We are constantly being told how important trade with China
is and never has this issue more prevalent than this week with the visit of
Chinese premier Li Kequiang, but can there really only be an upside to dealing
with the world’s second largest economy?
Mr Li came to London with apparently £17 billion in his back
pocket in the form of infrastructure deals and other investments in exchange
for…we are not sure yet, but visa restrictions are being relaxed to encourage
Chinese businessmen.
The way politicians speak you would naturally assume there
are only massive plus points for the UK increasing its trading partnerships
with China.
In fact UK trade with China has, according to the Chinese
ambassador to the UK Liu Xiaoming, increased nearly 14% in the last year,
faster than any other EU country.
Yes Mr Farage, that’s right. The UK has increased its trade
with China, like that economic powerhouse of Iceland, whilst still part of the
EU.
However, it should under no circumstances be assumed this is
all good news and in fact closer Sino-UK trading ties should be treated very
delicately.
Firstly China is a massive producer, but is not yet a nation
of consumers.
Yes, UK companies exported more than £12bn of goods and
services in 2013, but the UK imported well over £30bn and this is very
dangerous.
With the World Cup currently in progress, Brazil has been a
central to the news recently and is a great example of a country which has not
benefitted from Chinese imports, despite the country investing in South
America.
The Brazilian market has been flooded with cheap Chinese
merchandise which has put many domestic producers out of businesses and this is
a trend seen in many other countries, not least in America.
In exchange Brazil and many other developing nations in
Africa and South America were supposed to benefit both socially and
economically from infrastructure deals completed by the Chinese.
However, what ended up happening was a Sinification of
public services where the only winners where the Chinese state owned companies
who pillaged the land for natural resources in exchange for construction
projects carried out by workers from China, not locals.
At a time when America is issuing arrest warrants for
Chinese computer hacking of military and commercial computers is this really a
nation you want to invite into your country to build a new generation of
nuclear power plants and high speed railways?
Human rights also matter…a lot.
Contrary to the opinion of Tory minister Michael Fallon, who
said human rights dialogue should not get in the way of trade deals, the way a
country treats its people does matter.
How is China able to be competitive on the world stage?
Quite simple really. The workers in China are basically treated as slave labour
so there are no production costs.
This is how they are able to sell things around the world at
knock down prices.
Yes, human rights violations and trade are two separate
topics, but there has to be bilateral action to tackle both topics as they are
both intrinsically linked.
Until China agrees to play by the same trading rules as
everyone else it will always benefit disproportionally more than other countries.
Massive state owned monopolies dominate the industry, there
are no health and safety costs, no minimum wage, at best rudimental free
markets, pretty much non-existent environmental controls and massive violation
of international copyrights.
Pollution levels are appalling and a blatant public health
risk and yet there is no effort in China to curb the rapid increase in
consumption of carbon based fuels.
Most importantly however, the Chinese currency is still not
openly traded.
For years the value of the Yuan, or Renminbi, was pegged to
the dollar and it is only in very recent years any effort at all has been made
to open up this market.
This makes China unnaturally competitive, especially against
the large economies of America and Europe.
The combination of all the aforementioned factors is
especially dangerous for the UK and Europe, economies which produce high value
products, in particular cars.
China desperately wants to export more vehicles to the US
and EU, however Europe is also home to some of the world’s biggest and best car
manufacturers.
In the past China has less than subtly ripped off European
designs and the cars produced in the country would never pass EU safety
standards and crash tests, not to mention they can be produced at remarkably
low costs thanks to state funding and what is essentially slave labour.
With many car companies, particularly from Japan, setting up
manufacturing bases in the UK and the likes of BMW, Mercedes and Volkswagen,
Audi and Ferrari based on the continent it is in our interests to protect the
car industry.
While it is undeniably important to increase trade and
diplomatic ties with the world’s second largest economy, it is equally
important to remember dealing with China has the potential to be a very one
sided affair, as many countries in Africa have discovered to their detriment.
