The day after shadow Foreign Secretary David Lammy wrote how a Labour government would seek a more realistic yet pragmatic relationship with China, the Deputy Prime Minister Oliver Dowden outlined a framework to boost economic defences against threats to British economic interests. This strategy is principally aimed at China, in a further sign of cooling Sino-British relations as this Government balance trading relations with Beijing against mounting threats to the UK’s national and economic security.
Declaring that the UK is “in cyber and economic contestation with an increasing range of state and non-state actors”, the Deputy Prime Minister announced the launch of a dedicated analytical team, to deepen understanding of potential risks of outward investment in sensitive sectors.
Threats to the UK’s Economic Security
Dowden asserted that while the financial crash of 2008 exposed the economic risks of globalisation, the rising geopolitical competition evidenced in global affairs today demonstrates the security risks behind such integration. The Covid-19 pandemic, and Russia’s illegal and brutal war in Ukraine, have both laid bare the interconnectedness of global supply chains, and the extent to which these are exploited, such as and Chinese acts of economic coercion throughout the global pandemic, and by Russia driving up the price of gas across Europe.
Highlighting on ‘X’, the Deputy Prime Minster declared that the UK won’t ‘de-couple’ – but that it does need to ‘de-risk’ against increasing and evolving threats; a strategy which many backbench Conservative MPs have been calling on the Government to increase policies designed to ensure for a period of years. Highlighting how a stronger economy will ensure greater security, Dowden went on to declare that “in these uncertain times, our economic tools must adapt to respond to new threats”.
New Economic Tools
‘New economic tools’ is a carefully worded diplomatic term designed to help ‘de-risk’ the UK’s economic and technological security from emerging threats – and here, principally against China.
On exports, the Department for Business and Trade will improvements to export controls on emerging technologies. This will ensure that the UK’s export system is flexible enough to deal with rapidly emerging threats, and cases are processed more efficiently.
On outward investment, the Department of Business and Trade are launching a dedicated team to better understand potential risks from Outward Direct Investment (ODI), whilst also updating National Protective Security Authority guidance to ensure that businesses make better informed investment decisions.
On inward investment, the Government is publishing the recent call for evidence on the National Security and Investment (NSI) Act. The NSI Act continues to function well, but the Cabinet Office will bring forward updates to fine-tune the system, ensuring that remains capable dealing with the threats facing the UK, whilst crucially remaining as pro-business as possible, without compromising the Government’s ability to conduct proper scrutiny and ensure national security.
This includes considering a small number of targeted exemptions from the Act’s mandatory notification requirements, the publication of further guidance, and a new consultation on updates to the mandatory area definitions, setting out the areas of the economy subject to the NSI Act’s mandatory notification requirements. Critically, this is highly likely to include proposals for new areas for both critical minerals and semiconductors.
Two Sides of the Same Coin?
As Dowden suggests, prosperity and security are two sides of the same coin, and that we do not make ourselves more secure by being less open. Instead, we redouble our efforts to make our open market as secure as possible.
These sentiments are designed to ensure a continuation of trading relations, and to ruffle as gently as possible Beijing’s feathers. The Chinese Communist Party are becoming increasingly vocal in recent times announcing their displeasure with countries who cross them. The Deputy Prime Minister rightly points to China’s aggression in Xinjiang, the South China Sea, and Hong Kong demonstrates its disregard for the rules-based order in which the UK’s prosperity and security are wholly interlinked.
Deep in the Great Hall of the People Chinese officials will be reeling at this very public display of the UK de-risking from Beijing economic threats. But Dowden is completely correct in his assessment: “there is no greater source of resilience than a strong economy”. Given the trajectory of global affairs shaping the UK’s interconnected systems of prosperity and security, investing now in the UK’s own resilience is a most prudent step to be taking, and one that needs to maintain at pace.
This article was written by Curia’s Foreign Policy Director, Rob Clark, to gain more foreign policy analysis, click here.