connectivity with Asia which is the key theme of its 2018 strategy for Asia. Europe is after all at one end of the new Silk Road in a geographical sense. But the political overtones of constructing a China-friendly political grouping particularly in central Asia and of spreading China’s version of development which is considerably less careful of the environmental and other impacts of development have been unwelcome in old Europe and the EU as an institution. The Chinese have nonetheless had considerable success in getting several of the EU Member States, including Italy, to sign MOUs of support of the project. Meanwhile, the EU and Japan, another confirmed sceptic about the BRI, signed their own infrastructure project to promote connectivity between Europe and Asia in 2019, clearly covering similar ground to the BRI but governed by very different principles.27

Rise of China and Competition with the US The rise of China as an economic power hardly needs documenting. But particularly under the leadership of Xi Jinping, China has presented itself much more forcefully on the international stage. The era of biding its time which had been in place for almost twenty years was comprehensively

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over. In its place, Xi Jinping spoke of the China Dream and the rejuvenation of the Chinese nation, both of which were predicated upon China resuming its rightful place as a world power. There were already alarm bells being sounded in Washington and elsewhere about the increasing “assertiveness” of Chinese foreign policy in the later years of the Hu Jintao leadership, and there was a recognition by the US that the diversion of its focus on to Afghanistan and Iraq meant a degree of neglect of Asia, and of the potential challenge of China in particular. There were also growing questions—particularly in Asian countries that had traditionally been close to the US—about the degree of political commitment of the US to the region. In particular, its willingness to support friends and allies in any potential confrontation with China was coming under re-assessment. This was first addressed by the US through the so-called pivot to Asia in 2012, which had a large military element but was also accompanied by a renewed US diplomatic push to strengthen its relations and presence in the region. The US also began to compete directly with China over the Free Trade Agreement game. This had become a particular feature of Asian and East Asian economic diplomacy with complex networks of Free Trade Agreements being set up and an apparent rivalry developing between those with China as a member which tended to be laxer in their membership terms and those favoured by the more developed economies. In these countries, the terms were much stricter and implicitly at least made it hard for China to become a member. The TransPacific Partnership (TPP) was first mooted in 2005 and was signed in 2016. But the withdrawal of the United States under President Trump meant it could not enter into force in its original form. The EU has not been party to the TPP or its successor, but it does have free trade agreements with South Korea (2015) and more recently Japan (2019).

Conclusions and Historical Lessons 1. The last ten years have seen significant shifts in the economic, political and strategic scene in Europe and North-East Asia. Asian economies, and that of China, in particular, have generally performed better than those of the old developed world to the extent that the twenty-first century is often seen as being the Asian century. Similarly, respect for and the efficacy of the global and institutional order set up after the Second World War has declined. Where China was once seen as content, by and large, to

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go along with (and benefit from) accepted international norms and institutions, it is now seen as seeking a much more revisionist role. 2. Europe has been slow in acknowledging that the world has changed at least from an Asian perspective. A decade and more ago, there was huge confidence in the EU model through its achievements in helping to bring lasting stability to a region of historical turbulence. There was a belief in the EU as a potential supra-national model in global affairs and governance. But the EU’s own record is looking a lot less solid now, tensions within the EU itself have emerged, Brexit has happened, Turkey is moving, for the moment at least, away, there is slower progress in the Balkans and strongman behaviour in some of the Eastern European States. The global financial crisis and its aftermath have further reduced the attraction of the Westernoriented international order, though its resilience should not be underestimated. The implication here is that there is a considerably more significant challenge for Europe in dealing with—and also cultivating a greater knowledge and understanding of—North-East Asia. 3. By and large, Chinese policymakers pay considerably more attention to historical aspects of contemporary questions than do European ones. The Chinese are constantly made aware both of the historical background (in particular the still strong narrative of China’s shame at the hands of the imperial powers) and of more recent political history which colours their responses to contemporary issues. There is much greater preparedness in China to question and examine longer-term motivations—usually seen as attempts by the West to undermine the legitimacy and status of China. Europe’s interactions with other East Asian partners tend to be viewed by China through a similar lens of the historical experience. In formulating policy towards China and towards North-East Asia (which has a similar obsession with historical issues), this needs to be taken into account. Europeans tend to be less sensitive than they might be to the historical roots of many of the relationships in North-East Asia. 4. There is still both among Member States and in the Commission a lack of appreciation of the long-term ambitions of China (which are now becoming more apparent) and an unwillingness to stand up for important things. This applies not just to the values debate but includes the failure (and it is mutual) to act with the US on

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issues such as IP and access to Chinese markets, where joint pressure might have proved mutually beneficial. Much policy still seems to be formulated on a background of European superiority. This is becoming increasingly toxic in a Chinese context. As Wang Yi said at the Munich Conference: “the West also needs to eschew the subconscious belief in the superiority of its civilisation and abandon its prejudices and anxieties regarding China. It needs to respect the choices of the Chinese people and accept and welcome the development and rejuvenation of a major country in the East, one with a system different from the West.”28 Therefore, global institutions, which mean a lot to Europeans, are being undermined by the activities of states such as China and the US, all the while professing to be the true upholders of them. There is still a competition among Europe’s leaders to be China’s best friends and to be cavalier not only with wider European interests but also with their own national interests, in the pursuit of short-term political gains in the relationship with China. The Chinese cannot but be aware of this and the scope this gives for undermining European unity and resolve in dealing with China. They are adept in finding ways to make inroads into European unity. The 16 (now 17) + 1 arrangement is a classic example of this. Other North-East Asian countries can see this, and this undermines the EU’s credibility in their eyes. 5. In dealing with sensitive issues with China in particular, Europe has a poor track record, usually managing to extract the worst of outcomes. During the last 20 years, human rights, the Arms Embargo, Market Economy Status in the WTO and latterly Huawei have all figured largely in the EU’s exchanges with China. All have depressingly similar elements: the ease with which European consensus can be broken up—the way in which the lure of commercial advantage with China tends to subvert positions of principle. 6. Will Brexit make a difference? The answer is that it will probably have not much effect on the general trend of relations between Europe and North-East Asia. The EU will continue to seek to increase its engagement with the region and to develop its existing bilateral relationships. In their more bombastic moments, the Chinese can be sneeringly dismissive of the influence of the UK. However, they have always made it clear that, from an official government perspective, the UK was seen as an essential voice in EU

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foreign policy discussions and the Chinese certainly valued the UK’s free-market philosophy which generally encouraged and enabled greater Chinese investment in Europe. But the lure of Chinese investment is now probably strong enough of itself to enable China to penetrate wider into Europe, without the need for champions. The UK often led the way in taking decisions which worked in the Chinese wider interest and set useful precedents for China in its dealings with Europe and the wider world. Decisions such as the purchase of Chinese nuclear power technology, joining the AIIB and possibly Huawei fall in this category. Britain’s departure from the EU may actually encourage it to take more such decisions, and its withdrawal from the EU is not likely to weaken the power of its example for other Europeans seeking to make their mark with China. 7. The big question for the future is whose side are you on, that of China or the US in the growing competition between the two. Traditionally, the Europeans and the non-Chinese Asians have tried to avoid having to answer that question directly, preferring to find a middle way that cultivates profitable relationships with both of them. But it is cropping up in more and more places and areas of activity. Furthermore, for countries like Japan, South Korea and especially Taiwan, the US defence commitment to maintaining something of the security status quo and being prepared (should the last resort be reached) to maintain the security umbrella is matter of vital national security to which the answers are much less clear than in the past. For the Europeans, the commercial lure of China is strong and often over-rides political or security qualms. But that is perhaps because Europe is still behind the times in coming to a clear evaluation of the challenges that China poses. There is no real sign of a consistent European strategy towards China (despite numerous strategy papers) much less a North-East Asian one.29 That would appear to be an essential prerequisite for a consistent European policy in North-East Asia which hitherto has all too often been opportunistic and ad hoc. 8. Coronavirus and the reactions to it have changed everything. There has already been discussion around this, but there seems to be an emerging consensus that what we are seeing is going to be an acceleration of existing trends rather than a radical break with past practices.

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Notes 1. Beverely Loke, ‘Responsible Stakeholder with Chinese Characteristics,’ Asia Dialogue (blog), 16 June 2016, https://theasiadialogue.com/ 2016/06/16/responsible-stakeholder-with-chinese-characteristics/. 2. ‘Trade for All: Towards a More Responsible Trade and Investment Policy’ (Luxembourg: European Commission, December 2015), https://trade. ec.europa.eu/doclib/docs/2015/october/tradoc_153846.pdf. 3. For text see: Official Journal of the European Union 54 (14 May 2011), https://doi.org/10.3000/17252555.L_2011.127.eng. 4. For a brief appreciation, see Andrei Lungu, ‘Japan and Europe’s Triple Partnership,’ The Diplomat, 14 February 2019, https://thediplomat. com/2019/02/japan-and-europes-triple-partnership/. 5. ‘Joint Communication to the European Parliament and the Council: Elements for a New EU Strategy on China,’ European Commission Executive Summary (Brussels: High Representative of the Union for Foreign Affairs and Security Policy, 22 June 2016), http://eeas.europa.eu/arc hives/docs/china/docs/joint_communication_to_the_european_parlia ment_and_the_council_-_elements_for_a_new_eu_strategy_on_china.pdf. 6. ‘Strategic Partnership as an Instrument of EU Foreign Policy,’ Workshop Report (Canada: Centre for European Studies, November 2015), http://www.egmontinstitute.be/content/uploads/2015/12/Str ategic-Partnership-Workshop-Report-final.pdf?type=pdf. 7. Shengsong Yue, ‘Towards a Global Partnership Network: Implications, Evolution and Prospects of China’s Partnership Diplomacy,’ The Copenhagen Journal of Asian Studies 36, no. 2 (2018): 5–27. 8. Richard Maher, ‘The Elusive EU-China Strategic Partnership,’ International Affairs 92, no. 4 (1 July 2016): 959–976. 9. ‘Framework Agreement Between the European Union and Its Member States, on the One Part, and the Republic of Korea, on the Other Part,’ EU-Korea Framework Agreement (Brussels, 10 May 2010), http://eeas.europa.eu/archives/docs/korea_south/docs/framew ork_agreement_final_en.pdf. 10. D’ Ambrogio Enrico, ‘The EU-Japan Strategic Partnership Agreement (SPA),’ European Parliament Briefing (Brussels: EPRS | European Parliamentary Research Service, January 2019), https://www.europarl.europa. eu/RegData/etudes/BRIE/2018/630323/EPRS_BRI(2018)630323_ EN.pdf. 11. ‘Speech by President-Elect Von Der Leyen in the EP,’ European Commission, 27 November 2019, https://ec.europa.eu/commission/pre sscorner/detail/en/SPEECH_19_6408. 12. For discussion of China’s approach, see Nadège Rolland, ‘China’s Vision for a New World Order,’ NBR Special Report #83 (Seattle, Washington:

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13.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23. 24.

The National Bureau of Asian Research [NBR], 27 January 2020), https://www.nbr.org/publication/chinas-vision-for-a-new-world-order/. See the report of the Munich Security Conference 2020: ‘Westlessness—The Munich Security Conference 2020,’ Event Summary (Munich Security Conference, 16 February 2020), https://securityconference.org/ en/news/full/westlessness-the-munich-security-conference-2020/. ‘Xi Jinping Delivers Robust Defence of Globalisation at Davos,’ Financial Times, 17 January 2017, https://www.ft.com/content/67ec2ec0-dca211e6-9d7c-be108f1c1dce. See: ‘An Argument for Japan’s Becoming Permanent Member,’ Ministry of Foreign Affairs of Japan, https://www.mofa.go.jp/policy/q_a/faq5. html, accessed 30 June 2020. Patrick Wintour and Phillip Inman, ‘David Cameron: China Should Be Given Better Access to EU Markets as Reward for Opening Economy,’ The Guardian, 10 November 2010, https://www.theguardian.com/pol itics/2010/nov/10/david-cameron-china-eu-markets-economy. ‘Europe Split Over Whether to Grant China Market Economy Status,’ Financial Times, 28 December 2015, https://www.ft.com/content/2f5 81276-a716-11e5-955c-1e1d6de94879. All 45, to date, of these reports can be seen at: ‘Six-Monthly Reports on Hong Kong,’ GOV.UK, 12 July 2013, https://www.gov.uk/govern ment/collections/six-monthly-reports-on-hong-kong. Live: China’s Ambassador to the UK Holds Press Conference (中驻英大使 刘晓明就香港问题召开媒体记者会), 2019, https://www.youtube.com/ watch?reload=9&v=lXsAOkIh7kg. See discussion in: Scott A.W. Brown, ‘Anything but Arms? Perceptions, the European Union and the Arms Embargo on China,’ Journal of Contemporary European Research 7, no. 1 (31 May 2011): 23–40. Sophia Besch and Beth Oppenheim, ‘Up in Arms: Warring Over Europe’s Arms Export Regime,’ Centre for European Reform, 10 September 2019, https://www.cer.eu/publications/archive/policy-brief/ 2019/arms-warring-over-europes-arms-export-regime. Harry Yorke, ‘Huawei’s Role in 5g Network to Be Subject to Parliamentary Inquiry as Boris Johnson Faces Backbench Revolt,’ The Telegraph, 6 March 2020, https://www.telegraph.co.uk/politics/2020/03/06/hua weis-role-5g-network-subject-parliamentary-inquiry-boris/. Simon Jack, ‘Why a Chinese Firm Really Bought British Steel,’ BBC News, 13 November 2019, https://www.bbc.com/news/business-50411621. ‘Ambassador Liu Xiaoming Contributes an Article to the Sunday Telegraph Entitled Banning Huawei Would Leave Britain Trailing Behind on Technology,’ Embassy of the People’s Republic of China in the United Kingdom of Great Britain and Northern Ireland, 6 January 2020, http:// www.chinese-embassy.org.uk/eng/ambassador/t1729634.htm.

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25. ‘China Warns of Huawei 5G “Witch-Hunt”,’ BBC News, 9 February 2020, https://www.bbc.com/news/business-51433590. 26. ‘European Union Joins North Korean Nuclear Security Body,’ CORDIS EU Research Results (Brussels: European Commission, 22 September 1997), https://cordis.europa.eu/article/id/9049-european-union-joinsnorth-korean-nuclear-security-body. 27. ‘EU-Japan Take on China’s BRI with Own Silk Road,’ DW: Made for Minds, 4 October 2019, https://www.dw.com/en/eu-japan-take-on-chi nas-bri-with-own-silk-road/a-50697761. 28. ‘FM Wang Yi’s Speech at 56th Munich Security Conference,’ China Daily, 16 February 2020, http://www.chinadaily.com.cn/a/202002/ 16/WS5e490ce7a310128217277dc8.html. 29. Julianne Smith and Torrey Taussig, ‘Europe Needs a China Strategy; Brussels Needs to Shape It,’ Brookings (blog), 10 February 2020, https://www.brookings.edu/blog/order-from-chaos/2020/02/10/eur ope-needs-a-china-strategy-brussels-needs-to-shape-it/.

CHAPTER 4

US and EU Perspectives and Responses to China’s Strategic Challenge Robert Wang

Introduction In its National Security Strategy report in 2017, the US Trump Administration posited in clear and stark terms that “a geopolitical competition between free and repressive visions of world order is taking place in the Indo-Pacific region.”1 In particular, it argued that China “seeks to displace the United States” and “expand the reaches of its state-driven economic model, and reorder the region in its favor.”2 In its 2018 National Defense Strategy, the US Defense Department described China as a “strategic competitor using predatory economics to intimidate its neighbors while militarizing features in the South China Sea.”3 Separately, in its 2019 “EU-China—A Strategic Outlook” report, the European Commission noted at the outset that “there is a growing appreciation in Europe that the balance of challenges and opportunities presented by China has shifted” as China’s economic power and political influence has grown with unprecedented scale and speed over the

R. Wang (B) CSIS, Washington, DC, USA © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_4

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past decade.4 While still describing China as a cooperation and negotiation partner, the report explicitly stated that China has also become “an economic competitor in the pursuit of technological leadership, and a systemic rival promoting alternative models of governance.”5 In this connection, the Commission observed that “the human rights situation in China is deteriorating, notably in Xinjiang and regarding civil and political rights, as witnessed by the continuing crackdown on human rights lawyers and defenders.”6 It thus appears that the United States and the European Union (EU) have each come to the conclusion that China’s rapidly growing economic and military power, in conjunction with the government’s increasingly authoritarian and repressive domestic policies, currently poses a comprehensive threat, in different ways and to varying degrees, not only to their specific economic interests but also to the security of China’s neighbours in the region and the fundamental values of the rules-based liberal international order, which the two have championed since World War II. The key question now is whether and how the United States and the EU can and should respond to this perceived strategic threat, especially in the light of increased tensions in trans-Atlantic relations between the United States and various European countries as well as Britain’s departure from the EU (Brexit) and growing divisions within the EU itself. In this chapter, I will first elaborate and expand on the respective US and EU perspectives and policies in response to the multifaceted nature of China’s strategic threat and its regional and global implications. I will then discuss some of the difficulties they will face in developing a cohesive response to this perceived threat in the context of current trans-Atlantic and internal European relations, post-Brexit, as well as increasing Chinese economic presence in Europe. Finally, I will offer some recommendations as to how the United States and EU, as well as the UK, might nonetheless improve coordination to address the long-term strategic challenges posed by an increasingly powerful China in the coming years.

Evolving US Economic and Security Strategy in the Indo-Pacific Region As noted above, the US Trump administration has declared that the United States is currently engaged in a strategic competition with China, initially focused on the latter’s state-driven economic model as well as its militarisation of the South China Sea. In his letter introducing the 2017

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National Security Strategy, President Trump asserted that “the United States will no longer tolerate economic aggression or unfair trade practices.”7 In particular, the report claimed that “competitors such as China steal US intellectual property valued at hundreds of billions of dollars” each year.8 In addition to massive cyber-theft, many of these state-driven and subsidised actors also “use largely legitimate, legal transfers and relationships” to acquire technology and “erode America’s long-term competitive advantage.”9 In March 2018, President Trump approved a memorandum based on a detailed USTR investigation that identified specific Chinese policies that justified US action against China under US Section 301.10 These policies included: forced technology transfers, unfair licensing practices, statedirected investments to acquire foreign technology and cyber-theft against US companies and institutions. After the failure of numerous rounds of high-level trade negotiations, the United States raised tariffs by 25% on $250 billion and by 15% on another $120 billion worth of Chinese imports in several tranches.11 In retaliation, China increased tariffs at rates from 5 to 25% on $110 billion worth (or almost all) of imports from the United States.12 In August 2018, President Trump also signed into law the “Foreign Investment Risk Review Modernization Act” that will require foreign investments in 27 “critical technology” industries—ranging from aircraft manufacturing to semiconductor and biotechnology research—be subject to mandatory national security review.13 In May and August 2019, the US Commerce Department placed Chinese telecommunications giant Huawei and over a hundred of its non-US affiliates on its “Entity List” indicating that these entities are believed “to pose a significant risk of being or becoming involved in activities contrary to the national security or foreign policy interests of the United States.”14 This rule imposes a licensing requirement for US semiconductors and other exports to these entities. Finally, immediately after the rapid depreciation of the Chinese currency (“renminbi”) in early August 2019, the US Treasury officially designated China a “currency manipulator,” which may be seen as justifying further retaliatory trade measures against China.15 Following the interim US-China Phase One Trade Agreement in January 2020, the United States suspended further tariff increases and reduced the 15% tariff increase on $120 billion of Chinese imports by half to 7.5%, but retained the initial 25% tariffs on $250 billion worth of

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Chinese imports.16 At the same time, the US Treasury removed the designation of China as a currency manipulator. In response, China committed to increasing the import of US products and services by at least $200 billion over the next two-year period (from 2017 levels) while indicating it would improve intellectual property (IP) protection, expand foreign access to its financial services market and refrain from competitive currency devaluations. The two sides thus deferred negotiations on more fundamental economic structural reform issues, such as China’s state-driven trade and investment policies, along with its subsidising of state-owned enterprises, to the indefinite future, likely after the 2020 US elections. On the security front, the Trump administration warned in its 2017 National Security Strategy that China’s “efforts to build and militarise outposts in the South China Sea endanger the free flow of trade, threaten the sovereignty of other nations, and undermine regional stability.”17 Moreover, it noted that China has “mounted a rapid military modernization campaign designed to limit US access to the region and provide China a freer hand there.”18 To respond to this threat, the United States “will maintain a forward military presence capable of deterring and, if necessary, defeating the adversary” while strengthening long-standing military relationships and encouraging “the development of a strong defense network with our allies and partners.”19 In a pointed message to China, the administration asserted that the United States “will maintain our strong ties to Taiwan in accordance with our ‘One China’ policy, including our commitments under the Taiwan Relations Act to provide for Taiwan’s legitimate defense needs and deter coercion.”20 Accordingly, under the Trump administration, the US Navy stepped up the frequency of its freedom-of-navigation operations (FONOP) in the South China Sea starting with bimonthly operations from 2017 to 2018 to almost monthly operations since the beginning of 2019.21 Additionally, these operations now include more ship transits through the Taiwan Strait. In the summer of 2018, the Pentagon withdrew an invitation for China to participate (which China had done for the past two exercises) in a biennial US-hosted “Rim of the Pacific” (RimPac) multinational naval exercise that is intended to foster cooperation in ensuring the safety of sea lanes and security on the world’s oceans. In the announcement, the Pentagon spokesman said that this was a response to “China’s continued militarization of the South China Sea,” which is “inconsistent with the principles and purposes of the RimPac exercise.”22 Looking ahead, the

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US Defense Department submitted a 2020 budget proposal that focuses on a build-up in Asia in response to China’s rising military capability and threat.23 Finally, the 2017 National Security Strategy stated more broadly that “China and Russia want to shape a world antithetical to US values and interests.”24 It noted that “for decades, US policy was rooted in the belief that support for China’s rise and for its integration into the post-war international order would liberalize China.” Instead, China “expanded its power at the expense of the sovereignty of others,” and “gathers and exploits data on an unrivaled scale and spreads features of its authoritarian system, including corruption and the use of surveillance.” Vice President Pence underscored this theme in his October 2018 speech at the Hudson Institute, stating that “for a time, Beijing inched toward greater liberty and respect for human rights, but in recent years, it has taken a sharp U-turn toward control and oppression.”25 Today, Pence said, “China has built an unparalleled surveillance state, and it’s growing more expansive and intrusive.” “And when it comes to religious freedom, a new wave of persecution is crashing down on Chinese Christians, Buddhists, and Muslims.” Looking to the future, Pence warned that “as history attests, a country that oppresses its own people rarely stops there.” In another speech in October 2019, Pence strongly criticised China’s actions to intimidate the people of Taiwan and Hong Kong as well as its efforts to “export censorship” by “coercing corporate America.” He specifically cited Chinese financial pressures against the NBA to pressure it to take action against a Houston Rockets executive who tweeted support for Hong Kong protestors.26 In 2019, at the release of the 2018 US Human Rights Report, Secretary of State Pompeo declared that China is “in a league of its own when it comes to human rights violations.”27 A senior State Department official reportedly described Beijing’s roundup of Muslim minorities into re-education camps as something not seen “since the 1930s,” obviously referring to Nazi concentration camps in Germany prior to World War II.28 The report also included a long list of specific cases of other human rights violations, including politically-motivated killings, the use of torture and inhuman punishments, arbitrary arrests or detention, criminal prosecution of journalists, lawyers, writers, bloggers and dissidents, denial of civil liberties, censorship of the internet, and restrictive laws against foreign and domestic NGOs.29 In March 2020, Pompeo again highlighted Chinese human rights abuses at the release of the 2019

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report, calling the Communist Party’s record in Xinjiang “the stain of the century.”30

A Shift in the EU’s Strategic Outlook on China As noted earlier, the EU’s strategic perspective with respect to China has also hardened significantly since the European Commission issued its last report “Elements for a new EU strategy on China” in June 2016. The 2019 report asserted that “China can no longer be regarded as a developing country. It is a key global actor and leading technology power. Its increasing presence in the world, including in Europe, should be accompanied by greater responsibilities for upholding the rules-based international order, as well as greater reciprocity, non-discrimination, and openness of its system.”31 While the Commission continued to call for cooperation with China on major global issues, such as those related to UN goals and operations, climate change, and Iran and nuclear nonproliferation, the report highlighted differences over a wide range of bilateral trade and investment practices in the set of ten concrete actions sent to the European Council for endorsement. Specifically, mirroring key points in the US Section 301 Action, the Commission expressed strong concerns that “China’s proactive and statedriven industrial and economic policies such as ‘Made in China 2025 aim at developing domestic champions and helping them to become global leaders in strategic high-tech sectors.”32 Meanwhile, “China preserves its domestic markets for its champions shielding them from competition through selective market opening, licensing and other investment restrictions.” It thus called for EU actions, including the use of “recently modernized and strengthened trade defense instruments” as leverage to get China “to deliver on existing joint EU-China commitments” related to WTO reform, “in particular on government subsidies and forced technology transfers.”33 The Commission also indicated that it will identify needed legislative changes “to fully address the distortive effects of foreign state ownership and state finance in the internal market” and seek to develop a common EU approach to the security of 5G networks “to safeguard against potential serious security implications for critical digital infrastructure.”34 It urged Member States to fully implement the recently adopted EU regulation on screening of foreign direct investment “to detect and raise awareness of security risks posed by foreign investments in critical assets, technologies and infrastructure.”

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Although the 2019 EU-China Strategic Outlook report did not include any specific action related to the maintenance of peace and security, it did point out that “China’s maritime claims in the South China Sea and the refusal to accept the binding arbitration rulings issued under the United Nations Convention on the Law of the Sea (UNCLOS) affect the international legal order and make it harder to resolve tensions affecting sea-lanes of communication vital to the EU’s economic interests.”35 More broadly, the Commission observed that “China’s increasing military capabilities coupled with its comprehensive vision and ambition to have the technologically most advanced armed forces by 2050 present security issues for the EU.” It expressed concerns as well about China’s “cross-sectoral hybrid threats including information operations, and large military exercises” that “not only undermine trust, but also challenge the EU’s security” and “must be addressed in the context of our mutual relationship.” Having referred to China as a “systemic rival promoting alternative models of governance,” the European Commission underscored in the report that “the ability of EU and China to engage effectively on human rights will be an important measure of the quality of the bilateral relationship.”36 Apart from pointing to worsening domestic human rights conditions in China, it also stressed that “the human rights of EU and other foreign citizens in China must be protected,” and that “the high degree of autonomy enshrined in the Hong Kong Basic Law needs to be respected.” While the Commission also did not propose specific actions to promote human rights in China in the report, the EU did issue a press release after its subsequent 37th Human Dialogue with China in April 2019 that highlighted “the deteriorating situation of civil and political rights in China, marked by the arrest and detention of a significant number of human rights defenders and lawyers.”37 It provided a long list of names of such individuals as well as imprisoned or detained Uighur and Tibetan activists and an EU national (Gui Minhai), all of whom the EU urged China to release. The previous year, it was reported that the German Government had been instrumental in securing the release of Liu Xia from house arrest and travel to Germany after her husband, Nobel Peace Prize laureate Liu Xiaobo, died in detention the year before. More broadly, the EU expressed concerns about “the system of political re-education camps” and urged China “to allow meaningful, unsupervised and unrestricted access to Xinjiang for independent observers, including for the UN High

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Commissioner for Human Rights.” The EU also raised the cases of the two recently detained Canadian citizens and another Canadian sentenced to death “without due process” in connection with the extradition case of a Chinese Huawei executive from Canada to the United States.

China as a Strategic Threat to the Liberal International Order From the above, it is clear that both the United States and the EU are now beginning to see China and its recent policies and actions as threatening not only their own and the region’s economic or security interests but, more significantly, as also endangering the fundamental values of the post-war liberal international order. When China entered the WTO in 2001, it entered as a “developing country” which allowed it to take on fewer WTO commitments while enjoying full access to the markets of advanced economies such as the United States and most EU countries. Thus, over the past two decades, China has averaged doubledigit economic growth mainly on the basis of its comparative advantage as a low-cost manufacturing centre and has since become the secondlargest economy in the world. In recent years, however, China has moved away from market reforms and instead developed a state-driven economic model and industrial policies. To this end, China has sought to build up a domestic high-tech industry by acquiring—either legally or illegally— the technologies of advanced economies, thus eroding their comparative advantage. As such, China is seen by the United States and the EU not simply as an economic competitor but also as unfairly employing an economic model that evades the market-based rules of the WTO and the global trading system. As its economic power has grown, China has also developed into a major regional military power with its defence budget rising at doubledigit rates over the past few decades. China has also begun to extend its military presence into other regions, such as the Indian Ocean and Africa. Since the global financial crisis of 2008–2009 that shook the US and European economies, it appears that China’s ambitions have grown with many Chinese officials and scholars touting “China’s rise and US decline.” More recently, with the ascendency of Xi Jinping in 2012–2013, Beijing appears to have abandoned previous policies of relative caution with respect to China’s maritime claims with the massive reclamation and militarisation of reefs and islands in the South China Sea.38 And as the

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EU pointed out in its strategic outlook report, China’s defiance of the binding arbitration rulings issued under UNCLOS (of which China is a member) in a case brought by the Philippines against China’s maritime “Nine-Dash line” claims undermines the authority of the UN and the international legal order. Meanwhile, China and ASEAN negotiations on a “Code of Conduct” (COC) in the South China Sea have remained stalled, with Beijing refusing to accept any agreement that could compromise China’s expansive maritime claims that have already been repudiated by the UN Arbitration Tribunal.39 Finally, since President Tsai Ing-wen took office in Taiwan in 2016, China has employed military intimidation tactics and influence operations to apply pressure on the Tsai administration, especially in the run-up to the presidential elections in 2020, and continuing after her overwhelming election victory in January. Last, but certainly not least, the European Commission stated in its EU-China Strategic Outlook report that “as a permanent member of the United Nations Security Council and a beneficiary of the multilateral system, China has the responsibility to support all three pillars of the United Nations, namely, Human Rights, Peace and Security, and Development.”40 In many ways, the promotion of democracy and respect for universal human rights form the ideological and moral foundation of the post-war liberal international order. Beijing, under Xi Jinping, has significantly tightened Communist Party control over all aspects of society. It has engaged in the gross violation of basic human rights and individual freedoms on the mainland and now threatens the individual freedoms of people in Hong Kong and Taiwan’s democracy. It has thus become a “systemic rival” to the fundamental values of this liberal international order. Beyond this, there are increasing concerns that China is also “exporting” its model by providing support and assistance to authoritarian governments abroad as well as interfering in the governments and civil societies of democracies around the world. The Hoover Institution at Stanford published a 200-page report in 2018 titled “Chinese Influence and US Interests” which documented China’s influence operations abroad. It detailed its use of so-called “sharp power,” through which it has sought—using financial resources and in non-transparent and restrictive ways—to interfere in various sectors of American Government and society, going beyond normal public diplomacy.41 The report also included

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case studies of Chinese influence operations in eight other advanced democracies in Europe, Asia as well as Canada. In sum, the outcome of the US-China and EU-China strategic competition will likely have major regional and global consequences, beyond current government administrations, into the foreseeable future. Should China succeed in maintaining its current state-driven economic model, it will not only infringe on critical US and EU economic interests but will also eventually undermine the current WTO-led multilateral trading system based on accepted rules and market principles. As its economic power continues to grow on this basis, one expects that China will be even more determined—using either military force or economic leverage— to pursue its maritime claims and political goals throughout the region, including in Taiwan and Hong Kong. Finally, China’s authoritarian model that essentially disavows democratic principles and the universality of human rights values, and provides support to other authoritarian regimes, potentially presents an existential threat to democracies around the world.

Challenges in Developing a US-EU Response to China’s Strategic Threat It is thus critical that the United States and the EU, and also post-Brexit UK, take action to address the multifaceted threat currently posed by China if they are to sustain the values and multilateral institutions of the post-war liberal international order. In order to mobilise the support of like-minded countries and civil society institutions, they will need to take the lead in forging a strong response to convince China that it has to abide by existing international rules and norms, from which it has benefitted greatly, as well as share the responsibilities for strengthening, and in some cases reforming, the multilateral institutions in which it plays an increasingly important role. Unfortunately, as many have pointed out, the Trump administration’s “America First” policies and initial approach to its European allies generated considerable confusion and distrust in trans-Atlantic relations that could make such cooperation more difficult. Karen Donfried, the President of the German Marshall Fund of the United States, was reported as saying that “President Trump’s ‘America First’ foreign policy threatens to damage the US-European relationship” because “he views alliances as transactional rather than enduring; for example, when he says that the United States has gotten a ‘raw deal’ from its European allies and calls

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to re-evaluate US commitments in Europe.”42 This was a reference in particular to early public comments made by President Trump raising questions about the US role in NATO, focusing narrowly on the issue of defence burden-sharing. Additionally, the Trump administration had increased tariffs on global steel and aluminium imports on national security grounds, and it continued to threaten to raise tariffs on auto imports from Europe. More generally, by quickly withdrawing from a number of major multilateral agreements, including the Paris Climate Accord, Iran nuclear deal and Trans-Pacific Partnership, the Trump administration appeared to signal that it was willing to act unilaterally to pursue short-term US economic and political interests with minimal regard for the collective and long-term interests of its allies and global multilateral institutions. Moreover, although US and EU perspectives with respect to China have now begun to converge on the general perception of China as a strategic threat to their interests and the liberal international order, there are still significant and genuine differences concerning the extent and urgency of the threat and appropriate responses. At a meeting between the US and European and other allied diplomats in Washington, for example, it was reported that US officials were unable to persuade its allies to sign on to a joint statement critical of China’s Belt and Road Initiative (BRI) plan on the eve of the BRI summit in Beijing in April 2019.43 While European officials criticised the US “misguided zero-sum approach” to China, American diplomats complained about “Europe’s reluctance to stand up to China.”44 In large part, this difference can be attributed to the much greater US stake in Asia in the form of its post-war military assets and alliances as well as its broader regional and global roles that are now threatened by a China intent on regaining its hegemony over the region and expanding its global influence. While European countries have expressed general concerns about China’s ambitions in the region, most of them do not have very immediate and tangible interests involved in this aspect of the strategic competition, and they seem focused primarily on reducing risks and tensions that might eventually affect their economic ties to China and the region. In this context, it will be very difficult for the United States to obtain European cooperation in developing a unified response to China’s strategic challenge. While sharing some concerns about BRI in the recent meeting, for example, European participants also complained about the White House’s “mistaken belief that it can employ an à la carte

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approach with its partners, denouncing them publicly on some issues while expecting cooperation on others.” Similarly, with respect to USChina trade negotiations, a European diplomat indicated to me that there is real concern among his European colleagues that a final agreement, if eventually reached, could actually compromise European interests. He noted that recent shifts in US Government policies with respect to the Chinese telecommunications giant Huawei, for example, had increased uncertainty in Europe about the reliability and consistency of US commitments. In a study looking at the EU’s options amid the US-China trade war, one European economist suggested that the EU might need to begin exploring eventual “rebalancing toward China” to protect its own interests.45 There were also some doubts about the US commitment to democratic principles and human rights values under the Trump administration. While top US Government officials such as Vice President Pence and Secretary of State Pompeo spoke out repeatedly and strongly against perceived human rights violations in China, many have noted that President Trump himself appeared to be entirely focused on trade and economic issues. In fact, there appeared to be a general, if implicit, understanding within the US Government that the priorities of US-China trade negotiations were to take precedence over other China-related matters, including those related to human rights, and that the latter should not infringe on progress towards a final trade agreement. In this connection, it was widely noted that when asked by the media about the ongoing protests in Hong Kong and whether he was concerned that China might intervene, President Trump replied that the city had experienced “riots for a long period of time,” and that “Hong Kong is a part of China, they’ll have to deal with that themselves.”46 These comments, especially referring to the protests as “riots,” contrast notably from statements of the EU and other European leaders emphasising the need to respect the Hong Kong people’s “fundamental right to assemble and express themselves freely and peacefully.”47 On the other side of the Atlantic, Brexit and the rise of populist regimes and growing division among some European countries may also make it more difficult for the EU to develop its own united front to respond to the challenge from China. As Donfried also observed, “authoritarian populism is rising in Europe because of growing concerns about economic inequality and the loss of national identity as a result of immigration,” thus potentially eroding support for the EU and European

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integration.48 Although the EU has thus far held firm in the process of Brexit, it is not certain whether and how long this unity can be maintained as EU members continue to face increasingly difficult economic and immigration issues, especially in the midst of the recent pandemic crisis, and in the years ahead. In some ways, Brexit may be a reflection of the choices that other EU members will confront in future. In fact, Brexit, formally taking place at the end of January 2020, has not only weakened the EU as a major economic and political bloc but could also fuel Euro-sceptics and populist nationalists, possibly further undermining the effectiveness of the EU in future. Thus, with many of its member countries even more focused on their own diverging economic and political interests, and more sceptical of the EU, it could become increasingly difficult for the EU to maintain unity as well as the consensus needed to implement a China policy that addresses their broader long-term interests. Meanwhile, giving it increasing leverage and influence, China has dramatically expanded its trade and investment ties to Europe, with the EU now China’s largest trading partner and China becoming the EU’s second-largest trading partner after the United States. In his recent testimony to the US Congress, Philippe Le Corre, a French academic and former government official, noted that China’s annual foreign direct investment (FDI) in the EU “skyrocketed from $840 million in 2008 to $42 billion in 2017.” This figure does not even include the acquisition of the Swiss agri-business giant Syngenta for $43 billion by a Chinese state-owned enterprise in 2017.49 The vast majority of Chinese direct investment, both state and private, is concentrated in the major European economies, such as the UK, France, Italy and Germany, with nearly $50 billion accumulated investment in the UK.50 From 2015 to 2017, for example, it is reported that Chinese companies acquired nearly a dozen major robotics companies in the United States and EU that included German-based Kuka AG, the world’s fourth-largest robot manufacturer, for $4.5 billion.51 In 2018, Chinese investors also acquired a majority stake in British chip designer Arm’s subsidiary in China through its Japanese owner SoftBank for $775 million.52 Although Chinese FDI fell sharply in 2018–2019 from previous highs due largely to Chinese capital controls and new investment screening regulations in the EU, Chinese investments into the UK actually rebounded in 2019 partly as a result of the Brexit-pressured pound depreciation. According to the consulting firm Deloitte, non-real estate-related FDI from China into the UK in 2019 had reached an estimated $8.3

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billion, compared with $6.1 billion for the whole of 2018.53 In January 2020, perhaps not surprisingly, despite strong and high-level US Government interventions, the UK administration under Prime Minister Boris Johnson announced its decision to allow Huawei to take part in building the country’s non-core 5G network.54 Within the EU as a whole, it should be expected that countries will thus have different views and concerns about China’s expanding investments in Europe that stem largely from their own economic needs and interests. Many of the developing economies, for example, are much less concerned about the issues of intellectual property rights and technology competition highlighted in the EU-China Strategic Outlook and are more eager to attract Chinese capital and infrastructure investments. On the other hand, countries with advanced technologies as well as existing investments in China are more likely to be the targets of Chinese IPR theft and commercial acquisitions, and thus see the establishment of a foreign direct investment screening mechanism aimed particularly at China’s state-driven acquisitions as being more urgent. It thus remains a question as to whether such a mechanism, which will require the drafting of separate national laws and regulations, can be effectively implemented across the EU. More broadly, as part of its Belt and Road Initiative, China’s stateowned enterprises have also invested heavily in ports and infrastructure projects across Europe including, for example, a controlling stake in the Greek port of Piraeus. In his testimony, Le Corre warned Congress that “the greatest challenge is that Chinese investments in strategic sectors can generate economic dependence, especially among smaller countries and struggling economies, and this relationship can expand into the political realm.”55 For example, China has reached out separately to Central and Eastern European (CEE) countries that are seeking to increase trade and investment ties with China. Launched in 2012, the “16 + 1” annual summit between 16 (now “17 + 1, including Greece) European countries and China includes 12 EU members. Most of these countries have been strongly supportive of China’s Belt and Road Initiative in the hope of attracting Chinese infrastructure investment. Others in Europe, however, view “Beijing’s growing leverage over these countries…as a threat to EU unity, norms and values.”56 They point specifically to several instances where some of the EU members of this group have recently blocked proposed EU statements at the UN Human Rights Council critical of China’s human rights record as well as an EU

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declaration against Beijing’s activities in the South China Sea. With the EU often needing to make certain decisions on a consensual basis, China’s leverage on these countries makes it even more difficult for the EU to develop a unified policy vis-à-vis China. More recently, with the coronavirus pandemic spreading to most of Europe, many have argued that the offer of Chinese assistance to specific European countries, such as Hungary and Serbia (a current candidate for EU membership), is also intended to cover up China’s responsibility for the spread of the virus. They argue that such assistance also functions to “drive wedges between members of the European Union and to advance its propaganda war against the United States.”57 A news report noted, for example, that the Chinese embassy to France had “posted a series of tweets claiming the US Government had covered up a Coronavirus outbreak the year before as flu cases, deflecting claims that Covid-19 originated in China.”58 The report also pointed out that Huawei had very conspicuously donated millions of masks (“in cardboard boxes branded with Huawei logos”) to various EU governments in the middle of drafting rules on Huawei market access. In a recent blog post, EU’s foreign policy chief Josep Borrell himself warned against the “politics of generosity,” noting critically that “China is aggressively pushing the message that, unlike the US, it is a responsible and reliable partner.”59 Finally, there are also different degrees of concern among EU members on the issues of China’s human rights record and authoritarian political system. In a survey of 17 European countries and the EU itself, a recent study found that, despite the strong and public concerns raised by the EU about China’s worsening human rights record, only three EU members— Germany, Sweden and the UK—stood out as “active and vocal” advocates of “political values” (defined here as democracy, human rights and the rule of law) with respect to China over the years.60 Six of these countries (including Norway as a non-EU member) were classified as being “active and discreet” in promoting political values in China, while the remaining countries were categorised as “passive” or “passive and potentially counteractive.” The study found that historical legacy, economic relations (with China) and Chinese pressure were all factors contributing to the different perspectives and policies among these countries. While the general public and media in all the countries surveyed had “largely negative views” of China’s political system, there were divergent views on how and the extent to which Europe should be defending or promoting political values in relations with China.

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Confronting China’s Strategic Threat and Strengthening the Liberal International Order It is thus clear that the United States and the EU will face serious challenges in countering China’s growing threat to their interests as well as the values of the liberal international order. We need to start with the assumption, as seen above, that there will continue to be different views and priorities between the United States and the EU, and among European countries themselves, that will lead to different policy responses on a wide range of issues. Given these differences, and making clear that this is not a zero-sum competition with China, the United States and the EU should focus on mobilising various “coalitions of the willing” to tackle the specific challenges that China poses. At the same time, however, we have seen converging views on how China’s rapidly growing economic and military power, along with its authoritarian state-driven model, threatens to undermine the existing rules and standards of the widely accepted global trading system, infringe on the sovereignty of other countries and erode the values of the liberal international order that has helped foster the growth of democracies and respect for universal human rights around the world for the past 75 years. So, the question now is whether and how the United States and the EU, as well as the UK, can identify common interests, despite the differences, to work separately and together to respond to this broad and growing challenge. To start with, the United States and the EU will need to address the issues that emerged under the Trump administration and begin to repair and strengthen the increasingly troubled trans-Atlantic relations. Above all, they—including the UK—need to search for opportunities to reaffirm the enduring interests and values that have bound them together over the past decades while, however difficult, begin to work more discretely to address and resolve the various issues that have strained this relationship. As clearly evident at the recent Munich Security Conference in February 2020, the United States and key EU members, such as Germany and France, do have markedly different perspectives about the current state of trans-Atlantic relations.61 Despite voicing these differences, however, it is noteworthy that these leaders all continued to affirm and emphasise, perhaps even more strongly, the existence and importance of the underlying values of the liberal international order while pointing out

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the challenges that the “West” (broadly defined in terms of rules-based democratic and human rights values) currently faces in protecting and promoting these values around the world. Thus, under the incoming administration the United States needs to reach out proactively to the EU and European allies to consult on the specific trade and investment as well as defence spending issues that have been the main source of recent friction between the two sides. Although it is unlikely that they will be able to resolve these issues in the short term, it is nonetheless important to resume discussions as soon as possible with the aim of turning the relationship around and making some progress in mitigating their impact on trans-Atlantic relations. Some of the trade issues could be addressed within the context of, or parallel to, negotiations on a US-UK Free Trade Agreement, if these continue, as well as a narrower US-EU trade deal.62 During his January 2020 visit to the UK, for example, US Secretary of State Pompeo underscored that the two countries “would retain and enhance their special relationship” after Brexit, step up bilateral FTA negotiations—including further discussions on the Huawei issue—and predicted “exponential” growth in bilateral trade that will relieve some of the economic pressures on the UK.63 Meanwhile, the United States and EU should at least suspend further tariff measures as negotiations proceed toward an interim trade deal. On the part of Europe, there needs to be an acknowledgement that some of the defence, among other, issues do stem from long-standing US concerns about the need for more of its allies to assume even greater regional and global responsibilities. In fact, key European leaders underscored the importance of “strengthening Europe’s role in the world” at the 2020 Munich Security Conference. In effect, these combined efforts should aim to expand existing economic ties and enhance closer cooperation across the Atlantic at this critical moment in the history of the “West”. With respect to confronting China’s strategic challenge, the US Government should increase its efforts to inform and consult with EU, UK and other European officials on the full range of US policies vis-àvis China in order to improve understanding and restore trust between the two sides. While there are still likely to be many differences, this effort should seek to identify areas where there might be common interests among some of the countries and thus facilitate cooperation among them. Specifically, they need to focus on coordinating policy responses to China’s state-driven trade and investment practices, particularly with

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respect to intellectual property rights and technology competition, its increasingly expansive and aggressive military activities in the East and South China Seas, and gross human rights violations within China as well as its coercive actions against the peoples of Hong Kong and Taiwan.

Promoting Rules and Standards in the Global Economic Order While the United States and China did reach an interim Phase One Trade Agreement in January 2020, there is much scepticism, given its previous record, as to whether China will fully implement its commitments to protect IPR and halt the state-directed acquisition of foreign technology in targeted industries.64 Moreover, China has refused to include the key issues of government subsidies, cyber-security and state access to private company data networks in the negotiation of this agreement, deferring them indefinitely to future negotiations. With its comparative advantage as a low-cost manufacturing centre gradually diminished by other developing countries, China now seeks to move up the value chain by developing an advanced technology economy as quickly as possible. Unable yet to build its own innovation base, however, Beijing has continued to pursue its state-driven strategy (reflected in “Made in China 2025”) to acquire foreign technology through forced technology transfers, cyber-theft and commercial acquisitions to create its own national champions, whether private or state-owned enterprises. In response, as discussed earlier, the United States has not only taken retaliatory tariff measures under Section 301 in reaction to Chinese forced technology transfer and cyber-theft practices but also mandated a national security review of foreign direct investments in critical high-tech industries. It has also imposed restrictions on major Chinese technology companies, such as Huawei, seeking to operate in the United States. Beyond this, the US Justice Department also launched a nation-wide “China Initiative” in 2018 to investigate and counter Chinese economic espionage activities against US companies and research institutions, which has already resulted in the prosecution of a number of high-profile cases over the past two years.65 The United States and China thus remain far apart on the fundamental issues related to China’s state-driven development model that seeks through non-market and often extra-legal mechanisms to achieve global economic and technological superiority as well as to advance China’s broader foreign policy goals. Whatever the

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results of the 2020 presidential election, the next US administration will continue to face this critical challenge from China. Similarly, it is clear from the EU-China Strategic Outlook that advanced European countries in particular also share serious concerns about China’s state-driven industrial policies aimed at acquiring—legally or illegally—their advanced technology and eroding their comparative advantage. After the sharp rise in Chinese FDI in Europe targeting European high-tech industries since 2015, the EU has also developed a foreign direct investment screening framework directed primarily at Chinese acquisitions that took effect in April 2019, and has urged all EU members to enact national regulations needed to fully implement this framework as soon as possible. While certain policy differences may continue to exist, it would thus be useful for US, EU and European trade officials to consult regularly on ways to coordinate and improve the effectiveness of their respective policies and implementation in this area, including on the controversial issue of Huawei’s quest to help build the European 5G networks. They should also seek to include other advanced economies, such as Japan, Korea, Taiwan and Australia, who all have important stakes and critical roles to play in this effort. The US Justice Department should also be briefing EU and British officials regularly on the progress of its “China Initiative” to underscore the urgency and seriousness of Chinese economic espionage not only in the United States but possibly in Europe. Both sides need to underscore the need for joint action to bring about the structural changes in China that would create a more level playing field and strengthen the market and rules-based system of the global economic order. Additionally, it is critical that the United States, EU and the UK increase their cooperation within the WTO to challenge China’s nonmarket economy and industrial policies and government subsidies to its state-owned enterprises. For example, the US and EU refusal to grant China “market economy status” at the end of 2016 was essentially upheld when the WTO dispute settlement body suspended proceedings—at China’s own request—on its case against the EU on this issue in June 2019.66 The United States had submitted a third party filing supporting the EU position in this case. In connection with the US Section 301 Action against China in March 2018, the United States also officially launched a trade complaint at the WTO regarding China’s allegedly discriminatory technology licensing practices.67 Separately, the EU has filed complaints against China at the WTO over its forced

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technology transfer policies, specifically including electric vehicles and biotechnology.68 A recent CATO Institute study concluded that the WTO dispute settlement mechanism has actually had success in bringing about some market openings in China but is currently underutilised.69 In this connection, the United States should consult with the EU and others on ways to further improve the WTO dispute settlement mechanism with respect to specific US concerns regarding anti-dumping cases to address and resolve the current stalemate in the appointment of judges to the appellate process. Beyond this, the United States and the EU, along with the UK, Japan and others, should work towards broader WTO reforms that will improve its overall effectiveness and can challenge directly China’s government subsidies to its state-owned enterprises, especially in relation to their global activities. Looking to the future, the reform and strengthening of the WTO system are essential to enhancing the rules-based international economic order that should be their long-term goal. Another prospective area for US-EU cooperation would be in jointly promoting appropriate financial, governance, labour and environmental standards with respect to public-private assistance to developing countries. Both have recently launched new sustainable development and connectivity initiatives that will seek to promote and apply these standards and provide substantial funding alternatives to China’s Belt and Road Initiative.70 US and EU officials have now begun to meet regularly to refine standards and coordinate global projects. Thus, they should consider expanding cooperation to include Japan, given its significant global infrastructure development assistance programme.71 This effort need not be opposed to China’s BRI projects. However, it could be used to alert recipient countries about the economic and political costs and risks involved in accepting Chinese loans for major infrastructure projects as well as to inform them of the standards that should be employed to safeguard against corruption, poor labour practices and environmental degradation. Ideally, this could eventually pressure China into adopting similar standards for its BRI projects abroad as well.

Maintaining Peace and Security in Asia As noted earlier, the United States has stepped up its naval operations and clearly plans to strengthen its forward military position in the region as a response to China’s massive reclamation projects and militarisation

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of the South China Sea. Nonetheless, one security analyst argued that US efforts are “probably too little, too late” to reverse what China has already put in place that “has enabled it to claim possession of the South China Sea.”72 He advised that the United States needs to get tougher by not only increasing the frequency of FONOPs but also “send warships deeper into the 12-nautical-mile radius around the islands and reefs that China claims” to press the point home. Others noted that US FONOPs “have proved insufficient to prevent Beijing from using gray zone pressure to expand its influence over the sea and airspace within the nine-dash line and block its neighbors from accessing resources (including oil, gas and fish) in their own waters.”73 They argued that this had eroded US credibility among countries in Southeast Asia, and recommended that the United States further highlights Chinese transgressions, reaffirms its regional security commitments and considers sanctions against Chinese entities that violate international law. This is thus an area where stronger US-European and regional cooperation could have an impact. In the Asia Reassurance Initiative Act signed into law during December 2018, the US Congress authorised $1.5 billion for military and diplomatic programmes in the Asia and Pacific region. They tasked the president with developing “a diplomatic strategy that includes working with the United States allies and partners to conduct joint maritime training and freedom-of-navigation operations in the IndoPacific region, including the East China Sea and the South China Sea.”74 This would underscore that the issue is not simply one involving regional territorial disputes or US-China rivalry but also a matter of upholding international law. Although it is clear that the EU as a whole does not have a security role, the EU as an institution must continue to maintain and publicly express its position with regard to the need for China to adhere to its obligations under UNCLOS. Meanwhile, individual European countries, such as France and the UK, have been stepping up their naval operations in the area and should be encouraged to further expand their presence in the coming years. France was reported to have sailed at least five ships into the South China Sea in 2017, as well as conducting a joint FONOP with the UK in the Spratly Islands in June of 2018.75 More recently, a French warship passed through the strategic Taiwan Strait in early April 2019.76 During a security conference in Singapore in June 2018, the British Defence Secretary indicated that the UK would begin sending warships through

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Pacific waters to demonstrate its commitment to internationally recognised maritime rules in the region.77 In August, it was reported that the HMS Albion, an amphibious warship carrying a contingent of Royal Marines, exercised its “freedom of navigation” rights as it passed near the Paracel Islands.78 In a press interview in October, the Royal Navy commander said that Britain—despite protests by China—would continue to assert its right to freedom of navigation near disputed islands claimed by China.79 He also described the patrols as a means of demonstrating tangible support for allies in the region. Post-Brexit in February 2020, the HMS Enterprise, an Echo-class survey ship, paid a “courtesy” visit to the coastal city of Haiphong in Vietnam to highlight bilateral defence ties and, according to the British ambassador, to demonstrate “the UK’s commitment to security in the Asia-Pacific.”80 Both France and the UK are now reportedly planning to deploy aircraft carriers to the region within the next two years.81 It is thus important that the United States and its allies are conducting joint operations more frequently. Apart from the biennial RimPac exercise, the US Navy regularly trains with allies and partners in the Pacific, working with countries such as Japan, the Philippines and Australia throughout the year, including joint US-Philippine maritime activities around the contested Scarborough Shoals currently controlled by China.82 According to the US Navy, US and British ships conducted three joint training drills in the western Pacific from January to February 2019.83 In January 2019, US and UK warships also sailed together in the South China Sea, conducting communication and manoeuvring drills and exchanging personnel.84 As US Indo-Pacific Commander Adm. Phil Davidson told the Senate in February 2019, “We’ve had allies and partners in the region—the UK, Japan, Australia, New Zealand, Canada, France, all in one form or another step up their operations in the South China Sea, and I think that shows the international community’s willingness to push back.”85

Safeguarding Democracy and Human Rights Finally, the United States, EU and the UK must work together more openly and actively to support democracies and promote respect for universal human rights in the face of China’s increasing threat to the maintenance of these values within China and around the world. As

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the Trump administration stated in its National Security Strategy report, “a geopolitical competition between free and repressive visions of world order is taking place in the Indo-Pacific region.” In many ways, this is the most fundamental and difficult challenge that the world faces today, not only from China or in the Indo-Pacific region but also across the world from Russia and other authoritarian regimes and even within our own countries. It should be understood that the gradual erosion of the current rules-based liberal international order could eventually bring us back to the era of powerful authoritarian regimes and xenophobic rivalries that brought us the catastrophes of two world wars. The United States, EU and the UK, as the architects of the post-war liberal international order, have a responsibility to lead the world in confronting this grave challenge. With respect to China, specifically, the United States, EU members and the UK should start by working with relevant human rights NGOs to document and publicise even more widely reports of China’s gross human rights violations through the media and in public forums, including at the United Nations. The aim here is to raise public awareness and highlight deteriorating human rights conditions under China’s increasingly repressive authoritarian regime for even more of the world, including Chinese people at home and abroad, to see. For instance, the mass detention of over a million Muslims in “re-education camps” should not only be of concern to Muslim communities but should be a concern to all peoples, and particularly to cultural, ethnic and religious minorities in other countries around the world. Moreover, notwithstanding Beijing’s protests and retaliatory measures, senior US, EU and European officials need to be even more open and direct in speaking out against China’s human rights violations. They should continue to speak out publicly against Beijing’s increasingly repressive measures against its own citizens who seek to express different political views and against Muslim and other ethnic minorities. They should be unequivocal in expressing support under the Basic Law for the individual rights and freedom of the people in Hong Kong as well as for the right of the people in Taiwan to determine their own future. And even if President Trump was not personally focused on human rights issues, senior members of the US administration need to continue to speak out publicly and forcefully. Their failure to do so would undermine the longterm credibility of the United States in its support of democracy and universal human rights values around the world. In short, China should

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be openly challenged to live up to its public claims to be a global leader that upholds international law and respects human rights principles. In more concrete and substantive terms, the United States, EU and the UK should work with and significantly expand financial support for international NGOs and non-profit institutions to bolster democracies and promote human rights values around the world. One of the most effective ways to do this is to respond directly to Beijing’s threat against Taiwan and its democracy by expanding broad and multi-faceted ties with Taiwan to enable it to resist Beijing’s efforts to isolate it from the global community. To begin with, the United States and EU should proceed quickly to negotiate bilateral trade and investment agreements with Taiwan to expand mutually beneficial economic ties as well as to bolster Taiwan’s strategic position in the region. They should also support and encourage US and European NGOs to engage more actively with Taiwan’s vibrant NGO community not only to strengthen Taiwan’s own democracy and civil society but also to work together to facilitate the growth of NGOs and civil societies in the region, particularly in Southeast Asia. As such, Taiwan’s democracy can serve as a model for other countries in the region, including for the Chinese people on the mainland.

Conclusion Although the United States, UK and EU member countries continue to have different interests and priorities vis-à-vis China, it appears that there is growing convergence on views about specific aspects of China’s strategic threat, whether concerning its state-driven economic model, aggressive military policies in the region or increasingly authoritarian and repressive regime. The key point here is that these are interconnected facets of an increasingly powerful China that poses a genuine threat to the rules-based, liberal international order that the United States and many EU members—especially the UK—have built and sought to maintain since World War II. In this chapter, I have thus identified specific areas of common interests and offered suggestions as to how the United States and EU members as well as the post-Brexit UK might be able to respond together, and in their own ways, to the different aspects of this broad strategic challenge. Regardless of the outcome of the upcoming US presidential election and the consequences of Brexit for either the EU or Britain, the United States and Europe will continue to face this potentially existential threat to the

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post-war liberal international order. To be sure, the end goal is not to disengage from or contain China but rather to make clear to China that it can no longer continue to benefit from this system while ignoring and taking advantage of its rules and norms, and that it is in China’s own long-term interest to help maintain and strengthen this rules-based liberal international order.

Notes 1. Donald J. Trump, National Security Strategy (NSS) (Washington, DC: White House, 2017), 45, https://www.whitehouse.gov/wp-content/upl oads/2017/12/NSS-Final-12-18-2017-0905.pdf. 2. Trump, 25. 3. James Mattis, Summary of the 2018 National Defense Strategy (NDS) (Washington, DC: US Department of Defense, 2018), 1, https://dod. defense.gov/Portals/1/Documents/pubs/2018-National-Defense-Str ategy-Summary.pdf. 4. ‘EU-China—A strategic Outlook,’ European Commission and HR/VP contribution to the European Council (Strasbourg, 12 March 2019), 1, https://ec.europa.eu/commission/sites/beta-political/files/commun ication-eu-china-a-strategic-outlook.pdf. 5. ‘EU-China—A strategic Outlook,’ 1. 6. ‘EU-China—A strategic Outlook,’ 2. 7. Trump, ‘National Security Strategy (NSS),’ 1. 8. Trump, 21. 9. Trump, 21. 10. ‘Presidential Memorandum on the Actions by the United States Related to the Section 301 Investigation,’ 22 March 2018, https://www.whiteh ouse.gov/presidential-actions/presidential-memorandum-actions-unitedstates-related-section-301-investigation/. 11. Heather Timmons, ‘Timeline: Key Dates in the U.S.-China Trade War,’ Reuters, 15 January 2020, https://www.reuters.com/article/us-usatrade-china-timeline/timeline-key-dates-in-the-u-s-china-trade-war-idU SKBN1ZE1AA. 12. Timmons. 13. ‘U.S. Congress Foreign Investment Risk Review Modernization Act,’ Committee on Foreign Investment in the United States (Washington, DC, 13 August 2018), https://home.treasury.gov/sites/default/files/ 2018-08/The-Foreign-Investment-Risk-Review-Modernization-Act-of2018-FIRRMA_0.pdf. 14. ‘Addition of Entities to the Entities List,’ U.S Federal Register (Bureau of Industry and Security, Commerce, 21 May 2019), https://www.fed

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15.

16.

17. 18. 19. 20. 21.

22.

23.

24. 25.

26.

27.

28. 29.

eralregister.gov/documents/2019/05/21/2019-10616/addition-of-ent ities-to-the-entity-list. ‘Treasury Designates China as Currency Manipulator,’ U.S. Treasury Department Press Release, 5 August 2019, https://home.treasury.gov/ news/press-releases/sm751. David Lauder, Andrea Shalal, and Jeff Mason, ‘What’s in the US-China Phase 1 Trade Deal,’ Reuters, 15 January 2020, https://www.reuters. com/article/us-usa-trade-china-details-factbox/whats-in-the-us-chinaphase-1-trade-deal-idUSKBN1ZE2IF. Trump, ‘National Security Strategy (NSS),’ 46. Trump, 46. Trump, 47. Trump, 47. Mark J. Valencia, ‘The Latest US Spin On Its South China Sea FONOPs Against China—Analysis,’ Eurasia Review, 27 May 2019, https://www.eurasiareview.com/27052019-the-latest-us-spin-onits-south-china-sea-fonops-against-china-analysis/. Helene Cooper, ‘U.S. Disinvites China from Military Exercise Amid Rising Tension,’ New York Times, 23 May 2018, https://www.nytimes. com/2018/05/23/world/asia/us-china-rimpac-military-exercise-ten sions.html. Mark Stone and Patricia Zengerle, ‘US Defense Bill Takes Aim at China’s Growing Influence,’ Reuters, 23 May 2019, https://www.reuters.com/ article/us-usa-defense-spending/u-s-defense-bill-takes-aim-at-chinas-gro wing-influence-idUSKCN1ST1P4. Trump, ‘National Security Strategy (NSS),’ 23. Mike Pence, ‘Vice President Mike Pence’s Remarks,’ Hudson Institute, 4 October 2020, https://www.hudson.org/events/1610-vice-presid ent-mike-pence-s-remarks-on-the-administration-s-policy-towards-china1 02018. Mike Pence, ‘Remarks by Vice President Pence at the Frederic V. Malek Memorial Lecture,’ Whitehouse.gov, 24 October 2019, https://www.whitehouse.gov/briefings-statements/remarks-vicepresident-pence-frederic-v-malek-memorial-lecture/. ‘China Is “in a League of Its Own” on Human Rights Violations, Pompeo Says,’ The Guardian, 13 March 2019, https://www.thegua rdian.com/global-development/2019/mar/13/china-human-rights-vio lations-mike-pompeo. ‘China Is “in a League of Its Own” on Human Rights Violations, Pompeo Says.’ ‘Country Reports on Human Rights Practices: China (Includes Hong Kong, Tibet and Macau)—China,’ Executive Summary (Washington, DC: US Department of State, 13 March 2019), https://www.state.gov/

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31. 32. 33. 34. 35. 36. 37.

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wp-content/uploads/2019/03/CHINA-INCLUDES-TIBET-HONGKONG-AND-MACAU-2018.pdf. Michael R. Pompeo, Secretary Michael R. Pompeo on the Release of the 2019 Country Reports on Human Rights Practices (Washington, DC: U.S. Department of State, 11 March 2020), https://www.state.gov/sec retary-michael-r-pompeo-on-the-release-of-the-2019-country-reports-onhuman-rights-practices/. ‘EU-China—A strategic Outlook,’ 1. ‘EU-China—A strategic Outlook,’ 5. ‘EU-China—A strategic Outlook,’ 6–7. ‘EU-China—A strategic Outlook,’ 8–10. ‘EU-China—A strategic Outlook,’ 3–4. ‘EU-China—A strategic Outlook,’ 2. ‘The European Union and China Held Their 37th Human Rights Dialogue,’ Press Release from EEAS Press Team (European Union External Action Service, 2 April 2019), https://eeas.europa.eu/topics/ external-investment-plan/60545/european-union-and-china-held-their37th-human-rights-dialogue_en. ‘China Island Tracker Center for Strategic and International Studies (CSIS),’ Asia Maritime Transparency Initiative, n.d., https://amti.csis. org/island-tracker/china/. Nguyen Minh Quang, ‘Saving the China-ASEAN South China Sea Code of Conduct,’ The Diplomat, 29 June 2019, https://thediplomat.com/ 2019/06/saving-the-china-asean-south-china-sea-code-of-conduct/. ‘EU-China—A strategic Outlook,’ 2. Larry Diamond and Orville Schell, Chinese Influence and American Interests —Report of the Working Group on Chinese Influence Operations in the United States (Hoover Institution Press, 2019), https://www.hoo ver.org/sites/default/files/research/docs/chineseinfluence_americaninter ests_fullreport_web.pdf. Karen Donfried, ‘European Disunion and America First,’ German Marshall Fund (GMU) Blog Post (blog), 19 February 2019, http://www. gmfus.org/blog/2019/02/19/european-disunion-and-america-first. Noah Barkin, ‘The U.S. Is Losing Europe in Its Battle with China,’ The Atlantic, 4 June 2019, https://www.msn.com/en-xl/northamerica/topstories/the-us-is-losing-europe-in-its-battle-with-china/ar-AACpDAU?li= BBKhQr3. Barkin. Alicia Garcia Herrero, ‘Europe in the Midst of China-US Strategic Competition: What Are the European Union’s Options?,’ Breugal, 8 April 2019, https://www.bruegel.org/2019/04/europe-in-the-midst-ofchina-us-strategic-competition-what-are-the-european-unions-options/.

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46. Felix Tam and Anne Marie Roantree, ‘Trump Says It’s Up to China to Deal with Hong Kong Riots,’ Reuters, 2 August 2019, https://www. reuters.com/article/us-hongkong-protests-trump/trump-says-its-up-tochina-to-deal-with-hong-kong-riots-idUSKCN1US0OR. 47. ‘Global Backing for Protest Rights as Trump Hopes Hong Kong Can “Work It Out”,’ The Guardian, 12 June 2019, https://www.thegua rdian.com/world/2019/jun/13/global-reaction-hong-kong-protest-rig hts-trump-may. 48. Donfried, ‘European Disunion and America First.’ 49. Philippe Le Corre, ‘On China’s Expanding Influence in Europe and Eurasia, Testimony before the House of Representatives Foreign Affairs Committee, Carnegie Endowment for International Peace (CEIP),’ Carnegie Endowment for International Peace, 9 May 2019, https://carnegieendowment.org/2019/05/09/on-china-s-expand ing-influence-in-europe-and-eurasia-pub-79094. 50. ‘How Much of Europe Does China Own?,’ BBC, 20 April 2019, https:// www.bbc.com/news/world-47886902. 51. Frank Tobe, ‘Another Two Chinese Acquisitions of International Robotics Companies,’ The Robot Report, 14 November 2017, https://www.the robotreport.com/another-chinese-acquisition-european-robotics-manufa cturer/. 52. Kana Inagaki, Arash Massoudi, and Aliya Ram, ‘SoftBank Offloads Majority Stake in Arm’s China Unit for $775m,’ Financial Times, 5 June 2018, https://www.ft.com/content/5e855692-688b-11e8-8cf30c230fa67aec. 53. Angus McNeice, ‘Chinese Investment in the UK Bounces Back After Slow Year,’ China Daily Global, 29 August 2019, http://global.chinadaily.com. cn/a/201908/29/WS5d6723f6a310cf3e3556878f.html. 54. Michael Holden, ‘Trump’ Apoplectic’ with UK’s Johnson over Huawei Decision,’ Reuters, 7 May 2018, https://www.reuters.com/article/us-bri tain-usa-huawei-trump/trump-apoplectic-with-uks-johnson-over-huaweidecision-ft-idUSKBN2002R2. 55. Corre, ‘On China’s Expanding Influence in Europe and Eurasia, Testimony Before the House of Representatives Foreign Affairs Committee, Carnegie Endowment for International Peace (CEIP).’ 56. Srinivas Mazumdaru, ‘EU Fears Divisions as China woos Eastern European Nations,’ Made for Minds, 7 May 2018, https://www.dw.com/en/ eu-fears-divisions-as-china-woos-eastern-european-nations/a-44542971. 57. Peter Rough, ‘How China Is Exploiting the Coronavirus to Weaken Democracies,’ Hudson Institute, 25 March 2020, https://www.hudson. org/research/15860-how-china-is-exploiting-the-Coronavirus-to-wea ken-democracies.

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58. Stuart Lau, ‘EU Fires Warning Shot at China in Coronavirus Battle of the Narratives,’ South China Morning Post (SCMP), 24 March 2020, https://www.scmp.com/news/china/diplomacy/article/ 3076728/eu-fires-warning-shot-china-Coronavirus-battle-narratives. 59. Lau. 60. ‘Political Values in Europe-China Relations,’ A Report by the European Think-Tank Network on China (ETNC, December 2018), https://www. merics.org/sites/default/files/2019-01/190108_ETNC_report_2018_u pdated_2019.pdf. 61. ‘Westlessness—The Munich Security Conference 2020,’ Event Summary (Munich Security Conference, 16 February 2020), https://securityconf erence.org/en/news/full/westlessness-the-munich-security-conference2020/. 62. Kimberly Ann Elliott, ‘A Smaller U.S.-EU Trade Deal Is Possible— If Trump Doesn’t Blow It Up,’ World Politics Review, 25 February 2020, https://www.worldpoliticsreview.com/articles/28558/asmaller-u-s-eu-trade-deal-is-possible-if-trump-doesn-t-blow-it-up. 63. Matthew Lee, ‘Pompeo Reassures Britain on US Relations After Brexit,’ AP News, 30 January 2020, https://apnews.com/f79ffc8e2da3ca440a a773ceb1bee16e. 64. Peter Eavis, Alan Rappeport, and Ana Swanson, ‘What’s in (and Not in) the U.S.-China Trade Deal,’ The New York Times, 15 January 2020, https://www.nytimes.com/2020/01/15/business/eco nomy/china-trade-deal-text.html. 65. Betsy Woodruff Swan, ‘Inside DOJ’s Nationwide Effort to Take on China: Federal Prosecutors Say the Pandemic Hasn’t Hindered Their Efforts to Crack Down on Chinese Espionage,’ Politico, 7 April 2020, https://www.politico.com/news/2020/04/07/justice-dep artment-china-espionage-169653. 66. James J. Nedumpara, ‘China’s Market Economy Status in WTO: In a State of Abeyance,’ Financial Express, 8 July 2019, https://www.fin ancialexpress.com/economy/chinas-market-economy-status-wto-state-abe yance/1636350/. 67. Vicki Needham, ‘US Launches Trade Case Against China over Licensing Practices,’ The Hill, 23 March 2018, https://thehill.com/policy/ finance/380009-us-launches-trade-case-against-china-over-licensing-pra ctices. 68. Philip Blenkinsop, ‘EU Expands WTO Case Against Chinese Technology Transfers,’ Reuters, 20 December 2018, https://www.reuters.com/art icle/us-eu-china-wto/eu-expands-wto-case-against-chinese-technologytransfers-idUSKCN1OJ1AP. 69. James Bacchus, Simon Lester, and Huan Zhu, ‘Disciplining China’s Trade Practices at the WTO: How WTO Complaints Can Help Make China

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70. 71. 72.

73.

74. 75.

76.

77.

78. 79. 80.

81. 82.

83.

More Market-Oriented,’ CATO Institute, Policy Analysis, no. 856 (15 November 2018), https://www.cato.org/publications/policy-analysis/ disciplining-chinas-trade-practices-wto-how-wto-complaints-can-help. Reference here is to the “EU-Asia Connectivity Strategy” and the US “Better Utilization of Investment Leading to Development” (BUILD). Barkin, ‘The U.S. Is Losing Europe in Its Battle with China.’ Caitlin Doornbos, ‘Freedom-of-Navigation Ops Will Not Dent Beijing’s South China Sea Claims, Experts Say,’ Stars and Stripes, 4 April 2019, https://www.stripes.com/news/pacific/freedom-of-navigation-ops-willnot-dent-beijing-s-south-china-sea-claims-experts-say-1.575609. Zach Cooper and Greg Poling, ‘America’s Freedom of Navigation Operations Are Lost at Sea,’ Foreign Policy, 8 January 2019, https://foreignpolicy.com/2019/01/08/americas-freedom-of-nav igation-operations-are-lost-at-sea/. Doornbos, ‘Freedom-of-Navigation Ops Will Not Dent Beijing’s South China Sea Claims, Experts Say.’ Tuan An Luc, ‘Are France and the UK Here to Stay in the South China Sea?,’ The Diplomat, 14 September 2018, https://thediplomat.com/ 2018/09/are-france-and-the-uk-here-to-stay-in-the-south-china-sea/. Idrees Ali and Phil Stewart, ‘Exclusive: In Rare Move, French Warship Passes Through Taiwan Strait,’ Reuters, 24 April 2019, https://www. reuters.com/article/us-taiwan-france-warship-china-exclusive/exclusivein-rare-move-french-warship-passes-through-taiwan-strait-idUSKCN1S 10Q7. Wyatt Olson, ‘US, British Ships Train Together in Pacific for Third Consecutive Month,’ Stars and Stripes, 20 February 2019, https:// www.stripes.com/news/pacific/us-british-ships-train-together-in-pacificfor-third-consecutive-month-1.569525. Luc, ‘Are France and the UK Here to Stay in the South China Sea?’ Olson, ‘US, British Ships Train Together in Pacific for Third Consecutive Month.’ Prashanth Parameswaran, ‘UK Navy Vessel Vietnam Visit Highlights Defense Cooperation,’ The Diplomat, 21 February 2020, https://thedip lomat.com/2020/02/uk-navy-vessel-vietnam-visit-highlights-defense-coo peration/. Doornbos, ‘Freedom-of-Navigation Ops Will Not Dent Beijing’s South China Sea Claims, Experts Say.’ Ankit Panda, ‘South China Sea: US Destroyer Conducts Freedom of Navigation Operation Near Scarborough Shoal,’ The Diplomat, 21 May 2019, https://thediplomat.com/2019/05/south-china-sea-us-destroyerconducts-freedom-of-navigation-operation-near-scarborough-shoal/. Olson, ‘US, British Ships Train Together in Pacific for Third Consecutive Month.’

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84. Olson. 85. Ben Werner, ‘Future South China Sea FONOPS Will Include Allies, Partners,’ USNI News, 12 February 2019, https://news.usni.org/2019/02/ 12/41070.

CHAPTER 5

Imagining Brexit: The UK’s China Policy After the Referendum Tim Summers

Introduction This chapter examines British policy towards China from the ‘Brexit’ referendum of June 2016 to the UK’s departure from the EU on 31 January 2020.1 It uses a framework which examines the impact on policymaking of contrasting perceptions of China as a threat and/or an opportunity in the post-Cold War period. The premise of this analysis is that one consequence of the June 2016 Brexit referendum was a new degree of uncertainty about the future direction of British foreign policy, from its approach to relations with the EU after Brexit, to its attitude to the US, China and other emerging powers.2 The basic tenor of responses

An earlier version of this chapter was presented at the workshop on ‘Europe and East Asia after Brexit’ at the University of Nottingham, 1–2 November 2019. I am grateful to Chun-Yi Lee, Michael Reilly and the other participants for their comments. The usual disclaimers apply. T. Summers (B) The Chinese University of Hong Kong, Shatin, Hong Kong SAR © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_5

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to this uncertainty from policymakers after the referendum was either to stress continuity (thus postponing decisions about any new directions until after the shape of Brexit had become clearer) or to develop rhetorical concepts such as ‘Global Britain,’ whose precise implications for policy remained to be seen, and which were sufficiently flexible to allow a multitude of policy approaches.3 One implication of the latter was that, between June 2016 and January 2020, the future of the UK’s foreign policy after Brexit was particularly discursive; put another way, between the Brexit referendum and the UK’s actual withdrawal from the EU, post-Brexit Britain and its foreign policy were largely ‘imagined,’ though in ways which could have important material consequences. Ideas are important features of foreign policy. They reveal themselves in the way in which foreign policy elites position their country internationally, envisage its role and status,4 and approach relations with other countries. This emphasis on perception is at the heart of Scott Brown’s analysis of post-Cold War policy towards China in the US and the EU, which this chapter takes as a broad analytical framework for its discussion of Britain’s China policy after the Brexit referendum.5 Brown notes that, given that the implications of the rise of China have been substantially contested, an important factor in assessing other countries’ policy towards China is to ascertain how their policymakers perceive the rise of China and its impact.6 This emphasis on perceptions gives foreign policy actors and their agency a central role in the policymaking process, in contrast to approaches in International Relations (such as Power Transition Theory) which suggest that responses to China’s rise are structurally determined. Brown identifies the main postCold War perceptions of China’s rise in the US and EU as being either of threat or opportunity, developing this into a sixfold typology: military threat or military non-threat, economic threat or economic opportunity, and normative threat or political opportunity.7 This allows for multifaceted perceptions to develop alongside each other and consequently for multiple policy strands to coexist in response to the rise of China.8 The empirical focus of Brown’s study is a comparison of perceptions of China in the US and EU after the end of the Cold War. Across the Atlantic, he suggests that there was a common ‘fundamental objective’ of ‘ensuring China’s peaceful emergence.’9 At the same time, there were clear differences between the US and Europe, the former tending to perceive China more in terms of a threat than the latter. In the case of the UK, this accords with other studies which suggest that the UK has more

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consistently seen China as (economic) opportunity rather than (security) threat.10 These perceptions are clearly dynamic and influenced by multiple factors. In this chapter, the focus will be on the changing perceptions which policymakers in the UK have formed about the relative balance between political, economic and security threat and opportunity which China might bring to the UK after Brexit. The chapter is based primarily on the analysis of policy papers, statements and speeches from the government, with some reference to relevant contributions to the debate from other parts of the ‘subsystem’ of policymaking such as parliamentary committees, think tanks and media. Several issues recur and serve as good indicators of shifts in the policy mood: the Belt and Road Initiative (BRI) proposed by China; attitudes towards trade and investment, especially investment in the UK by Chinese companies; human rights; and maritime politics in the South China Sea. The chapter finds a range of perceptions in policy statements, from ideas that China offers important (and for some, necessary) economic opportunities for the UK after Brexit, or is an essential partner for the UK in global governance, to a growth in views of China as a challenge to the UK. These can be collated into three broad schools of thought about the impact of Brexit on China policy. First, the idea that Brexit is an opportunity for ‘Global Britain’ to develop deeper ties with China, in particular, to benefit from economic opportunities offered by China, including through some sort of free trade agreement (FTA). This view has been particularly prominent in China itself, but also echoed in some of the British debate. Second, the idea that Brexit presents a new challenge for London’s China policy as the UK will no longer have the policy options given by EU membership. This would relate to the ability to engage in a multi-layered approach to China, the safety in numbers on difficult issues and the more substantial lobbying clout that the EU enjoys. It could, therefore, be weaker and more vulnerable to Chinese lobbying on political issues, especially given the likely desire for Chinese investment or export markets. The third is that Brexit is neutral: China policy is mainly shaped by other trends such as the rise of China (with the contested perceptions of threat and opportunity that this brings), the changing approaches of ‘like-minded’ countries such as the US, Japan, Canada and the EU, developments in China itself, and the preferences of British politicians amid domestic debate about China.

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In conclusion, the chapter suggests that the ideas of economic opportunity were strongest in the immediate aftermath of the Brexit referendum, but diminished somewhat over time as security and normative concerns became more prominent and China policy became more contested through 2019. For the most part, it has been ‘non-Brexit’ factors relating to perceptions of developments in China which have had the greatest impact on the UK’s China policy, in contrast to the common tendency to look at every issue of British foreign policy through a Brexit lens.

The UK’s China Policy and the Brexit Referendum The legacy of Britain’s colonial history, in particular in Hong Kong, has meant that UK-China relations have long been an important part of British foreign policy. In the run-up to 1997, dealing with Hong Kong dominated China policy, but after its return to Chinese sovereignty, SinoBritish relations entered a new phase. This coincided with a growing sense of the significance of China’s rise and a general desire in the US and Europe to engage China and integrate it as much as possible into the post-Cold War international system, while continuing efforts to influence Chinese society and human rights in a more liberal direction. These dynamics were reflected in British policy towards China in the 2000s, which saw a growing emphasis on trade and investment ties, and a broadening of the relationship to incorporate engagement on global issues such as climate change and the promotion of deeper educational, cultural and scientific interactions. At the same time, human rights remained on London’s agenda. The hosting of the summer Olympics in Beijing and London in 2008 and 2012, respectively, reinforced the idea—at least in London—that a relationship of equals was emerging, and the government’s 2009 policy paper on China set out the direction for developing economic opportunities, while retaining space for attempts to influence Chinese behaviour.11 There was a positive start to relations under the coalition government in 2010, part of what Oliver Turner calls a ‘partial pivot to Asia.’12 However, the prime minister and deputy prime minister’s meeting with the Dalai Lama in 2012 put official high-level interactions with Beijing on hold for 18 months (though not with Hong Kong).13 After high-level exchanges were resumed with a ‘charm offensive’ from late 2013,14 relations intensified into 2015 and the UK’s positive response to the inauguration by Beijing of the Asian Infrastructure Investment

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Bank (AIIB), followed by the establishment of a ‘comprehensive global strategic partnership for the 21st century’ during President Xi Jinping’s state visit to the UK in October 2015, which heralded the start of the so-called ‘golden era’ in bilateral ties. This was the picture as the Brexit referendum of 23 June 2016 approached. Coincidentally, the vote took place the day after the EU issued a new policy paper on China, its first for a decade.15 As with other elements of EU policymaking towards China, the UK’s membership of the EU had been an important factor in this paper, both in the intergovernmental discussions over the EU policy document and through the presence in the EU institutions of British officials. These dynamics of EU policymaking will inevitably change following the decision in the referendum that the UK should leave the EU.16 Most existing analyses of the impact of the outcome of the referendum on the UK’s China policy begin by highlighting the uncertainty it has created for British foreign policy in general. Jie Yu also draws attention to the negative impact on Beijing’s engagement with the UK as a voice in the EU which tended to be supportive of Beijing’s approach on economic issues such as Market Economy Status under the WTO, high on the agenda in 2016.17 During the referendum campaign, the Chinese Government had made it clear it preferred an EU which included the UK. Moreover, the absence of the UK’s generally more liberal approach to economic policy questions may shift the EU towards a somewhat more protectionist approach to China,18 though that assumes that all other things are equal. In contrast, the broader (negative) shift in European perceptions of China over recent years may have more of an impact on the EU’s China policy than Brexit per se. For the UK, another dominant feature of post-referendum analysis has been that China will play an important role in the likely intensification of the UK’s economic engagement beyond Europe, including under the auspices of ‘Global Britain.’19 The positive response of the British Government to the BRI (discussed below) can be seen as an indication of this. Beyond the economic sphere, Champa Patel argues that it is unlikely the post-Brexit UK will be a leading voice in human rights promotion and protection.20 Meanwhile, in advocating a close post-Brexit alignment between the UK and EU in foreign and security policy, Malcolm Chalmers focuses mostly on challenges in the broader European neighbourhood, with only passing reference to the UK needing to be careful in any ‘attempts to pursue a more independent, and assertive, stance

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concerning major Eurasian states, such as Russia, China and Iran.’21 Kerry Brown offers the most developed analysis in relation to China, arguing that the new challenges and uncertainties brought by Brexit heighten the need for the UK to work out more systematically and strategically how to respond to the growing need to engage a rising (or risen) China.22 Other recent research has looked at the mixed nature of public perceptions of China in the UK, showing that a preference for Brexit is correlated with more negative perceptions of China.23 Meanwhile, Paul Irwin Crookes and John Farnell argue that the opportunities for closer economic partnership with China after Brexit will be constrained by a range of political factors, from views in the EU and US to the growing controversy over China policy in the UK.24

Brexit and the China Opportunity Building on these existing studies on the impact of Brexit on the UK’s China policy, this chapter turns to examine the statements of British policymakers themselves in the aftermath of the Brexit referendum.25 A good place to start is the speech by then minister of state for trade and industry, Lord Price, delivered on 8 July 2016 in Shanghai, shortly after the Brexit referendum. Price set an upbeat tone, stating that ‘through the new trade deals we now have the power to strike across the globe, the UK has the ability to create a second Elizabethan Golden Age of trade and investment.’26 He sought to reassure businesses about the impact of Brexit and welcomed the continued commitment to investment in the UK expressed by Chinese investors; on trade, he set out as the priority ‘a new [trade] deal with the EU,’ along with the prospect of a ‘new Commonwealth trading pact.’ He also noted that the Chinese Ministry of Commerce had been quoted as ‘saying they wanted to do a free trade deal with the UK.’27 Similar themes were expounded by the new chancellor (finance minister) on a visit to China later that month for the meeting of the G20 finance ministers.28 Government comments on an agreement later that year to increase flights between the UK and China made clear reference to the agreement’s contribution to building a ‘Global Britain’ after Brexit,29 with the transport secretary talking about the need to ‘continue competing on the global stage,’ and his deputy saying that Post-Brexit, improving trade links with key markets such as China will boost exports and tourism, as well as helping create jobs and strengthening

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our local economies. This deal demonstrates that the UK is very much open for business.30

A similar idea was developed in more detail in comments by senior members of the government in advance of the eighth UK-China Economic and Financial Dialogue held in London on 10 November 2016. The Prime Minister, Theresa May, said that the government would ‘build a truly global Britain that is open for business’ after Brexit and that she was ‘excited about the opportunities for expanding trade and investment between [the UK and China].’ The chancellor referred to ‘mutual benefits’ and being ‘natural partners.’31 A key outcome of that dialogue was agreement on a ‘stock connect’ arrangement between London and Shanghai, to facilitate trading on each other’s markets. As far as post-Brexit policy towards China is concerned, these early statements from senior government figures reflect a perception that engagement with the Chinese economy and businesses in trade and investment would offer economic opportunities for the UK. This was not a new message. It was a key part of the ‘golden era’ argument from the pre-referendum government,32 and given the financial and economic responsibilities of the ministers cited above, the first to visit China after the referendum, a continued advocacy of commercial engagement is not surprising. This advocacy was reflected in the response to the BRI, which the previous government had broadly welcomed as an opportunity for commercial collaboration. This was even though the UK looked to be well beyond the original geographic scope of the BRI, which in some formulations extended to Central and Eastern Europe but not Western Europe, and in other versions linked up to Germany (Duisburg) and ports in the Netherlands, but not beyond.33 The UK’s response to BRI, however, was based less on geography and more on the idea that it created new opportunities for collaboration between Chinese and British companies, mainly in third markets. London’s desire to join the AIIB in 2015 had reflected some similar thinking.34 The emphasis was also on opportunities when new Foreign Office minister of state, Alok Sharma, visited China in August 2016. He evinced a desire to work with China on global issues as well as developing further economic and cultural ties.35 This was an approach which appeared to reflect a perception of China not just as an economic opportunity, but a ‘political opportunity’ (to use Scott Brown’s term) as a partner in

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dealing with global issues.36 At the same time, the government continued to push other existing priorities with regard to China, for example, in highlighting concerns over human rights.37 When the 23rd round of UK-China human rights dialogue was held in October 2016, Sharma commented that ‘[p]romoting respect for human rights is a fundamental part of British diplomacy.’38 The public reports of other areas of bilateral relations, such as the ‘high-level people-to-people dialogue’ and associated healthcare deals reached in December 2016, did not specifically dwell on Brexit, though it was a theme of parts of the discussions. The context for these developments was a new post-referendum government led by Theresa May from 13 July 2016. The immediate China-related issue had been speculation that she would shift course on China policy, prompted mainly by her decision to review the Hinkley Point C nuclear power project in which a Chinese SOE had invested.39 The project went ahead soon afterwards, nonetheless,40 and while there may have been some cooling in tone when compared to the Cameron and Osborne years, the broad approach of engaging China looked set to continue. May visited China briefly for the G20 summit in September 2016, and by the end of 2016 the prime minister had publicly ‘reaffirmed her commitment to developing a genuine strategic partnership in this ‘golden era’ of bilateral relations,’ in a meeting with Chinese State Councillor Yang Jiechi where the two governments agreed to increase cooperation on security issues (such as in Afghanistan) and on climate change, themes which resonate with the idea of ‘political opportunity’ more than ‘normative threat’ or ‘security challenge.’41 However, other reports suggested that there was frustration with May’s Government in China, where officials were reported as taking a ‘wait-and-see attitude following the Brexit vote,’ with some slowing in the development of a planned London-Shanghai stock exchange link.42 In her January 2017 speech to the Republican Party conference in the US May talked of a ‘more assertive’ China, a country with ‘little tradition of democracy, liberty and human rights,’43 implying—at least for the US audience—a perception of China as both a potential security threat and a normative challenge.44 May addressed Brexit more directly in her speech at Davos in January 2017.45 She said that the UK would ‘step up to a new leadership role as the strongest and most forceful advocate for business, free markets and free trade anywhere in the world,’ and painted a picture of opportunity now that the British people had ‘chose[n] to build a truly Global Britain.’

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May described Britain’s ‘history and culture’ as ‘profoundly internationalist’ and Britain as a ‘great, global, trading nation that seeks to trade with countries not just in Europe but beyond Europe too.’ She noted that discussions on future trade ties had already begun with Australia, New Zealand and India, and that ‘countries including China, Brazil, and the Gulf States have already expressed their interest in striking trade deals with us.’ China was therefore presented as one of a number of places offering economic opportunity, but not a particular priority, and as the more active partner in seeking a trade deal with the UK, not the other way round. Celebrating the 45th anniversary of Sino-British ambassadorial ties in March 2017, Alok Sharma—as might be expected for such an occasion— highlighted opportunities in trade, as well as global challenges such as terrorism, opportunities for the bilateral Infrastructure Alliance to ‘build the capacity of third countries’ and the space to work together in tackling ‘global health issues.’46 He presented a picture of China as an economic and political opportunity. The idea of China as ‘military non-threat’ (to use Scott Brown’s term) could further be deduced from the new ‘highlevel security dialogues,’ the second of which was held in London in February 2017, focusing on terrorism, extremism, organised crime and cybersecurity, among other non-traditional security issues.47 The government’s messages of seeking economic opportunity and cooperation on global issues were not limited to interactions with China. The May Government also placed emphasis on developing ties with India and with Japan, where the importance of Japanese investment was highlighted, along with the message of continuity through Brexit.48 The approach to China was, therefore, reflective not just of a perception of the relationship with China as such, but also a consequence of a more general approach to the UK’s foreign policy in the aftermath of the Brexit referendum. However, one China-related initiative, the BRI, continued to be used by the government to deliver a message of opportunity. In September 2016, shortly after she became Prime Minister, May had been invited by the Chinese Government to attend the first Belt and Road Forum in Beijing, to be held in May 2017.49 In the end, this was attended by the chancellor, whose speech highlighted the potential opportunities from greater trade, and the contribution of the BRI to achieving that goal. It is worth quoting extracts from that speech at some length:

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I commend President Xi […] for setting in train such a bold and visionary project. This initiative is truly ground-breaking in the scale of its ambition … spanning more than 65 countries, across four continents … and it has the potential to raise the living standards of 70% of the global population. […] Britain, lying at the Western end of the Belt and Road, is a natural partner in this endeavour […] And as we embark on a new chapter in our history, as we leave the European Union … we want to maintain a close and open trading partnership with our European neighbours … but at the same time, it is our ambition to secure free trade agreements around the world with new partners and old allies alike. Our ambition is for more trade, not less. China clearly shares this ambition … and I support President Xi’s target to have mutually beneficial Free Trade Agreements in place with 40% of Belt and Road countries by the end of this year […] China and the UK have a long and rich trading history […]As China drives forward the Belt and Road Initiative from the East … we in Britain are a natural partner in the West … standing ready to work with all partner countries to make a success of this initiative.50

In other words, Brexit and the BRI came at a time when both could be used as rhetorical opportunities to strengthen economic ties between the UK and China. The Chinese response to this including labelling the Hinkley Point nuclear power station, the UK-China Infrastructure Academy and the ‘Golden Era: Sino-UK Maritime Trade and Investment Forum’ as BRI projects.51 The evidence submitted in spring 2017 by the Foreign and Commonwealth Office (FCO) to the House of Commons Foreign Affairs Committee (FAC) inquiry on relations with China gives a good snapshot of official policy towards China at that point in time.52 The overall message is that China offered an important economic opportunity for the UK, albeit with some challenges in areas such as market access; that China was a ‘key partner’ for the UK on a range of global issues, and that the UK would continue to work with the Chinese Government in ways that could shape and influence its position on global affairs; and that the UK could and did ‘promote’ human rights in China. Policy was presented as being driven by China’s re-emergence ‘as a global economic and political great power,’ characterised as ‘one of the defining geostrategic developments of this century.’ Only the last paragraph of the conclusion of the FCO’s evidence refers to Brexit, saying that after leaving the EU, the UK ‘will continue to develop our relationship with China, as part of our

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“Global Britain” agenda.’ In other words, this document sent a message of strong continuity in a positive policy approach towards China. This tone continued through 2017. In July, the Princess Royal (daughter of the Queen) visited China and launched a ‘Spirit of Youth campaign.’ The same month, the government announced record levels of inward investment in the year 2016–2017 (something which was highlighted to dispel criticism that Brexit would reduce the UK’s attractiveness as a destination for investment). The US was the source for most investment projects, a total of 577 out of 2,200, but China (including Hong Kong) was a clear second, with 160 projects, ahead of France, India, Australia and New Zealand. Later that month, however, the government announced a tighter ‘screening mechanism’ for foreign investments in the UK. While this covered all such investments, it was generally interpreted as being a response to growing investment from China, which had been attracting increased attention.53 This prompted a public intervention from the Chinese ambassador in London, saying that ‘Chinese investment in the UK is an opportunity not a threat,’54 language which explicitly picks up on the opportunity/threat binary, in response to what appeared to be something of a shift in balance in the British Government’s position on investment from China. As discussed further below, the domestic debate in the UK on this issue grew in the subsequent months, with a particular focus on specific areas considered as ‘critical national infrastructure.’55 That summer, the UK publicly supported the EU statement on Chinese dissident Liu Xiaobo (as it did with the EU statement on International Human Rights Day in December 2017). It also commented on developments in Hong Kong twenty years after the handover, including the statement that the Sino-British Joint Declaration of 1984 remained ‘valid,’ something that appeared to have been rejected by a Chinese Ministry of Foreign Affairs spokesperson.56 In August, as the first minister to visit China after the June 2017 general election, Foreign Office junior minister Mark Field described China as a ‘key global player and an essential partner for the UK in many areas, not least trade and investment and foreign policy,’ while the FCO noted that his talks in Beijing would also cover human rights.57 In October 2017, two Chinese warships visited London, a rare example of bilateral military diplomacy. Commenting on the visit, the Chinese ambassador tapped into the perception of shared opportunity, noting that ‘it is our shared responsibility to safeguard world peace and security.’58

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Meanwhile, economic opportunity and engagement continued to be strong features of the UK’s China policy. Even as Beijing’s industrial strategy, ‘Made in China 2025,’ was beginning to attract more critical voices elsewhere in the US and parts of Europe, the British and Chinese governments organised a summit on how they could ‘work together to reach their respective goals in the manufacturing sector, in research and development and on flagship initiatives—Made in China 2025 and the UK Industrial Strategy.’59 Other areas of opportunity were promoted in the next people-to-people dialogue, held in the UK in December 2017.60 A new strategy for science and innovation collaboration and partnerships was agreed and described as supporting British industrial strategy, driving growth and jointly tackling global challenges.61 At the subsequent Strategic Economic Dialogue, Chinese banks were given direct access to foreign exchange markets in London, in what was described in the official press release as part of a ‘new phase in golden era relations.’62 These developments were all about China as an opportunity for the UK, primarily economic in nature, but with some political and even security dimensions.

Changing Perceptions: A Shifting Balance The next major statement of the UK Government’s approach to China was the visit by Prime Minister Theresa May in January 2018. In something of a contrast to the developments of the previous few years, her remarks were somewhat more studied and less effusive in tone, though still positive overall. In comments delivered on 31 January 2018 alongside Chinese Premier Li Keqiang,63 May described the UK and China as ‘global powers with a global outlook,’ mentioning a range of issues which the two would address together, from North Korea to aviation security. She highlighted ‘complementary strengths’ of the two economies, along with their goal to work together for an ‘ambitious future trading relationship.’ However, there was also a new emphasis on language about ‘rules-based’ approaches to global issues. In advance of and during the visit, the issue which attracted most attention was whether May would sign a formal memorandum of understanding with the Chinese Government on the BRI, something which was to become a key indicator of policy intentions towards China.64 This reluctance suggested that there were limits to the UK Government’s willingness to embrace the BRI, but it also reflected a shift in the wider debate over the initiative, with concern

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that the BRI might undermine elements of what was understood to be the existing international order. The compromise May reached was not to sign the MoU and to highlight a desire for the BRI to follow ‘international standards,’ while still welcoming ‘the opportunities provided by [BRI] to further prosperity and sustainable development across Asia and the wider world’ and reiterating that the UK was a ‘natural partner’ for the BRI with ‘unrivalled expertise.’ The reference to standards was reiterated in a call between May and Xi Jinping in April 2018, where it was reported the two had agreed to ‘continue to work together to identify how best we can cooperate on the Belt and Road initiative across the region and ensure it meets international standards.’65 This theme, along with regular references to the ‘rules-based international system,’ became a prominent meme in the UK’s China policy during 2018 (and the subject of an inquiry by the FAC, whose findings were published in April 2019).66 May’s comments alongside Li also referred explicitly to Brexit, saying that it would leave Britain ‘free to strike our own trade deals’ and highlighting a joint UK-China trade and investment review which would begin working towards new trade arrangements, also commenting that the UK would become ‘ever-more outward-looking.’ This theme was developed in a more detailed statement to a Chinese audience of what a ‘Global Britain’ might look like after the UK left the EU, delivered by May’s deputy, David Lidington, in Beijing in 2018.67 The speech contained familiar ideas about the UK being ‘ever-more outward-looking’ and ‘free to strike our own comprehensive trade deals with nations around the world, including, of course, China … while continuing to work together with our international partners to tackle head-on the global challenges we will face’ (ellipsis in original), though the speech made clear that the future relationship with the EU would be the top priority for the UK. Lidington also said that being ‘stronger abroad’ would mean that China would ‘remain an increasingly important partner to the UK’ (sic). He concluded by saying that the government was ‘fully committed to our [Sino-British] Global Comprehensive Strategic Partnership for the twenty-first century, addressing rising global challenges; building thriving economies of the future; and enhancing further the already strong links between our people and our businesses.’ Overall, this was a message of economic opportunity first and foremost, but also of some political opportunity, both of which it was suggested would be enhanced by the UK’s global vision and flexibility after Brexit. Similarly, positive discourse about

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the economic opportunities was promoted through 2018 by Secretary of State for International Trade, Liam Fox, who highlighted, for example, that the UK was the leading European investor in China.68 Not long after May’s January 2018 visit, however, a sour note had entered the bilateral relationship. The UK Defence Secretary, Gavin Williamson, said on a visit to Australia in February 2018 that HMS Sutherland would return from Australia by sailing through the South China Sea, that the British navy had a ‘right to do that,’ and that it was important to ‘assert our values’ in the South China Sea. This apparent move to assert ‘freedom of navigation’ in the contested waters of the South China Sea prompted a modest response from Beijing, whose spokesperson said that there was ‘no problem of freedom of navigation or overflight in the South China Sea. The situation there is also improving. We hope that non-regional countries can respect the efforts made by regional ones.’69 The announcement by Williamson was followed by several ‘freedom of navigation’ sailings through the South China Sea in 2018.70 The initial Chinese response was moderate when compared to its response to similar actions by the US, but the intensity of Beijing’s criticism grew with further such naval operations, in particular after HMS Albion passed through the Paracel Islands on 31 August 2018.71 In February 2019, Williamson gave a widely-reported speech at the Royal United Services Institute in London, which effectively identified China as a revisionist power which implicitly posed a security threat to the UK. This marked a shift in ministerial narrative towards ‘military threat’ from China, and was met with a strong response from Beijing, in the form of the postponement of a visit to China by the chancellor. Williamson also brought Brexit into his comments, suggesting that a post-Brexit ‘Global Britain’ could be a truly global player again, with permanent military presence in Southeast Asia and the Caribbean.72 Another controversial set of issues which began to move up the agenda and demonstrated shifting perceptions of China in London through 2018 were related to digital and cyber. Highlighting the opportunities in this area, minister Matt Hancock spoke in February 2018 about the ‘transformational power of new digital technology to make this golden era even more golden,’ referring to a number of relevant collaborations between British and Chinese companies, and thanking Huawei for its continued commitment to the UK, including ‘3 billion pounds of procurement.’ While this emphasised the economic opportunities from digital engagement with China, Hancock also hinted at ‘normative threat’ (or normative

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difference), saying that China and the UK had different views about data protection and intellectual property. Nevertheless, his response to this was essentially to accept the differences, saying that ‘while we ask China to respect these protections, we also respect China, and the progress we have seen in mutual understanding.’73 In parallel, through 2018 there was growing debate over Huawei’s presence in the UK, and in particular, whether that could be expanded into the provision of equipment for the development of 5G networks. The arguments that this led to about how to deal with the economic opportunity and potential security risks74 have been covered well elsewhere.75 In short, the voices highlighting security risks became more significant through 2018, and the apparent leaking of a confidential decision by the National Security Council to allow Huawei to engage in the UK’s 5G network was followed by the sacking of Williamson as defence secretary in March 2019. With the US subsequently engaging in sustained public lobbying of London not to use Huawei equipment for 5G, this issue stayed on the agenda into 2020 (see below). Meanwhile, in other areas, the perception that engaging with China brought opportunity continued to be promoted. British ministers cited the growth of the Chinese middle class, the changing nature of manufacturing and the BRI as bringing economic opportunity to the UK.76 A more forceful statement of these opportunities came from the minister for international trade Baroness Fairhead in May 2018. Ahead of a visit to Xi’an, she argued that the BRI ‘offers the UK huge opportunities,’ particularly focusing on the financial sector, saying that ‘we intend to position London as the premier global centre for funding and facilitating BRI projects.’77 During her visit, she described the UK as ‘now the most westerly point of the Belt and Road, with the first train from Yiwu arriving in London in 2017.’78 As an indication of the UK’s desire (or at least the Treasury’s desire) to engage with the BRI, the chancellor appointed Douglas Flint, former chair of HSBC, as his ‘Belt and Road Envoy.’79 In terms of policy follow up, a big focus was UK-China cooperation in infrastructure in third markets, including through the bilateral Infrastructure Alliance and Academy.80 A number of joint seminars were held focusing on specific third countries, from East Africa to Central Asia. For example, a UK-China seminar on financing infrastructure to deliver economic growth and respond to security challenges in Afghanistan was held on 25 July 2017, with representatives from the ADB and AIIB.81 The British Consulate-General in Guangzhou organised two international

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conferences in Shenzhen on sustainability along the Belt and Road, in November 2016 and November 2018. All of this was a sharp contrast to the growing US rhetoric of BRI as a form of ‘debt-trap diplomacy.’ On her May 2018 visit to Xi’an, Baroness Fairhead also referred in familiar terms to Brexit, saying that she wanted ‘to reassure all of you that we’re not turning away from the world. Indeed, far from it - we are [a] naturally globally-facing nation, and that is how we intend to stay. We will continue to work actively with our friends and partners in China and across the world.’ Writing in Chinese media outlet Caixin ahead of a visit to China in June 2018, the chancellor linked Global Britain to the idea of the UK as ‘a committed and reliable partner and a proponent of open trade and free markets,’ with a particular emphasis on financial services. Revisiting China in July 2018, FCO minister Mark Field’s programme was described by the FCO as ‘reflecting the breadth and depth of business, investment and science and innovation links between the UK and China.’82 Other examples of economic engagement during this period included in designing smart cities,83 the dairy sector,84 healthcare and digital solutions to healthcare challenges,85 innovation,86 the simplification of visa application processes for Chinese students87 and (even) sales of military radar equipment.88 At the China International Import Expo in Shanghai in November 2018, British companies were reported as securing GBP 2 billion of deals.89 The secretary of state leading the delegation, Liam Fox, spoke in upbeat terms about Brexit and the opportunities it offered for UK-China trade ties: And as the UK leaves the European Union in March, we will be able to fashion our own independent trade policy for the first time in more than four decades, and speak with our own voice at international bodies like the World Trade Organisation. For our exit from the EU is not a retreat into isolationism. In fact, it is quite the opposite. What we will be is a truly ‘Global Britain’ - reaching out to our partners like China across the world to build prosperity, stability and security. And we will use this opportunity to further strengthen the ‘Golden Era’ of trade that the UK and China are now embarked on.90

Over the same period, there was also a steady stream of public statements from London about human rights in China, as well as a broadening of engagement with China on the ‘values agenda’ to include issues such

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as modern slavery and wildlife trafficking.91 After the appointment of Jeremy Hunt as foreign secretary to replace Boris Johnson in July 2018, there was something of a shift in tone. Johnson had not visited China as foreign secretary, but Hunt paid a visit in his first month in the job. This visit featured much of the ‘political opportunity’ agenda of cooperation on global issues,92 but also gave a higher profile to the UK’s human rights concerns, symbolised by a meeting with the wives of weiquan (‘rights protection’) lawyers who had been detained by the authorities,93 and publicly bringing up a difficult consular case. A balance between ‘normative difference’94 and ‘political opportunity’ in the approach to China was reinforced by Hunt in his press conference,95 when he said that ‘China and Britain have very different systems, but we do have a lot in common.’ Hunt also referred in positive but non-committal terms to a free trade agreement, saying that ‘the offer made by Foreign Minister Wang to open discussions about a possible free trade deal done between Britain and China post-Brexit [was] something we welcome and we said that we will explore.’ By October 2018, though, the growing number of reports about mass detention camps in Xinjiang led Hunt to confirm that British diplomats in China judged the reports to be ‘broadly accurate.’96 By the end of the year, Hunt publicly accused China of ‘significant and widespread cyber intrusions against the UK and allies…, targeting trade secrets and economies around the world.’97 The tone of statements of China policy was shifting.

Growing Contestation over China Policy All of these issues continued to feature in British policy towards China through the first half of 2019 and the resignation of Theresa May and her replacement by Boris Johnson as prime minister in July. The parts of the government responsible for economic relations, in particular the Treasury and the Department for International Trade, highlighted the economic opportunities—and actual business deals—from engagement with China. However, the idea that China posed some degree of security threat or challenge to the so-called ‘rules-based international system’ was the dominant perception of the parts of the government responsible for military and security issues, and its impact on the policy debate grew. The FCO and the British Embassy in Beijing continued to highlight the need and scope for cooperation with China on global issues,98 while giving greater prominence over time to human rights concerns, in particular in

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relation to Xinjiang. Foreign Secretary Jeremy Hunt was one of the few European foreign ministers to comment publicly on the ‘30th anniversary of Tiananmen Square’ in June 2019.99 Developments in Hong Kong added to the debate in the second quarter of 2019, though these have had something of their own dynamic to them and deserve separate analysis.100 The case of Huawei received growing attention, partly because it highlighted that debates about China as economic opportunity or security threat could not easily be kept separate. The maritime politics of the South China Sea also continued to feature from time to time, with the UK joining with France and Germany to express concern in late August about possible ‘insecurity and instability in the region.’101 It was these issues, rather than the impact of Brexit, which dominated the growing debates about the UK’s China policy during 2019,102 even as the domestic controversy over how to ‘deliver Brexit’ intensified. Nonetheless, the uncertainty over the UK’s post-EU future and its policy towards the EU meant that looking elsewhere for new economic opportunities remained an important feature of government policy statements, though this had anyway been a significant part of British policy for some years, including towards China. Instead, China policy was being driven primarily by developments in China and wider shifts in perception about these developments, including the debates in the US and across the EU. The FAC’s April 2019 report on China and the FCO’s response to that report give a picture of the issues. The FAC described the relationship with China as a ‘key issue in debates about post-Brexit foreign policy,’103 though there was little discussion of Brexit in the report itself, except at the end where one witness was recorded saying that ‘the UK’s voice in China will be all the smaller as it leaves the EU.’ Other witnesses were reported noting that, ‘regardless of their own views on Brexit, strong priority must be given to the UK working with allies, including the EU, because a collective voice will often carry greater weight with China than the UK’s voice alone.’104 The main conclusion of the report, though, was really about China, namely that the country was increasingly posing a threat to the ‘rules-based international system,’ and that the UK should work with other Western countries to counter this. Responding to the report in June, the FCO’s response was cautious and carefully balanced, though the language on the BRI, for example, was less positive than some of the government’s previous statements. The FAC’s position was reiterated, in somewhat starker terms, in a subsequent report on ‘defending democracy in an age of autocracies.’105

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This was mainly targeted at China and Russia, and identified a possible threat to academic freedom in the UK from political pressure from the Chinese party-state, with a few anecdotal cases given as examples. This brought the issue of educational exchanges into the political debate, a potentially sensitive move given the scale of educational linkages between the UK and China and the benefits to the UK’s higher education sector, with over 100,000 Chinese students in the UK.106 The ‘autocracies’ report also commented on Hong Kong, recommending that the FCO should rethink the participation of British judges on Hong Kong’s Court of Final Appeal and that the UK should grant ‘residency’ to British National (Overseas) passport holders from Hong Kong.107 These interventions by the FAC indicate a greater degree of domestic political attention being paid to the UK’s China policy and a higher level of contestation over how the government should approach SinoBritish relations. This contestation continued through the second half of 2019, particularly in response to the escalating unrest in Hong Kong and the issue of Huawei and 5G. The situation in Xinjiang also received plenty of media coverage in the UK and was raised publicly by the British Government on numerous occasions. For example, in October, London’s representative read a statement at the UN on behalf of 23 countries expressing concern about ‘credible reports’ of the mass detention of Uighurs.108 Other human rights issues were raised publicly during the same period.109 Meanwhile, the government continued to highlight commercial opportunities from China and the growth in trade and investment, with annual bilateral trade in goods with mainland China surpassing GBP 70 billion for the first time in 2019. The visit in June 2019 by Chinese Vice Premier Hu Chunhua—postponed due to the disagreements over the South China Sea—was used by the government to announce more than GBP 500 million in deals between British and Chinese companies.110 In August, minister for trade and investment Graham Stuart led a 200strong delegation of businesses in technology, manufacturing, transport and education, to ‘champion the UK’s global leadership in smart technology, and attend the UK’s flagship pavilion at the Horticulture Expo in Beijing, where the UK was showcasing its leadership in clean energy and sustainable development.’111 The post-Brexit investment regime and attitude towards Chinese companies (beyond Huawei) remained uncertain,112 though the bid by a Chinese company for the floundering British

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Steel again brought out the range of arguments about Chinese investment in the UK.113 Meanwhile, the commercial implications of Brexit for members of the British Chamber of Commerce in China featured in its survey released in late 2019, with the conclusion that Brexit would have a ‘marginal effect on their existing operations in China’ and that the ‘future benefits of a possible UK-China free trade agreement (FTA) would not have a significant impact on their current operations.’114 By 2019, though, the official references to a possible FTA between the UK and China which had featured in early post-Brexit discussions had all but disappeared,115 and it looked as if other trade agreements would be a higher priority for London after Brexit, for example with Japan or the US.116 Indeed, in his first big speech after Brexit, the prime minister did not mention China among the countries with which the UK wanted to do free trade deals, though he did mention the beef exports and the scope for selling lamb to China.117 China had featured to some extent in the foreign policy discussions during campaigning for the general election in December 2019, including the question of right of abode for people from Hong Kong.118 In a preelection debate between the foreign policy spokespersons of the major political parties, held at Chatham House, the issues of Hong Kong, human rights and Xinjiang were raised, and the first question asked was where the UK should be in relationship to ‘three great powers,’ the US, China and the EU.119 In the early days of the new post-election Boris Johnson Government, the most fraught issue relating to China was the Huawei/5G decision, which ended up being one of the final foreign policy decisions made by the government before the UK left the EU on 31 January 2020. As noted above, the debate had grown in intensity during 2018 and 2019, with the UK’s earlier economics-driven engagement with Huawei (which dated back more than a decade) increasingly challenged by voices concerned about the possible security implications of a key role for Huawei (the apparent world leader in the provision of 5G hardware) in the UK’s 5G network. The decision that emerged in January was little different in principle (though more detail was given) from the decisions which at the time were reported as having been made internally by May’s Government: in essence, a carefully-managed approach, which gave a somewhat-restricted role for Huawei in 5G.120 High-profile American lobbying against Huawei—led right at the top of the administration by Secretary of State Pompeo (and even the President)—had been stronger

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and more persistent than any Chinese lobbying in favour of its company (delivered mainly by the Chinese ambassador in London). The British Government sought to find a middle way between the two, though the January decision continued to prompt criticism from a number of highprofile Conservative Party MPs. Brexit itself does not seem to have been a direct factor in this decision, in spite of the coincidence of timing. Moreover, given the lack of consensus across the EU about how to deal with Huawei, there was not any common EU position with which the UK could have aligned.121 In July 2020, however, the British Government changed its position following increased pressure from the US and new American sanctions against Huawei, and in the context of a much more critical mood in the UK’s policy debate about China. The government announced that from the end of 2020, telecoms operators would not be allowed to buy any 5G equipment from Huawei and that Huawei equipment would be removed from the UK’s 5G network by 2027.122

Conclusion This discussion of the UK’s China policy between June 2016 and January 2020 reveals a range of perceptions of China, from those which identified economic or political opportunity to those that saw normative or security threat. In the period from the Brexit referendum to the UK’s departure from the EU, the relative weight of these perceptions changed as the initial government emphases on economic opportunity (and even a possible free trade agreement) and on political opportunity gave way to a greater balance between the economic potential and security and human rights concerns. In the latter phase of the period under study, the UK’s China policy became increasingly contested, not least because the Huawei/5G issue brought to the surface the challenges of reconciling conflicting perceptions of the impact of China’s rise. The primary driver behind these shifts in policy does not appear to have been Brexit, but the UK’s response to developments in China and to the debates about those developments in the UK and elsewhere. In a similar vein, the impact of Covid-19 on the UK’s China policy may end up being more significant than Brexit.123 It was in the area of economic policy that Brexit appears to have been most salient. The BRI served as a good example of an issue which drove perceptions in at least part of the UK Government that engagement with China offered significant new economic opportunities, and that grasping

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those opportunities was more important and relevant given Brexit. This is consistent with the general narrative developed by London in dealing with the implications of its departure from the EU, namely to stress that the UK would remain as open, or even become more open, to international trade and investment, and that China would be one of many important partners in this regard. However, as noted above, while the UK Government sought to boost exports to China as much as possible during this period, it remained cautious about the possibility of a free trade agreement. Meanwhile, the question of how to manage Chinese investment became more controversial.124 In other areas, it was developments in China and perceptions of them in the UK and the US and EU which drove policy towards China more than Brexit itself. It could be argued that in appropriating the post-Brexit imaginary of ‘Global Britain’ in the cause of a strengthened British military presence ‘East of Suez,’ and doing so in a way which painted China as a normative and security threat, politicians such as Gavin Williamson instrumentalised Brexit in the service of an agenda which was driven by considerations other than Brexit. Generally, though, in the spectra between political opportunity or normative threat and military threat or non-threat, Brexit did not feature as a key factor in shaping UK Government perceptions of China. The examples cited in this chapter also show that the argument that Brexit could reduce the space for the UK to raise human rights issues has not been borne out in the case of China policy. In conclusion, to return to the typology of threats and opportunities developed by Scott Brown, this chapter shows a complex and shifting picture in the perceptions of China expressed by British policymakers between the Brexit referendum and Brexit itself. In the economic sphere, China was clearly seen primarily as an opportunity, with the only potential ‘threat’ coming from over-reliance on Chinese investment in the UK (though with low investment stocks that point could still be some way off). On global issues, there was much in the government’s rhetoric which described China as a political opportunity, an important and essential partner in dealing with global challenges. At the same time, there was a recognition of ‘normative difference’ and some concerns about possible ‘normative threat’ in international standards in the economic sphere and on the more political ‘values agenda.’ These concerns became more significant over time. This did not go as far as indicating any direct ‘military threat’ from China, though the idea of ‘security threat’ may be

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more useful here in picking up on a wider set of challenges—from cyberattacks to challenges to international institutions and norms—which were perceived to emanate from China. In sum, in the period after the Brexit referendum, it was developments in China and the way they were interpreted in the UK, and not Brexit, that had the biggest impact on the changing trajectory of the UK’s China policy.

Notes 1. The paper does not therefore cover the impact of Covid-19, which as of April 2020 looks as if it could have a notable influence on the UK’s China policy. 2. Richard G. Whitman, ‘The UK’s European Diplomatic Strategy for Brexit and Beyond,’ International Affairs 95, no. 2 (2019): 383–404; Thomas Raines, ‘Five Foreign Policy Questions for the UK’s Next Prime Minister,’ Chatham House Expert Comment, 18 June 2019, https://www.chathamhouse.org/expert/comment/five-for eign-policy-questions-uk-s-next-prime-minister. All weblinks were last accessed 22 April 2020. 3. However, ‘Global Britain’ does draw on earlier notions of the UK as a global power and more recent foreign policy concepts such as the UK as a ‘global hub’ deployed by William Hague as Foreign Secretary. I am grateful to one of the participants in the workshop at Nottingham University for this comment. 4. Xiaoyu Pu, ‘Controversial Identity of a Rising China,’ The Chinese Journal of International Politics 10, no. 2 (2017): 131–149. 5. Scott A.W. Brown, Power, Perception and Foreign Policymaking (London and New York: Routledge, 2018). 6. Brown, 14. 7. Brown, 5 (Table 1). 8. Brown, 5–7. 9. Brown, 6. 10. Shaun Breslin, ‘UK-China Relations in the Context of Brexit: Economics Still in Command,’ China International Studies 6 (2017): 61–73. 11. Scott A. W. Brown, ‘Free Trade, Yes; Ideology, Not So Much: The UK’s Shifting China Policy 2010–16,’ Journal of the British Association for Chinese Studies 8, no. 1 (2018): 92–126. 12. Oliver Turner, ‘Subcontracting, Facilitating and Qualities of Regional Power: The UK’s Partial Pivot to Asia,’ Asia Europe Journal 17 (2019): 211–226. 13. Tim Summers, ‘UK-China Relations: Navigating a Changing World,’ in Mapping Europe-China Relations a Bottom-Up Approach, ed.

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14. 15.

16.

17. 18. 19.

20. 21.

22.

Mikko Huotari et al. (European Think-Tank Network on China, 2015), https://www.clingendael.org/sites/default/files/pdfs/ETNC% 20Report%20-%20Mapping%20Europe-China%20Relations%20A%20B ottom-Up%20Approach%20-%20October%202015.pdf. For discussion of the point on Hong Kong, see Tim Summers, ‘British Policy Toward Hong Kong and Its Political Reform,’ Issues & Studies 52, no. 4 (2016), https://www.worldscientific.com/doi/10.1142/S1013251116500132. Breslin, ‘UK-China Relations in the Context of Brexit: Economics Still in Command.’ ‘Joint Communication to the European Parliament and the Council: Elements for a New EU Strategy on China,’ European Commission Executive Summary (Brussels: High Representative of the Union for Foreign Affairs and Security Policy, 22 June 2016), http://eeas.eur opa.eu/archives/docs/china/docs/joint_communication_to_the_eur opean_parliament_and_the_council_-_elements_for_a_new_eu_strategy_ on_china.pdf. Tim Summers, ‘Brexit: Implications for EU-China Relations,’ Chatham House Research Paper, May 2017, https://www.chathamhouse.org/pub lication/brexit-implications-eu-china-relations. Jie Yu, ‘After Brexit: Risks and Opportunities to EU-China Relations,’ Global Policy 8, no. 4 (2017): 109–114. Summers, ‘Brexit: Implications for EU-China Relations.’ Yu, ‘After Brexit: Risks and Opportunities to EU-China Relations’; Peter Harris, ‘China in British Politics: Western Unexceptionalism in the Shadow of China’s Rise,’ The Chinese Journal of International Politics 10, no. 3 (2017): 241–267. Champa Patel, ‘Human Rights in the International System,’ IPPR Progressive Review 25, no. 1 (2018): 7–15. Malcolm Chalmers, ‘UK Foreign and Security Policy after Brexit,’ RUSI Briefing Paper (Royal United Services Institute for Defence and Security Studies, January 2017), 7, https://www.rusi.org/sites/def ault/files/201701_bp_uk_foreign_and_security_policy_after_brexit_v4. pdf. Chalmers has since noted that the UK remains ‘closer to France and Germany on most key foreign and security policy issues, and more distant from the Trump administration in the US’; Malcolm Chalmers, ‘Taking Control: Rediscovering the Centrality of National Interest in UK Foreign and Security Policy,’ RUSI Whitehall Report (Royal United Services Institute for Defence and Security Studies, 20 February 2020), https://rusi.org/sites/default/files/202002_whr_taking_control_web. pdf. Kerry Brown, The Future of UK-China Relations (Newcastle upon Tyne: Agenda Publishing, 2019).

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23. Wilfred M. Chow, Enze Han, and Xiaojun Li, ‘Brexit Identities and British Public Opinion on China,’ International Affairs 95, no. 6 (2019): 1369–1387. 24. Paul Irwin Crookes and John Farnell, ‘The UK’s Strategic Partnership with China Beyond Brexit: Economic Opportunities Facing Political Constraints,’ Journal of Current Chinese Affairs 48, no. 1 (2019): 106–121. 25. The focus is on the national level, not on city or regional ties to China, though regional ties have been emphasized as part of the official relationship. For example, see the report of the fourth regional leaders summit in 2018: ‘Bilateral Cooperation Boosted at UK-China Regional Leaders Summit,’ GOV.UK, 16 October 2018, https://www.gov.uk/government/news/bilateralcooperation-boosted-at-uk-china-regional-leaders-summit. 26. ‘Chinese Investors Seek to Power Second Elizabethan Golden Age,’ GOV.UK, 8 July 2016, https://www.gov.uk/government/speeches/chi nese-investors-seek-to-power-second-elizabethan-golden-age. 27. Price further commented that ‘The imperative now is to ensure we have a collective and unified view of the Britain we want in the future.’ 28. ‘Chancellor to Promote British Business Opportunities in China,’ GOV.UK, 22 July 2016, https://www.gov.uk/government/news/cha ncellor-to-promote-british-business-opportunities-in-china. 29. For example, the first direct flight from China to Edinburgh landed in June 2018: ‘First Direct China-Scotland Flight Lands,’ BBC News, 12 June 2018, https://www.bbc.com/news/uk-scotland-edinburgh-eastfife-44453220. 30. ‘UK and China to Increase Flights Between Both Countries in Boost for Global Britain,’ GOV.UK, 11 October 2016, https://www.gov.uk/ government/news/uk-and-china-to-increase-flights-between-both-cou ntries-in-boost-for-global-britain. 31. Both quoted in ‘UK-China Discuss the Next Step for Economic and Trade Relations,’ GOV.UK, 10 November 2016, https://www.gov.uk/ government/news/uk-china-discuss-the-next-step-for-economic-andtrade-relations. 32. ‘Chancellor: “Let’s Create a Golden Decade for the UK-China Relationship”,’ GOV.UK, 22 September 2015, https://www.gov.uk/govern ment/speeches/chancellor-lets-create-a-golden-decade-for-the-uk-chinarelationship. 33. Tim Summers, ‘Negotiating the Boundaries of China’s Belt and Road Initiative,’ in Politics and Spaces of China’s Belt and Road Initiative, ed. James D. Sidaway et al. (Symposium: Belt & Road, Politics and Space C, 2020), 15–19.

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34. Tim Summers, ‘A Platform for Commercial Cooperation,’ in Europe and China’s New Silk Roads (European Think-Tank Network on China, 2016), https://www.clingendael.org/publication/europe-andchinas-new-silk-roads. 35. ‘Alok Sharma Makes First Visit to China,’ GOV.UK, 15 August 2016, https://www.gov.uk/government/news/alok-sharma-makes-first-visitto-china. 36. See also the British Ambassador’s speech on China and greening global financial flows: ‘G20: How UK-China Cooperation Is Greening Global Financial Flows,’ GOV.UK, 8 September 2016, https://www.gov.uk/ government/speeches/g20-how-uk-china-cooperation-is-greening-glo bal-financial-flows. 37. ‘China—Human Rights Priority Country, Last Updated 8 Feb,’ GOV.UK, 8 February 2017, https://www.gov.uk/government/pub lications/china-human-rights-priority-country/china-human-rights-pri ority-country. 38. ‘Alok Sharma Comments on UK-China Human Rights Dialogue,’ GOV.UK, 28 October 2016, https://www.gov.uk/government/news/ alok-sharma-comments-on-uk-china-human-rights-dialogue. 39. Andrew Small, ‘May Appears to Abruptly Walk Away from Britain’s Embrace of China,’ World Politics Review, 17 August 2016, https://www.worldpoliticsreview.com/articles/19691/may-app ears-to-abruptly-walk-away-from-britain-s-embrace-of-china. 40. ‘Hinkley Point C Contract Signed,’ GOV.UK, 29 September 2016, https://www.gov.uk/government/news/hinkley-point-c-contractsigned. 41. ‘PM Meeting with Chinese State Councillor Yang Jiechi,’ GOV.UK, 20 December 2016, https://www.gov.uk/government/news/pm-meetingwith-chinese-state-councillor-yang-jiechi-20-december-2016. 42. Jonathan Ford and James Kynge, ‘Beijing Signals End of China-UK “Golden Age”,’ Financial Times, 7 January 2017, https://www.ft.com/ content/4ab22b66-d42d-11e6-9341-7393bb2e1b51. 43. ‘Prime Minister’s Speech to the Republican Party Conference 2017,’ GOV.UK, 26 January 2017, https://www.gov.uk/government/spe eches/prime-ministers-speech-to-the-republican-party-conference-2017. 44. Commenting on this in May 2017 in a speech at Chatham House (in advance of the general election), then opposition Labour Party leader Jeremy Corbyn said: ‘When Theresa May addressed a Republican Party conference in Philadelphia in January she spoke in alarmist terms about the rise of China and India and of the danger of the West being eclipsed. She said America and Britain had to stand together and use their military might to protect their interests. This is the sort of language that led to calamity in Iraq and Libya and all the other disastrous wars that

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46.

47.

48.

49.

50.

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stole the post-cold war promise of a new and peaceful world order. I do not see India and China in those terms. Nor do I think the vast majority of Americans or British people want the boots of their young men and women on the ground in Syria fighting a war that could escalate the suffering and slaughter even further.’ Available at: Jeremy Corbyn, ‘Chatham House Speech,’ 12 May 2017, https://www.chathamhouse. org/sites/default/files/images/events/2017-05-12-Corbyn.pdf. ‘Davos 2017: Prime Minister’s Speech to the World Economic Forum,’ GOV.UK, 19 January 2017, https://www.gov.uk/government/spe eches/davos-2017-prime-ministers-speech-to-the-world-economicforum. ‘Alok Sharma Marks 45 Years of UK-China Ambassadorial Ties,’ GOV.UK, 16 February 2017, https://www.gov.uk/government/news/ alok-sharma-marks-45-years-of-uk-china-ambassadorial-ties. ‘Second High Level UK-China Security Dialogue,’ GOV.UK, 17 February 2017, https://www.gov.uk/government/news/secondhigh-level-uk-china-security-dialogue-february-2017. See also: Xinhua, ‘China, Britain Hold Security Dialogue, Agree to Strengthen Cooperation,’ The State Council of the Peoples’ Republic of China, 18 February 2017, http://english.www.gov.cn/news/international_e xchanges/2017/02/19/content_281475572247225.htm. ‘PM Statement Following Talks with Japanese Prime Minister Abe,’ GOV.UK, 28 April 2017, https://www.gov.uk/government/speeches/ pm-statement-following-talks-with-japanese-prime-minister-abe-28-april2017. Elizabeth Piper and Ben Blanchard, ‘China Invites Britain to Attend New Silk Road Summit: Sources,’ Reuters, 8 February 2017, https://www. reuters.com/article/us-britain-eu-china-idUSKBN15M1TJ. ‘Belt and Road Forum in Beijing: Chancellor’s Speech,’ GOV.UK, 14 May 2017, https://www.gov.uk/government/speeches/belt-and-roadforum-in-beijing-chancellors-speech (ellipses in the original). François Godement and Abigaël Vasselier, China at the Gates: A New Power Audit of EU -China Relations (European Council on Foreign Relations, 2017), https://www.ecfr.eu/page/-/China_Power_ Audit.pdf. ‘Written Evidence from the Foreign and Commonwealth Office (CHI0033),’ Report from Foreign and Commonwealth Office (UK Parliament, n.d.), http://data.parliament.uk/writtenevidence/commit teeevidence.svc/evidencedocument/foreign-affairs-committee/uk-relati ons-with-china/written/45797.html. This inquiry—into UK relations with China—was closed because of the June 2017 general election, so no FAC report was produced. In the 2017 Parliament, the FAC

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launched a new inquiry into ‘China and the Rules-Based International System’ (see below). ‘UK to Tighten Foreign Investment Reviews,’ Financial Times, 24 July 2017, https://www.ft.com/content/9cb95e84-6bc2-11e7-b9c715af748b60d0. Liu Xiaoming, ‘Chinese Investment in the UK Is an Opportunity Not a Threat,’ Evening Standard, 21 August 2017, https://www.standard. co.uk/comment/comment/liu-xiaoming-chinese-investment-in-the-ukis-an-opportunity-not-a-threat-a3616376.html. For a broader discussion of the range of issues relating to critical national infrastructure, see Kristen Stoddart, ‘UK Cyber Security and Critical National Infrastructure Protection,’ International Affairs 92, no. 5 (2016): 1079–1106. The more recent statement from the Chinese MFA, on 1 July 2019, did not reiterate that point; see ‘Foreign Ministry Spokesperson Geng Shuang’s Regular Press Conference,’ Ministry of Foreign Affairs People’s Republic of China, 1 July 2019, https://www.mfa.gov.cn/web/fyrbt_ 673021/t1677331.shtml. ‘Minister Field Visits China for Trade, Security and Human Rights Talks,’ GOV.UK, 22 August 2017, https://www.gov.uk/government/ news/minister-field-visits-china-for-trade-security-human-rights-talks. Liu Xiaoming was cited in ‘Chinese Navy Visits London in Show of Power and Persuasion,’ Financial Times, 4 October 2017, https://www. ft.com/content/6993d52a-a916-11e7-ab55-27219df83c97. ‘UK-China Summit Explores Collaboration for Made in China 2025 and UK Industrial Strategy,’ GOV.UK, 7 November 2017, https:// www.gov.uk/government/news/uk-china-summit-explores-collabora tion-for-made-in-china-2025-and-uk-industrial-strategy. ‘Chinese Vice Premier Attends UK/China People to People Dialogue,’ GOV.UK, 8 December 2017, https://www.gov.uk/government/news/ chinese-vice-premier-attends-ukchina-people-to-people-dialogue. ‘Joint UK-China Strategy for Science, Technology and Innovation Cooperation Sets New Horizons for Closer International Collaborations,’ GOV.UK, 6 December 2017, https://www.gov.uk/govern ment/news/joint-uk-china-strategy-for-science-technology-and-innova tion-cooperation-sets-new-horizons-for-closer-international-collabora tions. ‘New Phase in Golden Era for UK-China Relations,’ GOV.UK, 15 December 2017, https://www.gov.uk/government/news/newphase-in-golden-era-for-uk-china-relations; Jonathan Wheatley, ‘Philip Hammond Opens London Forex Markets to China Banks,’ 16 December 2017, https://www.ft.com/content/c9217794-e0f8-11e78f9f-de1c2175f5ce. The officially-published policy outcomes from the

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dialogue amounted to 72 paragraphs on 49 pages and can be accessed at ‘UK-China 9th Economic and Financial Dialogue: Policy Outcomes,’ GOV.UK, 16 December 2017, https://www.gov.uk/government/ publications/uk-china-9th-economic-and-financial-dialogue-policy-out comes. ‘Prime Minister’s Press Conference with Premier Li,’ GOV.UK, 31 January 2018, https://www.gov.uk/government/speeches/prime-min isters-speech-in-china-31-january-2018. See, for example, Lucy Hornby, James Kynge, and George Parker, ‘“Golden Era” of UK-China Trade Links in Peril,’ Financial Times, 27 January 2018. ‘PM Call with President Xi on 19 April 2018,’ GOV.UK, 19 April 2018, https://www.gov.uk/government/news/pm-call-with-presidentxi-on-19-april-2018. For a detailed discussion of the emergence of this ‘meme,’ mainly in the US, see Adam Breuer and Alastair Iain Johnston, ‘Memes, Narratives and the Emergent US-China Security Dilemma,’ Cambridge Review of International Affairs 32, no. 4 (2019): 429–455. ‘Building a Global Britain,’ GOV.UK, 10 April 2018, https://www.gov. uk/government/speeches/building-a-global-britain. ‘UK Leading Europe for FDI as Fox Hunts Future Investors in China,’ GOV.UK, 5 November 2018, https://www.gov.uk/government/news/ uk-leading-europe-for-fdi-as-fox-hunts-future-investors-in-china. ‘Britain to Test China by Sailing Ship in Disputed Sea,’ Financial Times, 13 February 2018, https://www.ft.com/content/a3bbd5261073-11e8-8cb6-b9ccc4c4dbbb. See Liu Zhen, ‘France, Britain to Sail Warships in Contested South China Sea to Challenge Beijing,’ South China Morning Post, 4 June 2018, https://www.scmp.com/news/china/diplomacy-defence/art icle/2149062/france-britain-sail-warships-contested-south-china-sea. There were numerous supportive comments for these manoeuvres; for example, Bill Hayton, ‘Britain Is Right to Stand up to China Over Freedom of Navigation,’ Chatham House Expert Comment, 1 June 2018, https://www.chathamhouse.org/expert/comment/britain-rightstand-china-over-freedom-navigation. ‘China Complains Over British Warship Sailing Through Disputed South China Sea,’ The Guardian, 6 September 2018, https://www. theguardian.com/world/2018/sep/06/china-complains-over-britishwarship-sailing-through-disputed-south-china-sea; Catherine Wong, ‘Foreign Warships in South China Sea “Causing Trouble”, Beijing’s Ambassador to Britain Says,’ South China Morning Post, 20 September 2018, https://www.scmp.com/news/china/diplomacy/article/216 5008/foreign-warships-south-china-sea-causing-trouble-beijings.

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72. ‘Defence in Global Britain,’ GOV.UK, 11 February 2019, https://www. gov.uk/government/speeches/defence-in-global-britain. 73. ‘Matt Hancock Speaking at the CBI Annual Chinese New Year Dinner,’ GOV.UK, 22 February 2018, https://www.gov.uk/government/spe eches/matt-hancock-speaking-at-the-annual-cbi-chinese-dinner. 74. Or both opportunity and risk. The former head of GCHQ, Robert Hannigan wrote that ‘The challenge presented by China is radically different [from Russia] and brings both opportunity and risk on an entirely new scale’; ‘Wake Up to the Security Risks in Chinese Tech Dominance,’ Financial Times, 27 July 2018, https://www.ft.com/con tent/233f7dce-9013-11e8-9609-3d3b945e78cf. 75. Tim Summers, ‘The UK’s China Policy Under US-China Strategic Rivalry: The Impact of Think Tank Research,’ China Quarterly of International Strategic Studies 5, no. 2 (2019): 1–20. 76. ‘Why China’s Belt and Road Offers the UK Huge Opportunities,’ GOV.UK, 15 May 2018, https://www.gov.uk/government/spe eches/why-chinas-belt-and-road-offers-the-uk-huge-opportunities; ‘Celebrating Trading Opportunities Between China and the UK,’ GOV.UK, 11 May 2018, https://www.gov.uk/government/speeches/celebratingtrading-opportunities-between-china-and-the-uk. 77. ‘Why China’s Belt and Road Offers the UK Huge Opportunities,’ GOV.UK, 15 May 2018, https://www.gov.uk/government/speeches/ why-chinas-belt-and-road-offers-the-uk-huge-opportunities. 78. ‘Celebrating Trading Opportunities Between China and the UK.’ 79. ‘China and the UK—Committed Partners to Open Trade and Free Markets,’ GOV.UK, 27 June 2018, https://www.gov.uk/government/ speeches/china-and-the-uk-committed-partners-to-open-trade-and-freemarkets; Angus McNeice, ‘UK Government Outlines Belt and Road Plans,’ Belt and Road Portal, 13 July 2018, https://eng.yidaiyilu.gov. cn/qwyw/rdxw/60003.htm. 80. ‘UK-China Infrastructure Academy Opens Its Doors and Welcomes First Students,’ GOV.UK, 8 December 2016, https://www.gov.uk/gov ernment/news/uk-china-infrastructure-academy-opens-its-doors-andwelcomes-first-students. 81. ‘UK China and Afghanistan Trilateral Cooperation,’ GOV.UK, 25 July 2017, https://www.gov.uk/government/news/uk-china-and-afg hanistan-trilateral-cooperation. 82. ‘FCO Minister for Asia and the Pacific Arrives in China for 5-day Visit,’ GOV.UK, 22 July 2018, https://www.gov.uk/government/news/fcominister-for-asia-and-the-pacific-arrives-in-china-for-five-day-visit. 83. ‘UK Offers to Build Smart Future Cities Together with China at China Smart Cities International Expo,’ GOV.UK, 21 August 2018, https://

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www.gov.uk/government/news/uk-offers-to-build-smart-future-citiestogether-with-china-at-china-smart-cities-international-expo. ‘International Trade Secretary Secures Major Deal for UK Dairy in China,’ GOV.UK, 23 August 2018, https://www.gov.uk/government/ news/international-trade-secretary-secures-major-deal-for-uk-dairy-inchina. ‘Secretary of State Matt Hancock Visits China to Promote Innovative Digital Health Solutions to Shared Challenges,’ GOV.UK, 18 September 2018, https://www.gov.uk/government/news/secretary-of-state-matthancock-visits-china-to-promote-innovative-digital-health-solutions-toshared-challenges. ‘UK Sets to Showcase Cutting-Edge Innovation at China International Import Expo,’ GOV.UK, 15 October 2018, https://www.gov.uk/gov ernment/news/uk-sets-to-showcase-cutting-edge-innovation-at-chinainternational-import-expo. ‘Visa Application Process Made Easier for Chinese Students,’ GOV.UK, 15 June 2018, https://www.gov.uk/government/news/visaapplication-process-made-easier-for-chinese-students. Stephen Chen, ‘Britain to Sell China “Unlimited” Amount of Military Radar Equipment, Technology,’ South China Morning Post (SCMP), 1 November 2018, https://www.scmp.com/news/china/society/article/ 2171242/britain-sell-china-unlimited-amount-military-radar-equipment. ‘British Firms Secure £2 Billion of Deals at Expo in Shanghai,’ GOV.UK, 12 November 2018, https://www.gov.uk/government/news/britishfirms-secure-2-billion-of-deals-at-expo-in-shanghai. ‘Fox: Trends and Challenges in Rebalancing the World Economy,’ GOV.UK, 19 November 2018; on the reference to leaving the EU in ‘March’ [2019], note that the date of the UK’s departure from the EU was subsequently postponed. Tim Summers, ‘UK-China: Broadening the Values Agenda,’ in Political Values in Europe-China Relations (European Think-Tank Network on China, 2018), https://www.ui.se/english/news/2018/new-reportpolitical-values-in-europe-china-relations/. ‘Foreign Secretary Visits China,’ GOV.UK, 30 July 2018, https://www. gov.uk/government/news/foreign-secretary-visits-china. Kris Cheng, ‘UK’s New Foreign Sec. Jeremy Hunt Meets with Families of Detained Lawyers During China Visit,’ Hong Kong Free Press, 31 July 2018, https://www.hongkongfp.com/2018/07/31/uks-newforeign-sec-jeremy-hunt-meets-families-detained-lawyers-china-visit/. Several statements by ministers are more in line with a concept of ‘normative difference’ than ‘normative threat’ (the term used by Brown).

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95. ‘Foreign Secretary Remarks During Press Conference in Beijing,’ GOV.UK, 30 July 2018, https://www.gov.uk/government/news/for eign-secretary-remarks-during-press-conference-in-beijing-30-july-2018. 96. James Griffiths, ‘UK Says Reports of Internment Camps in China’s Xinjiang “Broadly Accurate”,’ CNN World, 1 November 2018, https:// edition.cnn.com/2018/10/31/uk/uk-xinjiang-china-uyghurs-intl/ index.html. This is in contrast to language used by the FCO in 2017, which notes that ‘China is facing increasing threats from extremism and terrorism, in particular in the Xinjiang region’; see ‘Written Evidence from the Foreign and Commonwealth Office (CHI0033),’ 7. 97. ‘UK and Allies Reveal Global Scale of Chinese Cyber Campaign,’ GOV.UK, 20 December 2018, https://www.gov.uk/government/ news/uk-and-allies-reveal-global-scale-of-chinese-cyber-campaign. 98. ‘UK-China in 2019: How Can Diplomacy Rise to the Challenges of the 21st Century,’ GOV.UK, 25 February 2019, https://www.gov.uk/gov ernment/speeches/uk-china-in-2019-how-can-diplomacy-rise-to-thechallenges-of-the-21st-century; ‘Great Britain and China Are Global Partners,’ GOV.UK, 26 September 2019, https://www.gov.uk/govern ment/news/great-britain-and-china-are-global-partners. 99. 30th Anniversary of Tiananmen Square: Foreign Secretary’s Statement,’ GOV.UK, 4 June 2019, https://www.gov.uk/government/news/for eign-secretary-statement-on-the-30th-anniversary-of-tiananmen-square; the comparison with other European responses is based on the author’s informal consultations with China analysts in the European Think-tank Network on China. 100. Tim Summers, ‘British Policy Towards Hong Kong,’ Paper Delivered at Hong Kong Political Science Association Annual Conference, 2019. 101. ‘E3 Joint Statement on the Situation in the South China Sea,’ GOV.UK, 29 August 2019, https://www.gov.uk/government/news/e3-joint-sta tement-on-the-situation-in-the-south-china-sea. 102. Tim Summers, ‘Better the Devil You Know? US-China Strategic Rivalry and the UK’s China Policy,’ in Europe in the Face of US-China Rivalry, ed. Mario Esteban et al. (European Think-Tank Network on China, 2020), http://www.realinstitutoelcano.org/wps/portal/rielcano_en/ publication?WCM_GLOBAL_CONTEXT=/elcano/elcano_in/publicati ons/etnc-europe-in-the-face-of-us-china-rivalry. 103. Foreign Affairs Committee of the House of Commons, ‘China and the Rules-Based International System,’ Sixteenth Report of Session 2017– 2019 (House of Commons, 2019), 5. 104. Foreign Affairs Committee of the House of Commons, ‘China and the Rules-Based International System,’ 46. 105. ‘A Cautious Embrace: Defending Democracy in an Age of Autocracies,’ Foreign Affairs Committee, 2019, https://publications.parliament.

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uk/pa/cm201919/cmselect/cmfaff/109/10902.htm. The report was completed somewhat hastily to allow publication before Parliament rose in preparation for the December 2019 general election. Education ties are also important for the Chinese Government; see Liu Xiaoming, ‘China Wants to Build Deeper Educational Links with Britain,’ Financial Times, 26 November 2019, https://www.ft.com/con tent/b6a32a72-0d33-11ea-8fb7-8fcec0c3b0f9. Neither recommendation on Hong Kong was drawn from evidence submitted to the committee during its inquiry, and the decisions of judges on this issue are not within the remit of the Government; for brief comment, see Tim Summers, ‘British Policy Towards Hong Kong,’ Asia Dialogue (blog), 4 December 2019, https://theasiadialogue.com/ 2019/12/04/british-policy-towards-hong-kong/. Edith M. Lederer, ‘China and West Clash Over Claims Beijing Oppresses Uighurs,’ Associated Press, 30 October 2019, https:// apnews.com/68f22c01a6fd47b7ba3443ca4295f233. Similar points were raised at the UN Human Rights Council in September 2019; see ‘UN Human Rights Council 42: Item 4 General Debate,’ GOV.UK, 17 September 2019, https://www.gov.uk/government/news/un-humanrights-council-42-item-4-general-debate. For example, see ‘Lord Ahmad Statement on the Sentencing of Human Rights Activist and Journalist Huang Qi,’ GOV.UK, 1 August 2019, https://www.gov.uk/government/news/lord-ahmad-statementon-the-sentencing-of-human-rights-activist-and-journalist-huang-qi. ‘Big Wins for British Businesses as Vice Premier Hu Chunhua Visits,’ GOV.UK, 17 June 2019, https://www.gov.uk/government/news/bigwins-for-british-businesses-as-vice-premier-hu-chunhua-visits. ‘UK-China Trade Relations Championed by Investment Minister Visit,’ GOV.UK, 21 August 2019, https://www.gov.uk/government/news/ uk-china-trade-relations-championed-by-investment-minister-visit. ‘UK Plans More Liberal Takeover Regime After Brexit,’ Financial Times, 20 September 2019, https://www.ft.com/content/91a7bd42dace-11e9-8f9b-77216ebe1f17. ‘British Steel Rescue Nears After Backing from Chinese Regions,’ Financial Times, 9 January 2020, https://www.ft.com/content/0e1d20363229-11ea-9703-eea0cae3f0de. The acquisition was completed in March 2020, with Jingye pledging investment of GBP 1.2 billion and saving 3,200 jobs. See ‘Jingye Completes Acquisition of British Steel,’ British Steel, 9 March 2020, https://britishsteel.co.uk/news/jingye-completesacquisition-of-british-steel/. ‘British Business in China: Sentiment Survey 2019–2020’ (British Chamber of Commerce in China, 2020), 5, https://www.britishch amber.cn/en/business-sentiment-survey/.

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115. However, the possibility of some sort of free trade agreement with Hong Kong remained a live one. 116. See ‘Japan Trade Accord Becomes Post-Brexit Priority for UK,’ Financial Times, 20 September 2019, https://www.ft.com/content/b6a 047c6-dafc-11e9-8f9b-77216ebe1f17. 117. See ‘PM Speech in Greenwich,’ GOV.UK, 3 February 2020, https:// www.gov.uk/government/speeches/pm-speech-in-greenwich-3-feb ruary-2020. 118. Summers, ‘British Policy Towards Hong Kong’ (see footnote 107). 119. The debate is available at ‘UK General Election 2019: BBC– Chatham House Foreign Policy Debate,’ Chatham House, 28 November 2019, https://www.chathamhouse.org/file/uk-general-ele ction-2019-bbc-chatham-house-foreign-policy-debate. 120. See the 28 January 2020 statement to the House of Commons by Foreign Secretary Dominic Raab, at ‘The Secretary of State for Foreign and Commonwealth Affairs and First Secretary of State (Dominic Raab),’ UK Telecommunications—Hansard, 28 January 2020, https:// hansard.parliament.uk/commons/2020-01-28/debates/282ECCE0919C-4EE5-BEAD-65FBD94B8299/UKTelecommunications. 121. I cover the background to the Huawei issue in more detail in Summers, ‘The UK’s China Policy.’ There has also been uncertainty over whether companies in the UK, such as ARM, could continue to supply Chinese companies, such as Huawei, which had been subjected to US restrictions. 122. ‘Digital, Culture, Media and Sport Secretary’s statement on telecoms,’ GOV.UK, 14 July 2020, https://www.gov.uk/government/speeches/ digital-culture-media-and-sport-secretarys-statement-on-telecoms. 123. Tim Summers, ‘UK: Sharpening the China Debate Amid Covid-19,’ in Covid-19 and Europe-China Relations: A Country Level Analysis: European Think-Tank Network on China (ETNC) Special Report —29 April 2020 (French Institute of International Relations (Ifri), 2020), 74–76, https://www.ifri.org/sites/default/files/atoms/files/etnc_spec ial_report_covid-19_china_europe_2020.pdf. 124. See Tim Summers, ‘Chinese Investment in the UK: Growing Flows or Growing Controversy?,’ in Chinese Investment in Europe a CountryLevel Approach: European Think-Tank Network on China (ETNC) Report December 2017 , ed. John Seaman, Mikko Huotari, and Miguel Otero-Iglesias (Institute of Foreign Relations (Ifri), 2017), https:// www.ifri.org/en/publications/publications-ifri/ouvrages-ifri/chineseinvestment-europe-country-level-approach.

CHAPTER 6

The Japanese Government’s Response to Brexit David Warren

Introduction This chapter examines the reactions of the Japanese Government to the result of the 2016 Brexit referendum, in terms of its impact on UK/Japan relations, particularly the close trade and investment relationship that has developed over the past 30 years. While the Japanese Government has always been careful to respect the decision taken by the British people in the referendum, which was eventually implemented in the UK’s withdrawal from the EU at the end of January 2020, it remains concerned about the terms of the future trading relationship between the UK and the EU and the possibility of continuing uncertainty if—as many expect, in spite of assertions to the contrary in London—the negotiating process has to be extended because of other, more urgent priorities linked to the Covid-19 crisis and its wider economic and social impact.

D. Warren (B) Chatham House, London, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_6

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Before the Referendum The 23 June 2016 referendum on whether Britain should remain in or leave the European Union was a matter of major concern for the Japanese Government, well in advance of the result. Japanese worries about the implications of a “Leave” vote were made explicitly clear on several occasions, by both government and some business representatives. When he visited the UK in May 2016, the Japanese Prime Minister Shinzo Abe made a point of saying in the joint press conference he held with the British Prime Minister David Cameron that “Japan very clearly would prefer Britain to remain within the EU. It is better for the world that Britain remain in a strong EU.”1 The reason given by Prime Minister Abe was that Britain’s EU membership was a crucial element in the growth of Japanese investment in the UK over the decades since Britain joined the EU in 1973. “About 1,000 Japanese companies operate in the UK, employing 140,000 people,” he explained. “Many of the Japanese companies set up their operations in the UK precisely because the UK is a gateway to the EU. A vote to leave would make the UK less attractive as a destination for Japanese investment.” To drive the point home, the two prime ministers visited one of the highest-profile newer Japanese investments, the Hitachi rolling stock construction and assembly facility at Newton Aycliffe in County Durham. This had opened—in the presence of Prime Minister Cameron and Chancellor of the Exchequer George Osborne—in September 2015. Not all Japanese business leaders had put their heads above the parapet during this period, preferring to reassure British voters that immediate business plans were not contingent on the result of the referendum and that investment flows would not cease overnight.2 But there was unease about the prospect of a Leave victory, and the Chairman of Hitachi, Hiroaki Nakanishi, went public on the issue, pleading with British voters not to support the Leave argument in a Daily Mirror article two weeks before the referendum: “In the 80s, Nissan and Toyota came to the UK on the basis that if they produced here and employed a British workforce they would be treated as European companies. This was only possible because Britain was inside the EU, and so the UK car industry was revived and became an exporter again. From Japan, this incredible success story looks like a huge gain from the UK’s membership of the EU. We worry because those advocating Brexit have no answer to how the UK could renegotiate cost-free access to this huge market from a position outside it. It

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would take a long time and result in uncertain market conditions; during this renegotiation period, investors would probably be waiting to see the outcomes, hold back on investment, and jobs would be lost. This is the cold economic reality of Brexit.”3 Prime Minister Abe’s support for David Cameron’s attempts to shore up the support for Remain in the final stages of the referendum campaign was not confined to statements of the Japanese Government’s concern about the dangers of a Leave vote. He also used the Japanese chairmanship of the G7 major economies’ summit at Ise-Shima at the end of May 2016 to corral support for the cause among his fellow leaders of the developed world. The statement at the end of that conference included an explicit warning about the impact of Brexit in its section on the “State of the Global Economy”: “A UK exit from the EU would reverse the trend towards greater global trade and investment, and the jobs they create, and is a further serious risk to growth.”4 But like the visit by President Obama two weeks after Prime Minister Abe, in which he had controversially warned that Britain would be “at the back of the queue” as far as a post-Brexit trade agreement with the United States was concerned, the warning of the risks attached to Brexit from close allies appeared to have little effect. Indeed, such statements were considered by some to have been counterproductive, even when echoed by those business leaders who were willing to become involved in what was rapidly developing into a bitter and polarised political debate.5 At all events, the result of the referendum indicated that voters were unimpressed by these warnings. Or perhaps it would be more accurate to say that they were outweighed by the other considerations believed to have contributed, among different constituencies, towards the success of the Leave vote. These included concerns about immigration, hostility to the economic and social effects of six years of austerity, scepticism about the European Union’s long-term sustainability, dislike of the EU’s perceived protectionist and capitalist policies, and a general disaffection from the government. The North-East of England is an area with strong historical links to Japan and had received a considerable amount of Japanese investment, led by Nissan, the automobile company. Indeed, 25 Japanese manufacturers had established factories there—with one European headquarters, along with eight research, development and design facilities—employing 13,700 people.6 Nevertheless, the Leave vote consistently outnumbered Remain in eleven of the North-East’s twelve areas by margins of around 7% or more. Only in Newcastle-upon-Tyne

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did Remain edge ahead by the narrowest of margins (1.4% of the vote). In County Durham, where Newton Aycliffe is situated, the majority to leave the EU was 40, 356 votes—15% of the total. In Sunderland, 61.3% of the voting population supported Leave. The same phenomenon was seen in the three other English regions where the Leave vote was highest7 — Yorkshire and Humberside, and the East and West Midlands, where over 52 Japanese companies are situated and employ 37,400 people.

After the Referendum The Japanese Government worked quickly to assess the impact of the vote, and to set out their views on how the views of the British people should now be put into effect. In September 2016, just over two months after the referendum, the Japanese Government published a paper on the implications of Brexit.8 It took the form of a message to both the British Government and the European Union. The document was a detailed, carefully argued analysis of the Brexit-related concerns of both the Japanese Government and the thousands of Japanese companies who had invested in the UK and the European Union. The statement upheld the values Japan shared with the UK and the EU, and the need to maintain the open trading system and to continue to collaborate in supporting prosperity, peace and stability. It urged that the Brexit negotiations be conducted transparently and with the aim of, as far as possible, ensuring predictability for all stakeholders in the postBrexit landscape. It also encouraged both the UK and the EU to seek to “maintain the current business environment or alleviate the impacts of any radical changes, so as to remain an attractive destination for doing business.” And specifically on that latter point, it stressed the importance of understanding the concerns of Japanese investing companies about maintaining customs-free trade in goods, unfettered investment, an environment in which trade in services could be carried out smoothly, and continued harmonisation of standards and regulations between the UK and the EU. The statement went into more granular detail, in a 10-page annex, on individual sectoral concerns in both goods and services. But the context in which the Japanese Government made their views known was explicitly geopolitical. The paper stated that “the withdrawal of the United Kingdom from the European Union constitutes an event that will wield a substantial impact not only on the future of European integration but

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also on the international community as a whole, which is why the world including Asia is paying close attention to the BREXIT negotiations.” The Japanese Government couched their concerns in diplomatic language and terms that made clear their respect for the democratic processes in the UK and the professionalism of the immediate EU response. “Although the negotiations are sure to encounter difficulties from time to time, Japan has no doubt that the UK and the EU will overcome such difficulties and lay the foundations for the creation of a new Europe.” But the direct message was that for the UK to withdraw from the EU risked destabilising one of the key pillars of the multilateral trading system. The immediate context was Japan’s concern about the risk of competitive protectionism in the 2016 US presidential campaign. Donald Trump was openly espousing a protectionist line, and Hillary Clinton had begun to move in that direction with a commitment to leave the free trade Trans-Pacific Partnership. For two of Japan’s important trading and political partners to be weakened in this way would endanger Japan’s broader interests. The paper came as something of a shock to the British Government, not least as its publication coincided with the G20 meeting at Hangzhou. In part, this was because of a residual assumption on the part of some British commentators, not wholly justified and owing a lot to old-fashioned national stereotypes, that Japanese politicians and officials rarely spoke in such direct terms. But the annoyance the paper caused in some quarters stemmed from an analysis not reflecting the narrative of some Brexit-supporting politicians—that the desire to leave the EU was perfectly explicable in terms of a sovereign nation wishing to assert its sovereignty, and the arguments that there might be negative economic consequences were either exaggerated or misplaced. The Brexit dictum was that the act of withdrawal from the EU was also an act of liberation from the protectionist customs union and single market, enabling greater autonomy of trading policy. All counter-arguments that the decision might weaken the British economy were fundamentally dismissed. This, however, was not the prism through which the Japanese Government viewed the outcome of the referendum, and there was already evidence to this effect. In his article of July 2016, initially printed in “The Diplomat,” Tomohiko Taniguchi, Special Adviser to Prime Minister Abe, set out Japan’s first reactions to the vote.9 These included the effect on Britain’s security interests in Asia (would these wane, even temporarily, as Britain focused on the task of negotiating withdrawal from the EU?); the

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risk of Japanese companies’ finding the UK a less attractive investment destination (given that even Sunderland, home to Nissan’s flagship plant, had voted to leave); the immediate fall in the value of sterling, creating “additional headwinds for Abenomics, the Prime Minister’s strategy to combat deflation”; and the implications, even for a democracy as old and apparently stable as Britain’s, of social media, a generational divide, the ways in which referenda can unleash demagogy and xenophobia, and the dangers of a metropolitan elite becoming detached from a national mood outside the political capital.10 The reaction of the Japanese Government to the referendum was inevitably to analyse the implications of the decision for Japan’s strategic interests, not just its economic relationships with Britain and Europe.

The Importance of Investment The Taniguchi article reflects a view of the UK in Europe as an influential and stabilising force that goes back to the 1980s. It was under the Prime Ministership of Margaret Thatcher that Nissan launched its investment in Sunderland. Although not the first such major Japanese manufacturing investment, Nissan paved the way for an upsurge of Japanese automobile, electronics, heavy industrial and pharmaceutical companies coming to the UK over the next thirty years. It was Margaret Thatcher who argued vigorously, in the face of those within the European Union who sought to present Japanese factories in the UK as foreign “implants,” that they should be regarded as British companies and that their products should therefore be seen as items traded within the single market, not Japanese exports under another guise. Given that Japanese companies were invited by Margaret Thatcher to invest in Britain partly because it was a part of the Single European Market and common customs union, the word “betrayal” has sometimes been heard privately to describe the sense of dismay among Japanese businesses and officials at Britain’s turning its back on the EU. As a result of this successful strategy to attract Japanese investment to the UK—along with other examples of the UK holding sway in intraEuropean arguments—Japan saw Britain as an influential voice within the European Union on issues where Japan and Britain shared a common objective. The establishment of a free trade partnership between Japan and the EU was one example: the British Government’s support in the initial stages of the negotiations had helped to ensure a degree of

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momentum that had not at first seemed likely, given the reservations of some European manufacturers to the proposal to reduce trading barriers. The UK was not just a platform within the Single European Market for inward investors, but a force within Europe, which was helping to shift the political debate in the direction of freer multilateral trading rules. Although the premise is rejected by those arguing for Brexit, the underlying assumption of Japanese policy thinkers is that for the UK and the European Union to separate in this way will result in a negative economic impact, which in turn may result in weakening political influence. Brexit advocates refute that assertion and sometimes go on to argue that as foreign investors, including the Japanese, have often urged greater cohesion within Europe; especially in monetary policy, against the wishes of some national governments within the EU, their views and analysis of the implications of Brexit are not wholly reliable. In other words, if Japanese companies were keen for Britain to join the Euro in 2002/3 (as some were), why should their views on Brexit be taken seriously now? These arguments are a simplification in the interests of making a debating point. The issue for most Japanese investors is stability and predictability, which are core elements of their manufacturing business strategies. When the political dynamic seemed to be pointing towards Euro membership, Japanese firms wanted to minimise political uncertainty and find a path towards a clear decision. Their business models could adapt to different policy outcomes, but an early decision was more desirable than drift. The same considerations apply now, except that what is now proposed is a radical shift from the status quo, rather than the risk of adopting a common currency. If a fundamental breach of the political and economic model that has governed the UK for nearly fifty years is in serious prospect, then companies who have made their investments based on the UK’s being an integral part of the EU—and its secondlargest economy—may wish to minimise the inevitable uncertainty that flows from such a disruption. Hence, the Japanese Government’s paper, arguing for a smooth, frictionless divorce, to enable companies to adapt their longer-term plans accordingly.

Since the Referendum From the initial responses to the result of the referendum to the present day, the Japanese Government and business views of Brexit have not radically shifted. They have focused on three main areas of activity:

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• Continued emphasis on the desirable outcomes as set out in the September 2016 Japanese Government paper. • Preparation by the major corporate investors for a post-Brexit business environment. • Government commitment to the continuation of a strategic partnership between the UK and Japan. Prime Minister Abe has continued to stress the desirability of avoiding a “no-deal” outcome at all costs. When he saw Prime Minister Theresa May at the December 2018 G20 conference in Buenos Aires, he paid tribute to her efforts in securing a deal (which was subsequently rejected three times by Parliament) but added, “I would like to once again to ask for your support to avoid no deal. As well as to ensure transparency, predictability [and] legal stability in the Brexit process.”11 He reiterated this message when he met her again the following month in London. On that occasion, he made the point explicitly that “it is the strong will of Japan to further develop this strong partnership with the UK, to invest more into your country and to enjoy further economic growth with the UK. That is why we truly hope that a no-deal Brexit will be avoided.” He further added, in terms that provoked a strong reaction from some Brexit supporters, “and in fact that is the wish of the whole world.”12

Companies’ Reactions The prime minister’s words echoed the views expressed by major Japanese companies. For example, Akio Toyoda, the President of Toyota (and Chair of the Japan Automobile Manufacturers’ Association), had referred in October 2018 to the growing apprehension that a no-deal Brexit might be a possibility. This prospect, he asserted, would adversely affect carmakers and their customers because of “suspended production activities resulting from failed just-in-time logistics operations, declines in revenue and revised vehicle sales prices caused by spiralling logistics and production costs,” and that, therefore, “we hope that both the UK and EU governments will continue to make maximum efforts to reach a satisfactory settlement and that a withdrawal without agreement is avoided at all costs.”13 Other manufacturers, including Nissan, had also warned that there would be disruption to their production operations if the government failed to avoid a “no-deal” withdrawal from the EU.

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In the meantime, some Japanese companies (and other foreign investors) prepared for Brexit by moving or scaling down their operations as appropriate. Japanese financial companies did this in the context of a general move by financial service companies to relocate or adopt contingency positions designed to deal with the implications of Brexit.14 The Japanese electronics manufacturer Panasonic moved its headquarters from London to Amsterdam in October 2018. The proposal that, postBrexit, the UK might become a lower-business tax environment to attract foreign investment was not an incentive for Panasonic to stay. This option was outweighed by the dangers of being taxed more in Japan to offset the UK’s potential “tax haven” designation and of experiencing barriers to trade in goods in the event of a non-frictionless trading border. Nomura became the first Japanese bank to choose a European location for its post-Brexit business when it announced Frankfurt as its European headquarters in 2017, a decision following the example of Goldman Sachs and Morgan Stanley. Daiwa established a trading subsidiary in Frankfurt in 2018 to “provide clients in the European Economic Area with all the products and services we currently provide out of London, whatever form Brexit takes.”15 Mitsubishi UFJ Financial Group is expanding its operations in Amsterdam and planning a Paris branch, Norinchukin Bank has announced a wholly-owned Amsterdam subsidiary, and Mizuho and Sumitomo Mitsui are setting up German subsidiaries. This does not constitute a rush for the exit, as Paul Maidment, Director of Analysis for Oxford Analytica, explained in an article first published in Harvard Business Review in March 2019: “They are making limited, defensive moves while they wait for clarity to emerge from the chaos… [They] are keeping a clear head in the political fog, making sensible defensive decisions to position themselves from what they know is certain about Brexit in the short-term and holding off long-term investment decisions until there is true clarity.”16 But as Maidment’s analysis also makes clear, the major Japanese automobile investors have also had to make calculations about where to put their new investment, against a volatile business background in which Brexit is only one factor (and which has since become infinitely more volatile with Covid-19). Hence, Nissan’s announcements in February 2019 that it would cease production of its Infiniti Q30 and QX30 models as part of its withdrawal from luxury production in Western Europe, as well as repatriating its production of the X-Trail sports utility vehicle to Japan. Not to mention its Europe Chairman warning in October 2019 that a “no-deal” Brexit would make

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Nissan’s European business model unsustainable.17 Additionally, Toyota has warned that it could end its UK production in the event of nodeal (although it has committed to building the next-generation Auris at its plant in Burnaston). And Honda has announced the closure of its Swindon plant in 2021. Honda made clear that this decision was due to global trends, although the uncertainty over post-Brexit tariffs—given that 40% of Honda’s components come from the EU and 35% of its exports go to the EU—had not helped.

Implications for the Strategic Partnership Both governments, however, have invested considerable time and effort since the referendum in maintaining and extending the strategic partnership developed by the two countries over the past three decades. The British aim has been to demonstrate that existing bilateral relationships with allies are not dependent on European Union membership. The Japanese objective has been to minimise any negative impact of the perceived weakening of British influence, with its consequential impact on geopolitical and global economic stability, once the UK has left the EU. The successful development of a strategic partnership between Britain and Japan goes back to the 1980s. The visit to Japan by Sir Geoffrey Howe, when he was foreign secretary in 1989, was designed to open a new chapter in a relationship that had been dominated for some years by trade and investment. This signalled the British Government’s desire to attract Japanese investment to the UK, which was accompanied by pressure on Japan to open its domestic markets to British exporters by removing tariff and non-tariff barriers. This was the period immediately before the bursting of the Japanese economic bubble in December 1989, in which Japan was widely seen as moving inexorably towards taking over from the United States as the world’s largest economy (Ezra Vogel’s book, “Japan as Number One,” published in 1979, was the canonical text of this school of thought). The context in which British policy-makers sought to develop links with Japan beyond the trade and investment agenda was well set out in an internal Foreign and Commonwealth Office memorandum on policy towards Japan in November 1987. This addressed the increasing interdependence of the Japanese and US economies, the importance of continued Japanese capital inflows to the United States to avoid higher US interest rates and/or a lower dollar, and the danger of bilateral trade

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deals instead of a common front against protectionism. There were, the authors of the paper argued, politico-military risks also: “…there is an inherent nonsense in a situation where the world’s biggest debtor is the defender of the world’s biggest creditor.” Quite apart from the potential difficulties of the Japanese becoming more militarily assertive, “the prospect of a world economic, and increasingly a world political, order arranged over our heads between Washington and Tokyo is singularly unappealing.” Sir Geoffrey Howe commented: “And we must seek to respond to all this by maximising our European leverage.”18 The result was a visit designed to raise the relationship above the purely economic level and to begin a more substantive political dialogue. The foreign secretary reported to the prime minister his impression that on the main political issues where the UK was seeking “sustained Japanese cooperation: particularly the Gulf, aid to sub-Saharan Africa, and the management of East/West relations…I detected unease among the Japanese about what has up to now been the bedrock of their attitude to the outside world, their reliance on American leadership.”19 This, in turn, led to more detailed foreign policy discussions between Japan and the UK, along with the eventual establishment of more formal mechanisms for the coordination of policy and exchange of information. Over the next decade, a broader relationship developed, in which the potential for closer links not only in trade and investment areas, but also in science and innovation, environmental policy and defence, as well as foreign policy itself, was explored. The momentum behind this has continued over the subsequent thirty years and, indeed, intensified since the Brexit referendum. While Geoffrey Howe’s supposition in 1989 that Japan was having doubts about its dependence on the United States underestimated the extent to which the US/Japan relationship remains existential, his words resonate in an age when Japan has feared the unpredictability of the Trump administration’s foreign policy agenda. However, this anxiety takes place alongside a private gratitude for Trump’s willingness to take a more aggressive stance against Chinese economic assertiveness. Successive British governments have managed to develop a relationship that represents a distinct political asset to both countries and has enabled Japan to multiply its influence through Britain with Europe. The “UK-Japan Joint Statement” issued by both prime ministers during the Abe visit to London in January 2019 represents the current

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state of this strategic partnership. It is a strong reaffirmation of the relationship between the two countries, which is “underpinned by mutual interests, common values and a commitment to upholding the rules-based international system.”20 Additionally, the Joint Statement states unequivocally that “as the UK leaves the EU, we will now deepen our strategic partnership further, looking ahead to the challenges and opportunities of the next decade. We again confirmed that it is of mutual benefit to work together with partners, to maintain a free and open Indo-Pacific region. Together, we will build connectivity and strengthen security in Asia and beyond, enhance our economic partnership, and harness strengths in science and innovation to shape the technologies of the future, as well as work together to tackle global poverty and achieve the Sustainable Development Goals.” The paper goes on to list in detail the areas in which the two countries will work together to do all these things. This includes a Fourth Japan-UK Foreign and Defence Ministerial Meeting, strengthened intergovernmental cooperation in the Indo-Pacific region, enhanced maritime security cooperation, combined defence exercises, joint action or at least common positions on key areas of security and human rights policy—North Korea, the East and South China Seas, Ukraine, Myanmar, cybersecurity, etc.—as well as closer links in science and innovation. Such links include energy policy, next-generation communication technology, artificial intelligence, robotics and medical research in areas such as dementia, nutrition, infectious diseases and regenerative medicine. Nor is culture in the broadest sense forgotten, with the announcement of Years of Culture in the UK and Japan during the period between the Rugby World Cup and the Olympics and Paralympics, due to be hosted by Japan in 2019 and 2020 (the latter subsequently postponed to 2021 because of the Covid-19 pandemic). This is an ambitious programme of cooperation between Britain and Japan. But while impressively broad in its scope, it is not new. Many of the areas listed in the Joint Statement have been part of the joint strategic agenda for many years. However, aspects of that agenda have seen cooperation intensified more recently—defence, for example, with increased numbers of warship visits and joint drills. The tone in which the joint agenda has been developed has, however, changed since Margaret Thatcher and Geoffrey Howe first identified this as a political objective. A (slightly patronising) assumption that the dialogue needed to be thickened up to “encourage” Japan to play an international political

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role commensurate with its global economic power has disappeared. It has been replaced by an emphasis on shared values and an attempt to find ways to work together on foreign policy dossiers where British and Japanese interests may be asymmetric. There are several examples of the latter. On North-East Asian security policy, Britain’s voice in the United Nations will support Japanese concerns about North Korea, but the deployment of military assets out of the NATO area is unlikely. On Russia, Japan is more reticently associated with the international response to aggression and human rights violations in Europe, in the hope of resolving its own post-1945 bilateral territorial disputes. On China, Japanese concerns about Chinese challenges to the US presence in the Asia-Pacific region have sometimes collided with UK and European desires to benefit from Chinese investment initiatives—although the attitude of the British Government on this specific issue changed perceptibly when Theresa May replaced David Cameron as prime minister. In these and other areas—as Sir Geoffrey Howe foresaw in 1989—Britain’s membership of the EU has helped to augment its voice in the bilateral political dialogue. Thus, Britain has benefited from both EU and member state support for its objectives in Tokyo,21 and the UK has been able to influence the European debate in support of shared interests with Japan.

A Free Trade Agreement? Despite the government’s continual emphasis on the “Global Britain” initiative, no element of this cooperative agenda of activity depends on Britain’s leaving the EU—other, of course, than the aspiration to enter into a bilateral trade agreement. Some Brexit advocates have allowed the impression to gain currency that the UK’s membership of the EU has, in some way, constrained the UK’s ability to trade with other countries. Their language (“EU membership means Brussels is in charge of UK trade and we have no independent voice in the World Trade Organization. If we Vote Leave, we can negotiate for ourselves”)22 is designed to suggest this. It implies both that the UK is at a disadvantage as part of the EU because we have to move at the speed of the slowest EU state in the formation of a common trading policy, and also that our membership positively holds us back from trading with third countries. The assumption is that trade is a factor of an inter-governmental legal framework. This is a simplification, as the figures for UK exports to Japan indicate. These have fluctuated

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since 2000, from £7.5 billion to £14.6 billion in 2018/2019, now representing around 6% of British trade, all in the absence of any UK or EU free trading agreement with what was for around half the time period in question the second-largest economy in the world until overtaken by China in 2009/2010.23 Paving the way for the signature of a free trade agreement between Britain and Japan after Brexit has been a high priority for the British Government since the 2016 referendum. The necessary processes were launched in a visit to Tokyo by the secretary of state for international trade in September 2019, during which an exchange of letters was signed to ensure continuity of the EU-Japan Mutual Recognition Agreement. In launching a consultation exercise to prepare for trade negotiations after Brexit, the International Trade Secretary Liz Truss said that “We want to have an ambitious, comprehensive arrangement with Japan that covers many modern industries—for example, artificial intelligence, financial services—and helps build the links between our two economies.” Such an agreement would build on the diverse make-up of current UK trade with Japan. Contrary to popular myth, which assumes that a high proportion of British goods exported are in the food and drink category, the consultation document clarifies that of the £7 billion worth of goods exported to Japan in 2018—which in turn represented 49% of total British exports to Japan—the largest sectors represented were industrial: turbojets, machinery and engines, vehicles and parts, and pharmaceutical products. The aim has always been to take the EU/Japan Economic Partnership Agreement, which entered into force on 1 February 2019—and which continues to apply to the UK until the end of the transition (or implementation) period following its departure from the EU in January 2020—as the basis for the future economic partnership between Japan and the UK. The EU/Japan agreement was a significant political achievement for both parties. It was seen as an important assertion of free trade values at a time when the system was under attack from the Trump administration, following the withdrawal of the United States from the Trans-Pacific Partnership. Some commentators described the creation of a trading zone including over 600 million people, and covering a third of the world economy, as a breakthrough in the battle against protectionism. For some, the agreement was not ideal; they argued against the phasing in of tariff

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reductions along with the lack of a substantive binding, reciprocal agreement on the free flow of data. Nevertheless, it represents an important step-change in the terms of trade. The British Government, which took office after the December 2019 general election, has sought to move quickly towards putting a substitute trade regime in place, one seeking to retain some or all of the trading advantages currently accruing to EU members under the present arrangement and improve upon it. The Foreign Secretary, Dominic Raab, made this clear in his first visit to Japan in February 2020. Just as the UK has sought—through the consultation exercise it launched in September 2019—to find areas in which they could obtain more from Japan than they were able to obtain with the EU negotiating on their behalf, so the Japanese Government has aimed to secure more from the British Government than they could obtain from the UK as one of 28 countries. As the Financial Times reported, following the international trade secretary’s 2019 visit, “Japan has resisted this ‘copy-and-paste’ approach, believing that it can secure much better terms from the UK than it did in negotiations with the much larger EU when it secured a bilateral EU/Japan treaty.”24 Nor has the Japanese Government been influenced by British rhetoric that the successful negotiation of a trade deal is needed to reassert the close links between Britain and Japan post-Brexit. It has recognised Britain’s need to develop strong bilateral trading relations with its major non-European partners after its withdrawal from the EU, and has seen the negotiation of a free trade agreement as a political process; it is not Japan which is the primary demandeur. Indeed, with the British Government giving a high priority to establishing free trade agreements with third countries post-withdrawal from the European Union, the Japanese Government has seen an opportunity to promote its own strategic objective of strengthening the Trans-Pacific Partnership, now entitled the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). With President Trump’s announcement of the United States’ withdrawal from the original agreement in one of his first official acts in January 2017, it became a primary concern for Japan to salvage as much of the original TPP-1225 agreement as it could. The original agreement was signed in 2016 but never entered into effect because of the United States’ withdrawal. Prime Minister Abe worked hard to give the Partnership a second lease of life and keep the flame of Asian trade multilateralism alive. Michael Reilly gives a fuller

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background to the CPTPP and Japan’s interest in securing UK membership of it in Chapter 10, “Towards a New World Trade Order?” It was a proposal about which International Trade Secretary Truss made polite noises when she visited Tokyo in September 2019,26 and Foreign Secretary Raab’s agreement with Japanese Foreign Minister Motegi in February 2020 that a new partnership should be built “as ambitious, high standard and mutually beneficial as the Japan-EU EPA”27 did not exclude this option. But while it is clearly in the Japanese geostrategic interest to strengthen this treaty with UK participation, is it as clearly in the UK’s interest? As part of a network of bilateral economic agreements, yes, and an EU/CPTPP agreement would, as Michael Reilly points out, cover around 40% of the world economy. But if the yardstick for making a judgement on the relative importance of a trade partnership is the existing volume of trade facilitated by it, then the priority for the UK must be to maintain the frictionless trade arrangements with the EU. These are agreements which currently account for over 40% of the UK’s exports (around 2.5% of British exports go to Japan, about 8% in all to the 11 countries of the CPTPP). Given that the main drivers of trade are geography and gravity rather than politics, these proportions are unlikely to change in the short term, although all economic forecasts must now be seen through the prism of the massive shock to the international economic system caused by the impact of the 2020 Covid-19 pandemic. There will be political reasons why the UK may wish to respond positively to Japan’s regional ambitions, but any binary choice must invite the obvious response that prioritising the EU relationship should matter more—not least for Japanese investors, as well as indigenous British companies. The Covid-19 crisis throws much of this agenda into uncertainty, which will be of concern for the Japanese and other foreign investors in the UK. They want to avoid any risk of terms not being agreed by the end of the implementation period and trade having then to be conducted on a WTO basis. Secondly, the full impact of the pandemic on the global economy, in terms of not only the damage to national and global GDP, but also the implications for the policies and practices that underpin the current world trading system—supply chains, freedom of movement and travel, the need for national self-sufficiency, the development of globalisation—are yet to be fully understood.

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Conclusion The Japanese Government has always sought to craft its public statements on Brexit in terms of respect for the decision of the British people in the 2016 referendum, while not concealing its concern about its potential impact. Eventual withdrawal from all EU structures in a manner that compromises the current state of frictionless trade between the UK and the EU would have a severe impact on—and could call into question the long-term status of—Japanese manufacturing and service investment in the UK, which has made a significant contribution to the British economy since the 1970s. The autonomy a post-Brexit UK would have to strike a free trade deal with Japan would be beneficial, but until it is clear how this improves on the current wide-ranging free trade arrangements between the EU and Japan, of which the UK is part until it finally negotiates the terms of its future trading relationship with the EU, the benefits for either party are speculative. Japan remains committed to the “strategic partnership” with the UK, which has been developed over recent years without constraint from— and indeed, in many areas, benefiting from—the UK’s membership of the EU. Japan sees an opportunity to benefit from the UK’s becoming a demandeur on bilateral/multilateral free trade arrangements to secure the strengthening of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) through the UK’s inclusion. That would not of itself compensate for any weakening of the UK’s trading arrangements with the EU. Japan remains pragmatic in its responses to Brexit but will want to take all appropriate measures to guard against any negative impact—specifically relating to the multilateral trading and global economic systems, on collective global security through any weakening or imbalance of the European voice in this area, or on the ability of the global community to uphold shared values. Japan attaches high importance to global stability, even more since the grave impact of the current Covid-19 pandemic. Indeed, it remains concerned about the possibility of Brexit acting as a destabilising force, and it will support all attempts to manage a process to avoid this.

Notes 1. David Cameron and Shinz¯ o Abe, ‘PM Statement at Press Conference with Japanese Prime Minister Abe,’ GOV.UK, 5 May 2016, https://

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2.

3.

4. 5.

6.

7. 8.

9. 10.

11.

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www.gov.uk/government/speeches/pm-statement-at-press-conferencewith-japanese-prime-minister-abe-5-may-2016. Prime Minister Abe’s remarks are to be found in the transcript of the press conference. With the result that their carefully reassuring message, designed to respect the integrity of the vote, was presented in some quarters as insouciance about the possibility of a decision to Leave—see Nissan’s decision to take legal action against Vote Leave for using their logo on leaflets quoting the then Chairman, Carlos Ghosn, as saying that the company stayed committed to their investment decisions, but not his earlier sentence that ‘our preference as a business is that the UK stays within Europe.’ Hiroaki Nakanishi, ‘Hitachi Boss Says Brexit Would “Force Rethink” of UK Operations and Jobs,’ The Mirror, 6 June 2016, sec. UK News, http://www.mirror.co.uk/news/uk-news/hitachi-boss-says-brexitwould-8125754. ‘G7 Ise-Shima Leaders Declaration,’ 26 May 2016, 4, https://www.mofa. go.jp/files/000160266.pdf. A poll of members of the Japan Chamber of Commerce in London before the referendum revealed near unanimous concern about the possibility of Brexit, but received very little publicity. See the Japanese Embassy’s pamphlet, ‘You Can Find Japanese Companies Throughout the UK,’ Embassy of Japan in the UK, 2019, https://www.uk.emb-japan.go.jp/en/econ/JapanPartneroftheBrit ishEconomy2019.pdf. Over 57% in each case. But Leave outnumbered Remain in every English region except London. The text of this document can be found at, ‘Japan’s Message to the United Kingdom and the European Union,’ Report Summary (Ministry of Foreign Affairs of Japan), https://www.mofa.go.jp/files/000185466. pdf, accessed 23 June 2020, from which quotations from the paper in this chapter are drawn. Tomohiko Taniguchi, ‘Brexit: The Consequences for Japan,’ 8 July 2016, https://thediplomat.com/2016/07/brexit-the-consequences-for-japan/. Japanese official antipathy to referendums also explains why some Japanese officials and commentators were cool about the idea of a second referendum, or ‘People’s Vote,’ at some stage, as a way of addressing the continued difficulty in finding a route out of the apparent impasse. Reported by Jessica Elgot, ‘Shinzo Abe Warns Theresa May to Avoid a No-Deal Brexit,’ The Guardian, 1 December 2018, https://www.the guardian.com/politics/2018/dec/01/shinzo-abe-to-theresa-may-avoida-no-deal-brexit-eu. Reported by Kate Ferguson, ‘Brexiteers Slam Japanese PM Shinzo Abe’s “Stunt” Warning That the “Whole World” Is against No Deal Brexit— and Warn It Will Fail Just like Barack Obama’s Support for Remain,’

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19. 20.

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Mail Online, 9 January 2019, https://www.dailymail.co.uk/news/art icle-6575111/Shinzo-Abe-visit-puts-spotlight-Japan-s-concerns-Brexit. html, which also gives examples of the angry reactions of some Brexit supporting politicians. Reported by Justin McCurry, ‘No-Deal Brexit Must Be Avoided at All Costs, Says Toyota President,’ The Guardian, 19 October 2018, https:// www.theguardian.com/politics/2018/oct/19/no-deal-brexit-must-beavoided-at-all-costs-says-toyota-president: the article gives chapter and verse on some of the implications of a ‘no-deal’ on specific manufacturing operations. The EY Financial Services Brexit Tracker reported at the end of June 2019 that approximately 7000 jobs and $1 trillion worth of assets had been moved to Europe, with investment banks accounting for 1000 jobs. Reported in ‘Japan’s Daiwa Trading Unit Shifts to Frankfurt as Brexit Looms,’ Financial Times, 11 October 2018, https://www.ft.com/con tent/2f695a7c-cd38-11e8-b276-b9069bde0956. Paul Maidment, ‘Brexit and How Japanese Companies Are Navigating Its Uncertainties,’ Oxford Analytica, 21 March 2019, http://www.oxan. com/insights/comment/japan-and-brexit/. Although ‘The Financial Times’ reported in February 2020 that one of the scenarios being developed by Nissan in the event of an eventual deal that involved tariffs on car exports would be to double down on its UK manufacturing operation and pull out of mainland Europe, in order to take market share from foreign carmakers in the UK forced to pay tariffs on imports from the EU: ‘Nissan Drafts Plan to Double Down on UK Under Hard Brexit,’ Financial Times, 2 February 2020, https://www.ft. com/content/c4f0d1e2-4442-11ea-a43a-c4b328d9061c. Quotations from the memorandum of 6 November 1987 by David Gillmore and Rodric Braithwaite, then the FCO’s Deputy Under-Secretary for Asia and Economic Director respectively, FCO 21/3818, National Archives, quoted in David Warren, ‘Sir Geoffrey Howe,’ in British Foreign Secretaries and Japan, 1850–1990: Aspects of the Evolution of British Foreign Policy, ed. Antony Best and Sir Hugh Cortazzi (Renaissance Books, 2018), which gives more detailed background to this diplomatic initiative. Foreign Secretary’s memorandum to Prime Minister, PM/88/005, 21 January 1988, FCO 21/4055, National Archives. Quotations in this passage are drawn from the ‘UK-Japan Joint Statement,’ Joint Statement, https://assets.publishing.service.gov.uk/gov ernment/uploads/system/uploads/attachment_data/file/770467/UKJapan_Joint_Statement.pdf, accessed 23 June 2020. The writer recalls, when he was British Ambassador in Japan, the example of the Hague Convention on Child Abduction, where a number of

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Japan’s partners were lobbying for Japan’s accession to this international legal instrument, and the collective voice was strengthened by the EU’s collective, and the EU members states’ individual voices in the discussion. ‘Briefing: Trade, Investment and Jobs Will Benefit If We Vote Leave,’ Vote Leave, http://www.voteleavetakecontrol.org/briefing_trade.html, accessed 16 October 2019. See Chart 1 in the ‘Information Note for the Call for Input on a Prospective Free Trade Agreement between the United Kingdom and Japan,’ September 2019, https://assets.publishing.service.gov.uk/govern ment/uploads/system/uploads/attachment_data/file/832819/Inform ation-pack-UK-Japan-FTA-call-for-input.pdf. ‘Japan Trade Accord Becomes Post-Brexit Priority for UK,’ Financial Times, 20 September 2019, https://www.ft.com/content/b6a047c6dafc-11e9-8f9b-77216ebe1f17. The original TPP 12 were the US, Japan, Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. ‘We are also very interested in the prospect of acceding to CPTPP as well. We are keen to move forward to the future where the UK plays a full part in the WTO, is part of trade agreements that help set standards for the future and keep a free trade world,’ quoted in ‘International Trade Secretary Meets Japan’s Minister of Foreign Affairs,’ GOV.UK, 20 September 2019, https://www.gov.uk/government/news/international-trade-secret ary-meets-japans-minister-of-foreign-affairs. ‘The Eighth Japan-UK Foreign Ministers’ Strategic Dialogue,’ Ministry of Foreign Affairs of Japan, 8 February 2020, https://www.mofa.go.jp/ press/release/press4e_002776.html.

CHAPTER 7

The Impact of Brexit on East Asian Security: A Taiwanese Perspective Corey Lee Bell and Andrew Yang

Introduction A fundamental truism in international relations is that the break-up of a powerful geopolitical entity grants relative gains to competing great powers. This is arguably one of the reasons for the intense consternation at both the timing and political ramifications of Brexit, which is occurring at the very moment that Russia, and an increasingly bellicose China, are exploiting the destabilising impact of the COVID-19 pandemic to challenge Western hegemony. This is a problem which threatens the integrity and perhaps even viability of the rules-based global order which the latter underpins. One region in which these concerns have been particularly acute is the western Pacific, where Chinese territorial intrusions, low-level maritime clashes, efforts to reclaim and militarise reefs, and a concerted

C. L. Bell (B) National Chengchi University, Taipei City, Taiwan A. Yang Chinese Council of Advanced Policy Studies, Taipei City, Taiwan e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_7

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attempt to gradually continentalise maritime space in the South China Sea have caused considerable alarm among East and Southeast Asian nations. Concerns that Brexit could weaken the capacity of the West to respond effectively to these growing challenges have been widely expressed. In Chapter 6, for example, David Warren notes the Japanese Government’s aim “to minimise any negative impact of the perceived weakening of British influence, with its consequential impact on geopolitical and global economic stability, once the UK has left the EU.”1 When looked at from the perspective of the unique geostrategic predicament of Taiwan, the picture of the potential impact of Brexit on regional security in the western Pacific is arguably different. The strategic threats facing Taiwan are profound in scale but relatively modest in their complexity. China’s territorial claims over the island dwarfs and arguably obviates potential threats from other state actors. Moreover, the combination of China’s growing military prowess and Taiwan’s woeful strategic depth means that essentially but one global power—the United States— has the military capabilities to head off Chinese aggression, and through so doing profoundly diminish China’s capacity to leverage pronounced asymmetries across the Taiwan Strait to compel Taiwan to relinquish its sovereignty on Beijing’s terms. In view of this, for Taiwan, the impact of Brexit on Europe pales in significance to another ongoing geopolitical transformation—a nascent shift in the balance of power between the United States and China in the western Pacific. Evaluating the significance of Brexit on East Asian security from a Taiwanese perspective thus brings to the fore another metric, which is whether any detrimental impact on the economic and geostrategic power of Europe is offset by any potential positive impact Brexit may have on America’s strategic situation in the western Pacific in particular. It could be contended that on this metric, a different appraisal of the ramifications of Brexit emerges that deviates from the more prevalent view that it will likely reduce the West’s capacity to curtail China’s growing bellicosity and inchoate yet accelerated march towards hegemony in that region. This chapter argues that from the perspective of Taiwan’s distinctive strategic predicament, Brexit, and in particular the “Global Britain” policy platform that began to take a more concrete form in the wake of the referendum, is spurring what is, on the balance of probabilities, shaping to be a positive development in East and Southeast Asia’s security architecture. This assessment is based on the core supposition that for Taiwan, any reduction in the influence of the European Union is secondary to

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the more significant geostrategic shift that is occurring in the balance of power between the United States and China in the western Pacific. On this measure, we argue that under the “Global Britain” policy platform, Britain’s growing willingness to augment the strength of a United States-led regional alliance, and through so doing potentially arrest China’s seemingly ominous trajectory towards regional hegemony, offsets the impact of the potential reduction in Europe’s soft and hard power deterrents against unilateral Chinese actions in the region. To support this assertion, we focus on analysing two aspects. Firstly, the test case of Britain and Europe’s engagement, immediately prior and subsequent to the Brexit referendum, in territorial disputes in the South China Sea—a theatre which is of strategic importance to Taiwan, and a testing ground for measuring Western resolve and tracking the ebb and flow of balance of power dynamics in the West Pacific, and secondly, Britain’s contribution to strengthening America’s alliance networks in the region, principally through an overview of Britain’s evolving security alliance with Japan, as well as trilateral UK-US-Japan security arrangements. We will seek to demonstrate that while Britain’s engagement in the region has escalated quantitatively and qualitatively since the 2018 tabling of the “Global Britain” report, European intervention has been relatively irresolute, of limited impact, and unable to adapt effectively to the region’s shifting geostrategic realities. We will also briefly consider whether bilateral efforts between China and Taiwan to reduce tension might offer a model for increasing the UK’s own security engagement with Taiwan.

Growing Tensions Across the Taiwan Strait and Taiwan’s Evolving Perspective on Regional Security The scale of the threats currently facing Taiwan’s national security is arguably the largest it has been in several decades.2 After a marked warming in cross-strait relations during the presidency in Taiwan of the Ma Ying-jeou administration (2008–2016), the subsequent election and reelection of Tsai Ing-wen in 2016 and 2020 has been met with considerable hostility in Zhongnanhai. Although the legacy of mistrust and suspicion between the two sides of the Taiwan Strait has always been strong, hitherto both sides had been prepared to make efforts to build and cultivate practical interactions to serve mutual interests. Even

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under the pro-independence administration of Chen Shui-bian (2000– 2008), for example, cross-strait visits and trade and investment with the mainland had steadily increased and the security situation remained relatively peaceful and stable even though Beijing turned a cold shoulder towards President Chen’s cross-strait policies. By contrast, while the Tsai administration, like that of Chen, has refused to acknowledge the so-called 1992 consensus, which implies that both sides of the strait agree that there is only “one China” but have different interpretations as to what this means, this time Beijing has reacted by cutting off the channels of communication between the two sides.3 This has been a serious setback to managing the implementation of the twenty-three bilateral agreements previously signed and has also fuelled suspicion and misunderstanding. The negative impact of shutting down normal communication channels has been compounded by the policies towards both Beijing and Taipei of the US Government under President Trump. 2020 has seen a worrying escalation in tension, with both sides adopting a harder line and more bellicose rhetoric. In the lead-up to the 2020 presidential election, President Tsai highlighted unrest in Hong Kong to argue that China’s claims to sovereignty over Taiwan pose a growing threat to the latter’s freedoms, advertised a raft of new and ambitious defence acquisitions, and claimed to be the president who has “placed the greatest emphasis on defence.”4 Immediately after the election, Tsai proclaimed that “Taiwan is already independent”—a statement scouting the periphery of China’s red line of “claiming independence.”5 China has, in turn, responded firmly. Released in May, the seventh annual work report under China’s current chairman Xi Jinping’s tenure removed for the first time references to “peaceful reunification.”6 Moreover, partially facilitated by the withdrawal of US naval assets from the region due to the COVID-19 pandemic, the last few months have witnessed a marked uptick in PLA exercises near Taiwan. This included incursions in Taiwan’s airspace and an incident when several PLA Air Force (PLAAF) aircraft crossed the median line between Taiwan and China. There was also another alleged incident where a PLAAF jet turned on its targeting radar.7 While the recent deterioration of the cross-strait relationship has heightened tensions, it could be argued that the intensity, temporal proximity and nature of the primary threats to Taiwan’s national security are being altered by other concurrent factors. The first is the growing sense that China’s extensive investment in economic incentives, soft power and

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united front work in Taiwan has failed to translate into the political and public relations outcomes Beijing would have preferred. For instance, partly due to the flailing demographic strength of the generation of mainland born migrants that fled to Taiwan with the Kuomintang, the number of Taiwanese who prefer to regard themselves as “Chinese” has been reported to stand at a mere 2.4%. Furthermore, those who regard themselves as both Taiwanese and Chinese reached a new low of 27.5% in mid-2020 (from a high of 46.5% in 1992). In terms of voters’ views on reunification, less than 1% of respondents participating in the 2020 survey stated that they would prefer unification to occur “as soon as possible,” while the last two years have featured a steep fall in the number of respondents favouring gradual unification (now at 5.1%) and increases in both categories supporting independence.8 While Chinese officials have continued to claim that they believe “time is on their side,” the number of respondents supporting “maintaining the status quo,” as a means to gradually move towards independence, has almost doubled over the last two years (it now sits at 27%). Furthermore, the demography more open to unification—and that supports the Chinafriendly opposition Kuomintang party—continues to decline.9 Reflecting the impact such developments may have upon cross-strait tensions, as one analyst noted, “If the economic and political approach doesn’t work, what’s left is the military approach.”10 In less absolute terms, Beijing may be tempted to change the formulae or hard/soft power mix of its approach to achieving “reunification,” meaning a relative shift away from a preference for soft power, incentivisation and persuasion—measures which have hitherto seen limited success—and an increased investment in measures that leverage hard power, threats and coercion. The second factor that is changing the nature of Taiwan’s security concerns relates to the evolving security relationship between Taiwan and the United States, and new links between Beijing’s aspirations for the reunification of Taiwan and for reshaping the strategic architecture of the western Pacific more generally. Aside from threatening Taiwan with war should it formally claim independence, Beijing has recently placed growing emphasis on warning that “seeking support from the US and [creating trouble] by taking advantage of the rivalry and competition between China and the US” is a new red line.11 Nevertheless, it could be argued that both China and the United States and its allies are increasingly approaching the “Taiwan problem” through the lens of the great

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power game, and more specifically, intensifying competition to establish hegemony in East Asia and the western Pacific in particular. On this point, recent Taiwanese reports reflect a growing view that China’s ambitions for absorbing Taiwan—typically advertised under the slogan of the “Chinese dream” of restoring Chinese territorial integrity—are increasingly being guided by China’s “strong military dream/superpower dream.” The first step of this is to secure the first island chain, of which Taiwan is a part, in order to control access to the Yellow Sea, East Asian Sea and the South China Sea.12 On the American side, while General Douglas MacArthur’s description of Taiwan as an “unsinkable aircraft carrier” was made in the backdrop of the battle to contain communism, a 2010 report by the US Taiwan Business Council emphasised the evolving significance of Taiwan for resisting potential efforts emanating from China to establish a “cordon sanitaire, or sphere of exclusive influence, in East Asia”13 —especially along and around the first island chain. More recently, Taiwan has also featured more prominently in discussions on America’s “Free and Open Indo-Pacific Strategy” (FOIP)—which emphasises protecting the region’s “rules-based order” and challenging actions from China, in particular, that may threaten the region’s security, openness and self-determination.14 Increasingly, references to Taiwan concerning this strategy have shifted from its status as a nation whose freedoms and democratic institutions should be protected under this banner, to its potential role as a contributor to the FOIP strategy.15 In line with this, America’s commitment to its ally has been unquestionably firm against the backdrop of growing Chinese bellicosity.16 The impact of these two factors has arguably been reflected not only in the ongoing escalation of Chinese military provocations and bellicose rhetoric directed at Taiwan but also their evolving nature. Chinese aircraft carriers have engaged in a number of operations around Taiwan since Tsai took office, with analysts surmising that an exercise involving its two aircraft carriers planned to be held in August 2020 was part of a rehearsal for a possible future assault on Taiwan’s Dongsha Islands.17 In addition to naval incursions, the last few years have seen an escalation in intrusions on Taiwan’s airspace, with ten occurring in June 2020 alone—surpassing the total number of incursions in the first five months of the year.18 Increasingly, PLAAF incursions have appeared to be in response to American military operations near Taiwan, as opposed to political events/military developments within Taiwan.19

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Balance of Power and Taiwan’s Strategic Predicament These developments reflect the rapidly evolving nature of the threat that China poses to Taiwan’s security. Arguably the most significant stems from a partial shift from rhetoric that frames the “Taiwan issue” as a Chinese domestic concern, to a growing propensity on both sides to frame it within the context of great power competition—a development which arguably reflects the growth of China as a regional power. It has perhaps long been the case that the balance across the Taiwan Strait has been lost. This point has been belatedly acknowledged in Taiwan through the development of Overall Defence Concept (OCD), which was first outlined in 2017 by Taiwan’s former Chief of General Staff, Admiral Lee Hsi-ming, and which emphasises the strengthening of asymmetric defence capabilities.20 However, to the extent to which shifts in the balance of power across the Taiwan Strait have made America’s Taiwan Relations Act (TRA) an even more essential pillar of Taiwan’s national security, the greater concern for Taiwan is that American hegemony in the region is now being challenged. Thus, the balance of power between China and the United States at the regional level may itself be shifting.21 Taiwan, moreover, is appearing to assume an increasingly important strategic role in this tussle for regional hegemony. Anxieties over the implications of both of these developments for Taiwan’s security have heightened considerably since 2019 when a series of war game simulations conducted by the RAND Corporation found that America would likely be defeated if it attempted to defend Taiwan from a Chinese invasion by 2030, and possibly earlier.22 The danger to Taiwan of a scenario in which China is the ascendant power in the western Pacific is profound. The profundity of this extends beyond the threat that China would be better positioned to invade Taiwan and succeed. The more significant problem is that Chinese control over the seas and airspace of the western Pacific would make available to China a wider array of coercive measures for degrading Taiwan’s sovereignty or national security. Beijing may prefer these options on the grounds that their economic, diplomatic and military costs are likely to be comparatively modest. To the extent that a combination of firm Chinese resolve and military superiority in the region creates the perception that the “reunification” of Taiwan is a fait accompli, Taiwan could be coerced to give ground on the issue of sovereignty—possibly even from a US administration reluctant to be dragged into a conflict it may lose.23

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A shift in power away from the United States and its allies could also open other options that span a wider spectrum between moderate forms of Chinese coercion and more dramatic forms of kinetic action, which could be selected according to different cost thresholds. Among them is applying the much-discussed “salami-slicing” approach—a strategy currently associated with China’s approach to making incremental territorial expansions in the South China Sea—to strengthen sovereignty claims over small sections of Taiwanese airspace/maritime territory.24 Such a move, if successful, would make Taiwan’s de facto independence less tenable by strengthening China’s area-denial capabilities, which could give China the facility to oversee an embargo of the island. Nevertheless, in the event that China achieves region-wide hegemony, Beijing may not even need to invade Taiwanese territory to achieve this outcome—it could alternatively apply an embargo/area denial to stretches of the sea outside of Taiwan’s territorial waters that are vital to the island’s defence and economy. One such area is the South China Sea. Nowhere is the fear that the shifting balance of power is positioning China to control access to the region’s non-territorial waters or global commons more acute and immediate than here. Consequently, Chinese unilateral actions, such as the construction and militarisation of man-made islands, are prompting growing concern that it could gain control over some of the world’s most strategically and economically vital sea lanes and restrict freedom of navigation through them. Chinese control over maritime transit in the western Pacific would give it a stronger hand to adopt a wide inventory of hard power measures to compromise or degrade Taiwan’s sovereignty. Control over the South China Sea would also help China deny theatre access to the American navy or implement an embargo should it attempt to invade Taiwan. Yet short of that, it will give China the enormous advantage of being able to exert greater control over Taiwan’s economic destiny. Trade through the South China Sea is vital to Taiwan’s maritime trade, and its capacity to meet its energy needs in particular.25 Measures such as blockades, harassment, constructing and enforcing administrative hurdles (such as establishing air defence identification zones) or regulating maritime trade volumes (a capacity that could be extended to air freight) could be used punitively or pre-emptively to influence political outcomes on the island. While hitherto unprecedented‚ this strategy would be in line with previous Chinese efforts to exert political influence by adjusting the numbers of mainland tourists visiting the island.26 On the more moderate side, mild versions of this strategy

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would equip China to counter Tsai’s efforts to reduce reliance on China and increase the island’s resilience through increasing and diversifying trade with Southeast Asian nations and transforming Taiwan into a global logistics centre—two core tenets of Tsai’s signature New Southbound Policy.27 This brings us back to the issue of the relationship between Brexit and Taiwanese perspectives on regional security. The soft power deterrents available to the European Union are likely to be most potent in mitigating acts of naked aggression, such as a direct military assault on the island. However, the defence of Taiwan is not a first-order defence priority for Europe. Moreover, if China attains hegemony in the western Pacific, it will have numerous options to degrade the sovereignty of Taiwan in ways that are unlikely to prompt strong punitive economic measures among states eager to retain access to the world’s second-largest economy. Such a supposition leads one to tentatively conclude that while Brexit may weaken the European Union, the more significant question for Taiwan is what direct impact it will have on geostrategic competition between America and its allies on the one hand, and China on the other, in the western Pacific in particular. A specific question that has special pertinence is how Brexit will affect the scale and efficacy of efforts by foreign powers to push back against unilateral attempts to expand China’s territorial waters and develop the facility to control navigation in and around the first island chain. With this in mind, we forecast that Brexit’s impact is overall likely to be positive for Taiwan’s security. The current US policy appears to envisage a two-pronged strategy for heading off China’s march to regional hegemony, involving internal rebalancing through upscaling and upgrading conventional naval warfare capabilities, and external rebalancing through widening and strengthening the integrity of American alliances.28 Since around the time of the Brexit referendum, Britain has answered this call by conducting freedom of navigation (FONOP) and flyover operations in the South China Sea. Furthermore, it has entered into trilateral agreements with the United States and Japan, which have emphasised a shared commitment to protecting freedom of navigation and—in an indirect reference to China’s unilateral maritime territorial claims—the protection of the rules-based global order. One scholar in the region has argued that although post-Brexit Britain is playing a more active role “East of Suez” to participate in American efforts to hold in check actions by China (and Russia) that threaten the rules-based order, the “not to be slighted naval

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powers that are Britain and Japan joining forces with America” could mean that “the already powerful naval capacity [of the current alliance] centred around America will become even more powerful.” This would be a development that would likely represent a strategic gain for Taiwan.29

Britain’s Engagement in South China Sea Territorial Disputes While competing territorial claims over the waters and reefs in the South China Sea have been a cause of friction for much of the post-World War II period, China’s approach to its claims began to harden appreciably around the beginning of the second decade of the twenty-first century. In May 2009, it submitted a map to the United Nation’s Commission on the Limits of the Continental Shelf (CLCS) with a “Nine-Dash line” that incorporated the South China Sea. It stated in the submission to which it was appended that “China has indisputable sovereignty over the islands of the South China Sea and the adjacent waters, and enjoys sovereign jurisdiction over the relevant waters as well as the seabed and subsoil thereof.”30 In March 2010, Chinese representatives reportedly claimed that the South China Sea is a “core interest” of China on par with Tibet. In 2013 a publisher under the jurisdiction of the PRC’s State Bureau of Surveying and Mapping published an officially state-sanction “ten-dashed” map—the tenth dash being added around Taiwan, which brought to the fore a new connection between territorial claims in the South China Sea and others in the East China Sea.31 In February that year, China announced that it would neither participate in, nor respect the ruling of, the case brought to the Permanent Court of Arbitration in the Hague by the Philippines challenging China’s territorial claims in the South China Sea. The following November, China unilaterally declared an Air Defence Identification Zone (ADIZ) over the East China Sea, which covered islands claimed by Taiwan and Japan. On the back of China’s occupation of the Scarborough Shoal, that same year saw Chinese vessels undertake oil exploration in Vietnam’s exclusive economic zone, and a growing number of run-ins between fishing boats and customs vessels in disputed waters. From December 2013 to October 2015, China constructed artificial islands spanning a combined total of 3,000 acres on seven coral reefs located in the South China Sea. Despite assurances to the contrary from China’s President Xi Jinping, it soon began militarising them, creating what has been called a “Great Wall of Sand” featuring

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ports, hangers and military-grade airstrips, radar installations, anti-aircraft batteries/missiles and anti-ship missiles, and fuel/ammunition reserves.32 Prior to the Brexit referendum, the UK’s responses to China’s islandbuilding initiatives were mainly in the form of contributions to a united front by Western, in particular European, governments‚ and were mostly manifest through joint communiques and principled statements, such as the G-7 Foreign Ministers’ Declaration of Maritime Security (we discuss this below). However, starting from the lead-up to the Brexit vote, Britain began to respond to China’s territorial claims more independently, and with increasing firmness. There were three identifiable stages in this process, beginning with this pre-Brexit period marked primarily by the UK’s participation in joint communiques. This was followed by the period roughly coinciding with the lead-up and aftermath of the Brexit referendum, in which Britain began voicing firm commitments to act to curtail unilateral actions. This was in turn followed by an escalation from rhetoric to action, whose initiation roughly coincided with the formal parliamentary release of the Global Britain policy vision. Joint Communiques and ‘Principled Statements’ (2014–2015) American and European attention to emerging security challenges in the South China Sea began to escalate in the mid-2010s. Notable in the response was a high level of solidarity and a tendency to speak with one voice—often through statements of joint principles and communiques— on a number of shared concerns. Foremost among these were concerns about China’s construction of artificial islands in the Paracel and Spratly island chains during 2014 and 2015. These, it was feared, would lay the foundations for Beijing to unilaterally draw new territorial water limits that could constrain other nations’ rights to freedom of navigation in that strategically vital region. China’s refusal to respect the jurisdiction of the Permanent Court of Arbitration in the case initiated against it by the Philippines in February 2013 also raised concerns as it was viewed as posing a challenge to the integrity and credibility of the rules-based-order. Britain’s early response to these events was primarily as a signatory to statements and joint communiques produced jointly with other Western powers, notable the EU and G7‚ and that reiterated signatories’ strong commitment to “freedom of navigation” and an “international maritime order based upon the principles of international law, in particular as reflected in UNCLOS.”33

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Committing to Act (2016–2017) By the lead-up to the Permanent Court of Arbitration’s ruling on the South China Sea Arbitration Case in early 2016, the UK began speaking out more regularly and stridently. A notable development was the shift from a mostly neutral tone to rebukes explicitly and implicitly directed at Chinese actions. In a visit in early January 2016 to the Philippines, Philip Hammond, the then British foreign secretary, asserted that freedom of navigation and overflight in the South China Sea was “non-negotiable” and a “red line.”34 In mid-March, the Beijing British Embassy website published the European Union declaration condemning the “deployment of military forces or equipment on disputed maritime features which… may threaten freedom of navigation,” and that reiterated support for a “rules-based regional and international order.”35 On 19 April, as the likely outcome of the arbitration was becoming more apparent—and in the knowledge that Beijing had refused to respect the outcome of the arbitration ruling—Hugo Swire, then the British minister of state responsible for East Asia, stated that “Under the international rules-based system on which the world depends, we would expect the ruling from The Hague to be adhered to by all parties concerned.”36 In the lead-up to the 42nd summit of the G7 in Japan in late May, then Prime Minister David Cameron was more direct: “We want to encourage China to be part of that rules-based world. We want to encourage everyone to abide by these adjudications.”37 After the Brexit vote, which roughly corresponded with China’s anticipated rejection of the finding of the arbitration ruling in July 2016, a noticeable change began to occur in the UK’s rhetoric, from expressions of concern to commitments to concrete actions such as FONOPs (Freedom of Navigation Operations). In early December 2016, shortly before the official release of reports of rapid militarisation of reefs in the Spratly Islands, Britain’s ambassador to the United States, Kim Darroch, reiterated Britain’s commitment to “keep air routes open and keep sea routes open,” and announced that British fighter planes would fly over the South China Sea on the way to Japan. He also said that Britain would commit to sending its new aircraft carriers, the 65,000 tonne HMS Queen Elizabeth and sister ship HMS Prince of Wales to the Pacific after they entered service.38 The shift in rhetoric was immediately noted in China, with the state news agency Xinhua stating “Such remarks create the impression that

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London may soon deviate from a largely aloof attitude over the South China Sea issue and start playing a meddling role there like the United States and Japan.”39 Soon after China threatened Vietnam for planning oil drilling operations within its 200 nautical mile exclusive economic zone in mid-2017, British Defence Minister Michael Fallon announced that Britain planned to send a warship and “won’t be constrained by China from sailing through the South China Sea,” a pledge that was repeated by his successor eighteen months later.40 As foreign secretary, Britain’s current Prime Minister Boris Johnson reiterated the commitment to send the UK’s “colossal” aircraft carriers to the region during a visit to Australia in July 2017.41 From Words to Action (2018–) Up to this point, the UK’s increasingly firm rhetoric was rarely matched by action.42 This was to change in 2018. As noted by Bob Wang in Chapter 4, in June of that year, Britain participated in a French FONOP operation near the Mischief, Subi and Fiery Cross reefs in the Spratly Islands. Then in late August, the 19,500-ton amphibious transport vessel, HMS Albion, conducted a FONOP in waters near the Paracel Islands soon after one by the frigate HMS Sutherland, prompting immediate and firm rebukes from Chinese officials.43 And on 9 December 2019 the survey ship HMS Enterprise sailed through the Taiwan Strait. While the COVID-19 crisis saw a pause in activities, Britain was still due to dispatch at least one of its Queen Elizabeth class aircraft carriers to the western Pacific in 2021.

Brexit’s Impact on East Asian Security Augmenting the US-Led Regional Alliance Several factors can explain the recent escalation of Britain’s engagement in East Asian and Southeast Asian security issues. One of the most important is China’s growing propensity to engage in unilateral actions to expand its maritime boundaries across vital trade routes. Not only have these actions defied the normative prescriptions of the rules-based order, but they arguably pose an indirect threat to its very viability. This is particularly threatening to an island nation highly dependent on maritime trade for its prosperity. The shift from a rules-based order to one in which hard

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power determines the outcomes of territorial disputes poses an additional threat to the UK as its maritime territory is disproportionate to both its geography and naval capacity. A further illustration might be the fact that Britain is responsible for a greater expanse of the world’s oceans than Brazil, Canada or China. Including the Overseas Territories, the UK’s “maritime estate” covers 2.6 million square miles—an area more than twice the size of India. With the cooperation of the Overseas Territories, the Government plans to safeguard 1.5 million square miles of ocean with a “Blue Belt” of marine protected areas by 2020.44 Furthermore, one of most grave challenges facing “sea states”—including, presumably, the small island territories of former colonies—is not only “restrictions on the right to use the seas” but “the creeping continentalisation of maritime space,” of which China’s island-building operations in the South China Sea are so far providing a successful model.45 Brexit has arguably accentuated these concerns. A core challenge associated with it was the conundrum as to how Britain would offset potential losses in trade with European Union nations through expanding trade opportunities further afield, mainly through maritime trade. Moreover, on the geostrategic front, questions arose as to how Britain could offset potential losses in global influence brought about by its separation from the European Union by expanding its presence and alliances “East of Suez.” The “Global Britain” vision linked these concerns with a growing aspiration for deeper engagement with East and Southeast Asia; a region of the world identified for its enormous economy and growth potential, as well as growing global influence. The juxtaposition of post-Brexit Britain’s ambitions to increase its engagement with the region and its recognition of the dangers posed by China’s unilateral actions in the region both to this ambition and Britain’s interests elsewhere are emphasised in government documents, and reports by British-based think tanks. While cautious not to paint China as an adversary, the 2018 National Security Capability Review (NSCR) included a sub-section titled “Global Britain” which stated “Global Britain means the UK as an open, inclusive and outward-facing free-trading global power playing a leading role on the world stage… We are championing free trade and the international rules-based system.” This was followed immediately by the observation that “Economic growth in Asia is moving the global centre of gravity east. Meanwhile, some states are actively destabilising the world order to their own ends, claiming that the rules and standards we have built, and

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the values on which they rest, no longer apply.”46 This report also emphasised the growing importance of maintaining, and building upon, Britain’s defence/security presence and alliances in the Asia/Pacific region. Another key document outlining the core tenets of the Global Britain vision, the House of Commons Foreign Affairs Committee Global Britain Sixth Report of Session 2017 –19, is less shy in identifying threats to Britain’s interests in Asia, emphasising that while Britain would like to upscale its economic relationship with the emerging superpower, Global Britain faces ongoing challenges posed by “an increasingly assertive China,”47 and will remain “robust in defending our position on areas of difference, including… the South China Sea.”48 On this point, the former document mentions the importance of maintaining the “rulesbased” international and global order on 12 occasions and the later 14, making this one of the most emphasised themes in both documents. While more measured in tone, the language used to discuss this point in both documents is not dissimilar to that used in the aforementioned rebukes of U.K. government representatives that were directed explicitly or implicitly at China’s actions in the South China Sea. From a Taiwanese perspective, what is arguably most positive about post-Brexit Britain’s apparent commitment to challenging China’s unilateral actions in the region is its emphasis on multilateralism, in particular, its potential effect of augmenting the US regional alliance. In terms of FONOP’s, Britain’s nascent yet strengthening embrace of the ship-rider (or “bilateral ship”) and multiple hulls programme strategy has a precedent in attaching Royal Navy helicopters to French operations near the Spratly Islands.49 Britain has also stated that it is open to hosting US Navy F35B Lightning fighters on future aircraft carrier deployments in the western Pacific. On this point, Britain’s growing cooperation with allies in the region, and the strength of its coordination and interoperability with partners, is a multiplying factor in terms of Britain’s impact on regional security. British officials have already expressed an openness to operating its carriers with coalition partner escorts, and this flexibility means that potent capabilities can be deployed “East of Suez” on a more sustainable basis and without unduly compromising Britain’s defence capabilities in the Atlantic.50 More importantly from a Taiwanese perspective, Britain’s coordination with allies means that its commitment need not be large to have a substantial impact, especially in relation to American efforts to retain the balance of power. As noted by Toshi Yoshihara, from the Washington Centre for Strategic and Budgetary Assessments:

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[it] would signal that Beijing cannot continue to advance its maritime ambitions in a resistance-free environment. Even a modest British contribution would help to maintain a favourable balance of naval power in the south China sea, reinforcing the message that Beijing confronts a coalition of the world’s most capable navies. The more friction the PRC encounters, the more likely it will think twice about challenging the rules-based system, thus shoring up deterrence.51

Further examples of the UK’s multilateral approach are found in its growing investment in regional security and defence partnerships such as the Five Power Defence Arrangements (FPDA) (a series of defence arrangements between Britain, Australia, New Zealand, Singapore and Malaysia), and, as David Warren mentions in Chapter 6, the rapid expansion of its cooperation in security and defence with Japan, as well as trilateral arrangements involving Britain, Japan and the United States. In 2012—a year in which Japan’s security concerns were heightened by a “semi-official” Chinese campaign to cast doubt over Japan’s sovereignty over the Ryukyu Islands, and a significant increase in territorial incursions around the Senkaku, or Diaoyutai Islands, the U.K and Japan signed a memorandum on defence cooperation.52 In October 2013, Prime Minister Abe highlighted the apparent new emphasis on strengthened cooperation in defence and security in a speech coinciding with the UK-Japan Strategic Dialogue. As with Britain’s engagement in the South China Sea, developments accelerated from around the time of the Brexit referendum. Both sides co-signed a number of important new agreements including a defence-related logistics treaty in January 2017, and most importantly, the Japan-UK Joint Declaration on Security Cooperation on 31 August that year.53 This expanded on the scope of the 2012 memorandum, listing the priorities for cooperation as regular joint exercises, “defence equipment and technology transfer,” the free exchange of strategic assessments and related intelligence, and an ongoing commitment to regular communication across all levels. By 2018—the year in which Britain released its “Global Britain” parliamentary report—one author claimed that UK-Japanese defence cooperation had become “full spectrum” across all domains of warfare, with a leading emphasis on maritime security.54 Especially pertinent to Taiwan’s regional security interests is both nations’ commitment to “promote concrete collaboration in assistance for capacity-building of developing countries in Southeast Asia… in areas such as maritime security.” This is a commitment that

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could see the bilateral agreement as the launching pad for a broader, loose coalition of states more directly concerned about the impact of the unilateral actions of China on their territorial integrity, access to resources and freedom of navigation across vital trade lines. Nevertheless, perhaps most pertinent to Taiwan is that this cooperation is arguably playing a pivotal role in strengthening a new regional focus for Anglo-American naval cooperation, and the nascent incorporation of the British navy in a western Pacific theatre defence coalition, by prompting a series of trilateral agreements and operations. Four months after the Brexit referendum, the heads of each nation’s navy signed a UK-US-Japan Trilateral Agreement at the Pentagon which outlined aims for “a common vision of enhancing the operational effectiveness of our maritime forces through increased cooperation.” This envisages strengthened cooperation through joint exercises and patrol operations and commitments to collectively maintaining freedom of navigation.55 This was followed in 2019 by a trilateral joint statement, pledging that each nation’s forces will continue to cooperate in combating “attempts to circumscribe freedom of navigation; the very foundation of the trade that is now the lifeblood of the global economic system.” It also noted, more interestingly, that the three nations cannot be expected to shoulder the burden of facing global challenges alone and that others that it should be shared by others who value and “adhere to the international rules-based system.”56 Accompanying joint exercises and operations included trilateral anti-submarine exercises in December 2018 and March 2019.57

Conclusion Even if Brexit weakens the European Union or “Western solidarity” in a broader sense, from the unique strategic predicament of Taiwan, Brexit, and even more so the Global Britain vision, could prompt certain positive developments in the security situation in East Asia/the western Pacific. Hitherto, Europe has been largely impotent in challenging, let alone curtailing, unilateral actions by China that threaten freedom of navigation both within, and indirectly beyond, the South China Sea. And as a “normative” and “civilian” power, Europe has also been reluctant to acknowledge the futility of retaining a focus on “process-oriented norms” for dealing with territorial disputes when a claimant has refused participation in arbitration, and obviated the very necessity of attaining

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de jure sovereignty, through installing access denial facilities on manmade maritime fortresses. While Brexit may further weaken the European Union’s influence, post-Brexit Britain’s pivot “East of Suez,” and in East Asia/Southeast Asia in particular, is serving to augment American hard power in the region at the very moment that the US Pacific Fleet is both challenging, and facing unprecedented challenges from, a rising and increasingly assertive China. Compared to its effect on the EU, Brexit’s impact on US hard power in the region is the more heavily weighted factor from a Taiwanese perspective—especially if the postCOVID-19 world is to see a continuing shift from liberalism back towards neo-realism. On its own, this can, therefore, be seen as a positive, if limited, British response to Bob Wang’s plea in Chapter 4 for the UK, United States and EU to work together more to support Taiwan against Chinese intimidation and coercion. Nevertheless, might Britain go further—could its increasing commitment to engage in security issues in the region through its nascent quasi-membership in a western Pacific American-led alliance translate into a willingness to join America in defending Taiwan in the event of Chinese aggression? On this point, it can be noted that while the “golden era” of Sino-British relations is likely over—with Britain’s response to the imposition of Hong Kong’s National Security Laws, and later its decision to ban Huawei from having any role in building Britain’s 5G networks—China remains an important market for the UK. Thus, Taiwan (as with East Asia more generally) remains at best a secondary defence priority. Arguably a more obtainable but nonetheless warmly welcomed outcome for Taiwan would be that Britain’s growing investment in the retention of American hegemony in the region would prompt it to adopt a position of strategic ambiguity on the Taiwan issue. While this might be a step too far at present for British policymakers, there are measures towards this that could be taken, paradoxically perhaps, drawing from Taiwan’s own experience with China. As far back as 2003, when Chinese distrust of the Chen Shui-bian administration in Taipei was high, and in an attempt to prevent cross-strait tensions from growing, Taipei, Beijing and Washington jointly organised a trilateral track-two dialogue mechanism. Although formally based around think tanks, the participants were close to each government’s top decision-makers so they could relay clear and accurate messages to their counterparts and refer responses back to their respective authorities. The setting and trustworthy atmosphere among participants delivered real

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benefits in transmitting and referring important and accurate messages from policy-makers so as to avoid misunderstanding and miscalculation. Even though formal cross-strait exchanges were suspended, the equilibrium of the security environment in the strait area was maintained. Arguably, such a mechanism is even more critical now. This also offers a model for consultations and cooperation between the UK and Taiwan. As long as the UK maintains its formal position of not recognising Taiwan as a state, government to government consultations or cooperation will not happen. However, as has been shown above, the UK and Taiwan have overlapping security interests in the western Pacific, not to mention significant trade and investment links. An institutionalised track-two security dialogue mechanism between the two would facilitate more efficient and effective exchanges without transgressing Chinese “red lines” over defence cooperation. There are several precedents, including the Shangri-La Dialogue (in which Taiwan used to participate) or China’s own Boao Forum, while the UK’s Royal United Services Institute (RUSI) has already held a dialogue with Taiwanese counterparts for many years. The practical benefits appear considerable, the only obstacles being political will.

Notes 1. Daisuke Ikemoto has opined that Japan “sees Brexit as a potential threat to the solidarity of the Western Alliance,” (113) and asserts that Brexit, in conjunction with the United States allegedly being “no longer willing to play the same role of the world’s policeman,” (114) has combined to heighten anxieties around China’s territorial ambitions in East and South East Asia. See Daisuke Ikemoto, ‘Is the Western Alliance Crumbling? A Japanese Perspective on Brexit,’ in The Implications of Brexit for East Asia, ed. David W.F. Huang and Michael Reilly (Singapore: Palgrave Macmillan, 2018), 113–127. A Korean view can be found in Si-hong Kim, ‘EU Geullobeol Jeollyakgwa Han-Eu Gwangye’ 글로벌 전략과 한-Eu관계 [The European Union Global Strategy (EUGS) and Korean-EU Relations], Yureobyeongu 유럽연구 [The Journal of Contemporary European Studies] 35, no. 3 (August 2017): 29–53. According to Kim, while “considerable progress had been made in the areas of security and defence in the comparatively short time period” (39) in the European Union despite Brexit, “It is also true that the EU and its member states have more than a few doubts about whether [they] have the capacity to restrain China’s intentions and actions in the South China Sea” (41).

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2. See, for instance, Ian Easton, ‘Ian Easton on Taiwan: America Should Put Military Forces in Taiwan,’ Taipei Times, 9 March 2020, https:// www.taipeitimes.com/News/editorials/archives/2020/03/09/200373 2335; ‘Taiwan: Concern Grows Over China’s Invasion Threat,’ Financial Times, 8 January 2020, https://www.ft.com/content/e3462762-308011ea-9703-eea0cae3f0de; Yimou Lee, ‘Chinese Military Threat on the Rise, Taiwan Foreign Minister Warns,’ NASDAQ, 22 July 2020, https:// www.nasdaq.com/articles/chinese-military-threat-on-the-rise-taiwan-for eign-minister-warns-2020-07-22. For a more detailed but slightly older assessment see Michael S. Chase, ‘Averting a Cross-Strait Crisis,’ Council on Foreign Relations, 26 February 2019, https://www.cfr.org/report/ averting-cross-strait-crisis. 3. Yeni Wong, Ho-I Wu, and Kent Wang, ‘Tsai’s Refusal to Affirm the 1992 Consensus Spells Trouble for Taiwan,’ The Diplomat, 26 August 2016, https://thediplomat.com/2016/08/tsais-refusal-to-aff irm-the-1992-consensus-spells-trouble-for-taiwan/. 4. For a thorough list of acquisitions listed in the 2019 budget paper, see ‘Guofangbu Yusuan Zongshuoming Zhonghua Minguo 108niandu’ 國防 部預算總說明 中華民國108年度 [Ministry of National Defence Budget Overview: 2019],’ Budget Overview (Ministry of National Defence of the Republic of China, 2019), https://www.mnd.gov.tw/NewUpload/ 201809/108年度國防部所屬單位預算案書表.pdf. For a brief summary of major acquisitions, including those announced in 2020, see ‘Cai Yingwen Shangren 4 Nian Jungou 7 Ci Zongjine Bijin 4qianyi’ 蔡英文上任4年 軍購7次 總金額逼近4千億 [Since Her Inauguration Tsai Ing-Wen Has Ordered 7 Military Acquisitions in 4 Years the Total Budget Is Nearly 400 Billion],’ Apple Daily, 11 July 2020. Tsung-Hua You 游宗樺 and Yu-Hsuan Lin 林昱萱, ‘Taoyuan Zaoshi! 桃園造勢! [Campaigning in Taoyuan!]’, ET Today, 5 January 2020, https://www.ettoday.net/news/ 20200105/1618192.htm. 5. See, for instance: ‘Cai Yingwen Xinnian Tanhua Qiangdiao Weiquan Yu Minsheng Wufa Gongcun Yu Yiguo 蔡英文新年談話強調威權與民主 無法共存於一國 [Tsai Ing-Wen’s New Year’s Address Emphasises That Authoritarianism and Democracy Cannot Coexist Within One Country],’ BBC News 中文, 1 January 2020, https://www.bbc.com/zhongwen/ trad/chinese-news-50964598. 6. Yew Lun Tian and Yimou Lee, ‘China Drops Word “Peaceful” in Latest Push for Taiwan “Reunification”,’Reuters, 22 May 2020, https://www. reuters.com/article/us-china-parliament-taiwan-idUSKBN22Y06S. 7. Jun-bin Yang, ‘Jian-11 Suoding F-16 Lumei Baodao Que You Ci Shi 殲-11鎖定f-16 陸媒報導確有此事 [a J-11 [Fighter] Locked Onto an F16—Mainland Media Has Reported That This Did in Fact Occur],’

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China Times, 21 February 2020, https://www.chinatimes.com/newspa pers/20200221000148-260301?chdtv. Hui-ling Chen, ‘Taiwan Independence vs. Unification with the Mainland (1992/06 ~ 2020/06),’ Election Study Centre National Chengchi University, 3 July 2020, https://esc.nccu.edu.tw/course/news.php? Sn=167. Minnie Chen and Kristen Huang, ‘Taiwan Elections: Beijing “Will View Tsai’s Victory as Setback but Not a Crisis”,’ South China Morning Post, 11 January 2020, https://www.scmp.com/news/china/politics/article/ 3045703/taiwan-election-beijing-will-view-tsai-ing-wens-victory-setback. Sun Yun, Stimson Centre, Washington, DC, See Kristen Huang, ‘Chinese Government Drops References to “Peaceful” Taiwan Reunification,’ South China Morning Post, 22 May 2020, https://www.scmp.com/ news/china/politics/article/3085700/chinese-government-drops-refere nces-peaceful-reunification. Chen and Huang, ‘Taiwan Elections: Beijing “Will View Tsai’s Victory as Setback but Not a Crisis.”’ See, for instance, Lieutenant colonels Yi-yun Wang 王逸雲 and HuangNan Guo 郭晃男, ‘Zhonggong Junji Rao Tai Dui Woguo Mouluezhan Zhi Yunyong Yu Yingxian - Yi Ping, Zhanshi Wei Li’ 中共軍機繞臺對 我國謀略戰之運用與影響-以平、戰時為例 [The Utility and Influence of PLAAF Aircraft Circling Taiwan for Taiwan’s Strategic Warfare—Peacetime and Wartime Scenarios],’ Lujun Xueshu 陸軍學術 [Army Bimonthly] 55, no. 565 (June 2019): 56–58. For Xi Jinping’s original quote which links the notion of the China dream to a ‘superpower [‘powerful nation’] dream’ 強國夢 and ‘strong military dream’ 強軍夢 see ‘Xi Jinping Lun Yifazhiguo - Shibada Yilai Zhongyao Lunshu Zhaibian 习近平论依 法治国——十八大以来重要论述摘编 [Xi Jinping on Law-Based Governance—Key Excerpts Since the 18th National Conference],’ www.cpcnew s.cn, 29 August 2014, http://theory.people.com.cn/n/2014/0829/c36 7653-25568411.html. Lotta Danielsson-Murphy, ed., The Balance of Air Power in the Taiwan Strait (Arlington, Virginia: US Taiwan Business Council, 2010), 35. ‘A Free and Open Indo-Pacific: Advancing a Shared Vision,’ Policy Statement (Washington, DC: Department of State, November 2019), https://www.state.gov/wp-content/uploads/2019/11/Free-and-OpenIndo-Pacific-4Nov2019.pdf. ‘Remarks by APEC Senior Official and DAS Sandra Oudkirk at the Yushan Forum, Taipei, Taiwan,’ American Institute in Taiwan, 9 October 2019, https://www.ait.org.tw/remarks-by-apec-senior-officialand-das-sandra-oudkirk-at-the-yushan-forum-taipei-taiwan/. ‘Junshi Dongtai: Shendunjian Cai Gang Guo Taihai, Meijun 2 Jia B52 Zai Taiwan Dongfang Kongyu Yanxun 軍情動態》 神盾艦才剛過台

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海 美軍2架b-52在台灣東方空域演訓 [Military Affairs News: An Aegis [equipped] Destroyer Just Passed the Taiwan Strait 2 American Army B52 s Conducted Exercises in Airspace East of Taiwan],’ Liberty Times, 27 March 2020, https://news.ltn.com.tw/news/world/breakingnews/311 4275; Keoni Everington, ‘2 More B-1b Bombers Patrol NE of Taiwan,’ Taiwan News, 6 May 2020, https://www.taiwannews.com.tw/en/news/ 3929296; Mathew Strong, ‘Chinese Warplane, Three Us Jets Fly Close to Taiwan,’ Taiwan News, 26 June 2020, https://www.taiwannews.com. tw/en/news/3954578. Keoni Everington, ‘China to Dispatch 2 Aircraft Carriers Near Taiwan for War Games,’ Taiwan News, 27 May 2020, https://www.taiwannews.com. tw/en/news/3940772. Ying Han 韓瑩 and Yao-tsu Peng 彭耀祖, ‘Gongji 6 Yue Raotai 10 Ci Qizhong Yici Guadan Bijin Shecheng Juli 共機6月擾台10次 其中一次 掛彈逼近射程距離 [PLA Planes Approached Taiwan on 10 Occasions. On One Occasion They Were Bearing Missiles and Approached Firing Distance],’ PTS News Network, 11 July 2020, https://news.pts.org.tw/ article/486635. See, for instance, Liu Xuanzun, ‘PLA Flies Aircraft to Taiwan, Both US and Taiwan Military Activities Targeted,’ Global Times, 26 June 2020, https://www.globaltimes.cn/content/1192706.shtml. A brief introduction to the ODC can be found in the ‘USCC Annual Report to Congress, Chapter 3 Sect. 3: “China and Taiwan”,’ Congress Report (Washington, DC: US-China Economic and Security Review Commission, 2017), 345–365, https://www.uscc.gov/sites/default/ files/2019-10/Chapter%203,%20Section%203%20-%20China%20and% 20Taiwan_0.pdf. Another description, and a more recent update on the implementation of the policy, can be found in ‘ASCC Report, Chapter 5: “Taiwan”,’ Congress Report (Washington, DC: US-China Economic and Security Review Commission, 2019), 446–456, https://www.uscc.gov/ sites/default/files/2019-11/Chapter%205%20-%20Taiwan.pdf. Sam Roggeveen, an analyst at Australia’s Lowry Institute, stated in a report posted by the Australian Strategic Policy Institute that “The strategic weight of… the United States is diminishing in relative terms” and “The main reason is China, whose military rise will ensure that the US will cease to be the region’s hegemon.” See Sam Roggeveen, ‘Developing a Strike Capability to Hit China Would Generate Dangerous Uncertainty,’ The Strategist, 20 March 2020, https://www.aspistrategist.org.au/developing-a-strikecapability-to-hit-china-would-generate-dangerous-uncertainty/. Kathy Gilsinan, ‘How the U.S. Could Lose a War with China,’ The Atlantic, 25 July 2019, https://www.theatlantic.com/politics/arc hive/2019/07/china-us-war/594793/. According to this article, David

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Ochmanek, a senior international and defence researcher at RAND, stated that in RAND’s assessment, a Chinese invasion could result in the fall of Taiwan within a timeframe measured in “days to weeks.” This view has more recently been put forth by David Santoro, a senior fellow at the Pacific Forum. See David Santoro, ‘Beijing’s South China Sea Aggression Is a Warning to Taiwan,’ Foreign Policy (blog), 16 September 2019, https://foreignpolicy.com/2019/09/16/beijings-south-china-seaaggression-is-a-warning-to-taiwan/. Seth Cropsey, ‘China’s Salami-Slicing Policy Toward Taiwan,’ Hudson Institute, 14 May 2018, http://www.hudson.org/research/14327-chinas-salami-slicing-policy-toward-taiwan; Santoro, ‘Beijing’s South China Sea Aggression Is a Warning to Taiwan.’ See Floriano Filho, ‘Taiwan’s Energy Security Challenges,’ Books and Ideas, 14 May 2020, https://booksandideas.net/Taiwan-s-Energy-Sec urity-Challenges.html. According to a report by Gas Processing and LNG, “more than 90% of Taiwan’s LNG imports passed through the South China Sea in 2016”—see ‘EIA: Almost 40% of Global LNG Trade Moves Through the South China Sea,’ Gas Processing and LNG, 18 May 2018, http://www.gasprocessingnews.com/news/eia-almost-40-ofglobal-lng-trade-moves-through-the-south-china-sea.aspx. Kensaku Ihara, ‘Chinese Tourists to Taiwan Plunge 60% in September,’ Nikkei Asian Review, 28 October 2019, https://asia.nikkei.com/Pol itics/International-relations/Chinese-tourists-to-Taiwan-plunge-60-inSeptember. ‘The New Southbound Policy: A Practical Approach Moving Full Steam Ahead,’ Executive Yuan Report (Ministry of Foreign Affairs Republic of China [Taiwan], 11 October 2017), http://nspp.mofa.gov.tw/nsppe/ list_tt.php?unit=440&unitname=Guidelines-and-Action-Plan. Mark Magnier, ‘US Must Be Ready for Military Clash with China, Pentagon Official Says,’ South China Morning Post, 21 February 2020, https://www.scmp.com/news/china/military/article/3051683/ us-must-gird-possible-military-clash-china-pentagon-official. Kim Choon Kun, ‘Mi Jungsimeuro Asia Yureop Haeyangganggugi Mungchyeo,’ 美 중심으로 아시아·유럽 해양강국이 뭉쳐 [An AmericanCentred Asian-European Maritime Superpower Bands Together],’ January 2019, http://monthly.chosun.com/client/news/viw.asp?ctcd= D&nNewsNumb=201901100031. ‘The United Nations Division for Ocean Affairs and the Law of the Sea,’ PRC Submission to the CLCS (United Nations, 7 May 2009 [updated 3 may 2011]), https://www.un.org/depts/los/clcs_new/sub missions_files/mysvnm33_09/chn_2009re_mys_vnm_e.pdf. This passage, and an analysis of its significance in relation to Taiwan’s territorial claims and security, can be found in Nien Tsu-Hu, ‘South China Sea: Troubled

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South China Sea; Carriers in Pacific After 2020: Envoy,’ Reuters, 2 December 2016, https://www.reuters.com/article/us-britain-southchin asea-fighters-idUSKBN13R00D. ‘Xinhua Commentary: London Needs to Tread Cautiously on South China Sea,’ China Daily, 6 December 2020, https://www.chinadaily. com.cn/opinion/2016-12/06/content_27587488.htm. Colin Packham, ‘Britain Plans to Send Warship to South China Sea in Move Likely to Irk Beijing,’ Reuters, 27 July 2017, https://www. reuters.com/article/us-southchinasea-britain-idUSKBN1AC1CB. ‘British Defense Secretary Says Warship Bound for South China Sea: Media,’ Reuters, 13 February 2018, https://www.reuters.com/article/us-southc hinasea-britain-idUSKBN1FX0TG. Andrew Greene, ‘South China Sea: Britain to Deploy “Colossal” Warships to Test Beijing’s Territorial Claims,’ Australian Broadcasting Corporation (ABC), 27 July 2017, https://www.abc.net.au/news/2017-07-27/ britain-to-deploy-warships-to-south-china-sea/8750646. As mentioned above, RAF Eurofighter Typhoons were sent over the South China Sea in late 2016. RAF Merlin helicopters were also embarked on the Mistral, a French amphibious assault ship, which passed through the South China Sea in 2017. See John Hemmings and James Rogers, The South China Sea: Why It Matters to Global Britain (London: Henry Jackson Society, 2019), 9. Catherine Wong, ‘China Protests After British Warship Sails Close to Disputed Paracels,’ South China Morning Post, 6 September 2018, https://www.scmp.com/news/china/diplomacy/article/2163103/ china-protests-after-british-warship-sails-close-disputed. Written question and answer on the matter of the South China Sea. See, Philip Hollobone and Mark Lancaster, ‘Navy: South China Sea182724 to Ask the Secretary of State for Defence, How Many Freedom of Navigation Exercises Were Conducted in the South China Sea by the Royal Navy in (a) 2017 and (b) 2018; and How Many Exercises His Department Has Planned for 2019,’ Parliamentary Question and Answer (London: Ministry of Defence, 31 October 2019), https://www.parliament.uk/business/pub lications/written-questions-answers-statements/written-question/Com mons/2018-10-23/182724/. ‘Global Britain: Government Response to the Committee’s 6th Report,’ Government Response (London: House of Commons: Foreign Affairs, 12 March 2018), https://publications.parliament.uk/pa/cm201719/cms elect/cmfaff/1236/123602.htm. Andrew Lambert, Seapower States: Maritime Culture, Continental Empires and the Conflict That Made the Modern World (Yale University Press, 2018), 320.

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46. HM Government: National Security Capability Review, March 2018, https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/705347/6.4391_CO_National-SecurityReview_web.pdf. 47. ‘House of Commons, Foreign Affairs Committee, Global Britain Sixth Report,’ House of Commons Report (Westminster: House of Commons, 12 March 2018), 22, https://publications.parliament.uk/pa/ cm201719/cmselect/cmfaff/780/780.pdf. 48. ‘House of Commons, Foreign Affairs Committee, Global Britain Sixth Report,’ 24. 49. See, for instance, ‘Wildcats Join French Task Group for Unique Pacific Mission,’ Royal Navy, 27 February 2018, https://www.royalnavy.mod. uk/news-and-latest-activity/news/2018/february/27/180227-wildcatsjoin-french-task-group-for-unique-pacific-mission. 50. ‘HMS Queen Elizabeth Joined by Frigate and Submarine to Expand Strike Capabilities,’ UK Defence Journal, 23 June 2020, https://ukdefe ncejournal.org.uk/hms-queen-elizabeth-joined-by-frigate-and-submarineto-expand-strike-capabilities/. 51. ‘HMS Queen Elizabeth Joined by Frigate and Submarine to Expand Strike Capabilities.’ 52. Jane Perlez, ‘Calls Grow in China to Press Claim for Okinawa,’ The New York Times, 14 June 2013, https://www.nytimes.com/2013/ 06/14/world/asia/sentiment-builds-in-china-to-press-claim-for-okinawa. html. Ian Johnson and Thom Shanker, ‘Beijing Mixes Messages Over Anti-Japan Protests,’ The New York Times, 16 September 2012, https:// www.nytimes.com/2012/09/17/world/asia/anti-japanese-protests-overdisputed-islands-continue-in-china.html. 53. Theresa May and Shinz¯ o Abe, ‘Japan-UK Joint Declaration on Security Cooperation,’ Joint Statement (Westminster: UK Parliament, 31 August 2017), https://assets.publishing.service.gov.uk/government/uploads/ system/uploads/attachment_data/file/641155/Japan-UK_Joint_Declar ation_on_Security_Cooperation.pdf. 54. ‘Chapter 2: Britain’s Quasi-Alliance with Japan,’ Elcano Policy Paper (Real Instituto Elcano, 12 November 2018), 17, https://anglojapanal liance.files.wordpress.com/2018/11/ls-us-eds-natural-partners_-europejapan-and-security-in-the-indo-pacific.pdf. 55. US, UK, Japan Navies Commit to Increase Cooperation, 20 October 2016, https://www.c7f.navy.mil/Media/News/Display/Article/981 325/us-uk-japan-navies-commit-to-increase-cooperation/ 56. The full statement can be found on the MSDF website, see ‘JPN/US/UK Trilateral Head of Navy Joint Statement,’ Japan Ministry of Defence Joint Statement (Tokyo: Ministry of Defence, 20 November 2019), https:// www.mod.go.jp/msdf/en/release/201911/20191121.pdf.

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57. See ‘World News Story: HMS Montrose Joined Trilateral Exercises with Japan and US. US, UK, Japan Maritime Forces Practiced Submarine Hunting on 14 and 15 March,’ GOV.UK, 18 March 2019, https://www.gov.uk/government/news/hms-montrose-joined-tri lateral-exercises-with-japan-and-us.

CHAPTER 8

Brexit, Supply Chains and the Contest for Supremacy: The Case of Taiwan and the Semiconductor Industry Robyn Klingler-Vidra and Yu Ching Kuo

Introduction Innovation is a crucial driver of productivity advance, which is the contemporary economic growth engine and arena for states to flex their international security muscle. Political phenomena in the shape of Brexit and the US-China trade war are inserting substantial uncertainty into the system, uncertainty that could thwart the potential for countries to achieve essential advances in innovation. Brexit raises questions about the availability of high-technology talent to live and work, as well as concerns over short-term disruptions to the import and export of goods, in Europe. The semiconductor industry is a particularly essential, and

R. Klingler-Vidra (B) King’s College London, London, UK e-mail: [email protected] Y. C. Kuo Science & Technology Policy Research and Information Center, Taipei City, Taiwan © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_8

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globally connected, component of the world’s innovation economy. For this reason, our chapter focuses specifically on semiconductors. Semiconductors—including silicon, the material for which Silicon Valley got its name|—are the materials that conduct currents, which are essential to electronic circuits. Microchips with electronic circuits enabled by silicon wafers help to power contemporary society’s innovations, from computers, to smartphones, appliances, cars, spacecraft and more. Since the creation of the first chip back in 1959, there has been an unprecedented rise in the production and use of semiconductors. As more of the physical world is brought online, and made “smart”, so the global semiconductor industry has boomed. The development of semiconductor design, research and manufacturing is a harbinger for innovation-centric economic growth, as semiconductors are crucial “in other fields essential to future economic growth, such as personalized healthcare, robotics, and intelligent products”.1 The semiconductor is as internationally produced as it is essential to our modern lives. The designs of the processors that power 95% of the world’s smartphones come from UK headquartered Arm Holdings. Brexit could mean that these essential designs could become suddenly less available to semiconductor manufacturers. For its part, the US-China trade war threatens to increase the cost of cross-border trade vis-à-vis the direct application of tariffs, but it poses further ripple effects. The inclusion of Huawei on the US Entity List, for instance, has meant that manufacturers around the world worry whether they can, or should, continue to supply Huawei and its subsidiaries, such as HiSilicon, for fear of losing access to the US market.2 European manufacturers in the globally-connected semiconductor industry, especially ASML, also lie exposed to disruptions due to evolving trade agreements and tensions. For makers of semiconductor components, supply chains are extraordinarily global, and individual parts are difficult—nearly impossible—to replace overnight, accentuating the potential havoc stemming from Brexit and the US-China trade war. The chapter explores how Brexit could undermine or boost Taiwan’s semiconductor industry. The focus on Taiwan-Europe relations with respect to the semiconductor industry stands to make a contribution to political economy literature. Scholarship on Taiwan’s industrial upgrading, high-technology industry advances and venture capital market growth have focused squarely on the “bridge” to Silicon Valley.3 Numerous studies have detailed how Taiwan’s “New Argonauts” travelled between California and Hsinchu Park, establishing connections that drove

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technology transfer (initially from RCA to Taiwan), investment, and an upgrading of the talent pool in Hsinchu Park.4 Much less has been written on the topic of the interactions between Taiwanese tech and Europe, and even less on the UK-Taiwan semiconductor connections. This has left a gap in our understanding, and one that is important to fill given contemporary trends that collectively constitute marked uncertainty about trade openness. The chapter’s second core focus is the impact of the US-China trade war on Taiwan’s semiconductor industry. In doing so, we offer a sectorspecific account of the trade war, to complement Bob Wang’s chapter on the US political response to the escalations. Companies on both the US and Chinese side of the dispute have spoken of reducing exposure to one another. For the Americans, this means moving out of China, with announcements of establishing or increasing operations in Taiwan, as well as India and Vietnam.5 While for the Chinese side, this involves a “deAmericanization” strategy.6 Both countries could increase their business with the Taiwanese semiconductor industry. On account of the industry’s massive contribution to the local economy, this would be a boon for the island as a whole. The following section sets the scene for the analysis, with an overview of the global semiconductor industry, and the stature of the various countries in this key industry. The chapter then interrogates, in turn, ways in which realization and escalation of Brexit and the US-China trade war could affect the industry, particularly in Taiwan. We close with brief concluding remarks on the potential effects of the rising uncertainty on semiconductors.

Front Lines of Innovation in Uncertainty: The Semiconductor Industry Semiconductor industry prowess has long been a key component of developmental state strategies, beginning with Japan’s Ministry of International Trade and Industry-led consortia in Japan in the 1970s, through to Taiwan and Korea’s highly effective interventions to boost their positions in the global industry.7 Taiwan, on account of its effective developmental state apparatus, has been a world leader in the fabrication of semiconductors since the 1990s.8 Semiconductor revenue is an important contributor to the gross domestic product of these countries with major

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manufacturers. In addition, politicians—in the USA, China and beyond— see that semiconductors are essential to contemporary national security. Semiconductors may contain backdoors that expose them to vulnerabilities, and lack of stock could inhibit economic activities. As a result, just as oil independence was essential to high politics in the 1970s, so semiconductor independence is at the top of the agenda in 2020. As evidence of the desire to have “chip independence”, Vice Premier Ma Kai said, at China’s 2018 National People’s Congress, that “we cannot be reliant on foreign chips”.9 The national giants of the semiconductor world are the USA, China, Taiwan, South Korea and Japan. At the time of writing, several of these giants are locking horns in trade disputes; notably the tit-for-tat tariffs (and “blacklisting” of specific firms) between the USA and China. The trade disputes spark uncertainty that undermines consumer confidence— hampering consumption volumes. This, along with trepidation over the sustainability of supply in the light of the Coronavirus outbreak at the outset of 2020, has caused several firms to reconsider their supply chains in an effort to reduce their exposure to global supply chain disruptions due to illness, or, in the case of Huawei, the loss of a key buyer. Taiwan is a crucial manufacturer, particularly in the “foundry” segment, of the global semiconductor industry. Foundries are the facilities that manufacture—but not necessarily design—semiconductor chips. Their global production capacity—based on projections by TrendForce in March 2019—was expected to reach nearly US$70 billion by the end of 2019. The semiconductor industry is regarded to be a veritable pillar of Taiwan’s economy. As of 2018, integrated circuits and micro-assemblies accounted for 28.5% of Taiwan’s exports.10 Given its massive share of the total economy and trade, disruptions in the semiconductor industry would have a disastrous impact on the Taiwanese economy. The three largest Taiwanese semiconductor manufacturers are Taiwan Semiconductor Manufacturing Company (TSMC), United Microelectronics Corp (UMC), and Powerchip Technology Co. Globally, these Hsinchu Park-based firms are essential players, as TSMC and UMC are two of the world’s largest pure-play foundries.11 In fact, TSMC is the world’s largest pure-play foundry, accounting for about half of the global foundry market share.12 Taiwan’s semiconductor foundry giants are essential to the world’s production of semiconductor chips, for chip makers ranging from Intel, AMD and HiSilicon through to electronics

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firms ranging from Apple, IBM and beyond. The names and key statistics of Taiwan’s largest semiconductor manufacturers are detailed in Tables 8.1 and 8.2. The semiconductor industry constitutes a significant share of Taiwan’s economy and its electronics exports in particular.13 Despite the prominent position of Taiwan’s semiconductor industry, President Tsai did not choose semiconductors as one of the priority industries when she came to power in 2016. Instead, her administration prioritized the following five industries: green energy technology, smart machinery, Internet of things, biotechnology and defence industry. In commenting on President Tsai’s administration balances between supporting emerging and existing industries, the founder of TSMC, Morris Chang, expressed his surprise that the industry receives little support from the Government’s plan.14 As the administration entered its second year (in 2017), this priority list developed into the so-called “5 + 2 Industrial Innovation Plan,” covering seven industries and projects: intelligent machinery, Asia Silicon Valley, green energy, biomedicine, national defence and aerospace, new agriculture and the circular economy. Again, semiconductors were not specified. As the following section demonstrates, the importance of the industry has been evidenced by media headlines and political discussions. This Table 8.1 Leading Taiwanese semiconductor foundries Firm

Founded (Date and Location)

Executive team

Taiwan Semiconductor Manufacture Co (TSMC) United Microelectronics Corp (UMC)

1987 Hsinchu

Powerchip Technology Co.

Share (%) of global foundry market

Revenue (2018, US$ bn)

Stock Exchange (ticker symbol)

Mark Liu & C.C. Wei

48.1

34.2

1980 Hsinchu

Stan Hung, SC Chien, Jason Wang

7.2

4.9

1994 Hsinchu

Frank Huang

1.7

1.6

NYSE (TSM), TWSE (2330) NYSE (UMC), TWSE (2303) TWSE (5346; delisted)

Sources Company websites, stock market listing information, TrendForce March 2019 market data

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Table 8.2 Taiwan’s market share and ranking of global semiconductor industry

Output value of IC Industry Chain Integrated Circuit (IC) IDM (including Memory) IC Foundry IC Packaging and Testing Output Value of IC products

Revenue (Taiwan) (US$100m)

Revenue (Global) (US $100m)

Market Share (%)

World Leading Ranking Companies

Leading Countries

868

5812

14.9

3

TSMC

Korea, the US

212

1234

17.2

2

Media Tek

the US

66

3694

1.8

5

Nanya Technology

427

592

72.2

1

TSMC

Korea, the US, Japan, Europe Taiwan

163

292

55.9

1

ASE

Taiwan

278

4928

5.6

4

Media Tek

Korea, the US, Japan

NB: The 2018 data is provided by the Industrial Technology Research Institute in Taiwan and is compiled by the Smart Electronic Industry Project Promotion Office (SIPO), Industrial Development Bureau, Ministry of Economic Affairs. Source: The SIPO Website (Semiconductor Industry Status Quo) (September 2019) (‘Smart Electronic Industry Project Promotion Office (SIPO), Industrial Development Bureau, Ministry of Economic Affairs,’ Smart Electronics Industry Project Promotion Office (SIPO), IDB, MOEA, 2018, https://www.sipo.org.tw/en/industry-overview/industry-catego ries/the-scope-of-semiconductor-industry.html, accessed on 21 February 2020)

is because uncertainties have peaked due to Brexit and the US-China trade war, even if it was not specified as one of the Tsai administration’s priorities.

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The Impact of Brexit and the US-China Trade War Brexit Partnerships with European firms have long been essential to Taiwan’s semiconductor industry. In fact, Taiwan’s largest semiconductor manufacturer, TSMC, was co-established by the Taiwanese Government’s Industrial Technology Research Institute (ITRI) and Royal Philips Electronics (“Philips”) of the Netherlands in 1987. As a founding shareholder, Philips provided technological support for TSMC’s establishing and growth. The collaboration did not end there. In 1998, for instance, TSMC, Philips and Singapore’s Economic Development Board Investments agreed to form a joint venture to build a new wafer fabrication facility (Systems-onSilicon Manufacturing company) in Singapore’s Pasir Ris Wafer Fab.15 Only in 2007 did TSMC and Philips jointly announce a multi-phased plan whereby Philips would release its shares, planning to gradually exit from its shareholding in TSMC, 30 years after its initial investment.16 In addition to the Philips-TSMC link, there are other key supplier and partnership relationships between European (primarily Dutch) and Taiwanese firms. Notably, ASML, based in the Netherlands, is a leading supplier for wafer processing.17 At the time of writing, it is the world’s largest supplier for photolithography systems for the semiconductor industry, which use light to etch integrated circuits onto silicon wafers.18 Given the importance of ASML’s photolithographic machines, in 2012, TSMC and ASML announced a collaboration on the Customer CoInvestment Programme, committing to investing 276 million EUR in R&D to accelerate the development of Extreme Ultraviolet lithography technology and 450-millimetre lithography tools.19 Also in 2012, ASML’s headquarters agreed to allow the whole manufacturing of new products in Taiwan.20 As of February 2020, TSMC was reported as being “reliant on ASML’s wares”.21 As evidence of their reliance on ASML as a supplier, TSMC—along with Samsung and Intel—have committed to financing R&D in exchange for ownership stakes in the Dutch firm. Beyond the ASML-TSMC connections, in 2016, ASML acquired its Taiwanese peer, Hermes Microvision Inc., in a cash transaction valued at about TWD 100 billion (approximately EUR 2.75 billion at current exchange rates) to further enhance its lithography product portfolio.22 The Taiwan-European connection in the semiconductor industry also relates to British manufacturers. The UK is not one of the global powerhouses in the sector, and in recent years, the UK players in semiconductor

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manufacturing have been acquired by international firms. Cambridge Silicon Radio was bought by Qualcomm, an American company, in August 2015, and Arm Holdings was acquired by SoftBank Group— Masayoshi Son’s technology and investment giant—for US$32 billion in the days after the Brexit vote in 2016. However, one of these UK-based firms—Arm Holdings Plc.—is a particularly important player in the global semiconductor industry given the use of its designs by major Chinese and American firms. Arm designs and licenses processors that “power 95% of smartphones”.23 In addition to Arm’s input into virtually all global smartphones, it has a direct impact on Taiwan’s leading semiconductor manufacturer vis-à-vis a partnership agreement signed in October 2014 with TSMC.24 From TSMC’s roots with Philips through to contemporary collaborations and supplier relationships, there is significant interdependence between Taiwan and Europe in the semiconductor industry. The question is then: What does Brexit, in particular, mean to these relations? Mark Liu, co-chairman of TSMC and chairman of the Taiwan Semiconductor Industry Association, spoke at a semiconductor show in Taiwan on 19 September 2019, where he pointed out that Taiwan’s semiconductor industry has been the most acutely damaged by talent shortages. Liu urged the Taiwanese Government to strengthen Taiwan’s basic scientific research capacity and attract professionals and experts to teach students at Taiwanese universities.25 In fact, Liu is not alone in pointing out the talent shortages. Other Taiwanese industrialists have been asking the Government and universities to make extra effort to prepare talents to be ready for both domestic and international highskill jobs, despite the fact that there have been many public and academic debates concerning to what extent higher education institutions should or could prepare their students for the labour market. One channel for such talent flows comes in the context of UK-Taiwan student exchanges. Since March 2009, there has been a visa waiver programme in place for the UK and Taiwan, and a Taiwan-UK Youth Mobility Scheme that encourages students (between 18 and 30 years old) to travel between countries.26 More recently, Taiwan’s Ministry of Science and Technology has been working with the UK’s British Academy and research councils to encourage greater research collaboration and facilitate exchange visit programmes.27 In addition, in March 2018 the UK-Taiwan Innovative Industries Programme was launched with a focus on R&D collaboration in key areas, such as biotechnology, AI, robotics, clean energy and

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autonomous vehicles. Taiwanese researchers are able to conduct projects at UK universities and research institutions.28 The thrust of the impact of Brexit on Taiwanese semiconductor manufacturer, it seems, relates more to the exchange of knowledge and development of talent. Production agreements with ASML, in the Netherlands, and Arm, in the UK, are in place and seem to be assured to be out of the crosshairs of Brexit negotiations. Nevertheless, the relationships between these key players—Arm, ASML and TSMC—are not exempt from tensions on account of the US-China trade war. For Brexitspecific concerns, the primary concern is the continuation of education programmes between Europe and the UK. As we explore in the next section, the stability of partnerships between Taiwanese and European firms is more immediately affected by ongoing US-China tensions. US-China Trade War The trade war between the USA and China is indeed a battle for technology supremacy29 and the “huge commercial and national security advantages that come with it”.30 When examining the reason why the semiconductor is at the heart of US-China technology tensions, Horwitz notes that “innovation in semiconductors leads to innovative products”. Furthermore, “chips are an economic boon” as the US chip industry “directly employs about 250,000 people, and generates $164 billion in sales each year”.31 He adds that “a small but critical portion of the semiconductor industry has specific applications in the defence sector, for use in things like missiles and radars. Mastery of the semiconductor technology can help ensure that a country’s military technology remains at the cutting edge”. For these reasons, semiconductor production capabilities—and each country’s independent ability to manufacture semiconductors—are front and centre in the US-China dispute. The US-China trade war could spell marked dislocations in the globally-integrated semiconductor industry.32 As one analyst remarked, the US president’s “campaign of tariffs and export restrictions against Chinese champions, such as Huawei Technologies, threatens to upend the production of the world’s electronics, from iPhones and laptops to 4K televisions”.33 It has prompted firms to consider who they do business with, and how. Gordon Sun, the director of the Taiwan Institute of Economic Research Macroeconomic Forecasting Centre, said that “both US and Chinese companies are diversifying their supply chains due

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to similar reasons—to mitigate geopolitical risks”. Some analysts raised concerns that Taiwan could be badly affected by the trade war.34 As we will show later in this section, at the time of writing, the opposite is proving true, as trade tensions have fuelled a rise in Taiwan’s semiconductor activities. Companies from other countries, particularly in Europe, have been affected by the US-China trade war. Notably, in 2018, ASML, the Dutch firm with close collaborations with TSMC and a core position in the global semiconductor industry, was caught in the crosshairs. When ASML received an order from a Chinese customer “widely thought to be the Semiconductor Manufacturing International Corporation, China’s biggest chipmaker”, under US pressure “the Dutch Government has yet to grant ASML an export license”.35 Yet given the size of the Chinese market, ASML does not want to lose access to it. Perhaps even more worrying, if Chinese manufacturers are not able to buy ASML inputs, then they will be forced to develop the capability in-house. Ultimately, blocking ASML from exporting to China could mean that Chinese firms learn to do it themselves, and then no longer need ASML. Britain’s leading semiconductor firm, Arm Holdings, also came very publicly into the crosshairs of the dispute in May 2019 when it suspended its licensing agreements to Huawei. Some analysts said such a move would be a “death sentence” for Huawei, given its dependence on Arm designs.36 Yet a reprieve was quickly given, as the president of Arm, Graham Budd, said in June 2019 that the company was “evaluating its options and seeking a ‘swift solution’ from policymakers” in order to continue to do business with Huawei.37 Arm’s business model sees them licensing designs to others to make the chips, so the announcement that Arm would not work with—or even speak to—Huawei had meant that (overnight) the Chinese firm no longer had access to essential designs for processors. What is more, Arm’s designs are playing “a significant role in [Huawei’s] efforts to develop its own chips as part of its plan to circumvent technology blocks from the US”.38 This includes HiSilicon’s “Kirin” series of chips that were launched in 2018, which were based on Arm designs. In the light of ongoing uncertainties around Huawei—and Arm’s willingness to continue to work with the firm—the successor chip will “have to be made from scratch”.39 Ostensibly in an effort to develop that “from scratch” capability in-house, in May 2019, Huawei revealed that it was building a 400-person chip R&D factory just outside of Cambridge, just

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a 15-minute drive away from Arm Holdings.40 In doing so, Huawei is establishing a facility that can benefit from the semiconductor design talent pool around Cambridge that is working at Arm Holdings, CSR (now Qualcomm) and more. Once the facility is up and running from 2021, Huawei will then be less dependent on corporate contracts with these British firms; the hope is to be capable of design, which has so far been elusive from its capabilities. Questions about Huawei’s continued ability to operate in the UK resumed when news broke in late May 2020 that Britain was considering alternative suppliers for building its (non-sensitive) aspects of the 5G network.41 TSMC has been courted—and scolded—by both sides of the US-China trade dispute.42 Following months of being affected by the inclusion and reprieve from “Entity List” status in the USA, in early November 2019, Huawei was reported to have met with TSMC. The discussion covered the production of key components for its smartphones as well as networking equipment after the USA banned firms from supplying components and technology to this Chinese technology giant. Officials in Washington responded to Huawei’s approach to TMSC by repeatedly asking the Taiwanese Government to restrain TSMC from selling chips to Huawei and urging TSMC’s US clients to make chips in America for security reasons.43 Furthermore, TSMC “has been pressured by the US to move production of some of its military-grade chips to the US”. Such specific types of chips are used in American F-35 fighter jets.44 Ostensibly in an effort to shore up its access to the American market, and in response to these explicit political pressures, in May 2020 TSMC announced that it would build a $12 billion factory in Arizona, in the USA.45 In the light of its pivotal position, TSMC-founder Morris Chang said, “as the world becomes more chaotic, TSMC is emerging as a strategic territory that all geopolitical forces aim to secure”.46 Cheng and Li commented that, on account of TSMC’s crucial position in the global semiconductor industry, “Taiwan finds itself in the middle as the world’s two biggest economies struggle to decouple and build more isolated supply chains in the battle for future tech supremacy”.47 Analysts have referred to this as a “geo-technological triangle” comprised of the USA, China and Taiwan”.48 The US-China trade war, and the resultant production of chips for both China and the USA separately, could represent substantial potential upside for Taiwan’s semiconductor industry. Trade data for 2019 suggests that diversification towards Taiwan is already well underway. An

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UNCTAD report asserted that Taiwan is “the largest beneficiary of the trade diversion effects of United States tariffs on China, accounting for additional exports to the United States of almost US$ 4.2 billion in the first half of 2019”.49 The gains were related to an increase in exports of office machinery and communication equipment—of which semiconductors are a large share. Compared to the same period the previous year, the annual growth rate of electronic component exports to China was approximately 18.23%; more than 90% of these components are integrated circuits.50 As some market analysts point out, this phenomenon is mainly due to the fact that the Chinese technology industry has been pursuing “de-Americanization” in response to the trade war.51 Taiwan is considered by Chinese 5G developers to have considerable competitive advantages in the 5G-related supply chain. Earlier in the chapter, we underscored the fact that the Tsai administration did not include the semiconductor industry as a priority sector. Recently, though, the US-China trade war escalations stimulated the Taiwanese Government to launch some initiatives to encourage Taiwanese factories based in China to relocate their manufacturing back to Taiwan. These initiatives did attract some Taiwanese firms to shift their operations back to Taiwan. However, some manufacturers are continuing to wait and see what happens with the trade tensions, hoping that the tensions (and now the virus disruption) are short term in nature.52

Conclusion The impacts of trade discussions in the USA, Europe and Asia are interconnected. The US-China trade war ensnares European companies in tensions over manufacturing partnerships and supplier relationships. Can Taiwanese and European companies sell to Huawei while also producing chip components for the US military? Thus far, the Taiwanese semiconductor industry appears to be a beneficiary of the US-China trade dispute, and the island’s economy is expected to be one of East Asia’s better performers in 2020.53 To do this, Taiwan’s leading firms, notably TSMC, are having to please both the USA and China. This means moving their production facilities, in some cases, outside of Taiwan, as the May 2020 announcement of the new Arizona plant underscored. In working to please both sides, they risk their non-alignment strategy backfiring, and then having one of the world tech giants reprimanding them, or worse, cutting them off. It seems, though, that TSMC is such an essential

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provider for both China and the USA, especially for chips that are essential to national security, that the foundry should be able to continue to expand its productive relationships with both sides simultaneously. Though the immediate days and weeks after Brexit occurs could bring potentially significant short-term disruption to cross-border trade for Taiwanese firms, the real concern about Brexit is much longer term. Britain and Taiwan have long-established—and growing—relationships that foster talent development and flows. The maintenance of this asset is of increasing importance to Taiwan, given rising concerns about an outflow of high-skilled workers. There have already been warnings that Taiwan has begun losing its global competition for talent—a talent pool that is essential to its ability to keep its position as a global leader in the fast-paced, high-technology semiconductor industry. To keep Taiwan at the technological frontier, the Minister of Science and Technology, Chen Liang-gee, has pledged a 10% annual increase in the basic research budget (reversing the trend after years of decline). In August 2019, he delivered on that promise by announcing a US$149.7 million increase in the 2020 basic research budget, with a “focus on technologies related to 5G, cybersecurity and precision medicine”.54 Such critical funding is essential to continuing to its long-term capabilities in the emerging geo-technological triangle. Broader than semiconductors, the impact of Brexit on this trade relationship comes in the form of its impact on the potential for a Taiwan-EU trade agreement. The European Commission first indicated its willingness to engage in talks about such an agreement with Taiwan in 2015.55 Such an advance for the EU in boosting cross-border investment with Taiwan would surely disadvantage future trade and investment with the UK.56 However, bilateral trade agreements with the EU notoriously take a long time to agree, so it may be many years before anything would come to be (and that is assuming that political will remains once the UK is out of the European Union). In terms of a Taiwan-UK trade agreement, Boris Johnson secured his prime ministership in the December 2019 General Election while Tsai won her second term in January 2020. These two events will probably not change the political landscape for Britain and for Taiwan. But, reaffirmation for Johnson as a prime minister was almost synonymous with reconfirming the tone of a done-deal Brexit. At the same time, there have been no further developments regarding the progression of any trade agreement between the UK and Taiwan. Given that Taiwan has been put

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in the middle of the US-China trade war, and the dynamics of geopolitics, the likelihood of a trade agreement between the UK and Taiwan reminds highly uncertain. In summary, in Table 8.3, we distil the potential short- and longterm impacts of both Brexit and the US-China trade war, with a focus on Taiwan’s position in the global semiconductor industry. In Europe, there are a few system-critical semiconductor firms that have significant engagements with Taiwanese manufacturers. Though Britain is not a leading buyer or supplier of semiconductors, it does contain some strategically important firms in the market, particularly Arm Holdings. Thus far, the US-China trade war has posed more of a risk to Arm-TSMC relations than Brexit has. Similarly, for Dutch ASML, concerns centre on US-China trade tensions rather than what Brexit could mean to market access. The uncertainties caused in terms of access to talent, ability to do business, and short-term trade complications, pose substantial risks to manufacturing and trade in this highly important, and globally organized, industry. In the long run, if US-China trade war interventions mean that Chinese manufacturers are not able to buy essential inputs from suppliers like ASML and Arm Holdings, they will dedicate the necessary time and money into developing their own capabilities. After all, independence in semiconductor manufacturing is raised again and again in the name of national security. Table 8.3 Summary of semiconductor industry

long

and

short-term

impacts

on

Taiwan’s

Brexit

US-China trade war

Short-term

Disruption, particularly for goods indirectly traded through the EU to the UK

Long-term

Risk of disruption to education and talent flows between Britain and Taiwan Potential for EU-Taiwan trade deal would diminish with the UK out of the EU

Disruption in trade, in particular, suspending contracts (e.g. with Huawei /HiSilicon) Potential gains from relocation of production (from mainland China to Taiwan, and also, to the US) Chinese semiconductor manufacturers to develop design capacity to reduce reliance on foreign suppliers (e.g. Arm Holdings and ASML)

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For Taiwan, economic success has been central to its strategy for survival as an autonomous entity. So far, it has demonstrated its ability to thrive in the face of global volatility. Taiwan’s firms seem to be effectively growing their export numbers despite—or because of—trade disruptions elsewhere. However, new tensions are boiling on account of the outbreak of the novel coronavirus, and the semiconductor business is highly cyclical, as it is directly affected by slumps in global consumer demand. In addition, on the political front Taiwan has recently seen two countries—the Solomon Islands and Kiribati—shift their recognition to the PRC, leaving it with just over a dozen countries still recognizing it as a sovereign state. At the same time, the ongoing Hong Kong protests stir questions and concerns about the future of the “one country, two systems” model and the potential for the status quo to remain. To maintain its formidable position in this innovation arena, Taiwan will need to keep stable relations with mainland China. President Tsai’s win of a second term in office signalled “strong voter support for her tough stance against China”.57 When it comes to technology as well as the trade war between America and China, Tsai unsurprisingly takes a pro-American stance. However, it would be difficult for Tsai and her administration to ignore the fact that China has become Taiwan’s largest trading partner, and also the world’s dominant technology superpower. While Taiwan’s economy has grown its interdependence with China, it is not included in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or the Regional Comprehensive Economic Partnership.58 Thus, Taiwan’s strong political stance vis-à-vis China requires balance with the acknowledgement that China represents both a booming customer and competitor for its semiconductor industry. Taiwanese firms also need to tango around partnerships within a splintering Europe, as this remains essential to producing advances in the high-technology field of semiconductor manufacturing.

Notes 1. ‘Winning the Future: A Blueprint for Sustained US Leadership in Semiconductor Technology,’ Semiconductor Industry Association Executive Summary, 2019, 3, https://www.semiconductors.org/wp-content/ uploads/2019/04/FINAL-SIA-Blueprint-for-web.pdf. 2. The US Commerce Department’s Bureau of Industry and Security (BIS) added Huawei Technologies Co., Ltd. (Huawei) and 68 non-US Huawei

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3.

4. 5. 6.

7.

affiliates to its Entity List on 16 May 2019. The 68 non-US affiliates are located in 26 countries, including Taiwan and the UK. The designation imposes an export license requirement on all exports, re-exports and transfers of items. Then, a few days later, the BIS issued a 90day temporary general license (on May 20) which partially restored the previous licensing in four category areas: (1) continued operation of existing networks and equipment; (2) support to existing handsets; (3) cybersecurity research and vulnerability disclosure; and (4) engagement as necessary for development of 5G standards by a duly recognized standards body. The 90-day temporary license was originally set to expire on 19 August 2019, but was extended again, until 19 November 2019. For more details on the entity list, see Richard Burke et al., “Designates Huawei to Entity List, Issues Temporary General License”, White & Case, 2019, https://www.whitecase.com/publications/alert/us-designates-hua wei-entity-list-issues-temporary-general-license. Zen Soo, Li Tao, and Chua Kong Ho, ‘Taiwan Became Top Chip Manufacturer with US Help. Can It Stay There?,’ South China Morning Post, 11 September 2019, https://www.scmp.com/tech/tech-leadersand-founders/article/3026766/taiwan-became-top-chip-manufacturerus-help-can-it; Robyn Klingler-Vidra, The Venture Capital State: The Silicon Valley Model in East Asia (Ithaca: Cornell University Press, 2018); Chao-Tung Wen and Jun-Ming Chen, ‘Taiwan: Linkage-Based Clusters of Innovation—The Case of Taiwan’s It Industry,’ in Global Clusters of Innovation: Entrepreneurial Engines of Economic Growth Around the World, ed. Jerome S. Engel (Cheltenham: Edward Elgar, 2014). AnnaLee Saxenian, The New Argonauts: Regional Advantage in a Global Economy (Cambridge: Harvard University Press, 2006). Debby Wu, ‘Trump Tumult Has Gadget Giants Splitting Along Us-China Lines,’ Taipei Times, 2019. Ting-Fang Cheng and Lauly Li, ‘Inside Huawei’s Secret Plan to Beat American Trade War Sanctions,’ Nikkei Asian Review, 2019, https://asia.nikkei.com/Spotlight/Cover-Story/Inside-Huawei-ssecret-plan-to-beat-American-trade-war-sanctions. Scholarship on the developmental state and their role in semiconductor capacity building includes the following: Chalmers Johnson, MITI and the Japanese Miracle: The Growth of Industrial Policy, 1925–1975 (Stanford: Stanford University Press, 1982); Scott Callon, Divided Sun: MITI and the Breakdown of Japanese High-Tech Industrial Policy, 1975–1993 (Stanford: Stanford University Press, 1995); Douglas B. Fuller, ‘Globalization for Nation-Building: Taiwan’s Industrial and Technology Policies for the High-Technology Sectors,’ Journal of Interdisciplinary Economics 18, no. 2–3 (2007): 203–224.

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8. For details of the role of the Taiwanese state in supporting the development of the semiconductor industry, see: Dan Breznitz, Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan, and Ireland (New Haven: Yale University Press, 2007); Megan J. Greene, Origins of the Developmental State in Taiwan: Science Policy and the Question for Modernization (Cambridge, MA and London: Harvard University Press, 2008); John A Mathews, ‘A Silicon Valley of the East: Creating Taiwan’s Semiconductor Industry,’ California Management Review 39, no. 4 (1997): 26–54. 9. James Andrew Lewis, China’s Pursuit of Semiconductor Independence (Washington, DC: Center for Strategic & International Studies, 2019). 10. Daniel Workman, ‘Taiwan’s Top Trading Partners,’ World’s Top Exports (blog), 2019, http://www.worldstopexports.com/taiwans-top-exports/, accessed on 29 September 2019. 11. Pure-play foundry means manufacturing devices under contract, rather than designing them. 12. Zen Soo, Li Tao, and Chua Kong Ho, ‘Taiwan Became Top Chip Manufacturer with US Help. Can It Stay There?,’ South China Morning Post, 11 September 2019, https://www.scmp.com/tech/tech-leadersand-founders/article/3026766/taiwan-became-top-chip-manufacturerus-help-can-it, accessed on 21 February 2020. 13. On the importance of the semiconductor industry to Taiwan’s economy, see: Ben Bland and Simon Mundy, ‘How Important Is the Semiconductor Industry to Taiwan?,’ The Financial Times, 2015. Also, ‘Taiwan’s Semiconductor Development for More Than 40 Years, the Economic Pillar Also Benefits Humanity (台灣半導體發展逾40年 經濟支柱也造福人類),’ CNA, 5 September 2018, https://www.cna. com.tw/news/afe/201809050305.aspx. See also: Chun-Ju Li, ‘TSMC Contributed 4.46% of Taiwan’s GDP Last Year, with an Added Value Rate of 77%, Far Exceeding the Average,’ Money Link, 30 August 2019, https://ww2.money-link.com.tw/RealtimeNews/New sContent.aspx?SN=1378215002&PU=0010. See also: ‘Warning New Government—Morris Chang: Innovation Is the Biggest Culprit in Distribution,’ Liberty Times, 2016, https://ec.ltn.com.tw/article/bre akingnews/1865007, accessed on 14 October. 2019; ‘Key Innovative Industry: Semiconductors,’ Policy Doctrine (Taiwan Republic of China, 2018), https://www.roc-taiwan.org/uploads/sites/30/2018/ 03/Semiconductors.pdf, accessed on 14 October 2019. 14. Ching-Wen Chang, ‘Why Morris Chang Opposed? Three Reasons That 5 + 2 Industrial Innovation Plan Cannot Deliver the Next TSMC (張忠謀 為何反對 ? 三個原因讓「5 + 2產業」孵不出下一個台積電),’ CM Media, 2017, https://www.cmmedia.com.tw/home/articles/5810.

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15. ‘Philips Semiconductors and TSMC Announce New Benchmark in Fab Construction; Singapore Fab Tools Up for First Silicon,’ TSMC, 2000, https://www.tsmc.com/tsmcdotcom/PRListingNewsArchivesAct ion.do?action=detail&newsid=ANCUST&language=E, accessed on 21 February 2020. 16. Lisa Wang, ‘Philips to Offload Us$8.5bn Holdings in TSMC by 2010–,’ Taipei Times, 1 March 2007, http://www.taipeitimes. com/News/biz/archives/2007/03/10/2003351741, accessed on 21 February 2020. 17. In 1984, ASMI formed a joint venture partnership with Philips to found ASM Lithography (ASML). Later, ASML became independent from Philips in 1988. 18. ‘Industrial Light and Magic: How ASML Became Chipmaking’s Biggest Monopoly,’ The Economist, 29 February 2020, https://www.econom ist.com/business/2020/02/29/how-asml-became-chipmakings-biggestmonopoly, accessed on 21 February 2020. 19. ‘TSMC Joins ASML’s Customer Co-Investment Program for Innovation,’ ASML, 5 August 2012, https://www.asml.com/en/news/press-rel eases/tsmc-joins-asmls-customer-co-investment-program-for-innovation(46903), accessed on 28 February 2020. 20. ‘TSMC Joins ASML’s Customer Co-Investment Program for Innovation.’ 21. ‘Industrial Light and Magic: How ASML Became Chipmaking’s Biggest Monopoly.’ 22. ‘Press Release: ASML to Acquire HMI to Enhance Holistic Lithography Product Portfolio,’ ASML, 16 June 2016, https://www.asml.com/en/ news/press-releases/asml-to-acquire-hmi-to-enhance-holistic-lithographyproduct-portfolio-(53782), accessed on 28 February 2020. 23. ARM was bought by SoftBank Group—Masayoshi Son’s technology and investment giant—for $32 billion in the days after the Brexit vote. For more details, see: Jacky Wong, ‘Softbank-Arm: These Chips Don’t Come Cheap,’ Wall Street Journal, 2016, https://www.wsj.com/articles/sof tbank-arm-these-chips-dont-come-cheap-1468827781. 24. ‘ARM to Expand Investments in Taiwan,’ Taipei Times, 24 June 2019, https://www.taipeitimes.com/News/biz/archives/2019/06/24/ 2003717458. 25. ‘Mark Liu Proposed 4 Directive Change Strategies to Boost the Semiconductor Industry,’ Liberty Times, 2019, https://ec.ltn.com.tw/article/ paper/1318942, accessed on 18 October. 2019. 26. ‘Taiwan-UK Relations,’ Taiwan Republic of China: Taipei Representative Office in the UK, 9 May 2017, https://www.roc-taiwan.org/uk_en/ post/39.html, accessed on 18 September 2019. 27. ‘News: Small Economy, Smart State: Taiwan-UK AI Cooperation Creates New Opportunities,’ Ministry of Science and Technology, 2019, https://

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28.

29. 30.

31.

32.

33. 34.

35. 36.

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www.most.gov.tw/folksonomy/detail?article_uid=ec408feb-c3d9-42ca8c74-68410136af63&menu_id=eb9eb136-4319-40d6-abd3-0788bea0d 3a8&l=en. Pei-Ju Teng, ‘British Office Taipei Launches Nt$8 Million Program to Fund Taiwanese Researchers in the UK,’ Taiwan News, 2018, https:// www.taiwannews.com.tw/en/news/3388159#:~:text=TAIPEI%20(Tai wan%20News)%20%E2%80%94%20The,Taipei%20(BOT)%20on%20Wedn esday. Kai-Fu Lee, AI Superpowers: China, Silicon Valley, and the New World Order (Boston, MA: Houghton Mifflin Harcourt, 2018). Debby Wu, Henry Hoenig, and Hannah Dormido, ‘Who’s Winning the Tech Cold War? A China vs. U.S. Scoreboard,’ Bloomberg, 2019, https://www.bloomberg.com/graphics/2019-us-china-who-is-win ning-the-tech-war/, accessed on 25 February 2020. Josh Horwitz, ‘Why the Semiconductor Is Suddenly at the Heart of USChina Tech,’ Quartz, 2018, https://qz.com/1335801/us-china-techwhy-the-semiconductor-is-suddenly-at-the-heart-of-us-china-tensions/, accessed on 18 February 2020. As an example of the impact of the trade war on the industry, see: Li Tao, ‘Global Chip Sales Continue to Decline as US-China Trade War Escalates,’ South China Morning Post, 6 August 2019, https://www. scmp.com/tech/gear/article/3021660/global-chip-sales-continue-dec line-us-china-trade-war-escalates, accessed on 24 February 2020. Wu, ‘Trump Tumult Has Gadget Giants Splitting Along Us-China Lines.’ For example, see: Alex Fang, ‘Taiwan and Malaysia Likely Biggest Losers in US-China Trade Deal—Supply Shift Could Hit Chip Exporters Hardest Says Goldman,’ Nikkei Asian Review, 14 March 2019, https:// asia.nikkei.com/Economy/Trade-war/Taiwan-and-Malaysia-likely-big gest-losers-in-US-China-trade-deal. Also: Huang Jing-Zhe, ‘The Hidden Concerns of Taiwan’s Semiconductor Industry- the Industrial Technology Research Institute Warns (台灣半導體現隱憂, 工研院報告出警訊),’ Tech News, 24 October 2018, https://technews.tw/2018/10/24/taiwansemiconductor-is-now-worried-the-industrial-technology-research-instit ute-reported-a-warning/. ‘Industrial Light and Magic: How ASML Became Chipmaking’s Biggest Monopoly.’ Katia Moskvitch, ‘Losing Arm Is a Disaster for Huawei. It Can’t Be Replaced,’ Wired, 23 May 2019, https://www.wired.co.uk/article/ arm-huawei-us-china-trade-war#:~:text=Phones-,Losing%20ARM%20is% 20a%20disaster%20for,It%20can’t%20be%20replaced&text=Dead%20in% 20the%20water.&text=Short%20of%20American%20president%20Dona ld,may%20be%20bleak%20for%20Huawei, accessed on 20 February 2020.

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37. Zhang Erchi and Mo Yelin, ‘Chip-Designer ARM Breaks Silence on Hauwei Ties,’ Caixin, 19 June 2019, https://www.caixinglobal.com/ 2019-06-19/chip-designer-arm-breaks-silence-on-huawei-ties-101429 005.html, accessed on 20 February 2020. 38. Erchi and Yelin. 39. Moskvitch, ‘Losing ARM Is a Disaster for Huawei. It Can’t Be Replaced.’ 40. Sarah Provan, ‘Huawei to Build Chip Plant Near Arm Holdings HQ in Cambridge,’ The Financial Times, 4 May 2019, https://www.ft.com/con tent/26b6d24e-6d77-11e9-a9a5-351eeaef6d84, accessed on 20 February 2020. 41. Sophia Sleigh, ‘UK Talks with US About Alternative 5g Supplier to Chinese Tech Giant Huawei,’ Evening Standard, 2020, https://www.sta ndard.co.uk/news/politics/alternative-huawei-government-china-uk-a44 54566.html, accessed on 20 February 2020. 42. Tim Culpan, ‘This Star Chipmaker Really Doesn’t Want to Pick Sides,’ Bloomberg, 2019, https://www.bloomberg.com/opinion/articles/201911-04/as-huawei-supplier-tsmc-will-have-to-choose-between-u-s-china, accessed on 20 February 2020. 43. Cheng Ting-Fang, ‘TSMC Tells US Clients It Can Meet Pentagon Security Standards,’ Nikkei Asian Review, 2 November 2019, https://asia.nik kei.com/Business/Companies/TSMC-tells-US-clients-it-can-meet-Pen tagon-security-standards, accessed on 20 February 2020. 44. Cheng Ting-Fang, ‘Sales at Apple and Huawei Chipmaker TSMC Power Ahead on 5g,’ Nikkei Asian Review, 2020, https://asia.nikkei.com/Bus iness/Technology/Sales-at-Apple-and-Huawei-chipmaker-TSMC-powerahead-on-5G, accessed on 21 February 2020. 45. Demetri Sevastopulo and Kathrin Hille, ‘Taiwanese Group to Build $12bn Chipmaking Plan in US,’ Financial Times, 15 May 2020, https://www.ft. com/content/80196d74-2632-4ca2-8b5e-7ff7924524a4, accessed on 29 June 2020. 46. Sevastopulo and Hille. 47. Cheng Ting-Fang and Li Lauly, ‘Huawei Chip Mission Shows Taiwan Economy Gaining from Trade War,’ Nikkei Asian Review, 14 November 2019, https://asia.nikkei.com/Economy/Trade-war/Huawei-chip-mis sion-shows-Taiwan-economy-gaining-from-trade-war, accessed on 20 February 2020. 48. Kirk Hannah, ‘The Geo-Technological Triangle Between the US, China, and Taiwan,’ The Diplomat, 8 February 2020, https://thediplomat. com/2020/02/the-geo-technological-triangle-between-the-us-chinaand-taiwan/, accessed on 24 February 2020. 49. Alessandro Nicita, ‘Trade and Trade Diversion Effects of United States Tariffs on China,’ UNCTAD Research Paper, no. 37 (26 November 2019): 11.

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50. Yang Zhuo-Han, ‘Is Taiwan’s Export Trend Turning Around as a Result of Inflows of RMB? (台灣出口逆勢轉正 靠的還是人民幣?),’ World Magazine, 2020, https://www.cw.com.tw/article/articleLogin.action?id=509 8452, accessed on 20 February 2020. 51. Cheng and Li, ‘Inside Huawei’s Secret Plan to Beat American Trade War Sanctions.’ 52. Tai-Xing Yang, ‘The Truth of the Return of Taiwanese Businesses Amid US-China Trade War- and the Discussion on the Impact on Taiwan (美中 貿易戰下,台商回流真相——兼談硝煙下的島內衝擊),’ Thought Tank, 3 June 2019, https://opinion.udn.com/opinion/story/12705/3849639, accessed on 25 February 2020. 53. ‘What Next for Taiwan After Tsai Ing-Wen’s Emphatic Victory?,’ The Economist, 16 January 2020, https://www.economist.com/asia/ 2020/01/16/what-next-for-taiwan-after-tsai-ing-wens-emphatic-victory, accessed on 25 February 2020. 54. Lin Chia-nan, ‘Research Budget to Increase by Nt$ 4.7bn,’ Taipei Times, 21 August 2019, https://www.taipeitimes.com/News/front/archives/ 2019/08/21/2003720852, accessed on 25 February 2020. 55. Jakub Piasecki, ‘Brexit Is Bad News for Taiwan,’ The Diplomat, 1 July 2016, https://thediplomat.com/2016/07/brexit-is-bad-news-fortaiwan/, accessed on 25 February 2020. 56. Taiwan has been a member of the WTO since 2002. 57. ‘Taiwan’s President Re-Elected as Voters Back Tough China Stance,’ NBC News, 22 February 2020, https://www.cnbc.com/2020/01/11/ taiwan-president-takes-early-lead-in-election-closely-watched-by-china. html, accessed on 22 February 2020. 58. Yang Zhuo-Han, ‘Is Taiwan’s Export Trend Turning Around as a Result of Inflows of RMB?’

CHAPTER 9

The Impact of Brexit on the Relations of UK Universities with East Asia Pei Hsi Susan Lin

Introduction Since the UK’s European Union membership referendum—or the Brexit referendum—in June 2016, discussions and concerns about the impact of Brexit on the relationship between UK universities and the EU have been widely reported. The importance of this is underlined by the fact that the UK’s higher education sector makes a major contribution to the country’s economy. According to the Department for Education, in 2017 67% of the UK revenue from education (£14.4 billion) was from higher education exports, excluding transnational education (TNE) activities/operations.1 These discussions and concerns are primarily about student recruitment, student and staff mobility, research funding, contracts and educational operations from the EU. From the perspective of higher education, therefore, the impact of the UK leaving the EU appears to exclusively concern the involvement of UK universities with the EU, its member states and its market. The question

P. H. Susan Lin (B) Centre of Taiwan Studies, SOAS, University of London, London, UK © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_9

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of what, if any, effect Brexit will have on the relationship of UK universities with East Asia, an important market for the UK’s higher education sector, has been rarely discussed. The UK Government has been developing and introducing policies to prepare to leave the EU. These policies may also have an impact on UK universities’ involvement with East Asian countries. This chapter will assess the potential impact of Brexit on the relations of UK universities with East Asia. To do that, it focuses on four areas, namely student recruitment and student and staff mobility, research funding, recognition of qualifications and TNE activities/operations. I have chosen these four impact areas because of their importance to UK universities. Furthermore, apart from focusing on the relationship between UK universities and the People’s Republic of China (PRC)— and also Hong Kong and Macao—occasional references will be made to Japan, South Korea and Taiwan. It is important to note that collaboration between the PRC and UK universities is relatively more significant than those with other East Asian countries. Hence, this chapter singles out the PRC due to evident student mobility, research collaboration and TNE activities/operations between the UK and Chinese academic institutions. This chapter will firstly describe the funding structure of UK universities and current UK policies that are related to UK universities in response to Brexit. The trend of UK universities’ funding structures and UK policies may affect the previously described four impact areas and the connection of UK universities to East Asia. I will then analyse the four impact areas and assess whether or not Brexit will have a significant impact on the relationship between UK universities and East Asia. In conclusion, I will summarise the analysis of the four impact areas.

The Funding Structure of UK Universities and Current UK Policies in Response to Brexit The structure of funding of UK universities has undergone significant changes in the past decade. The Higher Education Statistics Agency (HESA)2 divides UK universities’ income into the following categories: tuition fees and education contracts; funding body grants; research grants and contracts; other income; investment income and donations and endowments.3 From 2009/2010 to 2018/2019, as Fig. 9.1 shows, the more significant portion of UK universities’ income shifted towards tuition fees and education contracts from funding body grants. UK

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25,000 20,000 15,000 10,000 5,000 0 2009/10

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

2016/17

2017/18

2018/19

Surplus Tuition fees and education contracts Funding body grants Research grants and contract Other income Investment income and donations and endowments

Fig. 9.1 Income of Higher Education providers by category and academic year (£millions) 2009/2010 to 2018/2019 (Source The Higher Education Statistics Agency (HESA)—Publication Archive—Finance of Higher Education Providers, https://www.hesa.ac.uk/data-and-analysis/publications, accessed March 2020)

universities’ income from the former two sources more than doubled, while income from funding body grants decreased by 41.1%. Income from research grants and contracts and other income was broadly maintained and grew by 1.5% in the past decade. Since 2012/2013, UK universities have become heavily dependent on tuition fees and education contracts, which have become a greater source of income than the combined income from funding council grants and research grants and contracts. UK universities’ research funding has been primarily from the UK Government. In 2014/2015, 78% of UK universities’ research grants and contracts came from the UK Government, charities and corporations, while 14% came from EU sources.4 UK universities continue to generate a surplus, despite the introduction of several reforms in the past decade. These reforms include the removal of the cap on the UK and EU student numbers for universities in England in 2012. The tuition fee cap for UK and EU student studying in England increased from £3,000 per year in 2006/2007 to £9,000 per year in 2012/2013 to £9,250 per year with inflation from 2017/2018.5 Rules for international students studying in the UK have also undergone major change, including tightened work

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restrictions, additional NHS surcharge, proof of substantial savings for course fees and living costs and so on.6 Since Brexit, UK universities’ funding has been overshadowed by uncertainties regarding student recruitment, their TNE activities/operations in the EU, along with funding possibilities that would support students, academic mobility and research. Relevant policies have been developed and introduced by the UK Government to respond to Brexit and aim to reduce its impact on the higher education sector in the UK while negotiations are still ongoing. The transition period (1 February to 31 December 2020) allows students, staff and their family members, who are EU, EEA or Swiss citizens (excluding Irish citizens) to come to or remain in the country until 31 December 2020 and apply for the EU Settlement Scheme. The scheme will enable them to live in the UK after 2021.7 Guaranteed home tuition fees in England, Wales and Northern Ireland, free tuition fees in Scotland and financial support will also continue to be available to current EU, EEA and Swiss students, and also to those who wish to study in the UK for the academic year 2020/2021.8 The majority of EU funded programmes will continue to receive funding until the end of the programme’s lifetime, and UK universities can also bid for and participate in EU funded programmes. The EU’s Mutual Recognition of Professional Qualification Directive and UK universities’ education services and activities in the EU, including TNE, will continue until 31 December 2020.9 From 1 January 2021, according to an announcement made by the UK Government in February 2020, EU, EEA and Swiss citizens will not need visas to travel as visitors for up to 6 months. However, they will need a visa to work or study in the UK, just like all other immigrants. A pointsbased immigration system will be introduced to regulate immigration to the UK. Immigrants in the following categories will be able to study or work in the UK: • students who have an offer from an approved educational institution, and who can speak, read, write and understand English, along with supporting themselves during their studies; • students who complete a degree in the UK from summer 2021 for up to 2 years via a new graduate route10 ; • skilled workers who have a job offer from an approved sponsor, meet the required skill level of Regulated Qualifications Framework

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(RQF) Level 3 or above,11 speak English at a required level and earn a minimum salary threshold (£25,600); • highly skilled workers with a background in STEM subjects (via Global Talent route) or in the shortage occupation list, as designated by the Migration Advisory Committee, or have a PhD relevant to the job.12 Other visa routes, such as short-term work visas (Tier 5) and investor, business development and talent visas (Tier 1), will also be available to immigrants to work in the UK.13 To boost the UK’s education exports, an “International Education Strategy” has been developed and introduced by the UK Government with the ambition of increasing education exports to £35 billion and the number of international students studying in UK universities to 600,000 by 2030.14 The UK Government has also set out an “International Research and Innovation Strategy,” which envisages investments of 2.4% of GDP in research and innovation by 2027 and 3% of GDP in the longer term. It aims to facilitate UK universities and research and innovation organisations’ international partnerships and collaborations, to attract international researchers, innovators and entrepreneurs by providing visa arrangements (Global Talent route) and fellowships, to provide financial support for UK universities’ research and development activities and so on.15 The UK Government has made a significant investment in universities. In July 2019, the universities and science minister confirmed that £2.2 billion research funding had been allocated to English universities for 2019 to 2020 and an additional £91 million had been given to support university-led research.16 Nevertheless, while the UK and the EU negotiate additional arrangements during the transition period, there is considerable confusion and uncertainty over tuition fees and financial support for EU, EEA and Swiss students in the academic year 2021/2022.17 Furthermore, there is confusion over the UK’s participation in future EU programmes, along with recognition of professional qualifications between the UK and EU, and also regarding UK universities’ TNE activities/operations within the EU. Given the current structure of UK universities’ funding and UK Governmental policies relating to higher education, what impact, if any, will Brexit have on the relationship of British universities with East Asia, especially with the PRC? What are the wider implications for UK universities?

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Impact Area 1: Student Recruitment & Student and Staff Mobility Student Recruitment Brexit might have some positive effect on UK universities’ student recruitment in East Asia. The UK has been increasingly attractive to East Asian students. According to HESA’s data, the number of students from East Asian countries continues to grow (Fig. 9.2), and in 2018/2019 (after the Brexit vote) it was 21% higher than in 2014/2015 (before the Brexit vote). In comparison, the number of EU students grew by 12.8% in the same period. The growth in the number of East Asian students is almost entirely attributable to the PRC—the number of PRC students grew by 22.6%, compared to the 2.3% growth of students from Japan, South & North Koreas and Taiwan. The number of students from East Asian 143,025 2018/19

137,265

193,220

12,135

139,150 2017/18

123,580

11,820

183,940

134,835 2016/17

112,365

11,825

183,350

127,340 2015/16

108,475

11,690

190,410

11,845

193,960

124,590 2014/15

106,205 0

50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 China including HK & Macao

Japan, S&N Korea & Taiwan

The rest international students

EU

Fig. 9.2 Student enrolment on undergraduate and postgraduate (taught and research) programmes, including full-time and part-time from the EU, the People’s Republic of China (including Hong Kong & Macao), Japan, South & North Korea and Taiwan plus international students from the rest of the world (Source The Higher Education Statistics Agency (HESA). ‘HE Student Enrolments by Domicile and Region of HE Provider 2014/15 to 2018/19’. HESA, last updated February 2020, https://www.hesa.ac.uk/data-and-analysis/ students/table-11)

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countries was more than that of students from the EU in 2018/2019. Moreover, it ranged between 37.8 and 43.6% of the total number of international students in the years between 2014/2015 and 2018/2019. Data from the Universities and Colleges Admissions Services (UCAS)18 further verifies the increasing number of East Asian students studying on undergraduate programmes in the UK from 2016 to 2019 (Table 9.1). The number of applicants and accepted applicants from East Asian countries continued to increase following the Brexit vote in 2016 and after the UK invoked Article 50 of the Treaty on European Union in 2017 and began the withdrawal process in 2020. A continuous growing interest in studying in the UK for East Asian students has not been—and possibly will not be—dampened by Brexit. As explained previously, tuition fees and education contracts were UK universities’ most substantial income in the past decade. This has led to a great reliance on tuition fees from East Asian students. The average tuition fee for international students, in which category East Asian students fall, was about £15,150 in 2016/2017, £16,260 in 2017/2018 and £16,908 in 2018/2019 (Table 9.2). Since the number of students from East Asia has also been increasing year on year, UK universities have become more reliant on fee income from East Asian students. It can be expected to be even more important after Brexit. Table 9.1 Acceptances from East Asian Countries from 2016 to 2019

2019 2018 2017 2016

Applicants Accepted applicants Applicants Accepted applicants Applicants Accepted applicants Applicants Accepted applicants

China, including Hong Kong and Macao

Japan, S&N Korea and Taiwan

Total

27,980 16,165 23,960 14,115 21,975 13,125 20,795 12,025

2,830 1,545 2,705 1,495 2,555 1,395 2,475 1,355

30,810 17,710 26,665 15,610 24,530 14,520 23,270 13,380

Source Universities and Colleges Admissions Services (UCAS). ‘UCAS Undergraduate Sector-Level End of Cycle Data Resources 2019’. Accessed 12 April 2020, https://www.ucas.com/data-andanalysis/undergraduate-statistics-and-reports/ucas-undergraduate-sector-level-end-cycle-data-resources2019

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Table 9.2 Tuition fees and education contracts by domicile 2016/2017

UK & EU fees International fees Research training support grants Other course fees (Non-credit bearing course fees and FE course fees) Total

2017/2018

2018/2019

Total (£ million)

Averagea

Total (£million)

Average

Total (£ million)

Average

12,145 4,659

6,042 15,150

12,736 5,193

6,293 16,260

13,025 5,793

6,381 16,908

384

390

425

570

631

676

17,757

18,950

19,919

a The average UK and EU tuition fee is derived by dividing the total amount income from UK and

EU tuition fees by the total number of UK and EU students for year. The average international or non-EU tuition fee is calculated in the same way Source The Higher Education Statistics Agency (HESA). ‘Tuition fees and education contracts analysed by domicile, mode, level and source.’ HESA, last updated April 2020, https://www.hesa. ac.uk/data-and-analysis/finances/table-6

Factors that are related to Brexit and have contributed, or will contribute, to the growth of East Asian students studying in the UK are the devaluation of sterling since the Brexit vote and the regulatory policies in response to Brexit that will apply from 2021. For example, the value of sterling against the Chinese Renminbi (RMB) decreased by almost 10% between June 2014 and March 2020. As a result, tuition fees, costs associated with studying and living in the UK, such as visa, health surcharge, accommodation and living costs, are lower for Chinese students from the PRC. Studying in the UK has become relatively more affordable than studying in other popular English-speaking countries, such as the United States, Australia and Canada, as shown in Table 9.3. This is certainly the case when we also consider that in the UK the length of undergraduate study is generally three years and the length of postgraduate study is one year, which is one year shorter than in those countries. It is even possible that the outcome of the Brexit vote in June 2016 has already contributed

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Table 9.3 Annual average exchange rate of GBP, USD, AUD and CAD against RMB between 1 June 2014 to 31 March 2020

£1 GBP $1 USD AU$1 CA$1

Jun 2014/May 2015

Jun 2015/May 2016

Jun 2016/May 2017

June 2017/May 2018

June 2018/May 2019

Jun 2019/15/May 2020

9.818432

9.574753

8.692400

8.768473

8.815304

8.854488

6.190662

6.409260

6.792954

6.792954

6.792954

7.013516

5.259596 5.349220

4.683184 4.852411

5.112243 5.133553

5.180521 5.140406

4.884002 5.132523

4.70524 5.235295

Source X-Rates, https://www.x-rates.com/, accessed 15 May 2020

to the increasing number of East Asian students studying in the UK and that this short-term trend may well continue for some time to come. The immigration policies that the UK Government has introduced in response to Brexit might continue to attract students from East Asian countries from 1 January 2021. Notably, the new graduate route will permit students to work in the UK for two years after they complete a UK degree from summer 2021. East Asian students may study in the UK with the prospect of becoming skilled or highly skilled workers. They also can apply for settlement in the UK after working for five years. With the experience of studying and working abroad, East Asian graduates are more likely to find employment in local and multinational companies in their home countries even if they do not settle in the UK. There are also other factors that might have encouraged, and will possibly continue to encourage, the growth of UK universities’ international student recruitment in East Asia, especially in the PRC. These factors are not necessarily dependent on or influenced by the relationship that the UK has with the EU. For instance, UK universities have become more active in reaching out to international students and competing for international student recruitment with universities around the world. A variety of pathway programmes have been developed by UK universities, similar to those in the United States, Australia and Canada. They are offered to international students who would like to enrol in undergraduate or postgraduate programmes but have not met the academic or English language requirements.19 These pathway programmes attract students because some programmes offer guaranteed progression to one

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or more specific courses at the providing institution or partner institutions. They are also attractive for universities as a source of income and students with the ability to enrol to and possibly complete undergraduate and postgraduate programmes. UK universities’ admissions have also become more flexible in recent years. They now accept a wider range of diplomas from East Asian countries as qualifications for undergraduate programmes or to enter the second year of undergraduate programmes. These include Vocational Diplomas (Gaozhi, 高職) or 2year or 5-year Diplomas (Zhuanke, 專科 or Dazhuan, 大專) in China,20 2-year or 5-year Junior College Diplomas (五專二技) in Taiwan21 and Associate Degrees/Junior College Diplomas in South Korea.22 Some UK universities, such as the University of Birmingham,23 also accept the result of the National College Entrance Examination (Gaokao, 高 考), which is the national standardised exam for entering universities in China (like the GCE Advanced Level examination in the UK), for entering undergraduate degree programmes and even the second year of undergraduate degrees.24 Students who obtain satisfactory results in the National College Entrance Examination do not necessarily need to enrol into 1-year foundation programmes in the UK, which most high or secondary school certificate or diploma holders from East Asian countries need to do. There are some factors which have affected the number of East Asian students studying in the UK since the Brexit vote, but reflect current global trends and are not Brexit-related. The most important among those are the trade war between the United States and China and COVID-19. The trade war between the United States and China seems to have contributed to the growing number of Chinese students coming to study in the UK in 2019, as several newspapers reported that 20% of Chinese students chose to study in the UK, while 1 7% chose the United States. This was almost certainly related to the US Government tightening of visa requirements for students, especially those who wish to study science and technology.25 On the other hand, COVID-19 forced the closure of UK universities from March 2020. This was expected to result in a decline in the number of students from East Asia for the 2020/2021 academic year. The British Council carried out a survey that examined how the study plans and sentiments of 15,000 students from eight East Asia markets might change during the COVID-19 crisis. The likelihood of students from Mainland China,

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Hong Kong and Taiwan to cancel or delay their plan to study undergraduate programmes overseas was from 7 to 15%. 1 to 15% of students from Mainland China, Hong and Taiwan have already cancelled their plans to study on undergraduate programmes overseas.26 Student and Staff Mobility It has been estimated that Brexit will have significant effects on student and staff mobility between the UK and the EU.27 It is unknown at present whether the UK will be able to participate in the Erasmus+ programmes or how the UK will participate in them. This will depend on the outcome of the ongoing negotiations on the future relationship between the UK and the EU. On the other hand, student and staff mobility between East Asian countries and the UK through Erasmus+ has been limited, and Brexit is likely to have little impact on it. This is because East Asian countries have been considered as partner nations and can participate in certain key action programmes under specific criteria or conditions and with a limited budget set by the EU.28 In the 2017 call, 155 UK students and staff went to Asia, and 47 UK students and staff went to industrialised Asia. Furthermore, 219 Asian students and staff went to the UK, and 44 students and staff from industrialised Asia went to the UK.29 China is only one of the 19 countries in Region 6 (Asia); Japan, Taiwan, South Korea, Hong Kong and Macao are five of the 13 countries or Special Administrative Regions in Region 13 (other industrialised countries), according to the categorisations set by the EU.30 In other words, the actual number of students and staff who went to East Asian countries and vice versa via Erasmus+ in the 2017 call is probably even smaller. By comparison, in the 2017 call, 16,868 UK students and 2,974 UK staff went to the EU, while 31,396 EU students and 4,306 EU staff came to the UK via Erasmus+ programmes. Student and staff mobility between East Asian countries and the UK does not depend on the Erasmus+ programmes like that between EU countries and the UK. Therefore, student and staff mobility between East Asian countries and the UK will be considerably less affected by Brexit. Also, Erasmus+ programmes are not the only sources of funding for supporting student and staff mobility between universities in East Asia and the UK. East Asian governments have initiated projects for internationalising the higher education sector to improve the global

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competitiveness of their universities. For example, the Japanese Government has launched the Global 30 Project in 2009, the Re-Inventing Japan Project (2011 to present), the Go Global Japan Project (2012– 2016) and the Top Global University Project (2014–2023) that carry out a wide range of programmes to facilitate student, academic and research exchanges with overseas universities.31 The University Alliance of Silk Road (絲綢之路大學聯盟) was established in 2015 as part of the PRC’s Belt and Road Initiative and promotes student and academic mobility across 38 countries along the Belt and Road route.32 Another example is the UK-China-BRI Countries33 Education Partnership Initiative in 2019, which is funded and administered by the British Council. Seed-funding of between £60,000 and £80,000 will be provided to UK institutions to partner with China and BRI countries to facilitate higher education exchanges and create opportunities for students, academics and researchers. Priority areas include manufacturing technologies, engineering design, robotics, material engineering and process systems.34 We might also mention the international exchange cost-share programmes between the Royal Society in the UK and various East Asian partners. These include the Japanese Society for the Promotion of Science, the Ministry of Science and Technology of Taiwan and the National Natural Science Foundation of China.35 Student mobility has also been operating via collaborative provision, such as dual degrees, as part of UK universities’ TNE activities/operations with their partners in East Asia (see below Impact area 4: TNE activities/operations). UK students can also study with their universities’ partners in East Asia, and vice versa, as part of their degree or in shortterm or summer courses. Still, students usually have to bear the cost of participating in these exchange programmes or are subjected to the availability and limitation of scholarships or loans. These mobility programmes have not been affected and will not be affected by Brexit as they have been jointly funded and initiated by Britain and governments in East Asia. However, these programmes are limited to a number of universities, students, academics and researchers or are subjected to particular disciplines. They might therefore have less impact on skills and career development than Erasmus+ programmes. Social and cultural factors have also contributed to the increasing number of East Asian students studying overseas, including in the UK, and have facilitated student and staff mobility. For example, employment prospects, language proficiency, alumni networks, the experience of living

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and studying abroad, different learning environment and styles, meeting a diverse range of people, avoiding severe competitive entrance exams for higher education in their home countries, influence from their friends or expectations from their parents.36 The expansion of the middle class in East Asian countries, especially in China—to perhaps over 600 million people, many of whom are brought up in families with some English or which focus on English learning for their children—has further amplified these social and cultural factors. Consequently, this has resulted in the flow of East Asian students studying abroad.

Impact Areas 2: UK Universities’ Research Funding Brexit will not have a direct impact on UK universities’ relations with East Asia in terms of research funding and collaboration. This is because major sources of research funding and research collaborations are established on a bilateral basis and are not dependent on the UK’s membership of the EU. Significant research and innovation collaborations with East Asia, especially with the PRC, happen through joint funding from UK Research and Innovation (UKRI), the Royal Society, the British Academy and the Royal Society of Edinburgh. For example, UKRI China, one of UKRI’s international offices, has facilitated 313 joint research and development programmes with China that have a total combined investment value of £320 million and have involved over 200 partner institutions and businesses.37 In 2014, the UK-China Research and Innovation Partnership Fund (Newton Fund) was launched with a 5-year budget of £200 million, to which the UK and China equally contribute.38 In 2018, four new interdisciplinary research projects were funded by the UKRI with an £8 million investment and by the National Natural Science Foundation of China (NSFC) with 36 million RMB.39 Several collaborative research projects between UK universities and East Asia have also been launched recently through the research councils under the UKRI. For instance, the Medical Research Council (MRC) and the Korea Health Industry Development Institute (KHDI) initiated the MRC-KHDI UK Korea Dementia Research in 2019 with a £600,000 investment from the MRC and around £750,000 from the KHDI.40 Collaborative research projects in life sciences and environmental sciences have been jointly funded by UKRI (£5 million) and the Japan Society for the Promotion of Science (JSPS, around £2 million).41 With Taiwan, joint projects were funded by the Royal Society of Edinburgh and the Ministry of Science and

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Technology in 2019.42 China was the third of the UK’s most frequent collaborative research partners and Japan was the fourteenth in 2018. The UK is also ranked as the fourth of Japan’s most frequent collaborative research partners. China, Japan and South Korea are in the top five Asian countries in terms of the number of researchers who co-authored publications with UK researchers between 2015 and 2018.43 It will certainly continue to serve the interest of UK universities to carry out and further explore research collaborations with East Asia and vice versa. Brexit, however, might have a considerable impact on UK universities’ participation in research funding from the EU. Unless there is an agreement, UK universities will not be eligible to compete for research funding from the EU. This jeopardises, in particular, UK universities’ participation in the next Horizon Europe, for which the European Commission has proposed a e100 billion budget for the years 2021–2027. Given UK universities’ reliance on EU funding,44 along with academics and scientists from EU countries, the UK Government has created the “International Research and Innovation Strategy,” which supports universities’ research and innovation collaboration. It aims to attract international researchers and research leaders with visa arrangement and financial support. As part of this strategy, the UK has signed far-reaching bilateral research and innovation agreements with China, Japan and South Korea, and we might see this as a response to Brexit that is bringing the UK and East Asia closer together.45 For example, the UK and China launched the UK-China Joint Strategy for Science, Technology and Innovation Cooperation in December 2017 for supporting academics, researchers and businesses from basic research to commercialisation of innovation. It also set out actions and measures for deepening cooperation, including enhanced cooperative mechanisms, UK-China joint innovation funding, implementation of a flagship challenge programme, mutual access to research infrastructure, and finally, open access to data, and intellectual property rights protection and application.46 This shows that it is likely that the UK will more actively look for overseas sources of funding and research collaborations. A consequence of this is that the relations between UK universities and East Asia will deepen, which will depend on the relationship that the UK has with individual East Asian countries. If the direct effects of Brexit dominate impact area 1, we might say that impact area 2 might be more influenced by such indirect responses, where Brexit acts as a trigger to responses initiated by the UK.

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Impact Area 3: Recognition of Qualifications47 Another possible impact on UK universities is the recognition of UK qualifications in the EU and vice versa after Brexit, in particular the recognition of professional qualifications—such as in medicine, nursing, dentistry, law, architecture, accountancy, etc.48 This is currently being considered as part of the trade deal negotiations between the UK and the EU. UK universities might not be able to attract EU and East Asian students if they cannot work in the professions that are regulated in the EU, EEA and EFTA countries with the qualifications they acquire in the UK. UK universities might also not be able to attract EU academics and researchers in the professions that are regulated in the UK. Regardless of the precise outcome of negotiations between the UK and the EU, the recognition of academic qualifications provided by UK universities in the EU will not be affected. The UK has been a full member of the Bologna Process. It aims to facilitate transparency, mutual recognition of qualifications and of study periods, quality assurance and the European Credit Transfer System (ECTS) with credits that are based on meeting learning outcomes and led to the creation of the European Higher Education Area (EHEA) under the Lisbon Recognition Convention in 1999.49 The Bologna Process is a voluntary intergovernmental collaboration on higher education operating outside the framework of the EU. So it is not limited to EU member states, and it does not have the status of EU legislation. Since East Asian countries are not members of the EU or part of the Bologna Process, the recognition of UK qualifications in East Asian countries, both academic and professional, will not be affected by Brexit. However, the recognition of academic and professional qualifications that are awarded from overseas in East Asian countries varies from country to country.50 For professional qualifications, in particular, recognition depends on the legal requirements or restrictions on practice concerning licences, certificates or registration with relevant regulatory authorities.51 These requirements or restrictions are usually unilaterally imposed, although they are sometimes agreed between countries. For example, the International Professional Engineer Agreement (IPEA) governs the mutual recognition of engineering education qualifications and professional competence between members.52 Regulatory authorities, higher education institutions and employers in East Asian countries have discretion in recognising qualifications from overseas and in laying

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down further requirements for working and studying, such as undergoing training or courses, taking exams, meeting language requirements and so on. Similarly, the recognition of East Asian academic and professional qualifications in the UK depends on local legal requirements, restrictions on practice, regulatory authorities, higher education institutions and employers.53

Impact Area 4: UK Universities’ Transnational Education (TNE) Activities/Operations The impact of Brexit on UK universities’ TNE activities/operations in East Asia will be minimal as such are dependent on local regulations in East Asian countries and any trade agreements covering services. On the other hand, there is considerable uncertainty as to whether, and to what extent, UK universities will be able to continue their transnational education (TNE) activities/operations in EU countries after Brexit. This is because UK universities might no longer enjoy protection under the Services Directive and the Treaty on the Functioning of the EU, which allow UK universities to set up branch campuses and franchise operations.54 An agreement on the provision of cross-border services between the UK and the EU is currently being negotiated. Since Brexit, the UK has signed trade agreements with South Korea in September 2019,55 and it has agreed on a future free trade agreement with Japan by using the EU-Japan Economic Partnership Agreement (EPA) as the basis.56 UK universities’ TNEs in East Asia will be subjected to those agreements. The UK has not yet signed any trade agreements with China and Taiwan. UK universities, like many universities from the United States, Australia, Canada, France, Germany and others, already have considerable TNE activities/operations in East Asia. According to HESA and Universities UK (UUK), in 2017–2018, 139 UK universities delivered different TNE services to 693,695 students in 225 countries and territories around the world,57 which is considerably more than the number of all international students (319,340) studying in the UK during the same academic year. Malaysia, China, Sri Lanka, Singapore and Hong Kong are the top five host countries for UK universities’ TNE activities/operations. According to International Facts and Figures 2019 published by UUK, the number of TNE students was 36,940 in mainland China and it was 18,730 in Hong Kong in 2017/2018. However, this does not include the numbers of three main distance learning and blended

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learning providers.58 While the value of UK universities’ TNE activities/operations in China and Hong Kong in 2017/2018 is unknown, the value of UK universities’ TNE work overall grew from £350 million in 2010 to £640 million in 2017.59 Given the uncertainties surrounding Brexit and the change of UK universities’ funding structure, it is in the UK universities’ interest to continue to expand their TNE work in East Asia. The UK Government is keen to support this cooperation. The government’s “International Education Strategy,” for example, contains a number of actions relating to TNE. These include: appointing an “international education champion” to stimulate overseas activity and to open up opportunities by developing strong partnerships and helping to overcome challenges and barriers; promoting UK education internationally with the £5 million GREAT Challenge Fund for supporting export activity; supporting and identifying educational opportunities in places like China, Hong Kong and the ASEAN group of nations; providing country-specific guides supplied by UUK, along with the British Council for supporting and facilitating partnership development and opportunities; and identifying the overall value of TNE to the UK economy for providing insights into markets and improving performance.60 So, Brexit might seem to have some positive impact and to stimulate TNE in East Asia further. With the support of the government, UK universities could certainly continue to deploy their rich experience in delivering TNE programmes and knowledge of regulatory environments and markets in East Asia. UK universities could also develop further types of TNE programmes collaborating with institutions in East Asia. Nevertheless, new and existing challenges will persist as TNE activities/operations depend on the legislation, regulations, business practices, political system and social culture of a country.61 For example, the PRC, the second-largest host country of the UK’s TNE in Asia, has 23 UKChina joint institutes and 374 UK-China joint programmes according to the China-Foreign Cooperation in Running Schools (中外合作辦學, CFCRS) in 2019.62 To obtain a CFCRS licence, a UK university is required to provide information such as a detailed implementation plan, a financial model with an analysis of relevant costs and contributions from each partner and tuition fees. All the approved CFCRS are required to submit a self-evaluation document to the CDGDC annually, and 20% of CFCRS programmes will be evaluated every six years via a desk-based

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assessment and site visits.63 Challenges are not limited to local regulations, since there is a great dependency on Chinese partners in financial and management issues. Both the UK and Chinese institutions find that curriculum design and scheduling are the most challenging areas for delivering TNE programmes. The second most challenging area for UK staff is recruitment and evaluation of academic staff, whereas it is issues relating to the provision of UK teaching resources for Chinese staff.64 UK universities also bear a high reputational risk of ensuring the quality of programmes and graduates that are fit for the employment market when delivering their TNE programmes overseas. Another potential challenge for UK universities’ TNE activities/operations is the increasing emergence of English-taught programmes as part of the higher education internationalisation strategy in East Asian countries. This is a trend which can also be observed in other European countries. Chinese universities have also established TNE activities/operations overseas. For example, the Peking University HSBC Business School in Oxford65 and Xiamen University in Malaysia.66 This shows that universities in East Asia have actively developed strategies to internationalise their universities and to improve their competitiveness as world universities with the support of governments. These strategies also have the common aim of attracting international students with scholarships. English-taught programmes had been established in Japanese universities as one of the main objectives in a series of projects (such as the Top Global University Project (2014–2023), carried out by the Japanese Government to internationalise Japanese universities.67 There were 126 English-taught bachelor programmes and 531 English-taught master programmes at 74 institutions in Japan in 2018.68 The Ministry of Education, Taiwan, launched a series of policies and plans for attracting international students from 2002. In particular, their 2011 “Higher Education Output—Expansion of Recruiting International Students Action Project” (高等教育輸出—擴大招收境外學生 行動計畫) aimed to recruit 87,000 international students by 2014.69 There were 159 English-taught bachelor programmes along with 572 English-taught master programmes and 126,997 international students studied English or Chinese taught programmes in Taiwan in 2018.70 The “Studying China Project” (留學中國計劃) initiated by China in 2010 aimed to attract 150,000 international students studying in higher education by 2020.71 In 2018, there were 607 English-taught bachelor programmes72 and 258,122 international students studying English or

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Chinese taught bachelor programmes in China.73 UK universities’ TNE activities/operations compete not only with other TNE programmes delivered by other foreign universities in East Asian countries but also with local universities that will deliver English-taught programmes in the future. While the quality standards of English-taught programmes in universities in East Asian countries are unknown, UK universities’ TNE programmes that are delivered in English will still have a considerable advantage in East Asia.

Conclusion If the UK and the EU fail to reach an agreement, the impact of Brexit will be profoundly negative on EU student recruitment and mobility, research funding from the EU, the mutual recognition of professional—but not academic—qualifications and TNE activities/operations in the EU of UK universities. In contrast, it appears that Brexit will have little negative impact on UK universities’ relations with East Asia and no impact on the mutual recognition of professional and academic qualifications between the UK and East Asian countries. This might be because UK universities’ relations with East Asia have been influenced by more general economic, social, political and cultural factors, which are not related to Brexit. After assessing the four areas of potential impact of Brexit on UK universities, this chapter concludes that Brexit is likely to have a favourable impact on the recruitment and mobility of East Asian students for UK universities. However, it is anticipated that the number of students in the UK from East Asia will decrease in the 2020/2021 academic year due to Covid-19. The positive impact of Brexit on the UK-East Asian research collaboration, including funding, has been observed. Bilateral agreements might further enhance research collaboration between universities and industries in the UK and East Asian countries. It could also have an indirect impact on UK universities’ TNE activities/operations in East Asia because it might force UK universities to work harder to exploit the competitive East Asian market. UK universities will also begin to experience growing competition in the provision of TNE activities/operations. This is because East Asian higher education providers have started to develop English-taught programmes and engage in TNE in overseas countries, like in the UK. The raising of concerns over UK universities’ reliance on the PRC has become inevitable. Still, this is not just about the growing amount of PRC

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students enrolling over the past decade; it also concerns the terms of TNE activities/operations in the PRC. Furthermore, research collaborations between the UK and PRC universities with substantial funding from both their respective governments are increasing. How the UK Government and universities exert their leverage with the PRC for protecting national security, intellectual property and academic freedom has become a major challenge. Strategic and creative responses to these challenges will be required. Brexit could also open up opportunities for UK universities to further adjust their services and competitiveness. It could further serve to aid them in achieving a more comprehensive understanding of the East Asian education systems, employment environments and markets through the recruitment of international students, research collaborations, qualification recognition and TNE activities/operations in East Asia.

Notes 1. Transnational Education (TNE) is educational activity delivered outside the country in which the awarding body is based. It includes, but is not limited to, online and distance learning, joint and dual degree programmes, franchise programmes, validation of courses, and international branch campuses. ‘UK Revenue from Education Related Exports and Transnational Education Activity in 2017,’ Official Statistics (London: Department for Education, December 2019), https://assets.publishing. service.gov.uk/government/uploads/system/uploads/attachment_data/ file/850263/SFR_Education_Exports_2017_FINAL.pdf. 2. The Higher Education Statistics Agency (HESA) collects, analyses and disseminates quantitative information about higher education in the UK. 3. Income from investment and donations and endowments has been combined here, while it has been split into two categories since 2015/2016 in the HESA data. Information about the coverage of each category can be found in: ‘Definitions: Finances’ The Higher Education Statistics Agency (HESA), https://www.hesa.ac.uk/support/definitions/ finances, accessed 29 October 2019. 4. Ursula Kelly, ‘Economic Impact on the UK of EU Research Funding to UK Universities,’ Report to Universities UK (Viewforth Consulting Ltd, May 2016), 3, https://www.universitiesuk.ac.uk/policy-and-analysis/rep orts/Documents/2016/economic-impact-of-eu-research-funding-in-ukuniversities.pdf. 5. Sue Hubble and Paul Bolton, ‘Prime Minister’s Announcement on Changes to Student Funding,’ Briefing Paper (Westminster,

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3 January 2018), https://commonslibrary.parliament.uk/research-briefi ngs/cbp-8097/; Paul Bolton, ‘Higher Education Funding in England,’ Briefing Paper (Westminster, 16 December 2019), https://commonsli brary.parliament.uk/research-briefings/cbp-7973/. Natalie Gil, ‘A Guide to the Government’s New Rules for International Students,’ The Guardian, 29 July 2015, https://www.theguardian.com/ education/2015/jul/29/a-guide-to-the-governments-new-rules-for-int ernational-students. Under the EU settlement Scheme, EU, EEA and Swiss citizens who have lived in the UK for a continuous 5-year period before 31 December 2020 will be given a settled status; those who do not have 5 years’ continuous residence will be given a pre-settled status, which will then allow them to apply for a settled status after they reach 5 years’ continuous residence. They will also be eligible to apply for British citizenship. See: ‘Apply to the EU Settlement Scheme (Settled and Pre-Settled Status),’ GOV.UK, https://www.gov.uk/settled-status-eu-citizens-families, accessed 7 April 2019. ‘Studying in the UK: Guidance for EU Students,’ Department for Education, GOV.UK, 31 January 2020, https://www.gov.uk/guidance/ studying-in-the-uk-guidance-for-eu-students; ‘Government Student Support—Brexit: Impact on Student Finance,’ UK Council for International Students Affairs, 27 June 2019, https://www.ukcisa.org.uk/Inf ormation–Advice/Fees-and-Money/Government-Student-Support#layer6245. ‘EU Funded Programmes Under the Withdrawal Agreement,’ H. M. Treasury, GOV.UK, 31 January 2020, https://www.gov.uk/govern ment/publications/continued-uk-participation-in-eu-programmes/eufunded-programmes-under-the-withdrawal-agreement#contents; ‘Brexit Transition Period,’ Universities UK, https://www.universitiesuk.ac.uk/ policy-and-analysis/brexit/Pages/brexit-transition-period.aspx, accessed 8 April 2020. ‘Graduate Route—What’s Happening?,’ UK Council for International Students Affairs, 24 January 2020, https://www.ukcisa.org.uk/studen tnews/1448/Graduate-route—whats-happening?q=graduates&ExactM atch=False. Regulated Qualifications Framework (RQF) is one of the national qualifications frameworks in the UK. It describes all general and vocational qualifications that are regulated by the Ofqual in England and Northern Ireland from 2015. For example, GCE AS level and A levels are both RQF level 3. Other RQF level 3 qualifications in England, Wales and Northern Ireland can be found at: ‘What Qualification Levels Mean,’ Education and Learning, GOV.UK, https://www.gov.uk/what-different-qualification-lev els-mean, accessed 1 July 2020.

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12. ‘The UK’s Points-Based Immigration System-An Introduction for Employers,’ Promotional Material (London: UK Visas and Immigration, 9 April 2020), https://assets.publishing.service.gov.uk/government/upl oads/system/uploads/attachment_data/file/878597/The_UK_s_pointsbased_immigration_system_-_an_introduction_for_employers.pdf. 13. ‘New Immigration System: What You Need to Know,’ Home Office and UK Visas and Immigration, GOV.UK, 19 February 2020, https://www. gov.uk/guidance/new-immigration-system-what-you-need-to-know#vis iting-the-uk; ‘The UK’s Points-Based Immigration System,’ Policy Statement (London: Home Office, February 2020), https://assets.publishing. service.gov.uk/government/uploads/system/uploads/attachment_data/ file/866664/CCS207_CCS0120013106-001_The_UKs_Points-Based_ Immigration_System_print.pdf. 14. ‘International Education Strategy: Global Potential, Global Growth,’ Policy Paper (London: Department for Education and International Trade, 16 March 2019), https://www.gov.uk/government/publications/ international-education-strategy-global-potential-global-growth. 15. ‘UK International Research and Innovation Strategy,’ Policy Paper (London: Department for Business, Energy & Industrial Strategy, 14 May 2019), https://www.gov.uk/government/publications/uk-internati onal-research-and-innovation-strategy. 16. Christopher Skidmore, ‘University Research to Receive Major Funding Boost,’ Department for Business, Energy & Industrial Strategy, GOV.UK, 12 July 2019, https://www.gov.uk/government/news/university-res earch-to-receive-major-funding-boost. 17. ‘For Students Intending to Study in the UK in 2021–22,’ UK Council for International Students Affairs, 9 September 2019, https://www.ukc isa.org.uk/Information–Advice/EU-EEA–Swiss-Students/Brexit-immigr ation-fees-and-student-support-for-when-you-arrive/For-students-intend ing-to-study-in-the-UK-in-2021-22. 18. UCAS is a UK-based organisation which provides undergraduate application service for UK universities and several other admissions services, including UCAS Conservatoires, UCAS Teacher Training (UTT) and UCAS Postgraduate. Further information can be found at: ‘Our Services,’ UCAS, 7 October 2014, https://www.ucas.com/about-us/our-services. 19. Pathway programmes in the UK generally include foundation or prebachelor programmes, international year one and pre-master programmes. The duration of pathway programmes can be from four months to up to two years. The majority of these pathway programmes in the UK are delivered face-to-face and some are delivered online. Some pathway programmes are delivered overseas by the partner of pathway providers, for example, the Northern Consortium UK has study centres in 32 countries. Cambridge Education Group, INTO University Partnerships,

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Kaplan International Colleges, Navitas, Study Group and Shorelight are the six major pathway programmes providers, representing more than half of the market for pathway programmes in the world: ‘Routes to Higher Education: The Global Shape of Pathway Programmes,’ Pathways Report (Cambridge: Cambridge English: Study Portals, September 2016), https://www.cambridgeenglish.org/Images/pathways-report-2016.pdf. ‘University of Birmingham and China—Entry Requirements,’ University of Birmingham, https://www.birmingham.ac.uk/International/stu dents/country/China/index.aspx#EntryRequirementsTab, accessed 14 April 2020. ‘Taiwan—Undergraduate Entry Requirements,’ Birkbeck University of London, http://www.bbk.ac.uk/international/country-information/ taiwan, accessed 14 April 2020. ‘Information for Students from South Korea—Entry Requirements,’ University of Kent, n.d., https://www.kent.ac.uk/internationalstudent/ countries/south-korea.html. ‘GAOKAO Undergraduate Entry,’ University of Birmingham, https:// www.birmingham.ac.uk/International/students/country/china/GAO KAO.aspx, accessed 14 April 2020. The result of Gaokao is sometimes considered for entry to foundation programmes. Viggo Stacey, ‘Gaokao Offers Colleges “New Opportunities” for Global Recruitment,’ The Pie News (blog), 22 March 2019, https://thepienews.com/news/gaokao-offers-colleges-andchinese-students-new-opportunities/. Rosemary Bennett, Boer Deng, and Didi Tang, ‘Trump’s Trade War Sends Chinese Students to British Universities,’ The Times, 19 August 2019, https://www.thetimes.co.uk/article/trumps-trade-war-sends-chi nese-students-to-british-universities-5hfqqprxt; Elizabeth Redden, ‘In the UK., a Surge in Chinese Applicants,’ Inside Higher Ed, 15 July 2019, https://www.insidehighered.com/admissions/article/2019/07/ 15/surge-chinese-applicants-british-universities. Matt Durnin, ‘Covid-19 Update: East Asia Survey Results,’ British Council: International Education Services (blog), June 2020, https:// education-services.britishcouncil.org/insights-blog/covid-19-update-eastasia-survey-results. ‘Erasmus: What Could Happen to Scheme After Brexit?,’ BBC, 17 February 2020, https://www.bbc.co.uk/news/education-47293927. They are primarily limited to Key Action 1, which supports mobility projects in the fields of higher education and youth and Erasmus Mundus Joint Master Degrees, and Jean Monnet Activities. Further information can be found at: ‘Erasmus+ Programme Guide—Part B—Information About the Actions Covered by This Guide,’ Programme Guide (European Commission, 26 February 2020), https://ec.europa.eu/programmes/

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erasmus-plus/programme-guide/introduction/how-to-read-programmeguide_en. ‘Erasmus + Annual Report 2018,’ Statistical Annex (European Commission, 28 January 2020), https://op.europa.eu/en/publication-detail/-/ publication/ae35558f-41b8-11ea-9099-01aa75ed71a1/language-en/for mat-PDF/source-search. ‘Erasmus+ Programme Guide—Eligible Countries,’ Programme Document (European Commission, n.d.), https://ec.europa.eu/programmes/ erasmus-plus/programme-guide/part-a/who-can-participate/eligible-cou ntries_en. ‘Programmes—Japan Society for the Promotion of Science,’ Japan Society for the Promotion of Science, https://www.jsps.go.jp/english/ programs/index.html, accessed 9 May 2020. Simon Baker, ‘Is China’s Belt and Road Initiative Boosting Academic Links?,’ Times Higher Education, 14 May 2019, https://www.timesh ighereducation.com/news/chinas-belt-and-road-initiative-boosting-aca demic-links. Three UK institutions are part of the alliance, namely Aston University, University of Liverpool and University of Aberdeen Xi’an Jiaotong University: ‘University Alliance of The Silk Road (UASR),’ Xi’an Jiaotong University, http://uasr.xjtu.edu.cn/S_R.htm, accessed 12 May 2020. For the list and profile of BRI countries, see: ‘Profiles,’ Belt and Road Portal, https://eng.yidaiyilu.gov.cn/info/iList.jsp?cat_id=10076, accessed 3 July 2020. ‘2019 UK-China-BRI Countries Partnership Initiative,’ British Council, October 2019, https://www.britishcouncil.cn/en/programmes/educat ion/partnership-fund;‘2019 UK-China-BRI Countries Education Partnership Initiative Call Guidelines (for UK Applicants),’ British Council (British Council, 11 October 2018), https://www.britishcouncil.cn/ sites/default/files/uk-china-bri_countries_education_partnership_initia tive_-_call_guidelines_2019.pdf. ‘International Exchanges,’ The Royal Society, 9 May 2020, https://roy alsociety.org/grants-schemes-awards/grants/international-exchanges/. Peter G. Ghazarian, ‘Actual vs. Ideal Attraction: Trends in the Mobility of Korean International Students,’ Journal of International Students 4, no. 1 (2014): 89–103; Yukiko Shimmi, ‘Longterm Impact of Studying Abroad for Japanese Students,’ Inside Higher Ed, 13 November 2016, https://www.insidehighered.com/blogs/world-view/longterm-impactstudying-abroad-japanese-students; Dandan Cheng, ‘Nine Reasons Why Chinese Students Choose to Study Abroad,’ Times Higher Education, 14 June 2018, https://www.timeshighereducation.com/student/advice/ nine-reasons-why-chinese-students-choose-study-abroad; Chen 陳芳毓 Fang-Yu, ‘Guónèi Qiúxué Yánsh¯en Rénmài, Liúxué Néngràng Nˇaodài

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F¯anzhuˇan 國內求學延伸人脈, 留學能讓腦袋翻轉,’ 遠見 Global Views, 19 September 2014, https://www.gvm.com.tw/article/19671. ‘UKRI China—UK Research and Innovation,’ UK Research and Innovation (UKRI), 29 October 2019, https://www.ukri.org/research/intern ational/ukri-international-offices/ukri-china/. ‘The Newton Fund—China,’ The Newton Fund, https://www.newton fund.ac.uk/about/about-partner-countries/china/, accessed 9 May 2020; David Willetts, ‘UK and China Agree Multi-Million Pound Global Research Deals,’ Department for Business, Innovation & Skills, GOV.UK, 17 June 2014, https://www.gov.uk/government/news/uk-and-chinaagree-multi-milion-pound-global-research-deals. ‘Multimillion Pound Grants Bring UK and Chinese Researchers Together in the Global Fight Against Superbugs,’ Medical Research Council, 28 November 2018, https://mrc.ukri.org/news/browse/uk-and-chinese-res earchers-to-collaborate-on-fight-against-superbugs/. ‘MRC-KHIDI UK-Korea Dementia Research Call 2019,’ Medical Research Council, 21 December 2018, https://mrc.ukri.org/funding/ browse/uk-korea/mrc-khidi-uk-korea-dementia-research-call-2019/#Bac kground. ‘UKRI—JSPS Joint Call 2018,’ Natural Environment Research Council, 10 July 2018, https://nerc.ukri.org/research/partnerships/internati onal/fic/ukri-jsps-call/. ‘Joint Projects with Ministry of Science and Technology Taiwan (MOST),’ The Royal Society of Edinburgh, https://www.rse.org.uk/awards/rev ision-joint-projects-ministry-science-technology-taiwan/, accessed 9 May 2020. ‘International Facts and Figures 2019’ (Universities UK: International, 30 July 2019), 27, 35, https://www.universitiesuk.ac.uk/International/Doc uments/2019/intl-facts-figs-19.pdf. Kelly, ‘Economic Impact on the UK of EU Research Funding to UK Universities.’; ‘UK Research and the European Union—The Role of the EU in Funding UK Research,’ The Royal Society, December 2015, https://royalsociety.org/topics-policy/projects/uk-research-andeuropean-union/role-of-eu-in-funding-uk-research/uk-and-eu-researchfunding/. ‘UK International Research and Innovation Strategy,’ 11. Jo Johnson, ‘Joint UK-China Strategy for Science, Technology and Innovation Cooperation Sets New Horizons for Closer International Collaborations,’ Press Release (London: Department for Business, Energy & Industrial Strategy, 6 December 2017), https://www.gov.uk/gov ernment/news/joint-uk-china-strategy-for-science-technology-and-inn ovation-cooperation-sets-new-horizons-for-closer-international-collabora tions;Jo Johnson, ‘UK-China Joint Strategy for Science, Technology

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and Innovation Cooperation,’ Press Release (London: Department for Business, Energy & Industrial Strategy and Ministry of Science and Technology of the People’s Republic of China, 6 December 2017), https://assets.publishing.service.gov.uk/government/uploads/system/ uploads/attachment_data/file/665199/uk-china-strategy-science-techno logy-innovation-cooperation.pdf. According to the European Areas of Recognition Manual, “Recognition of foreign qualifications may be sought for different purposes, the most common being for access to further education and training (academic recognition) and/or the labour market (professional recognition). Academic recognition focuses on recognition of periods of study or qualifications issued by an educational institution with regard to a person wishing to continue or to begin studying or to use an academic title. Professional recognition is an official authorisation to practice a particular profession. It deals with the assessment of knowledge and skills of a specific person.” ‘European Area of Recognition Manual—Chapter 5 Purpose of Recognition,’ EAR Project (UK NARIC Nuffic, January 2012), http://www.eurorecognition.eu/emanual/Cha pter%205/introduction.aspx. Regulated professions vary in every country. For a list of regulated professions in the UK, see: ‘Professions Regulated by Law or Public Authority,’ CPQ: Centre for Professional Qualifications, https://www. naric.org.uk/cpq/professions/Regulated%20Professions/Professions% 20Regulated%20by%20Law%20or%20Public%20Authority.aspx, accessed 3 July 2020. ‘Bologna Process: The European Higher Education Area,’ Enic-Naric.net: Gateway to Recognition of Academic and Professional Qualifications, https://www.enic-naric.net/bologna-process.aspx, accessed 18 October 2019. East Asian countries sometimes require overseas qualifications, both academic and professional, to be verified by the relevant governmental department. In China, for example, foreign qualifications are verified by the Overseas Academic Credential Evaluation Center, Chinese Service Center for Scholarly Exchange (CSCSE). In Taiwan, overseas qualifications are verified by the local or nearest Taipei representative office. In China, the Ministry of Human Resources and Social Security (MOHRSS) is responsible for regulating professional qualifications and approving overseas professional qualifications. Current Permanent Members include: Australia, Canada, Chinese Taipei, Hong Kong China, India, Ireland, Japan, Korea, Malaysia, New Zealand, Singapore, South Africa, Sri Lanka, the UK and the United States. See: ‘International Professional Engineer Agreement (IPEA),’ International

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Engineering Alliance, https://www.ieagreements.org/agreements/ipea/, accessed 15 May 2020. UK NARIC is responsible for providing information, advice and opinion on academic, vocational and professional qualifications and skills from all over the world. It is a national agency, managed on behalf of the UK Government, under contract to the Department for Education (DfE). Howard Davies, ‘Prospects for Mobility of UK Universities After Brexit,’ University World News, 8 February 2020, https://www.universityworld news.com/post.php?story=20200206141512923. ‘Summary of UK-South Korea Trade Agreement,’ Report Summary (London: Department for International Trade, 9 September 2020), https://www.gov.uk/guidance/summary-of-uk-south-korea-trade-agr eement. ‘Trade with Japan,’ Consultation (London: Department for International Trade, 20 September 2020), https://www.gov.uk/government/consultat ions/trade-with-japan. The three main distance learning and blended learning providers (the Open University, University of London and Oxford Brookes University) account for 52% of all recorded UK TNE students. ‘International Facts and Figures 2019,’ 20; ‘HE Student Enrolments Based Wholly Overseas by Location and Type of Provision—Academic Years 2014/15 to 2018/1,’ HESA, 16 January 2020, https://www.hesa.ac.uk/data-andanalysis/sb255/figure-11. ‘International Facts and Figures 2019,’ 22. ‘UK Revenue from Education Related Exports and Transnational Education Activity in 2017,’ 7. ‘International Education Strategy: Global Potential, Global Growth.’ Nigel Martin Healey, ‘The End of Transnational Education? The View from the UK,’ Perspectives: Policy and Practice in Higher Education, 27 June 2019. 22 UK-China joint institutes and 265 UK-China joint bachelor and above programmes have been approved by the Ministry of Education; 1 UK-China joint institute and 109 UK-China joint diplomas have been approved by education departments of provinces and municipalities. ‘List of Chinese-Foreign Cooperative Schools and Projects (Including Mainland and Hong Kong-Taiwan Cooperation Schools and Projects) (中外合作办学机构与项目(含内地与港台地区合作办学机构 与项目)名单),’ PRC Ministry of Education, Chinese-Foreign Cooperation in Running Schools, http://www.crs.jsj.edu.cn/aproval/orglists, accessed 29 October 2019. ‘The People’s Republic of China,’ Country Report (Gloucester: The Quality Assurance Agency for Higher Education (QAA), October

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2017), https://www.qaa.ac.uk/docs/qaa/international/country-reportchina-2017.pdf?sfvrsn=12c9f781_10. 64. ‘Research on Current UK-China Transnational Education: From the Perspective of Administrators and Students,’ Research Report (British Council and China Education Association for International Exchange, August 2017), https://education-services.britishcouncil.org/sites/siem/ files/field/file/news/2017%20BC-CEAIE%20Joint%20Research%20R eport%20of%20UK-China%20TNE.pdf. 65. ‘Peking University HSBC Business School,’ PHBS UK: Peking University HSBC Business School, 12 May 2020, https://pku.org.uk/. 66. ‘Xiamen University Malaysia,’ Xiamen University Malaysia, 12 May 2020, http://www.xmu.edu.my/. 67. Heath Rose and Jim McKinley, ‘Japan’s English-Medium Instruction Initiatives and the Globalization of Higher Education,’ High Education 75 (22 February 2017): 111–129. 68. ‘日本留学学校情報(大学院・大学学部・短期大学)【検索】 Search for Schools (Graduate Schools, Universities and Junior Colleges),’ 独立行政 法人日本學生支援機構 Japan Study Services Organization, 26 April 2018, https://www.jasso.go.jp/en/study_j/search/daigakukensaku.html. 69. ‘Gaodeng Jiaoyu Shuchu -Kuoda Zhaoshou Jingwai Xuesheng Xingdong Jihua 高等教育輸出-擴大招收境外學生行動計畫 (Higher Education Export—Study-in-Taiwan Enhancement Program)’ (Taiwan Ministry of Education, April 2011), https://ws.ndc.gov.tw/Download.ashx?u=LzA wMS9hZG1pbmlzdHJhdG9yLzEwL1JlbEZpbGUvNTU2Ni81MjQxLz AwMTQ0NDUucGRm&n=6auY562J5pWZ6IKy6Ly45Ye6LeaTtOWkp% 2baLm%2baUtuWig%2bWkluWtuOeUn%2bihjOWLleioiOeVqy5wZGY% 3d&icon=..pdf. 70. Carmen Neghina, ‘Mapping English-Taught Programmes,’ Study Portals, 3 May 2018, https://studyportals.com/intelligence/mapping-englishtaught-programmes-at-the-top-1000-universities-2/. ‘107nian Dazhuan Yuanxiao Jingwai Xuesheng Gaikuan 107年大專校院境外學生概況 (Analysis on the International Student in Higher Education in Taiwan in 2018),’ Statistics Report (Taiwan Department of Statistics, 28 January 2019). 71. ‘Jiaoyubu Guanyu Yinfa Liuxuezhongguojihua De Tongzhi 教育部关于 印发 《留学中国计划》 的通知 (Notification on the Plan of Study in China),’ Notice (PRC Ministry of Education, 21 September 2010), http://www. moe.gov.cn/srcsite/A20/moe_850/201009/t20100921_108815.html. 72. ‘Liuxue Zhongguo 留学中国 (Study in China),’ Guojia Liuxue Jijing Guanli Weiyuanhui 国家留学基金管理委员会 (China Scholarship Council), http://www.campuschina.org/zh/universities/regions. html, accessed 25 April 2018.

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73. ‘2018nian Laihua Liuxue Tongji 2018 年来华留学统计 (Statistics on the Number of International Students Studying in China in 2018),’ PRC Ministry of Education, 12 April 2019, http://www.moe.gov.cn/ jyb_xwfb/gzdt_gzdt/s5987/201904/t20190412_377692.html.

CHAPTER 10

Towards a New World Trade Order? The EU, Brexit and North-East Asia Michael Reilly

Introduction Among the many arguments advanced by those in the UK who advocated it leaving the European Union (EU), one of the most passionate was that doing so would allow the country to negotiate its own trade deals with other countries around the world, rather than being subject to priorities set by the European Commission. This was stated clearly by then Prime Minister Theresa May in her Lancaster House speech of January 2017, in which she set out her vision of the future relationship between the UK and EU. In it, she claimed that ‘Many in Britain have always felt that the UK’s place in the European Union came at the expense of our global ties, and of a bolder embrace of free trade with the wider world.’1 The conviction of the UK as a great global trading nation is widely held. It often goes hand in hand with a frequently expressed notion that EU bureaucracy and the differing objectives of some other member states

M. Reilly (B) Taiwan Studies Programme, School of Politics and International Relations, University of Nottingham, Nottingham, UK e-mail: [email protected] © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8_10

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have somehow hampered Britain’s trading ambitions. Leave the EU, and the ambition could be fulfilled. As the then International Trade Secretary, Liam Fox, said shortly after the result of the 2016 referendum: ‘I believe the UK is in a prime position to become a world leader in free trade because of the brave and historic decision of the British people to leave the European Union.’2 As Dr Fox admitted, however, only 11% of British firms export, and the value of British exports when measured as a percentage of Gross Domestic Product (GDP) is considerably less than that of other EU member states. But it is a powerful narrative, and a major reason why the withdrawal agreement Mrs May negotiated with the EU provoked so much opposition from her own party’s parliamentarians, who saw the proposal for continuing, even if temporary, membership of a Customs Union with the EU as falling some way short of the complete break they hoped for.3 It is a narrative in which North-East Asia, or more specifically China, has also featured. The British Government’s statements and policy papers on post-Brexit relationships and priorities compared the growth of exports to China favourably with those to the EU. China was the only country mentioned by name in a 2017 Government paper on future trading relationships, and on her visit to Beijing in February 2018, Theresa May pitched for a bilateral trade agreement post-Brexit.4 Whether these ambitions are ephemeral rather than substantive remains to be seen. As Tim Summers has shown in Chapter 5, the idea of China as an economic opportunity for the UK has diminished noticeably since Theresa May was replaced by Boris Johnson as prime minister in 2019, with security and other concerns becoming more prominent. In April 2020, at the height of the Covid-19 pandemic, British Foreign Secretary Dominic Raab was widely reported as saying: ‘We can’t have business as usual [with China] after this crisis,’ a view that was reinforced after China announced plans to impose a national security law on Hong Kong the following month.5

The UK’s Trade with North-East Asia At the time of the Brexit referendum in 2016, the only country in NorthEast Asia with which the EU had a free trade agreement (FTA) was the Republic of Korea (RoK, Korea). A comprehensive agreement between the two, including many ground-breaking features in the coverage of non-tariff barriers (NTBs), entered into force in 2011. Then in December

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2017 the EU concluded a similarly comprehensive agreement with Japan. And on 30 December 2020, after thirty-four rounds of negotiations lasting seven years, the EU and China reached agreement on a bilateral investment treaty. In October 2015, the European Commission also announced that it would explore launching negotiations on an investment agreement with Taiwan, although progress to date has been minimal.6 While this undermines the narrative that the EU is protectionist, of greater consequence is that as a minimum, the UK will have to negotiate or renegotiate new bilateral agreements with Korea, China and Japan if its businesses are not to be placed at a disadvantage in trading with these countries from 2021, once EU policies and regulations cease to apply in the UK. The UK’s apparent determination to pursue new bilateral agreements is not happening in isolation, however, but against the background of much bigger and more significant changes in the global trading environment, primarily arising from a major shift in US policies under the Trump administration. One of President Trump’s first acts on taking office was to withdraw the USA from the Trans-Pacific Partnership (TPP) trade agreement, a signature policy of the previous Obama administration. No negotiations with the EU over an ambitious Transatlantic Trade and Investment Partnership (TTIP) agreement, another Obama administration project, have been held since 2016 and the EU has now concluded that the negotiating directives for this are ‘obsolete and no longer relevant.’7 The Trump administration had also engaged in an increasingly bitter trade dispute with China that saw each side impose tariffs and retaliatory tariffs on imports from the other, a dispute that had consequences for many other countries and that also fuelled global business uncertainty. On the other hand, in direct contrast to President Obama’s warning in 2016 that in the event of a vote for Brexit, the UK would be at the back of the queue in negotiating any replacement trade agreement with the USA, President Trump had said: ‘we stand ready to complete an exceptional new trade agreement with the UK that will bring tremendous benefits to both of our countries,’ and by May 2020 preliminary discussions had already taken place. He also signed a partial ‘early harvest’ bilateral trade agreement with Japan.8 While Trump’s preference for bilateral agreements over multilateral ones, therefore, seemed clear, it was radically different from the policies of previous US administrations, so it is not possible to say at present whether his preference will be maintained by his successor.

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Other than in negotiations over a future bilateral agreement, the UK has no influence over the conduct of US trade policy or, now that it has left, that of the EU. For countries in North-East Asia, US trade policy is of far greater significance than post-Brexit trade with the UK. China is by any measure the UK’s largest trade partner in the region, accounting for 7.8% of the UK’s total global trade and 5.65% of its exports. But to put this in broader perspective, China’s share of British exports is smaller than that of Ireland, the UK’s neighbour but a country with a population less than one-half per cent that of China. And from China’s perspective, the UK accounts for just 1.75% of its total trade, or 2.29% of its exports, compared with the USA which accounts for 13.74% of its trade and takes almost 20% of its exports.9 A new bilateral trade agreement with the UK is therefore not an obvious priority for China, nor does the UK have any obvious leverage in trying to negotiate one. From 2000 to 2018, the UK’s two-way trade with China grew almost fivefold. Export growth was even more spectacular. This growth explains the positive noises about bilateral trade and investment opportunities made by British ministers in the aftermath of the referendum that Tim Summers mentions in Chapter 5. But the experience was simply in line with that of other countries’ trade with China. Prior to 2010, not only were exports to China from Germany, France and Italy, the other three EU members of the G7, also growing, they were growing faster than those of the UK. (Since 2010, the growth rate of British exports to China has overtaken that of Italy’s but remains behind those of France and Germany.) But for the UK, the growth of exports to China has been a bright spot compared to its trade with other countries in North-East Asia. Since the turn of the millennium, this has grown more slowly than has the UK’s trade with the rest of the EU. Table 10.1 shows that, in contrast to the fivefold growth in trade with Table 10.1 UK trade with select economies, 2000–2018. Figures are in US$ million

China Japan Korea Taiwan Rest of EU

2000

2010

2018

15,091 21,130 7,568 6,447 339,458

61,234 18,787 6,908 6,215 496,490

88,105 20,726 13,112 6,718 582,025

Source IMF, Direction of Trade Statistics

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China, total trade growth with Korea over the same 18-year period was at a more modest compound annual rate of 3.1%, only a little more than the annual rate of growth of 3.04% in trade with the rest of the EU over the same period. Long-term trade with Taiwan was stagnant, being just 4% higher in dollar terms in 2018 than in 2000, while with Japan the UK did less trade in 2018 than at the start of the millennium. In part, this was due to a marked decline in trade with all three in the aftermath of the global financial crisis and the ensuing great recession of 2007–2009. But only in the case of Korea has trade since surpassed the levels of 2000. Somewhat inconveniently for the anti-EU narrative in the UK, the bulk of the growth in British exports to Korea also followed the signing of the EU’s free trade agreement (FTA) with Korea, which came into effect in 2011.10 Nonetheless, the UK’s overall trade with North-East Asia is far from negligible, and against a background of wider economic uncertainty, a carefully planned approach to future trading relations could still enable the UK to influence multilateral trading agreements more broadly, as well as deliver significant benefits to the British economy. But this will require not only a strategic vision but, just as importantly, an understanding both of contemporary global trading and manufacturing patterns and of the relative importance of trade and foreign investment to the British economy. Yet much of the political narrative and rhetoric surrounding both Brexit and the future of the UK’s relations with the EU has focused on trade, often at the expense of investment. In considering the potential influence the UK might have in any future trading arrangements with North-East Asia, a good starting point is the reaction of the countries in the region to the result of the Brexit referendum. For China, Japan and Korea, the proportions of their total exports to the EU going to the UK are almost identical, at between 16.2 and 16.7%. (For Taiwan, the proportion is less—13.8%.) But only in Korea, which in recent years has pursued a vigorous trade-oriented diplomacy, were fears about the impact of Brexit on trade uppermost in the reactions of policymakers. Within a matter of days of the referendum outcome in 2016, the Korean Government, fearing an adverse impact on trade, was considering a $17bn economic stimulus package in response.11 By contrast, the Chinese Government, which had made clear its preference for the UK to remain in the EU, was worried less about trade and more about both a loss of influence within the EU if the UK left, and an increase in American influence upon it, to China’s disadvantage (this

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was before the election of Donald Trump as American president).12 In Taiwan, senior members of the government were privately optimistic that, as the UK had already signed a series of bilateral agreements in recent years covering a broad range of issues from double taxation through air services to working holidaymakers, outside the EU it might prove even more amenable to further expanding bilateral links.13 The most measured and detailed official response came from the Japanese Government. As David Warren explains in Chapter 6, just over two months after the referendum, Prime Minister Shinzo Abe handed Theresa May a 15-page letter setting out Japan’s concerns in detail. These focussed not on trade, as Brexit advocates might have assumed, but on the potential impact of Brexit on the Japanese companies which had invested in the UK to take advantage of its membership of the Single Market, some of them, as Abe tartly pointed out, having been invited by the government to do so.14

The Overlooked Importance of Foreign Investment Privately, many Japanese officials felt that the very nature of the letter, not to mention the detailed concerns expressed therein, was almost unprecedented in diplomatic terms. But what was surely more surprising was that the Japanese prime minister felt compelled to state such home truths in the first place. For, despite the emphasis placed on Britain’s free trade ambitions both during and since the referendum campaign, this is something of a chimera. Overseas investment, whether inward or outward, has long been proportionately more important to the UK than to any comparable economy. Prior to the Second World War, the primary interest of British businesses overseas was less in exporting goods and more in investing, in utilities especially, notably railways, but also in natural resources such as agriculture in Australia and Argentina or rubber plantations in Malaya. The remittances from these investments were returned to the UK and the export of goods from the country—of railway locomotives, for example—was frequently to supply these investments. But the reverse was also true, as the years before the First World War saw significant foreign investment in the British economy. American companies carried out investment in emerging industries such as motor manufacturing (Ford) and electrical equipment (GEC, Westinghouse). This even

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extended to London’s public transport, most of which was run by an American-controlled company until 1933. By 1947, most of the country’s pre-war overseas capital assets had been liquidated through a combination of nationalisation in the countries concerned, the expiry of concessions, or their exchange or forced sale as part of wider deals to settle post-war debts. (By one estimate, the total stock of British investment in China in 1949 was some £300 million and the importance of protecting this was a major reason why the British Government moved so quickly to recognise the new People’s Republic of China in 1950, although the move was to no avail.)15 Bereft of hitherto near-captive markets, henceforward exporters would have to work much harder to win orders. Over the next forty years, the importance of Foreign Direct Investment (FDI) into the British economy would remain broadly in line with other comparable economies, but this was to change dramatically after the European Single Market came into being in 1993. In 1995, FDI in the UK was equivalent to 16.1% of GDP, not so different from the then EU overall figure of 13.2%. By 2014, it was equivalent to 58.3% of GDP against an EU average of 43.6% and a world average of 31.8%. Even this figure probably understates its full impact on the economy. An independent report on the likely impact of Brexit on FDI calculated that foreign-owned companies account for approximately 30% of UK gross value added, fully half of all UK manufacturing investment and one-third of employment in UK manufacturing.16 The bulk of this—nearly 60%— came from other EU countries, but according to the UK’s Office for National Statistics, 5.6% came from Japan, a much larger share than from any other North-East Asian economy. While relatively small in proportion to the total, the investment from Japan has been of disproportionate importance for the British economy. Not only was the bulk of it put into manufacturing—most notably the UK’s hitherto ailing motor industry—but as Abe explained in his letter to Mrs May, the UK was chosen as it was seen by the companies concerned as a ‘gateway to Europe’ and they established value chains across Europe as part of their investment decision.17

Supply Chains and Free Trade Agreements Given the rise over the last two decades of such value or supply chains for business generally, and manufacturing especially, not just within the European Single Market but globally, it is surprising that their importance appears to be so little understood by politicians and policymakers. It is a

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major explanation for the apparent stagnation of bilateral trade between the UK (and the EU generally) and Japan and Taiwan since 2000, and it has important implications for future trade agreements if these are to achieve their purported objectives. As one relatively small but nonetheless illuminating example of the way modern supply chains work, China is now the third-largest supplier of fish to the UK market by value, after Iceland and the Faroe Islands. The bulk of this is cod, which is not caught in the Pacific or Chinese waters but in the North Atlantic. The cod is either caught by or sold to Russian factory ships, which take it to Qingdao in China. Once there, it is processed in Korean-owned factories before being shipped back to the UK to be sold.18 What happens on a relatively small scale with frozen fish takes place on a far larger scale in the automotive, ICT and other industries. Apart from a few niche companies, the British motor industry is now completely foreign owned. In 2016, Japanese plants accounted for 48% of UK output in the sector, 80% of which is exported.19 The biggest selling brand of cars in the UK for most of the past 40 years, however, has been Ford which no longer makes cars in the country. But it did make engines and transmissions in the UK until autumn 2020, which were shipped to plants elsewhere in Europe for installation in vehicles, many of which were then exported back to the UK. China is now the world’s second-largest exporter of ICT and ICTrelated products, after the USA. But between 40% and 80% of the computer hardware made in China is produced in Taiwanese-owned factories and Taiwanese-owned firms and subsidiaries are responsible for up to 20% of China’s exports to the EU. While the UK may import no more today from Taiwan than it did in 2000, just as its imports from China have soared, so too have Taiwanese exports to China, which is now Taiwan’s largest market. Taiwan is also the second-largest source of FDI for China.20 Both the exports and investment are heavily concentrated in the ICT sector, which accounts for over 40% of all Taiwan’s exports and more than 60% of those to China. The bulk of this is in components, or intermediate goods, such as memory chips or semiconductors, rather than fully finished products. Trade in intermediate goods generally is important for Taiwan, comprising 64% of its total trade with North America and 73% of that with the rest of Asia.21 While this is much higher than for comparable

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countries, intermediate goods form an important and growing proportion of overall world trade. For Japan, Korea and the UK, they comprise between 19% and 23% of total exports and imports.22 As Robyn Klingler-Vidra and Yu Ching Kuo have shown in Chapter 8, this becomes especially relevant in considering the US-China trade dispute, in which Taiwanese firms have become unwittingly embroiled in view of their importance as suppliers of critical components to endusers in both countries. Notwithstanding the rise of companies such as Huawei, China’s primary role in much of the ICT trade is as the final assembly point of intermediate goods from Taiwan, Japan, Korea, SouthEast Asia and elsewhere, including the USA. The proportion of value added in China is usually small, by one estimate in the case of mobile phones, barely 3.5% of the final selling price. In the words of the WTO: ‘The statistical bias created by attributing the full commercial value to the last country of origin can pervert the political debate on the origin of the imbalances and lead to misguided, and hence counter-productive, decisions.’23 As multilateral trade agreements increasingly give way to bilateral or regional agreements, so too the significance of value chains, ‘just in time delivery’ and trade in intermediate goods is becoming more apparent. The growth of bilateral agreements, especially, is giving rise to the ‘noodle bowl’ effect in which different agreements have different rules of origin applied to limit or prevent third-country producers from taking advantage of them. The degree of local content permitted, and consequent tariff levels applied, varies not only from agreement to agreement but also from product to product. The growing complexity of such agreements in turn creates hurdles for businesses in terms of the procedures necessary to demonstrate compliance with the rules of origin, which can make the agreements self-defeating to all but the politicians advocating them. As one example, the Economic Cooperation Framework Agreement (ECFA) between Taiwan and China came into effect in January 2010, yet by 2014 one study found that the utilisation rate among Taiwanese exporters of the preferential tariffs available to them was only 52%. (This was an average, which masked sectoral differences, and admittedly the utilisation rate was increasing.) A similar analysis of the Switzerland-China FTA four years after that entered into force found a utilisation rate of just 44% on Swiss exports to China.24

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The ‘continuity free trade agreement’ that the UK signed with South Korea in August 2019 also demonstrates well some of the challenges. Under this, the existing provisions of Korea’s FTA with the EU were ‘cut and pasted’ into a separate bilateral agreement with the UK to take effect after Brexit. From a UK perspective, the deal was something of a relief. It was the first full deal signed with any of its top 15 trading partners to cover post-Brexit trading arrangements. Even then, it was only reached three months after the originally planned ‘Brexit day’ of 31 March. Furthermore, it provides only short-term reassurance as it will need to be renegotiated within two years.25 This renegotiation will have to cover the future treatment of UK goods with significant European components and vice versa. To give just one example, for a car to be eligible to be imported into Korea under the current EU-Korea FTA, non-EU parts or materials should account for no more than 45% of the ex-works price.26 For two years from August 2019, British-made cars will be able to be imported into Korea as if they were made in the EU. Thereafter, the UK will have to negotiate a new, long-term agreement with Seoul if British-made cars are to continue to benefit from the current provisions. But based on current trade patterns, the UK motor industry will continue to rely on significant quantities of components from the EU after Brexit, and any future agreement will also have to agree on how these should be treated. The reverse will also apply. Had Ford not closed its Bridgend plant, and wished to export European made cars to Korea, for example, it would either have had to persuade the Commission to negotiate with Korea to amend the current FTA to take account of the value of the engines made in the UK, or source engines from within the EU. This does not negate potential wider benefits of bilateral FTAs, but it does highlight some of the limitations that surround them, and suggests that for post-Brexit Britain they are likely to be an inferior substitute for multilateral, or at least regional, agreements, given the nature of so much UK trade, as shown by the examples already cited. In the negotiations that led to the EU-Korea FTA of 2011, Korea was very much the junior partner and its negotiating leverage reflected this. But in bilateral negotiations with the UK, Korea is much more evenly matched in economic weight. It also has the advantage of having a highly experienced cadre of trade negotiators, in contrast to the UK for whom such negotiations have been handled until now by the European Commission.

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The EU deal also reflects Korea’s determined pursuit of trade diplomacy. In addition to this agreement, in recent years it has signed agreements with both the USA and China, as well as opening discussions with Japan and China on a tri-partite agreement. Japan, by contrast, has been more hesitant in pursuing bilateral trade deals. This reticence perhaps reflects, in part, a preference it shares with the EU, Taiwan and others for multilateral agreements, along with strong opposition from domestic vested interests, the agriculture lobby especially, to the anticipated demands of other parties. But the very success of its investments in the UK economy means that of the North-East Asian countries, Japan stands to lose the most from Brexit. Spurred perhaps by this, together with the withdrawal of the USA from the TPP, and after some prevarication on both sides since the idea was first proposed formally in 2013, Japan and the EU moved quickly to conclude their own FTA, or Economic Partnership Agreement (EPA), in December 2017. It entered into force in February 2019.27 Given the international trade environment at the time, the significance of this should not be under-estimated. One commentator described it as ‘one of the few trade deals of geopolitical importance,’ and Japan as ‘the only global actor’ capable of helping the EU advance its agenda of open trade, the rule of law and social and environmental standards. But the agreement was of considerable strategic benefit to Japan too: ‘The EU may have lost a member but has found its first strategic partner in Japan to bolster its role in the Pacific century.’28 If Korea was content to a ‘cut and paste’ agreement with the UK, albeit on a short-term basis, Japan showed no reticence in demonstrating its relative bargaining muscle. Following the signing of the EPA with the EU, the British Government hastened to seek a similar rollover agreement with Japan to that with Korea. On the face of it, this should have been attractive to Japan: by one estimate, the impact of Brexit would reduce the estimated economic gains for Japan of the EPA by 14%.29 But British ministers appear to have repeatedly misunderstood Japan’s concerns, focusing on the importance of securing a ‘cut and paste’ FTA. In contrast, Japan placed a greater emphasis on protecting its investments in the UK and their supply chains after Brexit. As David Warren has shown in his chapter, they had no excuse for doing so, as the Japanese Government had been consistent in its concern about the impact of a Leave vote on Japanese investment in the UK. The concerns were again made clear by Abe when Mrs May visited Tokyo in 2017, when he said: ‘I have asked

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Prime Minister May for her continued consideration in ensuring transparency and predictability so as to minimise [Brexit’s] impact on business activities, including Japanese companies… I hope that transparency and predictability will be ensured. That would be very important.’30 Almost twelve months later, a representative of the Japan Business Council in Europe openly expressed frustration that officials in the UK’s Department for International Trade remained both ignorant of the importance of supply chains for Japanese businesses in the UK, and convinced that the concerns of the Council’s members over future trading arrangements with the EU could be dealt with through a UKJapan bilateral free trade agreement.31 Japan did eventually agree to enter discussions about a bilateral FTA, however, and an agreement was signed in October 2020. While this was politically important for the British Government, in demonstrating its ability to negotiate such agreements, in practice it is little more than a ‘cut and paste’ from the Japan—EU agreement and the economic impact is likely to be small.32

Towards a New Multilateral Free Trade Agreement Notwithstanding the firm approach Japan initially took towards bilateral trade negotiations with the UK, again as David Warren has explained, Shinzo Abe was probably the most vocal foreign supporter of the withdrawal agreement that Mrs May agreed with the EU but failed to get through her own parliament, recognising better than many British politicians the importance of stability and certainty for business confidence.33 And Abe’s broader response to Brexit demonstrated leadership on a scale unusual if not unprecedented for Japan since 1945. The catalyst for his new approach was concern about the policies of US President Donald Trump and China’s Xi Jinping more than Brexit. Still, it offers nonetheless an intriguing way forward for the UK and the EU too, if his wider ambitions ever come to fruition. As Prime Minister Abe implied in his September 2016 letter to Mrs May, at the heart of Japanese concerns about Brexit was a feeling that much of Japan’s investment in the UK had been not simply a business decision but a response to a British Government invitation. Moreover, by risking the success of this investment, the British Government had broken its side of an agreement. At least one Japanese author has suggested that the likely consequence would be that Abe would seek to tie Japan ever more closely to the USA,

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at the expense of its relationship with the UK and EU.34 This may have been his original intention. But barely four months after the September 2016 G20 meeting in Hangzhou at which Abe handed his letter to Mrs May, the TPP trade agreement faced collapse after the USA withdrew. Although Japan had initially appeared no more than lukewarm about the TPP proposal, Prime Minister Abe grasped the initiative. He successfully resurrected the agreement, re-branding it as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), in effect a TPP minus both the USA and the provisions that would have been of most benefit to American companies. It entered into force in December 2018. His motivation for doing so has been ascribed to various factors, including the likely impact on his domestic economic policies. Initially, it may have been an attempt to try to persuade President Trump to reconsider his decision to withdraw the USA, and he received tacit support and encouragement from former senior American officials in pursuing this approach. Subsequently, it may have been motivated by a realisation that without a TPP or CPTPP, China would try to fill the vacuum in Pacific trade policy created by American withdrawal.35 At first sight, shorn of the USA the CPTPP is a somewhat disparate group. Only two of its eleven signatories—Canada and Japan—are in the G7 and two more—Mexico and Australia—in the G20. It is geographically as well as economically diverse. But together its members still represent 13.4% of world Gross Domestic Product (GDP), making it the third-largest global trade agreement after the EU-Japan and USACanada-Mexico Agreements.36 Nevertheless, reports in early 2018 that the UK was exploring possible membership of the group seemed to stretch credulity, appearing to be more a desperate attempt by Brexiteers to join a non-EU-based trade agreement than a proposal that took serious account of the country’s trade patterns.37 Hitherto, the one feature all members of the group had in common was a coastline on the Pacific Ocean or a part of it; the UK lacked even that. Its bilateral trade with most CPTPP members is small: its 2018 exports to all eleven members combined were not even three-quarters of those to Germany alone. Geography, plus the relatively small size of most of the member economies, means that it would never be a substitute for the EU market for UK businesses. Pretending otherwise would be a massive act of self-delusion. Then, in October 2018, Prime Minister Abe said that post-Brexit, Britain would be welcome ‘with open arms’ to join the CPTPP.38 Despite

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the appeal of the proposal to some British politicians with their vision of a ‘global Britain,’ it still seemed fanciful, for the reasons given. But Abe then signalled that Japan’s EPA with the EU could also be aligned with the CPTPP. This is a much less fanciful proposition, for the EU already has, or is negotiating, FTAs with nine of the eleven CPTPP members. Aligning these with CPTPP provisions should be relatively straightforward. If this happened, and if Britain also joined the CPTPP, it would give the UK a degree of continued access to the EU market as well as the CPTPP, Brexit notwithstanding, while placing Japan at the centre of what would be the world’s largest free trade area.39 Given that until quite recently, Japan appeared lukewarm about both the TPP as originally envisaged and a trade agreement with the EU, Abe’s new-found enthusiasm not just for the agreements but for combining them deserves scrutiny. It may simply reflect Japan’s historic preference for multilateral trade liberalisation through the World Trade Organisation (WTO) rather than bilateral deals. With further progress on multilateral trade agreements blocked for some years now, this is the next best thing. It is also, surely, at least in part, a reaction to Japan’s economic rivals, notably Korea, signing bilateral FTAs. Japanese firms faced being placed at a significant disadvantage if Japan had not also entered into bilateral agreements with its main trading partners. It may also be motivated by a desire to protect the multilateral trading system in the face of a protectionist American president who appeared to have an antipathy to multilateral agreements generally. Working with the EU and other like-minded countries such as Canada to protect the system and preserve the WTO is to be welcomed. (Abe resigned as prime minister on health grounds in August 2020 and with Donald Trump also having left office, it remains to be seen how policy will evolve). But given the poor state of Japan’s bilateral relations with its two most important neighbours, it is also pertinent to ask whether the proposal is motivated by geostrategic considerations and regional ambitions as much as, or even more than, by a desire for freer trade. The wider trading environment is certainly relevant. For example, while the US-China trade dispute is having a negative impact on overall growth in the region and on global trade generally, it has been a boon to the Vietnamese economy, which saw its exports to the USA jump 33% in the first half of 2019, as electronics suppliers sought to move production away from China to avoid the increase in tariffs. In the same period, Chinese exports to the USA fell by 12%. Asian Development Bank analysis suggests that the more

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serious the dispute, the greater will be the boost to Vietnamese growth as it will benefit from further trade diversion.40 It is not clear that this is what President Trump expected when he launched his trade war with China. As Vietnam is also a member of the CPTPP, Japan and other members are in a more advantageous position to take advantage of its faster growth than non-members. Vietnam’s gain and the knock-on effects for other CPTPP members are of little consequence, however, compared to the friction between Japan and Korea. Unlike the trade war between the USA and China, this is a conflict between two countries which have formal security agreements with the USA, profess to uphold the same values of democracy and respect for human rights as does the EU, and in whose long-term security and stability the EU also has a major interest. The relationship has long been tetchy but the speed with which it deteriorated during 2019, with the two even regarding one another as adversaries, not competitors, should surely be a cause for worry to the EU. Korea’s threatened withdrawal from a three-country pact with Japan and the USA on the sharing of military information, primarily related to the shared threat from North Korea, was probably of greater concern to Washington than to European capitals.41 But the latter cannot afford to ignore the consequences of the rift for world trade, which may well have longer-term implications. That the two countries compete fiercely in trade is not, or should not be, an issue. European countries have long done the same. But Tokyo’s decision in July 2019 to impose export controls on national security grounds on materials critical for Korea’s production of memory chips and other ICT components turned the heat up on long-simmering tensions between the two. Already in 2019, the WTO had ruled once in favour of each side in bilateral disputes they had taken to the organisation. Seoul subsequently announced that it would also refer the new export controls to the WTO. But rather than waiting for a ruling which, given that as a result of the Trump administration’s refusal to appoint new judges to the WTO’s appeals body, could be a long time coming, if indeed it happens at all, Seoul then took a series of other measures, including tax breaks, subsidies and research incentives to encourage the replacement of Japanese products by local manufacture. As one report put it, the outcome of this approach is likely to be ‘higher costs, lower revenues and a reduced return on capital for companies in both economies.’ (Although the EU and 15 other WTO members agreed to set up a temporary disputes resolution procedure in March 2020 to

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overcome the paralysis in the Appellate Body, neither Korea nor Japan joined.)42 Korea is not a member of the CPTPP although it has expressed interest in joining, as has Taiwan, so from Japan’s point of view a deal between the CPTPP and EU would not only place Japan at the centre of a major new free trade area, with all the benefits this would bring to Japanese business, but if Korea continues to be outside the agreement, it would also increase Japan’s competitive advantage and global influence at Korea’s expense. Admittedly, both Korea and Japan are engaged in tripartite discussions with China on an FTA, but as of December 2019, sixteen rounds of discussions had been held since negotiations were first launched in 2012, with little obvious sign of progress. On a more promising note, both Korea and Japan—but not Taiwan—are signatories of the Regional Comprehensive Economic Partnership Agreement (RCEP), initiated by Indonesia, which also includes other ASEAN countries and China.43 While it remains to be seen whether the EU will be enthusiastic about the proposal, there is ample evidence of its readiness to work more closely with Japan generally. The two collaborated effectively at the G20 summit meeting in Osaka in June 2019 in overcoming US opposition to strong language in the communiqué on the need for action over climate change and the environment (a separate dissenting paragraph on the US’ position only served to highlight its isolation).44 Three months later, the two signed a ‘connectivity partnership’ in what was reported to be a counter to China’s Belt and Road Initiative.45 But given its own important trade links with both China and Korea, and for that matter Taiwan too, none of whom are members of the CPTPP, the EU should consider the implications of the proposal carefully. An EU-CPTPP agreement would represent around 40% of global trade, putting all the members in a stronger position to resist more protectionist moves by the USA. Indeed, such an agreement could herald a return to multilateralism and perhaps the start of a new world trading order. It would show that neither the USA nor China is able to block moves to future trade liberalisation, nor use their economic weight to sway the agreement to their own advantage. But should the proposal gain traction, it would surely be in the EU’s interests to address both geostrategic and trade aspects in its approach. On the latter, the EU increasingly seeks Partnership and Cooperation Agreements which extend beyond trade alone, to embrace common values, notably democracy and respect for human rights. At least seven of the eleven CPTPP members

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are full democracies which have seen regular changes of government through the ballot box, and a further two hold regular elections. On the other hand, the EU’s willingness to sign an FTA with Vietnam, despite the absence of democracy and well-founded concerns about the lack of human rights there, suggests that the EU attaches higher importance to potential economic gains than to values. On this basis, the only CPTPP member about whom the EU may have reservations is likely to be Brunei, given its adoption of sharia law. Even with some of the original provisions of the TPP suspended after the USA withdrew, the CPTPP remains a remarkably comprehensive agreement for such a diverse group of countries. But some of these suspended provisions, notably on the degree of copyright protection for pharmaceuticals, would be of benefit to European companies and unless they are re-instated, the CPTPP will fall short of the EU’s agreement with Japan in its coverage. The geostrategic aspects are of greater potential significance for the EU. The economic benefits to it from alignment with the CPTPP would be greater if it were expanded to include Korea and Taiwan. To exclude two such important trading economies makes no sense. Although China is the principal export market for both, the same is true of Japan. Like Japan, both have also suffered from China’s crude use of its economic muscle for political ends, principally through tourist boycotts but also in the case of Korea, a Chinese consumer boycott of the major Korean retailer Lotte, which eventually pulled out of the Chinese market altogether in consequence. Again, like Japan, they share the EU’s professed values, and the EU has a vested interest in their continuing stability and prosperity. An EU-CPTPP agreement that included them would be predominantly a grouping of countries with shared political and social values, not just an interest in trade. It would deliver a strong political message to both a protectionist USA and a China with hegemonic ambitions. And common membership may help Korea and Japan find a way to work through their bilateral trade frictions with less risk of adverse consequences. The government in Taipei is acutely sensitive to the risks posed by excessive reliance on the Chinese economy, which it has been seeking to reduce through its New Southbound Policy, aimed at reducing dependence on the Chinese market, and which has been given added impetus since late 2018 by the trade dispute between the USA and China. Joining the TPP in its original form was a priority for Taiwan, and even without US membership being in the group would bring important trade benefits. From the EU’s perspective, it would also deal with the ‘China problem.’

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Commission officials have always been unwilling to negotiate a bilateral FTA with Taiwan prior to doing so with China. With the prospects of an EU-China FTA as remote as ever, Taiwanese membership of the CPTPP would sidestep the matter. As for the UK, to date, it has been spared the trade and tourist boycotts that China has applied against other countries. Its membership of the Single Market has undoubtedly helped as it surely makes China very wary of such behaviour unless it can be shown to be a response specific trade measures, such as the imposition of anti-dumping duties. Would China be similarly inhibited once the UK is no longer in the Single Market? Its track record does not inspire confidence.

Conclusion With Brexit confirmed, the UK’s overwhelming trade priority must be a comprehensive new agreement with its former partners in the EU. Quite apart from the wider importance for current trade, this is essential to protect as much as possible of existing supply chains, which is the best way of trying to ensure that foreign-invested facilities—especially those from Japan—remain in the country and do not relocate elsewhere in Europe. In view of the importance the Japanese Government attached to supporting these investments, this, in turn, would help the UK in its relations with Japan. Attractive though membership of the CPTPP may be to some British politicians, however, this only makes sense as a trade priority if the EU also joins, or after the UK has first negotiated a new agreement with it. While some politicians may harbour nostalgic visions of re-kindling old Commonwealth or imperial trade ties, the reality is that the UK’s trade with CPTPP members is modest indeed when compared to that with the rest of the EU. Even its exports to Japan, by some way its largest trading partner within the CPTPP, are less than one-third of those to Ireland, while its exports to Sweden are greater than those to Canada, its second-largest market in the CPTPP, geographically the closest, and a country with almost four times the population of Sweden. For all the Commonwealth nostalgia, the UK even exports more to Israel, not an EU member, than it does to New Zealand.46 But the UK will find that its negotiating leverage in new bilateral agreements will be a fraction of that it has enjoyed from being within the EU. Paradoxically, the one country in the region which would unreservedly

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welcome an early bilateral agreement with the UK is also the one with which the UK would be most reluctant to enter negotiations—Taiwan. While a deal between the two could probably be agreed quickly and be of mutual benefit, the UK is unlikely to wish to risk offending perceived Chinese sensibilities by doing so (although such perceptions were once also a major obstacle to countries removing their visa restrictions on Taiwanese passport holders before being eventually found to have no basis in fact). So, it will be very much to the UK’s benefit to seek to join new multilateral agreements, the CPTPP included, where it can, rather than trying to negotiate a series of bilateral agreements. But its influence in this will be limited, as it is likely to find the world outside the EU a tough environment. Indeed, it may find it has little choice but to pursue the bilateral route. Its politicians may dream of doing more but outside the EU, and as negotiations with Japan have already shown, they are likely to find the country’s influence and leverage greatly diminished.

Notes 1. Cited in Kevin O’Rourke, A Short History of Brexit: From Brentry to Backstop (London: Pelican, 2019). 2. Liam Fox, ‘Liam Fox’s Free Trade Speech,’ GOV.UK, 29 September 2016, https://www.gov.uk/government/speeches/liam-foxs-free-tradespeech, accessed 24 September 2019. 3. Fox. 4. Huileng Tan, ‘UK’s May Wants Free Trade with China: Beijing Has Its Own Goals,’ CNBC, 31 January 2018, https://www.cnbc.com/2018/ 01/31/uk-theresa-may-wants-more-trade-with-china-beijing-wants-beltand-road-endorsement.html, accessed 21 May 2020. 5. Anna Mikhailova, ‘It Cannot Be “Business as Usual” with China After Coronavirus Crisis, Dominic Raab Warns,’ The Telegraph, 16 April 2020, https://www.telegraph.co.uk/politics/2020/04/16/canno-longer-business-usual-china-coronavirus-dominic-raab/, accessed 21 May 2020; Dominic Raab, ‘Joint Statement from the UK, Australia and Canada on Hong Kong: Joint Statement by UK Foreign Secretary Dominic Raab, Australian Foreign Minister Marise Payne and Canadian Foreign Minister François-Philippe Champagne, Responding to China’s Proposed New Security Law for Hong Kong.’ GOV.UK, 22 May 2020, https://www.gov.uk/government/news/joint-statementfrom-the-uk-australia-and-canada-on-hong-kong.

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6. ‘Report of the 28 the Round of Negotiations on the EU-China Comprehensive Agreement on Investment’ (Brussels: DG Trade European Commission, 27 April 2020), https://trade.ec.europa.eu/doclib/docs/ 2020/april/tradoc_158727.pdf, accessed 21 May 2020; ‘EU-China Comprehensive Agreement on Investment (EU-China CAI),’ Bilateral Investment Agreement (European Parliament, 5 May 2020), https:// www.europarl.europa.eu/legislative-train/theme-a-balanced-and-progre ssive-trade-policy-to-harness-globalisation/file-eu-china-investment-agr eement, accessed 27 September 2019; ‘Trade for All: Towards a More Responsible Trade and Investment Policy,’ Trade and Investment Policy (Luxembourg: European Union, 2015), https://trade.ec.europa.eu/ doclib/docs/2015/october/tradoc_153846.pdf, accessed 27 September 2019; ‘EU and China agree new investment treaty,’ Financial Times, 30 December 2020. 7. Adam Taylor, ‘A Timeline of Trump’s Complicated Relationship with the TPP,’ Washington Post, 13 April 2018, https://www.washingto npost.com/news/worldviews/wp/2018/04/13/a-timeline-of-trumpscomplicated-relationship-with-the-tpp/, accessed 27 September 2019; ‘The Transatlantic Trade and Investment Partnership (TTIP),’ European Commission, https://ec.europa.eu/trade/policy/in-focus/ttip/index_ en.htm, accessed 27 September 2019. 8. Laura Kuenssberg, ‘Barack Obama Says Exit from the European Union Would Leave the UK “at the Back of the Queue” for Trade Deals, Saying Britain Is Best When Leading a Strong EU,’ BBC News, 22 April 2016, https://www.bbc.com/news/uk-36115138; ‘Donald Trump and Boris Johnson Talk up Trade Deal Potential,’ Financial Times, 24 September 2019, https://www.ft.com/content/11316094-def4-11e9-9743-db5a37 0481bc;‘US and Japan Sign Partial Trade Agreement,’ Financial Times, 25 September 2019, https://www.ft.com/content/8590d3bedfb4-11e9-9743-db5a370481bc, all accessed 27 September 2019. 9. ‘IMF: Direction of Trade Statistics, Exports and Imports by Areas and Countries, https://data.imf.org/regular.aspx?key=61013712, accessed 24 September 2019. 10. ‘IMF: Direction of Trade Statistics’. 11. Peter Wells, ‘South Korea—When Brexit Is Worth $17bn,’ Financial Times, 28 June 2016, https://www.ft.com/content/43464d45-99243691-9717-4bfb2aeffdda, accessed 24 September 2019. 12. ‘David Cameron and Li Keqiang Press Conference,’ GOV.UK, 17 June 2014, https://www.gov.uk/government/speeches/david-cameronand-li-keqiang-press-conference-june-2014, accessed 24 September 2019; ‘Britain Steps Backward as EU Faces Decline,’ Global Times, 25 June 2016, http://www.globaltimes.cn/content/990440.shtml, accessed 24 September 2019.

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13. Private conversations in Taipei, July and August 2016. 14. ‘Japan’s Message to the United Kingdom and the European Union,’ Summary (Ministry of Foreign Affairs), https://www.mofa.go.jp/files/ 000185466.pdf, accessed 24 September 2019. 15. S. Tsang, The Cold War’s Odd Couple (London 2006), pp. 10, 19. 16. World Investment Report, 2016 (UNCTAD), https://unctad.org/en/ PublicationsLibrary/wir2016_en.pdf; ‘The Impact of Brexit on Foreign Direct Investment into the UK: Recommendations for Investment Promotion Strategy,’ WAVTEQ, 24 September 2019. 17. ‘Japan’s Message to the United Kingdom and the European Union.’ 18. ‘UK Seafood Industry Overview,’ Seafish, https://seafish.org/article/ukseafood-industry-overview, accessed 25 September 2019; private conversation with Korean trading house representative. 19. Figures from Society of Motor Manufacturers and Traders (SMMT). 20. Iana Dreyer et al., ‘Beyond Geopolitics—The Case for a Free Trade Accord Between Europe and Taiwan,’ European Centre for International Political Economy, ECIPE Occasional Paper, no. 3 (2010): 1–70. 21. Dreyer et al. 22. ‘Data on Export, Import, Tariff, NTM,’ World Integrated Trade Solution (WITS, https://wits.worldbank.org/Default.aspx), accessed 25 September 2019. 23. Greg Linden, Jason Dedrick, and Kenneth L. Kraemer, ‘We Estimate China Only Makes $8.46 from an iphone—And That’s Why Trump’s Trade War Is Futile,’ The Conversation, 6 July 2018, http://theconversation.com/we-estimate-china-only-makes-8-46from-an-iphone-and-thats-why-trumps-trade-war-is-futile-99258, accessed 8 October 2019; Jayant Menon, ‘How the Us-China Trade War Has Fractured Global Value Chains,’ Asia Dialogue (blog), 9 September 2019, https://theasiadialogue.com/2019/09/09/how-theus-china-trade-war-has-fractured-global-value-chains/, accessed 1 October 2019; ‘Global Value Chains,’ World Trade Organisation, https:// www.wto.org/english/res_e/statis_e/miwi_e/miwi_e.htm, accessed 30 September 2019. 24. Michael Reilly, Towards an EU -Taiwan Investment Agreement: Prospects and Pitfalls, The European Union in International Affairs (Palgrave Pivot, 2018), 34, https://doi.org/10.1007/978-3-319-68403-1; Jian Han, Stefan Legge, and Patrick Ziltener, ‘Sino-Swiss Fta- Utilization Rate Analysis,’ in Sino-Swiss Free Trade Agreement —2018 Academic Evaluation Report, ed. Tomas Casas et al. (Basel: Sino-Swiss Competence Center 中 瑞经贸研究中心 (SSCC), 2018), 22–26, https://www.mdpi.com/books/ pdfview/edition/784. 25. James Blitz, ‘UK and South Korea to Sign “Continuity Free Trade Agreement”,’ Financial Times, 21 August 2019, https://www.ft.com/con

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36. Zachery Torrey, ‘Tpp 2.0: The Deal Without the Us: What’s New About the CPTPP and What Do the Changes Mean?,’ The Diplomat, 3 February 2018, https://thediplomat.com/2018/02/tpp-2-0-the-dealwithout-the-us/, accessed 27 September 2019. The eleven members are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, Peru, Singapore, Vietnam. 37. Julia Gregory, ‘Britain Exploring Membership of the TPP to Boost Trade After Brexit,’ The Guardian, 3 January 2018, https://www.the guardian.com/politics/2018/jan/03/britain-in-talks-to-join-the-tpp-toboost-trade-after-brexit, accessed 27 September 2019. 38. Daisuke Ikemoto, ‘UK Would Be Welcomed to TPP “with Open Arms,” Says Shinzo Abe,’ Financial Times, 8 October 2018, https://www. ft.com/content/57c4e3ce-ca22-11e8-b276-b9069bde0956, accessed 2 August 2019; The 11 members of the CPTPP are: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. 39. ‘No-Deal Brexit Risks Rise as UK-Japan Trade Talks Stall,’ Financial Times, 8 February 2019, https://www.ft.com/content/5ce60af2-2b9011e9-a5ab-ff8ef2b976c7, accessed 16 August 2019. 40. ‘US-China Trade War Pushes Global Exports into Contraction,’ Financial Times, 25 September 2019, https://www.ft.com/content/ 74a00ed4-df9c-11e9-b112-9624ec9edc59; ‘Asia’s Emerging Economies Are Winning US-China Trade War,’ Financial Times, 25 September 2019, https://www.ft.com/content/b01d048c-df59-11e9-9743-db5a37 0481bc. 41. Choe Sang-Hun, Motoko Rich, and Edward Wong, ‘South Korea Says It Will End Intelligence-Sharing Deal with Japan, Adding to Tensions,’ The New York Times, 22 August 2019, https://www.nytimes.com/ 2019/08/22/world/asia/south-korea-japan-intelligence.html, accessed 30 September 2019. 42. ‘South Korea Groups See Supply Chain Boost in Trade War with Japan,’ Financial Times, 25 September 2019, https://www.ft.com/ content/644ecb2e-ddad-11e9-9743-db5a370481bc; ‘South Korea Files WTO Complaint Over Japan Trade Restrictions,’ Financial Times, 11 September 2019, https://www.ft.com/content/ea993216-d42d-11e98367-807ebd53ab77, accessed 30 September 2019; Philip Blenkinsop, ‘Eu, China and 14 Others Agree Stop-Gap Fix for WTO Crisis,’ Reuters, 27 March 2020, https://www.reuters.com/article/us-trade-wto-idUSKB N21E2I0, accessed 21 May 2020. 43. ‘Free Trade Agreement (FTA) and Economic Partnership Agreement (EPA),’ Ministry of Foreign Affairs of Japan, 30 September 2019, https://www.mofa.go.jp/policy/economy/page2e_000001.html, accessed 30 September 2019; Peter Petri and Michael Plummer, ‘RCEP:

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A new trade agreement that will shape global economics and politics’, 16 November 2020, https://www.brookings.edu/blog/order-from-chaos/ 2020/11/16/a-new-trade-agreement-that-will-shape-global-economicsand-politics, accessed 1 December 2020. 44. ‘G20 Summit in Osaka, Japan,’ European Council, 28–29 June 2019, http://www.consilium.europa.eu/en/meetings/international-sum mit/2019/06/28-29/, accessed 30 September 2019. 45. ‘Japan and EU Sign Deal in Riposte to China’s Belt and Road,’ Financial Times, 27 September 2019, https://www.ft.com/content/dd14ce1ee11d-11e9-9743-db5a370481bc, accessed 8 October 2019. 46. ‘IMF: Direction of Trade Statistics.’

Index

A Abenomics, 140 Abe, Shinz¯ o, 136, 137, 139, 142, 145, 149, 151, 170, 180, 240, 241, 245–248 letter to Theresa May, September 2016, 246 Advanced Micro Devices. See AMD Afghanistan, 30, 61, 108 Africa, 76, 145, 230 AI. See Artificial Intelligence AIIB. See Asian Infrastructure Investment Bank AMD, 186 American World Order, 21 Amsterdam, 143 Apple, 187 Arizona, 193, 194 Arm Holdings, 13, 81, 184, 190–193, 196 Arms Embargo EU’s on China, 3, 7, 56, 57, 59, 63 Artificial Intelligence, 23, 26, 28, 32, 146, 148, 190, 200

Asian Development Bank (ADB), 115, 248 Asian Financial Crisis, 50 Asian Infrastructure Investment Bank, 9, 53, 64, 105. See also AIIB ASML, 184, 189, 191, 192, 196, 200 Australia, 52, 87, 90, 109, 111, 114, 154, 167, 170, 176, 212, 213, 220, 230, 240, 247, 257 B Beijing, 51, 104 British Embassy in, 166 Horticulture Expo, 119 Beijing (as in Chinese Government) domestic repression, 9 Belt and Road Initiative. See BRI biomedicine, 187 Boao Forum, 173 Bologna Process, 219 Bolsonaro, Jair, 19 Borrell, Josep, 36, 83 Brazil, 109 Brexit

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2021 M. Reilly and C.-Y. Lee (eds.), A New Beginning or More of the Same?, https://doi.org/10.1007/978-981-15-9841-8

259

260

INDEX

after Brexit, 17, 85, 106, 148 Brexit and nationalism, 18, 30 Brexit and Taiwan, 156, 157, 163, 169, 171, 184, 191, 195, 253 Brexit negotiations, 8, 191 Brexit referendum, 2, 37, 101, 102, 105, 121–123, 145, 157, 163, 165, 170, 205, 236, 239 Brexit supporters, 142 impact of Brexit, 1, 10, 106, 137, 156, 195, 205, 223, 239, 241 impact on Japanese investment in the UK, 136, 240, 241, 245 impact on UK-Japan relations, 11 impact on UK universities, 14, 210, 218, 220, 223 implications for UK policy on China, 103, 106, 118 no-deal Brexit, 142–144 post-Brexit, 6, 70, 90, 92, 101, 102, 106, 137, 138, 142–144, 151, 154, 163, 169, 172, 236 as a pragmatic success, 18 2016 referendum, 1, 3, 136, 148, 151, 236, 238 risks of to manufacturing and trade, 13 Brexit referendum impact on British policy making, 10 BRI, 10, 33, 34, 60, 79, 82, 88, 103, 105, 107, 109, 110, 112, 115, 118, 121, 216, 250 British Chamber of Commerce in China implications of Brexit for members, 120 British Council, 214, 216, 221 British Steel, 58, 120 Brown, Scott, 102, 107, 109, 122 Brunei, 2, 154, 251, 257 Brussels, 36, 147 Budd, Graham, 192

Buenos Aires, 142 Bush, George H.W., 21 Bush, George W., 21 C Cambridge Silicon Radio, 190 Cameron, David, 10, 52, 108, 136, 137, 147, 151, 166 Canada, 33, 76, 78, 90, 103, 154, 212, 213, 220, 230, 247, 248, 252, 257 CATO Institute, 88 Chang, Morris, 187, 193, 199 Chen Liang-gee, 195 Chen Shui-bian, 158, 172 China, 2, 55, 170, 197, 209, 210, 213, 217, 223, 230, 241 Anti-Secession Law and Arms Embargo, 56 China and British Policy, 5 China and India, 23, 126 China and Taiwan, 48, 55, 157, 158, 193 China and world order, 6, 20, 28, 36, 69, 91 China-Foreign Cooperation in Running Schools, 221 China’s expansion, 162 Chinese dream, 160 and corporate espionage, 27 defence budget, 76 designated a “currency manipulator”, 71 emergence as a major power, 45 expanding military presence, 76 fish exports to UK, 242 foreign direct investment in Europe, 81, 87 foreign direct investment in UK, 81 Government fears over impact of Brexit, 239 growing assertiveness of, 5, 7, 61

INDEX

ICT exports, 242 and industrial policy, 26 influence of the UK, 63 “Made in China 2025”, 74, 86, 112 Made in China 2025 strategy, 27 and Market Economy Status. See Market Economy Status Ministry of Commerce and trade deal with UK, 106 narrative of years of humiliation, 54, 62 and new world order, 49 One China, 55, 72 relations with USA, 17 as a “responsible stakeholder”, 46 as a revisionist power, 24 State Bureau of Surveying and Mapping, 164 and trade with UK, 238 and UN Commission for Human Rights, 53 views on Brexit, 105 Chirac, Jacques, 57 climate change, 31, 50, 74, 104, 108, 250 Paris Climate Accord, 79 Clinton, Bill, 21 Clinton, Hillary, 139 Cold War, 23, 25, 28, 29, 34, 36, 56, 101, 102, 104, 201 colonialism, 54 Comprehensive and Progressive Agreement for Trans-Pacific Partnership, 197. See also CPTPP Coronavirus. See Covid-19 Covid-19, 1, 4, 7, 15–17, 26, 27, 29, 64, 83, 121, 135, 143, 146, 150, 151, 158, 167, 172, 186, 214, 223, 236 and closure of UK universities, 214 and “mask diplomacy”, 35

261

CPTPP, 15, 33, 149–151, 154, 247, 249–253, 257 cyber-attacks, 123 cybersecurity, 23, 109, 146, 195, 198 D Daiwa, 143 Dalai Lama, 104 Darroch, Kim, 166 Davidson, Phil, 90 demagogy, 140 Donald Trump “America first” policy, 8 Duterte, Rodrigo, 19 E East Asia, 1–3, 14, 64, 172, 173, 220, 221, 236 Economic Cooperation Framework Agreement (ECFA), 243 Economic Partnership Agreement. See EPA EPA, 245, 248, 257 Erasmus+, 215, 216, 227 Erdo˘gan, Recep Tayyip, 19 EU, 45, 54, 168, 173 Bilateral Investment Treaty with China, 47 China’s largest trading partner, 81 and current international order, 30 Economic Partnership Agreement with Japan, 47 EU and Brexit, 10 EU and China, 8, 51, 75 EU and human rights, 75 EU and Japan, 140, 245 EU and members, 173 EU and UK, 5, 6 EU and USA, 70 2019 EU-China Strategic Outlook, 69, 75, 77, 82, 87

262

INDEX

Free Trade Agreement with Korea, 47, 239 lack of consensus in dealing with China, 7 lack of strategic interest in North-East Asia, 3 and long-term ambitions of China, 62 Market Economy Status for China, 52 Mutual Recognition of Professional Qualifications Directive, 208 Partnership and Cooperation Agreements, 250 relations with South Korea, 48 representation of women, 38 1989 response to Tiananmen, 59 Strategic Partnership Agreement with Japan, 49 Strategic Vision Statement, 2016, 37 strategy towards China, 48, 64, 74, 105 Trade for All policy, 47 views of China, 46 EU code of conduct for arms sales, proposed, 3 EU-Japan Economic Partnership Agreement. See EPA EU-Japan Mutual Recognition Agreement, 148 Europe, 1 European consensus, 63 European countries, 83, 222 Europe and China, 126 Europe and East Asia, 2 Europe and Eurasia, 96 Europe and Japan, 33 Europe and North-East Asia, 46 Europe and USA, 31 European foreign policy, 36

European Single Market, 3, 11, 240, 241, 252 Fortress Europe, 3 European Council on Foreign Relations, 16, 32 European Higher Education Area (EHEA), 219 Euro-sceptics, 81 F Fallon, Michael, 167 FBI, 27 Field, Mark, 111, 116 Financial Times, 18, 149, 153 5G, 7, 9, 12, 32, 57, 58, 74, 82, 87, 115, 119–121, 172, 193–195, 198 Five Power Defence Arrangements (FPDA), 170 Flint, Douglas, 115 FONOPs, 12, 55, 58, 72, 89, 90, 114, 162, 163, 165–167, 169, 171, 179 Foreign and Commonwealth Office, 110, 144 Fox, Liam, 114, 116, 236, 253 France, 12, 32, 55, 81, 84, 89, 90, 111, 118, 124, 220, 238 Frankfurt, 143 Freedom of Navigation Operations. See FONOPs Free Trade Agreements. See FTA FTA, 10, 47, 61, 85, 103, 120, 147, 154, 236, 239, 244, 245, 251, 252, 257 EU-Korea, 244 Switzerland and China, 243 G G7, 4, 7, 18, 22, 51, 165, 166, 238, 247

INDEX

Foreign Ministers’ Declaration of Maritime Security, 165 Ise-Shima summit 2016, 137 G20, 7, 18, 51, 106, 108, 247, 258 Buenos Aires summit, 2018, 142 Hangzhou summit, 2016, 139 2016 summit in Hangzhou, 247 2019 summit in Osaka, 250 geopolitics, 28, 32, 34, 37, 39, 144 Germany, 9, 32, 73, 75, 81, 83, 84, 107, 118, 124, 220, 238, 247 Global Britain, 2, 12, 102, 103, 105, 106, 108, 111, 113, 114, 116, 122, 147, 156, 157, 165, 168–171 Global Financial Crisis, 45, 47 globalisation, 21, 22, 26, 28, 29, 33, 46, 50, 150 globalism, 23 Global Times , 3, 4, 8 ‘golden era’ in UK-China relations, 10, 105, 107, 172 Goldman Sachs, 143 Greater Eurasian Partnership, 34 green energy, 187 Gui Minhai, 75 H Hammond, Philip, 166 Hancock, Matt, 114 Hangzhou, 139, 247 hegemony, 21, 156, 157, 160–163, 172 Hermes Microvision Inc, 189 Higher Education Statistics Agency (HESA), 206, 210, 220, 224 Hinkley Point, 108, 110 HiSilicon, 184, 186, 192 Honda, 144 Hong Kong, 2, 4, 9, 10, 50, 54, 55, 75, 77, 78, 80, 91, 104, 119,

263

133, 134, 158, 197, 206, 215, 220, 230 Court of Final Appeal, 119 national security law, 7, 9, 172, 236 2019 protests, 54, 60 protests and Legislative Council, 55 transnational education activities, 221 and UK general election, December 2019, 120 Hoover Institution 2018 report on “Chinese Influence and US Interests”, 77 Howe, Geoffrey, 144–147, 153 Hsinchu Park, 184, 186 Huawei, 7, 9, 13, 16, 32, 57, 58, 63, 64, 71, 76, 80, 82, 83, 85–87, 114, 115, 118–121, 134, 172, 184, 186, 191–194, 197, 243 Hu Chunhua, 119 Hu Jintao, 61 human rights, 5, 7, 8, 49, 53, 59, 63, 70, 73, 75, 77, 78, 80, 82–86, 90–92, 103–105, 108, 110, 111, 116, 117, 119–122, 146, 147, 249, 250 European ‘preaching’ about, 3 threat to from China, 8 violations by China, 8 Human Rights Commission, 59 Hungary, 36, 83 Huntington, Samuel Clash of Civilisations, 23 Hunt, Jeremy, 117, 118

I IBM, 187 ideology, 34 influence of in policy making, 6 Ilham Tothi, 9 imperialism, 29

264

INDEX

India, 18, 20, 23, 29, 36, 109, 111, 126, 185, 230 Indo-Pacific, 28, 69, 89, 160 Industrial Technology Research Institute (ITRI), 189 Intel, 186, 189 intellectual property, 25–27, 31, 71, 72, 82, 86, 115, 218, 224 International Business Machines Corporation. See IBM IPR. See intellectual property Iran, 30, 32, 37, 74, 79, 106 Iraq, 30, 61, 126 Italy, 60, 81, 238 J Japan, 4, 103, 109, 218 and colonialism, 54 Global 30 Project, 216 Japan and Brexit, 137, 138, 140, 142, 143, 148, 149, 151, 246 Japan and Europe, 65 Japan and G7, 247 Japan and North-East England, 137 Japan and South Korea, 249 Japan and USA, 11, 170, 249 Japan and WTO, 248 Japan Business Council in Europe, 246 Japanese Government, 142, 240, 245, 252 Japan-UK Joint Declaration on Security Cooperation, 170 ‘Lost Decade’, 11 Ministry of International Trade and Industry, 185 Re-Inventing Japan Project, 216 relations with China and USA, 8 and rise of American protectionism, 15 ‘strategic partnership’ with the UK, 11

and UNSC, 52 Johnson, Boris, 16, 19, 82, 117, 120, 167, 180, 195, 198, 229, 236 K KEDO, 58 Kim Jong-un, 4 Kiribati, 197 Korea and CPTPP, 251 Korean War, 2, 54 Kuka AG, 81 Kuomintang, 159 L Lee Hsi-ming, 161 Levy, Bernard Henri Last Exit Before Brexit, 18 Li, Alan asylum in Germany, 9 Lidington, David, 113 Li Keqiang, 112 Liu, Mark, 190 Liu Xia, 9, 75 Liu Xiaobo, 9, 75, 111 Liu Xiaoming, 55, 58, 111, 121, 128 London, 104, 143, 145, 152, 199, 231, 241 stock exchange link with Shanghai, 107, 108 visit by Chinese warships, 111 M Macao, 2, 206, 215 MacArthur, Douglas, 160 Mahbubani, Kishore, 20 Maidment, Paul, 143, 153 Ma Kai, 186 Market Economy Status, 7, 47, 52, 57, 63, 87, 105 Ma Ying-jeou, 157

INDEX

May, Theresa, 10, 107, 108, 112, 117, 126, 142, 147, 180, 236, 240, 241, 245, 246 Lancaster House speech, January 2017, 235 speech in Davos, January 2017, 108 Merkel, Angela, 52 Mexico, 154, 247, 257 militarisation, 70, 76, 88, 162, 166 military, 89, 126, 166, 175, 176, 191 Mitsubishi, 11, 143 Morgan Stanley, 143 Motegi, Toshimitsu, 150 Munich Security Conference, 63, 84, 85 Myanmar, 146 N Nakanishi, Hiroaki and Brexit, 136 nationalism, 30, 46, 50 NATO, 31, 34, 79, 147 NBA, 73 New Argonauts, 184 New Southbound Policy, 163, 251 New Zealand, 90, 109, 111, 154, 170, 230, 252, 257 Nine-dash line, 77, 89, 164 Nissan, 136, 137, 140, 142, 143, 152, 153 Nixon, Richard, 25, 56 Nomura, 143 North-East Asia, 45 Northern Territories, 53 North Korea, 4, 56, 58, 112, 146, 147, 249 O Obama, Barack, 11, 21, 25, 137, 152, 237 Olympics, 104, 146

265

Opium War, 29, 54 Orbán, Viktor, 19 Osaka, 250, 258 Osborne, George, 9, 108, 136 Overall Defence Concept, 161 Oxford Analytica, 143

P Panasonic, 143 pandemic. See Covid-19 Paralympics, 146 Peking University, 222 Pence, Mike, 28, 42, 73, 80, 94 Pentagon, 72, 171 People’s Liberation Army. See PLA People’s Republic of China (PRC). See China Permanent Court of Arbitration and S China Sea, 164–166 Philips Electronics, 189, 190, 200 PLA, 158, 160, 175, 176 Plaza Accord, 11 Poland, 36 Pompeo, Mike, 32, 73, 80, 85, 95, 120 post WWII, 164 Powerchip Technology Co., 186 Princess Royal, 111

Q Qualcomm, 190, 193 quantum politics, 23, 38

R Raab, Dominic, 134, 149, 150, 236, 253 RAND Corporation, 161 Regional Comprehensive Economic Partnership, 197, 250 Republic of Korea. See South Korea

266

INDEX

Rim of the Pacific. See RimPac RimPac, 72, 90 Russia, 18, 20, 23, 24, 28, 30–34, 36, 46, 53, 57, 73, 91, 106, 119, 147, 163 S Samsung, 189 Schroder, Gerhard, 57 semiconductors, 13, 71, 183–187, 189–199 Shanghai stock exchange link with London, 107 Shangri-La Dialogue, 173 Sharma, Alok, 107, 109 Silicon Valley, 184, 199 Singapore, 2, 154, 170, 173, 189, 200, 220, 230, 257 Single European Market, 141. See also European Single Market Sino-British Global Comprehensive Strategic Partnership, 113 Sino-British Joint Declaration, 111 16 + 1 arrangement, 63, 82 social media, 23, 38, 140 SoftBank, 81, 190, 200 Solomon Islands, 197 Soros, George, 27, 42 South China Sea, 12, 53–55, 58, 69, 70, 72, 75–77, 83, 86, 89, 90, 103, 114, 118, 119, 146, 157, 160, 162–171, 173, 177, 179 Chinese militarisation of, 12 South Korea, 2, 4, 5, 37, 50, 51, 56, 61, 64, 186, 206, 214, 215, 218, 220 and CPTPP, 250 Government fears over impact of Brexit, 239 relations with China and USA, 8 Spratly Islands, 89, 166, 167, 169

‘strongman leaders’ rise of, 20, 38, 62 Sun, Gordon, 191 Sweden, 83, 252 Swire, Hugo, 166 Syngenta, 81 Syria, 30, 127 T Taiwan, 2 and CPTPP, 250, 251 dependence on USA for security, 12 5 + 2 Industrial Innovation Plan, 187 Taiwan and Europe, 5, 13, 56, 190 Taiwan and semiconductors, 13, 185–187, 189, 190, 192, 193 Taiwan and South Korea, 185 Taiwanese firms, 189, 194, 195, 197, 243 Taiwan Relations Act, 72, 161 Taiwan’s democracy, 92 Taiwan’s Dongsha Islands, 160 Taiwan’s exports, 186, 242 Taiwan’s national security, 12, 157–159, 161, 163, 170 Taiwan Semiconductor Manufacturing Company. See TSMC Taiwan’s sovereignty, 161, 162 Taiwan’s territorial waters, 162 Taiwan Strait, 72, 89, 156, 157, 161, 167, 176 Taiwan-UK Youth Mobility Scheme, 190 Taniguchi, Tomohiko, 139, 152 Thatcher, Margaret, 140, 146 Tibet, 164 Timor Leste, 2 Tokyo, 5, 147, 148, 150 Toyoda, Akio, 142 Toyota, 136, 142, 144

INDEX

TPP, 15, 33, 47, 61, 79, 139, 148, 149, 154, 237, 245, 247, 248, 251 Transatlantic Trade and Investment Partnership (TTIP), 237 Trans-Pacific Partnership. See CPTPP; TPP Trump, Donald, 2, 4, 6, 15, 16, 19, 21, 23, 24, 27–30, 34, 35, 37, 40, 41, 69–72, 78–80, 91, 93, 94, 124, 139, 145, 148, 158, 237, 240, 246, 247, 249, 255 “America first” policy, 7, 50, 78 embargo on Huawei, 13 and Iran nuclear agreement, 30 preference for bilateral agreements, 237 trade war with China, 15 and trans-Atlantic relations, 84 and US relations with EU, 31 withdrawal of USA from TPP, 61, 149, 237 Truss, Liz, 148 Tsai Ing-wen, 77, 157, 158, 160, 163, 174, 187, 188, 194, 195, 197 TSMC, 13, 186, 187, 189–194, 196, 199, 200 Turkey, 20, 23, 62 Twitter, 24 U Uighurs, 9, 119 UK, 1, 55, 83, 154, 166, 224, 230, 236 China as a ‘key partner’, 110 ‘continuity free trade agreement’ with Korea, 244 exports to Japan, 147, 148 growth of trade with China, 238 Japan bilateral free trade agreement with Japan, 246 as a major international player, 18

267

2018 National Security Capability Review, 168 and relations with USA, 5 responses to China’s policy in S. China Sea, 165 trade with Japan, 239, 242 trade with Korea, 239 trade with Taiwan, 239, 242 UK and Brexit, 236 UK and East-Asia, 5, 6, 14, 206, 210, 221 UK and Free Trade Agreement, 85, 120 UK and South Korea, 214, 218, 220 UK and Taiwan, 173, 190, 195, 196 UK International Education Strategy, 209, 221 UK International Research and Innovation Strategy, 209, 218 UK and China, 218, 224 educational links, 119 Infrastructure Alliance and Academy, 115 joint trade and investment review, 113 possible free trade agreement, 120 UK and EU post-Brexit relationship, 14 UK and Japan, 11, 145 security alliance, 157 strategic partnership, 142, 151 UK-Japan Joint Statement, 2019, 145, 146, 180 UK-Japan Strategic Dialogue, 170 UK-China Economic and Financial Dialogue, 107 UK-China-BRI Education Partnership Initiative, 216

268

INDEX

UK-China Joint Strategy for Science, Technology and Innovation Cooperation, 218 UK Government, 2, 8, 14, 58, 105, 112, 121, 221, 231, 236 and ‘One Country Two Systems’ model in Hong Kong, 54 relations with China, 9, 10 Ukraine, 34, 146 UK universities and China, 206 and Hong Kong, 206 UK universities’ income, 206, 207 UK universities’ research funding, 207, 217 UK-US-Japan Trilateral Agreement, 171 UMC, 186 UN, 56, 74, 77, 91, 119 Arbitration Tribunal on S. China Sea, 77 Commission on the Limits of the Continental Shelf, 164 High Commissioner for Human Rights, 76 UNCLOS, 75, 77, 89, 165. See also UN Convention on the Law of the Sea UN Convention on the Law of the Sea. See UNCLOS UN Human Rights Council. See UNHRC United Kingdom. See UK United Microelectronics Corp. See UMC United Nations. See UN UN Security Council, 4, 7, 18, 52, 77 USA attitudes towards globalisation, 29 Foreign Investment Risk Review Modernization Act, 71 2018 Human Rights Report, 73

2018 National Defense Strategy, 69 National Defense Strategy of, 24 2017 National Security Strategy report, 69, 71–73, 91 pivot to Asia, 61 possible Free Trade Agreement with UK, 85 relations with China, 17 Section 301 trade procedures, 41, 71, 74, 86, 87 and security guarantees, 4 tightening of visa requirements, 214 trade war with China, 57 USA and East Asia, 23 USA and Soviet Union, 29 USA and Taiwan, 64, 159, 161 USA and UK, 8 US Entity List, 71, 184, 193, 198 US foreign policy, 2 US Taiwan Business Council, 160 USA and China, 6, 11, 14, 15, 18, 19, 22, 23, 27, 28, 31, 32, 34, 46, 51, 156, 159, 186, 249 balance of power in western Pacific, 157, 161 contest for supremacy between, 10, 23 Justice Department, 2018 China Initiative, 86, 87 2020 Phase One Trade Agreement, 71, 86 pressure on Chinese telecoms companies, 58 US-China trade war, 191, 193, 194, 214, 243, 249, 251 US Congress Asia Reassurance Initiative Act, 89 US Government, 58, 80, 82, 83, 85, 158, 214 appointment of judges to WTO, 249 USTR, 25, 26, 41, 71

INDEX

V Vietnam, 90, 154, 164, 167, 185, 249, 251, 257 Vietnam War, 2 Vietnamese economy impact of US-China trade dispute on, 248 Vogel, Ezra, 144 von der Leyen, Ursula, 18, 37, 49 Vote Leave, 147, 152, 154

W Wang Yi, 43, 50, 63, 117, 200 Washington, 51 Wen Jiabao, 57 Westlessness, 50, 51 Williamson, Gavin, 114, 122 Wong, Ray asylum in Germany, 9 World Health Organisation (WHO) suspension of US financial contributions to, 7 World Trade Organisation. See WTO

269

WTO, 7, 22, 25, 26, 31–33, 52, 56, 63, 74, 76, 78, 87, 88, 105, 147, 150, 154, 243, 248, 249 Market Economy Status in. See Market Economy Status WWII, 51, 53, 56, 61, 73, 92, 240 X xenophobia, 140 Xiamen University, 222 Xi Jinping, 2, 4, 5, 19, 26, 30, 35, 41, 53, 60, 76, 77, 105, 110, 113, 158, 164, 175, 246 and China Dream, 61 Xinhua, 166 Xinjiang, 9, 60, 70, 74, 75, 117–120 Y Yang Jiechi, 108 Z zeitgeist, 18 Zhongnanhai, 157 Zoellick, Robert, 46