Orders of the Day — Foreign Affairs and Overseas Development

Part of the debate – in the House of Commons at 11:10 am on 8 November 1985.

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Photo of Mr Peter Blaker Mr Peter Blaker , Blackpool South 11:10, 8 November 1985

I have recently had the good fortune to visit three countries in the far east, and I want to say a few words about each. The first country was Japan, and the most important question in our relations with that country concerns the measures that Japan is taking in an attempt to reduce its vast trading surpluses with the remainder of the world.

The measures take three forms—liberalisation of the barriers to imports, stimulation of demand and raising and sustaining the value of the yen. I have no doubt that the Japanese Government intend to make the measures effective. I cannot judge whether they are sufficiently ambitious, but I have two doubts about whether they will be successful. Indeed, some of the Japanese to whom I spoke shared my doubts.

The first doubt is whether it will be possible to change the habitual practice of so many Japanese business men to buy Japanese without studying what is available from overseas—unless, of course, nothing Japanese is available. The second doubt is whether it will be possible to sustain the value of the yen—the most important of the three measures—in view of the enormous demand for Japanese funds from America. The financial flows from Japan to America during the past 12 months amounted to $40 billion, which is equal to Japan's trade surplus with America.

Whatever may be the validity of those doubts, it is important that Japan's measures to reduce its trade surpluses with the free world countries should indeed be successful; otherwise we will be faced with ever-increasing demands for protectionism in the United States Congress, which will have implications not only for economic relations in the free world, but for our political cohesion. This House should make it clear that it believes that it is important that Japan should succeed in its efforts.

The second country I visited was China, where the results of the liberalisation measures since 1979 are becoming evident. I visited a fanning township, which not long ago would have been called a farming commune, where the average income per worker has doubled during the past five years—admittedly from a low base—owing to the new incentive and liberalisation measures.

It is more difficult in an urban environment to apply incentives, but the Chinese are making efforts to introduce them more and more into the factories, and the results are becoming apparent there too. Indeed, these results and the enthusiasm shown by the Chinese for the changes are such that it is extremely unlikely that the new liberalisation tendency will be reversed. If there were any strength behind a desire for a reversal, I think that the memories of the horrors of the cultural revolution, which are fresh in the minds of many people, would be an effective barrier.

China wants to learn how an incentive-based economic system works, it wants to trade with the outside world and especially the free world and it wants joint ventures. This open door policy provides great opportunities to foreign business men, and especially to British business men because of the good will between China and the United Kingdom generated by the agreement on Hong Kong.

The Chinese market is undoubtedly difficult to enter for a business man who does not already know it. My advice to potential British exporters or those interested in joint ventures is to find someone who knows the China market. There is no better place to find someone to give that advice than Hong Kong, the third country that I visited.

Despite the agreement between the United Kingdom and China, there is still concern in Hong Kong about the future after 1997. I believe that that concern will steadily diminish as practical arrangements are made between the British and Chinese Governments on the various matters covered in the joint declaration and agreement.

There have been two recent examples. The first was an agreement in the Land Commission about the amount of land to be released in the coming 12 months, which was reached in a cordial and rapid manner. The second agreement was within the joint liaison group about Hong Kong's position in the Asian Development bank.

As I have just hinted, the importance of capitalist Hong Kong to China will become ever more obvious. We used to say that Hong Kong's value lay principally in its being a source of foreign exchange with China. Although that is still true to some extent, it is becoming more and more clear that Hong Kong is China's best source for technology.

One of the problems still debated in Hong Kong is whether—and if so, how fast—progress should be made towards more representative government. I was in Hong Kong when the new legislative council was inaugurated in its new building. It was a landmark in the direction of representative government. For the first time, it contains elected members. I believe that further constitutional development should be undertaken with caution. If it is too fast, it could damage the stability and prosperity of Hong Kong, which would not happen if we proceeded with caution.

I have mentioned three countries, two of which—Japan and Hong Kong—are success stories, not simply by Asian standards but by world standards. They are free enterprise countries. The third country, China, is engaged in a difficult struggle towards greater incentives and more economic success, following the agonising period of rigid state control and state ownership.

Would it not be a good idea if the Labour party sent a high-powered delegation to those three countries to study their respective economic systems? Perhaps then the Labour party might learn a thing or two.