Motion to Take Note

China: EU Committee Report – in the House of Lords at 3:58 pm on 9th June 2010.

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Moved By Lord Teverson

To move that this House takes note of the Report of the European Union Committee on Stars and Dragons: The EU and China (7th Report, Session 2009-10, HL Paper 76).

Photo of Lord Teverson Lord Teverson Liberal Democrat 4:20 pm, 9th June 2010

My Lords, at the moment we in the western world are inward-looking. What we see as a global financial and economic crisis makes us in the western economies and societies look inwards more than we have done for many years, and we have not been paying as much as attention as we did a few years ago to the rise of many other economies around the world, particularly China. Yet the Chinese economy has been growing at some 10 per cent per annum and has become effectively the third largest economy in the world behind the European single market and the United States. It still has a very large trading surplus with the western world, including the European Union, and it is continuing to spread its influence, investment and tentacles across the developing world. It is a country, an economy and a trading nation that we cannot afford to ignore, let alone forget about. We need to keep the focus on it.

For this report, we intended to look at the broad relationship between Europe and China and ask ourselves what the nature of that relationship should be, what it should include, and in which areas the European Union should take action to make sure that the relationship is more effective. For the benefit of the House, I shall give a little of the history of the relationship between the European Union and China. It is perhaps staggering that the current formal legal relationship, in the form of a trading and co-operation agreement, was made between the EU and China in 1985. Although it is 25 years old, it is still valid and is the basis on which EU-China relations formally work. Since then we have seen the introduction of annual summits and, more recently, regular high-level dialogues between Ministers and their equivalents on both sides. Indeed, in 2007 it was agreed that there should be a new partnership and co-operation agreement that would cover a far broader range of subjects than just that of trade as covered in the original agreement. The negotiations towards it continue, but three years later, the agreement is yet to be fulfilled.

The headline from the report and the view of the sub-committee is that, given the important nature of the two entities-one a sovereign state and the other a collection of member states-the agreement needs to be of a much more strategic nature than at the moment. Europe comprises some half a billion people, while China has 1.3 billion. Along with the United States, between us we account for over 50 per cent of global greenhouse gas emissions, and we are major players not just in the world economy but in how the world will work in the future. We believe, therefore, that we should have a much better and more strategic relationship with China.

One of the themes that came up repeatedly throughout our studies was the concern whether Europe had already lost the game and was being left out in terms of future global relations, so that we would have a G2-the two being, of course, China and the United States. We considered this many times, but the committee felt that that was not the case at this point, that it certainly should not be the case, and that the G20 model, in which China participates strongly, would provide a much better role in terms of future inter-governmental co-operation at the global level. The G8 is clearly moving on; it is important to include the developing nations within that, and China could play a strong role. At the moment our relationship with China is not a strategic one. It was described by one of our witnesses-and agreed by the committee-as more representative of a collaborative relationship.

Looking back on the history of EU-China relations, up until 2003 China saw Europe as an important player on the world stage generally. It saw it as a balance to the power of the United States-in an economic if not a military or security sense-and it took great time to understand Europe and invest in the relationship. In 2003, a small incident changed the nature of the relationship. This was when a number of major member states within Europe started to make it clear to China that the EU arms embargo should be removed. That expectation moved to the brink and, although it may not have made a great difference to the way in which the arms trade worked, it was an important policy decision. However, because of the intervention of the United States, negotiations stopped and the arms embargo remained. It was felt by a number of witnesses that at that point China no longer saw the EU as having a pivotal role in its relationships, particularly with the United States, and that, in many ways, it was a partner to the United States in a different way to China. We still have to recover from that situation.

Indeed, one of the lessons that we learned from that episode is that the EU must never again put itself into a position where it is directly in conflict with the United States in its relationship with China-and certainly not into a position where it changes its own policies. There needs to be much greater consultation and co-operation in that area.

It came through from a number of witnesses that the EU, a major economy-among the world's largest-and a large market for China, failed generally to put leverage on to China in regard to certain decisions. To say that the EU rolled over on every occasion is clearly not the case, but we felt that, given our strong trading position, our market and our position in the world, the EU failed to use its natural power to sufficiently influence Chinese policies in areas such as human rights, trade negotiations, intellectual property and access to markets.

An example of when the EU did not help itself was described by a number of our witnesses. This was when the Heads of Government of three major member states-the United Kingdom, France and Germany-entered into a dialogue with the Dalai Lama. China took diplomatic action and, at the same time, other member states tried to take advantage of the situation. We showed no solidarity whatever and the rug was taken from under the feet of the European Union as a whole-this happened during the French presidency under President Sarkozy-when the Chinese cancelled a summit that was due to take place between the EU and China. The committee asked itself whether China would ever have done what it did to the European Union if the United States had been its strategic partner. There is a great need to show strength of unity and to use leverage wherever possible.

The sub-committee also felt that there was a mismatch of understanding within the relationship. The Chinese embassy in Brussels has some 70 or 80 staff and it sends a large number of students to European and other western countries to understand their culture and the way in which they work. There is much greater understanding of the English language in China than of the Chinese language in Europe. There needs to be much greater investment in our understanding of China.

A possible outcome of that lack of understanding is that we look upon China as a single entity. To a large degree, it is clear that it is. It is a centralised, unitary state, with one-party rule everywhere apart from in Hong Kong. However, we forget that there are 31 different provinces in China whose provincial Governments have many powers, even within international investment projects. There are also some 55 minority populations, of which the Han Chinese are by far the largest. The EU therefore needs to have a more complex view of China as a nation, particularly in its dealings on development issues.

The sub-committee was in China for one week. You cannot see a great deal of the country within that time, but we did visit one of the industrial areas in Guangzhou and the Pearl River Delta. Although this is a major industrial area, and although a very effective UK trade delegation is there, we were surprised to find that EU representation was concentrated within Beijing and that it did not have any trade delegations or staff in the provinces. A presence in the provinces is important not just for promoting trade, which is much more a national issue, but also for market access and for making sure that WTO rules are applied and that the writ of trading rules in Beijing is felt out in the provinces.

However, we were not as utterly pessimistic as I have sounded so far. We were encouraged that China is starting to take on a broader role as a world citizen. It is still finding its way in this area and we felt that it was in many ways hesitant to take on that broader responsibility, let alone a regional responsibility. Yet we were surprised, as might be many of your Lordships here, that China is the largest contributor of peacekeeping troops of the permanent five members of UN Security Council, P5. While it has participated independently in the Somali counterpiracy operation, its naval force has co-operated with the EU's Operation Atalanta and the NATO force. We welcome this taking-on of responsibility, while understanding that there is nervousness among the western security community about what that might lead to in the future. We welcome China's increased world citizenship.

It is clear that China's main relationship with Europe is through trade. In 2008, there was a €170 billion deficit between the EU and China. Ironically, one of the outcomes of the recession is that the trade deficit has gone down, but we were reminded that an important aspect of the international recession is imbalances such as that in trade between China and the western economies. The undervaluation of the Chinese currency has enabled China to have very high savings at a time when the West has consumption and very much a trade deficit. So what we see there is a balance that has not changed but needs to change, for future economic stability. With the United States, Europe needs to ensure that there is a resolution of that problem over time before it again becomes a major problem to world trade.

Many noble Lords will be particularly concerned with the human rights issues. We were concerned that there was too much rhetoric and grandstanding and not enough effect in that area, and I know that a number of noble Lords will wish to talk about that. One area that we found very positive, which was never mentioned by the Commission in Brussels but which we saw on the ground, was a number of practical justice and rule-of-law policies, investments and developments that were EU-financed and that found success and were welcomed at a provincial level by provincial Chinese government. We felt that those should be particularly strongly invested in. As for the broader human rights issues, it was pointed out to us by China's Government that, through their economic development, social rights have been improved as at no other time in history. Several tens of billions of Chinese citizens had been taken out of poverty by the current growth and regime within China. We do not dispute that-we welcome it. However, clearly it is not acceptable that that still comes at the level of restriction of human rights and democracy that that still represents.

On climate change, we saw the shift of power from west to east at Copenhagen. Although China signed up to reducing energy intensity at the Copenhagen accord, it was a great sign to us of Europe's failure in that negotiation that it was hardly involved in the Copenhagen accord, while China chaired it and influenced how it worked. We are still in a position of having great challenges as we move towards the next meeting on climate change at the end of the year in Mexico.

I shall leave the description of our report at that. The clear message that came over to us was that in the 21st century, as China clearly improves its economic performance even more and its importance in the world increases, it was essential that the EU had a proper strategic relationship with China. Is the Lisbon treaty, which came into force while we were looking at this relationship, going to enable that? It could do-but we were far from convinced that it would. The summit that took place this May was positive, but I do not think that it moved that relationship forward very much. The challenge is with the European Union to use its power, influence and moral authority to create a strategic relationship that works for the rest of the global community. I beg to move.

Photo of Lord Howe of Aberavon Lord Howe of Aberavon Conservative 4:38 pm, 9th June 2010

My Lords, it is a pleasure to welcome the speech just made by my noble friend and the report of the sub-committee under his chairmanship. As his presentation made clear, it produced a comprehensive, clear and constructive report containing some plain and important messages both for the United Kingdom and the European Union, as well as the People's Republic of China.

The central message is clearly important. If ever a subject cried out for pan-European consideration, it is the management over the long term of our relations with China. That proposition contains no suggestion of hostility, although I noticed with some irony the use of the word "tentacles" by my noble friend. I know that that was not meant to be a demonstration of hostility. There is no question of hostility, but there is a growing significance and diversity of common interests, all requiring the consideration of collective response by the European Union-on climate change and energy, the WTO and IMF obligations, intellectual property rights, the impact of Chinese investments on developing countries and the possible sources of political tension in North Korea, Myanmar, Taiwan and so on.

I am glad to be able to welcome what is said in Paragraph 303 of the report. It states:

"China... has gradually been prepared to play a more constructive role in respect of some armed conflicts in Africa".

My noble friend did indeed make that point. One must hope for a continuation of that-a less passive role by China, for example, in relation to a different style of conflict, whether in Myanmar itself or in Zimbabwe.

I am glad, aside from my noble friend, to be able to endorse the recognition by our new Foreign Secretary, who made his celebrated maiden speech at a party conference in the debate to which I had to reply. He outshone me throughout the evening as I commented on his speech, rather than he on mine. I have great confidence in him. He has been emphasising the value and necessity of approaching these problems and others from a European base. That is an important proposition.

I agree with my noble friend that the formalities of the Lisbon treaty are far from being a magic wand in this context. I venture to suggest that our own colleague, the noble Baroness, Lady Ashton, although she is not here, has an important role to play in this. Because of her demonstration of leadership qualities in this House, I think that she will achieve a constructive partnership-even leadership-with our own Secretary of State and other colleagues in the foreign affairs field.

My second major point is no less important than the first. In Britain's case, at least, and not just in relation to foreign policy, there is truly an important independent role to be played. There are two reasons for making that point. The first is the probability that both our countries, the United Kingdom and the People's Republic, are likely to remain permanent members of the United Nations Security Council. I know from limited experience in that context that it gave an opportunity for me to collaborate with my then Chinese opposite number in that venue. It is no disadvantage that the only other European member is France.

The second reason for confidence in this relationship is the fact that the United Kingdom and China have a long, although sometimes chequered, mutual relationship with each other. We share a sense of history that we are not able to share in quite the same way with other countries.

For me personally, if I may digress for a moment, my own contact with this concept first arose on 5 January 1950. Together with my noble friend Lord Jenkin of Roding, who is not here today, and one other Cambridge undergraduate, I was, rather surprisingly, in Ebbw Vale preaching the cause of Conservatism and holding what was laughingly called a "brains trust" in the constitutional club of that important community. On that day, the news had broken that Ernest Bevin, that terrible socialist Foreign Secretary, had announced Britain's recognition of the People's Republic of China. Surprisingly, members of the club asked us the question, "Do you Conservatives agree or not agree with this rash decision taken by this socialist Foreign Minister?". We had all been well trained by Professor Sir Hersch Lauterpacht, and we all responded collectively to say, "Of course we agree with Ernest Bevin's decision". That laid a firm foundation for my relationship with China thereafter.

The next step came, a little more seriously, in 1973 when I had my first meeting-in the United Kingdom, as it happens-under the benevolent surveillance of my noble friend Lord Walker, who, unhappily, is not with us at the moment. I was Minister for Trade and Consumer Affairs, and I met my Chinese opposite number. Again, the bridge was being built a little further. For that reason or some other, I became a friend of China to the extent that, in 1978, I found myself invited as a guest by the People's Republic together with my noble friend Lord Brittan of Spennithorne and my noble kinsman who is not here. The three of us were in the party together. I remember one episode. There was a notice put out by the China Dailynewspaper to the effect that:

"Vice President Gu Mu had received British Member of Parliament Geoffrey Howe and his wife Leon Brittan".

We overcame that.

During that visit one of our missions was to search for the existence and effectiveness of anything resembling the rule of law in China. We found very little evidence of it. The gang of four were only just being identified as being responsible, with Chairman Mao, for the destruction that had taken place. In Beijing itself we searched for lawyers and eventually met three ageing and retired lawyers from what had once been Beijing University, and that was not very encouraging. In Shanghai, on our last day, we went inside a police cantonmentand were there shown what purported to be a law court. There were only two characters there with white shirts on who claimed to be judges and turned out to be retired generals. When we asked them whether there had been any acquittals during their time at the court, they said they could not recollect anything of that kind. I say that not to be humorous but to emphasise the extent of the depth of uncivilised culture that the Chinese themselves are beginning to acknowledge as they get away from the rules that had been made.

Six years later, I was privileged as Secretary of State, under the leadership of my noble friend Lady Thatcher, to take part in the Hong Kong negotiations. One saw then, in the wisdom with which those were conducted by the then Chinese leader Deng Xiaoping, the extent to which their leadership was developing wisdom that would lead it far into the future not just in economic terms but in political and institutional ones as well.

Deng Xiaoping's four-word phrase "one country, two systems" was one of the wisest things that one has ever had to work within. He hoped that it might one day work for North and South Korea, and we must share his hope. He hoped that it would one day work in Germany, but he was overtaken by the collapse of the Berlin Wall. It enabled him to ensure that the agreement we made for Hong Kong guaranteed the survival of the rule of law in a strong form and guaranteed the existence of the Court of Final Appeal, which still includes two members of our own Supreme Court. It provided for a Legislative Council constituted by elections to come into existence in due course and that the Executive should be accountable to that legislature. That process moves on. Universal suffrage is now likely to arrive in 2017.

I mention that for our own significantly useful impact on the future of Hong Kong and then offer a word about such influence as we may have on the great mass of China itself. It is well known that China regards human rights as a strictly internal matter. None the less, it does recognise pragmatically that her own commitment in that direction-and there is such a commitment-as well as to the rule of law requires technical support which makes her willing, in practical terms, to study the models of other legal systems. China has long felt that the United Kingdom has much to offer in this area. We have found ourselves leading a handful of countries-the United States, Canada, Germany and Scandinavia-at a serious level on these human rights issues.

In that context, Beijing was persuaded some years later by John Major in his premiership in 1992 to receive a mission from this Parliament of ours, of which I was the modest leader, to study-this is carefully drafted-

"Matters of common interest, including human rights".

The party included my noble friend Lord Higgins and, more important than that for tonight, the noble Lord, Lord Anderson, who is in the Chamber. We were members of a party of 11 who went together. I remember the way in which we were warmly received by the then General Secretary-later President-Jiang Zemin. He made the point-also made by my noble friend Lord Teverson-that the most important human right for China at that time was the feeding of 1.25 billion people, coupled with the enlargement of social freedom to move, and so on. That was the point that the General Secretary emphasised. However, we made specific recommendations, and we were delighted that four years later, in 1996, the NPC-the Chinese Parliament-enacted legislation providing for a presumption of innocence, a bail system and the existence of defence lawyers. In fact, two out of three of those propositions are now in place. Bail remains a rather shadowy proposition, and it does not surprise one that shortly after the NPC passed the legislation, a Beijing newspaper reported that a retired police superintendent-a member of the NPC-had protested to the meeting that, given all these changes, how could he be confident of capturing criminals? There is that balance of debate in more places than one.

In that context, perhaps I may declare an interest in the Great Britain-China Centre, of which I have been president since 1992. Many colleagues may not have heard a great deal about it, but it has been, and is, a vital vehicle in pressing for the objectives that I have been talking about-the rule of law, human rights and the various missions financed by the European Union and this country that are being undertaken, together with highly technical assistance in sensitive areas of work. The centre helps in the fundamental role of building up trust with key institutions, such as the Supreme People's Court and the Procuratorate. The centre of our current work includes the reduction of the use of torture and firmly addressing the excessive role of death penalties. We are all clear in our memory of that, due to the recent tragic execution of Akmal Shaikh-despite our protests.

It now gives me pleasure to draw attention to a report in China Daily on 31 May, under the headline:

"New rules on confession to limit death sentences".

I shall quote just two sentences:

"Evidence obtained illegally-such as through torture during interrogation-cannot be used in testimony, particularly in cases involving the death penalty, according to two regulations issued on Sunday ... jointly issued by the top court, the top procuratorate, the ministries of public security, state security and justice".

One has always to hesitate regarding the difference between that which is proclaimed and what happens, but I draw attention to the fact that this is part of steady progress in the direction which we seek to encourage.

My final point concerns the uniquely purposeful quality of the Great Britain-China Centre's achievements. They involve what strikes me, as an ex-Chancellor of the Exchequer, as a very small spend indeed by Her Majesty's Government. The grant-in-aid received by the centre was £300,000 last year. It has been reduced to £270,000 this year, with which we are able to lever other funding institutions, including the European Union, to raise our resources to about £1 million. We are anxious that we should not be further squeezed in the present circumstances.

I dare to say this: in so far as money becomes a problem, given what the Treasury may seek from our overseas budget, I urge the Chancellor to reach out-this may sound very inhuman-towards the huge proportion of that budget exercised by the Department for International Development, so as to allow strong and worthwhile projects, such as those that I have described in the Foreign and Commonwealth Office budget, to continue to prosper in Britain's and Europe's joint interests in the People's Republic of China.

My Lords, I rest my case.

Photo of Lord Anderson of Swansea Lord Anderson of Swansea Labour 4:55 pm, 9th June 2010

My Lords, I congratulate the noble Lord, Lord Teverson, on his opening speech and his very able chairing of our committee. I am truly delighted to follow the noble and learned Lord, Lord Howe, who has a distinguished history with China, not least in respect of the smooth passage of Hong Kong to being a special administrative region of the People's Republic of China.

I was, as the noble and learned Lord said, the statutory Labour member on the human rights mission in 1992, which increased enormously my admiration for the noble and learned Lord as a great leader. Perhaps I may be allowed one short memory of that visit. New passports had been issued in the UK shortly before the visit. The then Prime Minister, with appropriate humility, chose the number 001. The noble and learned Lord, Lord Howe, then Foreign Secretary, could have chosen 002 but, with his usual humour, chose instead 007. When he gave his passport to the officials at Beijing airport, it met with a flurry of excitement. The official in charge called all his colleagues over to see this mild-mannered Welsh gentleman who had a licence to kill. However, he was allowed in and led us extraordinarily well.

The starting point for this debate is, as the noble Lord, Lord Teverson, mentioned, the consensus-across all international and national studies-that China is the new colossus. The only difference is over the degree of the Spenglerian relative decline of the West and, perhaps, the pace of the change and whether the US global influence has not declined as rapidly as some claim, as Professor Nye has argued.

There has been an amazing transformation, as the noble Lord has no doubt seen on his regular visits to China. When I went on holiday to Shanghai with my wife, I recall gazing around open-mouthed at the general prosperity. I think at that time almost half the tall cranes in the world were in Shanghai, building those vast edifices. The giddy pace of development is likely to continue, in spite of the downside of increased pollution, which affects Hong Kong, the demographic problems and the problem of uneven development. Shanghai is not the whole of China. As the noble Lord, Lord Teverson, said, we must understand the difference of implementation in the several provinces. I always get this wrong, but it is said, "The mountains are high and the emperor is far away".

How do we in old Europe-since the European Union is China's largest trading partner and overseas market-respond to these changes? I served on the European Union Committee. I confess to being, at first, a little sceptical about the subject that we had chosen. Was it too big? Had there been too many reports from other groups? Where would our value-added be? However, I hail the result, even if it is necessarily broad. I particularly congratulate the noble Lord, Lord Teverson, and Kathryn Colvin, our clerk. We were also well served by Dr David Kerr, our specialist adviser.

When I chaired the Foreign Affairs Committee in the other place, I tried always to ensure that we spoke not only to government and parliamentarians but to a wider audience, including the think-tank world. I believe that this report does just that. I am pleased that we also had our report noted in the European Parliament. I know that the noble Lord, Lord Teverson, has been invited to address the European Parliament's human rights committee on, I think, 15 July, which shows that we are, quite properly, read by our partners in the European Parliament.

Because of the speed of transformation, we need constantly to examine our policies. For example, in the current climate, even when DfID's expenditure is ring-fenced, is DfID doing exactly as it should? Where are the respective responsibilities of national Governments and the European Union? Has China adjusted to its new weight and responsibility? Rather incredibly, China still wishes to be seen as a developing country and, as we saw at the Copenhagen climate change conference, throws its weight along with the other developing countries, even if their interests may somewhat diverge. Is China now more of a status quo power? Is it prepared to play a responsible role in international affairs? The noble Lord, Lord Teverson, mentioned some pointers. I mention Operation Atalanta, in which a Chinese vessel is involved, and, as we see in Appendix VI of the report, the way in which China is playing a significant role in UN peacekeeping operations.

We are on the eve of the UN Security Council decision on new sanctions for Iran. In spite of China's reservations, its declared policy of non-interference in the internal affairs of other countries and the significant oil trade between it and Iran, it seems pretty clear that it will vote with the other members of the Security Council on the new sanctions package. However, looking at Chinese history, geography and its interests, we have to accept that those interests will, not infrequently, not coincide with our own, so how does the European Union relate to the new China?

Our report asks how China sees us. Clearly, China has difficulty understanding the complexity and uniqueness of the European Union. At one stage, it hoped that the Union would develop into a united states of Europe, a federation to which it could relate and which would act as a counterweight to the hegemon so often criticised by China-the United States. At others, it has concentrated on individual states, having, as the noble Lord said, had a rude awakening as to the nature of the European Union and our close relationship with the United States in 2003 during the arms embargo saga. On several occasions China has sought to play off one European country against another. It is sad to relate that we have often been prepared to play its game, as was shown in respect of the Dalai Lama.

Much foreign policy comprises international trade policy, which is where the European Union has a key role. I hope that the Government will see clearly that there are areas where we have substantial clout as a member of the European Union that we would not have on our own, particularly as regards specific trade issues, be they counterfeiting or the lack of licensing agreements within China. I hope that the Minister will say how the Government see the European Union's External Action Service working. It is suggested that there is currently a great dispute over the senior appointments, rather like cats in a sack, and that the new action service will not come into operation at least until 1 December. What will be the relationship between the British and EU representatives? I hope that there will be an increased complement of European officials in Beijing. It is absurd that there is now only one full-time EU official there concerned with human rights. We suggested that the European Union should have more widespread coverage within China. I hope that that will not be affected by financial cutbacks. It may well be that, as the Foreign Office looks around for savings in our external representation, we shall find scope for collocation of consular premises in different parts of China with the European Union, for which there should surely be no objection in principle. It would be helpful to know how the Foreign Office and the Government now see the scope for working together with the European Union's External Action Service.

On human rights, much wisdom has already been expressed. We recognise that there is no early prospect of a western-style rule of law. We also recognise that, if we want results, we should not megaphone our Chinese colleagues but instead, as the noble and learned Lord, Lord Howe, said, deal sensitively with them. I believe that we achieved certain results by leaving with our Chinese colleagues lists of sometimes forgotten Catholic priests who were languishing in different parts of China and who, even though nothing happened immediately, we understand were eventually released.

Although there is some scepticism about the EU/China dialogue on human rights, one has to ask what the alternative is. Indeed, we can concentrate on areas where progress can be made, such as legal reforms, the way in which the prosecution is handled, the rights of defendants and so on. We should press the Chinese to ratify the International Covenant on Civil and Political Rights. We should also note Chinese concern about the western reaction to events in Xinjiang, where, rather insensitively, the western press responded in a one-eyed way, forgetting the atrocities on the Han population in the capital at that time. Over the longer term, we have to work very closely with the Chinese. In terms of student exchange, more than 112,000 Chinese students are in the EU at the moment and, as the noble Lord, Lord Teverson, said, we have to encourage greater EU interests in China.

Much has been said about China in the world. It is gradually adjusting to a global role, as one saw at Copenhagen, and that is now most notably seen in Africa. There are many examples of infrastructure projects for mining rights: platinum in South Africa, iron ore in Sierra Leone, oil in Sudan and so on. There are proper western concerns about transparency, human rights, the increase in debt and training local people, yet the IFC-an arm of the World Bank-has recently, for the first time, financed Chinese investment in Africa and has sought to add human rights and environmental conditions to the offer. One should look for trilateral co-operation between the African Union, the European Union and China. In spite of those concerns, surely Chinese investment is to be welcomed. There is room within Africa for us all. Certainly, African leaders are pleased and there is scope for greater co-operation.

In conclusion, in disputes such as this, there are no partisan differences. I hope that the Foreign Office will respond speedily to the report, as it has promised. Because there are no real differences, I hope that the Government will reply well before we go into recess in July so that we can give the matter consideration. The Government, and certainly the Conservative component, should surely recognise that the European Union is a key instrument in furthering our own national interests and that policy is evolved at all levels-in Brussels and through regular contact between missions en poste. We should seek to understand the problems but also to relate to, channel and co-operate with our Chinese colleagues on a basis of mutual trust. I believe that our report will have made a contribution to that trust and to a greater understanding.

Photo of Lord Hannay of Chiswick Lord Hannay of Chiswick Crossbench 5:10 pm, 9th June 2010

My Lords, the former Prime Minister of China, Zhou Enlai, is recorded as having replied to a question about the consequences of the French revolution with the lapidary statement, "Too soon to say". One could well say the same of the direction and destination of the relationship between the EU and China.

The Chinese have a marked habit of taking the long view of their geopolitical relationships with other parts of the world. We Europeans have a tendency to take an excessively short-term view of such relationships. So it is very desirable, from time to time, to stand back a bit and look at the relationship between the EU and China in the round. I therefore congratulate the noble Lord, Lord Teverson, and my former colleagues on Sub-Committee C of the EU Select Committee, on providing us with this timely and thought-provoking report which provides an opportunity to do precisely that.

I shall, if I may, go back to the beginning of the EU-China relationship some 35 years ago last month, not just because I was present at the creation but because it contains some useful lessons for the present day. It also provides me with the opportunity to pay tribute to the former Leader of this House, Lord Soames, for whom I worked at the time in the European Commission and without whose skill and flair the entirely new relationship between the European Community and China that emerged following his visit to Beijing in May 1975 would not have developed so rapidly, so smoothly and so constructively.

The Europe from which we travelled then in 1975 was at that time in some considerable disarray. There was a leadership vacuum following the death of President Pompidou and the departure from office of Messrs Heath and Brandt. Europe's economies were wracked by high inflation and high unemployment following the Yom Kippur war and the quadrupling of the oil price. China, too, was in turmoil with Zhou Enlai and Mao in their final days and the "gang of four" just around the corner. But that did not prevent the establishment of diplomatic relations being agreed and it did not prevent the foundations of the first EU-China trade agreement being made, both of which developments survived all the subsequent upheavals and blossomed into the much more elaborate and multifaceted set of relations described in the report that we are debating.

We should not be overly concerned if the short-term prospects for that relationship are currently not particularly brilliant, nor should we draw too drastic conclusions from Europe's current leadership vacuum and the preoccupation with its internal problems, which is certainly leading to some expressions of frustration on the Chinese side and to a number of derogatory remarks about the waning importance of the relationship.

Why do I take the view that this relationship is so robust and durable, other than the elements of history that I have recounted and which rather demonstrate that? Basically, both sides have substantive and different reasons for ensuring that it remains. There is no parallel here at all for the EU's rather fraught and unsatisfactory relationship with Russia. The Soviet Union, and now Russia, have consistently had as a guiding principle of their relations with the EU and its member states the policy of divide and rule. While the Chinese are not averse from time to time to playing off one member state against the other in an opportunistic way that is not the guiding principle of their attitude. Quite the contrary. From the very outset they have wanted to see a Europe working together and playing a more significant role in the world. They do so not out of any starry-eyed belief in European integration but because they see Europe as one of the constellations in a multipolar world which revolves around the middle kingdom-their picture of a desirable balance of power. They recognise that in the trade policy field, which matters a lot to them, Europe on the whole speaks with a single voice and acts as a single unit.

From the European perspective, which is a completely different one, effective multinationalism is one of the guiding principles of our common foreign and security policy. That means that we are working for an increasingly rules-based international community because it is in our interest, as well as that of many others, to do so. But we cannot have effective multilateralism without the active co-operation of China, with its veto on the UN Security Council, its membership of the G20, its leadership role among the G77 developing countries.

Getting China to co-operate in achieving effective multilateralism is, of course, no easy matter. There clearly are tensions in Chinese foreign policy between a trend towards nationalism and mercantilism on the one hand, and on the other a trend towards playing a full and responsible role in the search for global solutions to global problems. In joining the World Trade Organisation, and in accepting its fully rules-based approach to trade policy, the second trend has been clearly dominant. In dealings over Burma, Zimbabwe and Darfur, the first trend has so far prevailed. Over North Korea, the Chinese have sat on the fence but they may not be able to do so for much longer. However, one thing is very clear: we shall not achieve our objective from this relationship-the objective of effective multilateralism with the Chinese co-operating fully-if we do not make full use of the toolkit provided by the Lisbon treaty. I was glad to see that point brought out in the report we are debating, and today by the noble Lord, Lord Anderson.

Should we be worried about the possible emergence of a G2, which is a kind of shorthand for a Sino-US directoire ruling the world, to which the noble Lord, Lord Teverson, referred in his opening remarks? I do not myself believe so. For one thing, neither the US nor China seem to me to be prepared for or to want the kind of structured, systematic, all-purpose relationship that a G2 would imply. No doubt, from time to time these two countries will strike deals and that will affect us and many others. But we really should not fret that these two countries bulk so large in each other's foreign policies. They have done so for 40 years now and they are going to continue to do so for the foreseeable future. That has not been, and should not be, seen as an obstacle for a healthy and expanding EU-China relationship.

I believe therefore that we should be relatively optimistic about the prospects for EU-China relations. On my analysis, we are working with the grain of the two parties' fundamental interests. Whether we succeed in building successfully on that foundation depends every bit as much on us as it does on the Chinese. So far, we have not been terribly effective at doing so. But we cannot afford to give up, or to fall back on a network of bilateral links between China and individual member states which will never maximise our influence or successfully further the protection of our interests.

Photo of Lord Inglewood Lord Inglewood Conservative 5:17 pm, 9th June 2010

My Lords, for me, one of the best brief general descriptions of western Europe's relationship with China appears in the opening paragraph of The Chan's Great Continent, written by the great Chinese observer, Jonathan Spence. He writes:

"One aspect of a country's greatness is surely its capacity to attract and retain the attention of others. This capacity has been evident from the very beginnings of the West's encounter with China; the passing centuries have never managed to obliterate it altogether, even though vagaries of fashion and shifting political stances have at times dulled the sheen. The sharpness of the feelings aroused by China in the West, the reiterated attempts to describe and analysze the country and its people, the apparently unending receptivity of Westerners to news from China, all testify to the levels of fascination the country has generated".

When I first became involved in China, just over a decade ago, when to my unexpected delight I became vice-president of the European Parliament's China delegation, I was dazzled. At that time, I spoke to an older and wise friend, a considerable China scholar who in a diplomatic capacity-not, I would mention, in a UK diplomatic capacity-spent a number of years in the country during and after the Cultural Revolution. Her reply was, "Don't be distracted by the exoticism: focus on the rational". The problem we face is that we may not fully understand what the Chinese want, since their historic and cultural framework is not the same as ours.

A good example of that has already been alluded to in this debate-the Chinese attitude to human rights. As we all know, in the Chinese hierarchy of values, human rights are different and less important than they are to us. I expect that not only everyone in the Chamber but many Chinese people themselves believe that the Western hierarchy of values is right but, as has already been mentioned, to influence human rights in China, we need to appreciate that our values and theirs may be different. The arguments that we think are self-evident are not necessarily those which will persuade those whom we wish to change. We must deploy the arguments that are potent to others if we wish to bring about change. The report is absolutely right about that.

Equally, the concept of the rule of law is subtly different. It is not law quite as we understand it because ultimately, in China, the law is an expression of policy and the Executive's aspirations-in much the same way as the National People's Congress is not quite the same as Parliament here. In my judgment-I strongly echo the sentiments expressed by my noble and learned friend Lord Howe-we in this country and western Europe have not placed as much emphasis on legal education and the development of legal studies in China as we might have. We have missed a trick in that regard. Had we done as much in respect of legal education as we have in trying to introduce business education to China, we would have achieved more than we have.

China has a very clear historically based perception of itself. Whether one agrees or disagrees with it, it is understandable within the framework of the way in which constitutional arrangements have evolved in the East. They may be expressed in terms of international law, which is, after all, a western European concept but, underneath that, there are slightly different eastern ideas. For example, I do not think that the Chinese treatment of Tibet and the Tibetans is in any way proper or justified, and I am no apologist for it, but I can see how, from a Chinese perspective, the Chinese have reached their justification for what they have done. We are not doing the Tibetans any favour by not being clear about that. Indeed, the Dalai Lama's attitude towards the independence of Tibet suggests that he shares that view.

Against the background of a "one China" policy, combined with a "one country, several systems" approach, we can see how the approach is being allowed to evolve to the People's Republic's advantage. It has the potential to provide considerable benefits, and may well do so in future, especially in respect of Taiwan, Tibet and even bits of what are now integrally part of what is more generally considered to be single China-say, Shanghai or Shenzhen. That constitutional approach may seem somewhat perverse to those of the European Union-especially, I suspect, to some in this country-but there is nevertheless a clear logic to what is going on which we ignore at our peril.

We need to be equally clear about the destructive character of the previous century in China which has, from its point of view, been more or less one continuous civil war. In particular, the Cultural Revolution will have had a considerable impact on the Chinese leadership. Understanding their economic policies must be based on an appreciation that they are trying to pursue the antithesis of the destructive chaos that swept that land over most of the past century. In particular, they are looking for stability and good fortune. I suppose that we would describe good fortune as getting richer. After all, in the 19th and 20th centuries, China in its historic context was politically at a very low ebb and was a demoralised great power. The wealth in the world was being created in the West and the Chinese, understandably, wanted to engage with that and participate.

Under the administration of a one-party system speaking the liturgy of Marxism with Chinese characteristics, we have seen a Chinese attempt in the World Trade Organisation, for example, and in how it has been behaving in the international monetary markets, to try to return to its rightful position as a great power. That will not necessarily be to our advantage in the immediate or the longer term, but from a Chinese perspective, I can see precisely what they are trying to do. It is also interesting to see our reaction in the West to what has been going on in this context. It has put into stark perspective the issues that are thrown up by how Europe should retain its economic competitiveness. This has been a subject of considerable debate, not least in this Chamber, and it will, no doubt, continue to be one.

How is China looking at the wider world? Is it striving for a tripolar world of the US, China and the EU, a bipolar world or what? Indeed, it is not clear to me what the European Union wants, and it is certainly not obvious what the evidence of the EU's external policy may be saying to the Chinese. As was pointed out in the report, Chinese puzzlement seems to be entirely justified. It is arguable that it is we who are in a muddle about this.

One of the most important things emerging from this report is that it highlights a couple of issues that arise from looking at the EU/China relationship. They are some of the biggest issues facing western Europe and the European Union. How do we deal with questions of competitiveness and in what way does the European Union's diplomatic mission and approach go forward? There is a difference between many in this country and the European Union of which we are part. The same disagreement is to be found among some other members of the European Union. Since those disagreements are not necessarily about the same things, it seems to me that we have to focus very hard to work out what we collectively want in these circumstances.

Photo of Lord Clement-Jones Lord Clement-Jones Liberal Democrat 5:25 pm, 9th June 2010

My Lords, I declare an interest as vice-chairman of the All-Party China Group and as a partner of the law firm DLA Piper with responsibility for international business relations in China, Korea and the Middle East. As a very regular visitor to China, I think that this is an extremely welcome and thought-provoking report. I congratulate my noble friend Lord Teverson on his opening speech and him and his colleagues on an extremely well put-together report.

The report quotes Vice-Minister Zhang Zhijun and Dr Kerry Brown and, as China watchers will know, that means that the report is balanced and authoritative and gives two interesting sides of the equation. The report is right to treat China as a major EU priority in foreign and trade policy. China has swiftly returned to double-digit growth and will overtake Japan later this year to become the world's second-largest economy. Essentially, this is seen from the Chinese perspective as a rightful re-establishment of China's position in the world, as I am sure many noble Lords will know. In terms of bilateral relations, the report rightly concentrates more on what the EU should do than on what China should do. There is nothing worse than preaching at China, as a number of noble Lords have said.

Seen from the Chinese perspective, China faces many major issues, which are inherently difficult and full of paradox. They include: keeping the value of the renminbi competitive in the face of a massive surplus and rising costs, because the future of the Chinese export economy is at stake; the recent suicides at the major supplier Foxconn; and the Honda strike in China, which will have an impact on labour costs. Many other factors may lead to higher costs, particularly in the east of China. There is a desire in the Chinese Government to move from an export-led economy to a more consumer-based economy, while controlling domestic inflation after the success of the economic stimulus package, but that will not be easy with double-digit growth.

There is a need to grow and create a massive number of jobs each year just to cope with new graduates, while improving the protection of the environment and moving to a low-carbon economy at the same time. How can the Chinese extend local autonomy at county and provincial level, as they wish to do, and satisfy demands for more human rights generally-and in Xinjiang and Tibet in particular-while maintaining political stability, one of the cardinal objectives of Chinese policy? In the education system, how can China deal with the dilemma of encouraging greater creativity in the face of a traditionally prescriptive teaching method at all levels? How can it ensure proper intellectual property protection without, as it sees it, overpricing legitimate consumer expectations? How can it ensure Chinese influence over natural resources, particularly in Africa, without being accused of employment malpractice?

In many of these areas, we want China to do more to satisfy western government expectations, but China rarely responds to external pressure. It is much more sensitive nowadays to domestic public opinion, particularly as it is expressed through the internet. Much will depend on the relationship that we manage to build over time and on whether any move meets the essential criterion, which I repeat, of retaining and delivering the cardinal virtue of political stability.

The relationship will have its ups and downs and, in the past year in particular, there have been quite a number of downs. What do the Chinese Government seek to derive from their relationship with the EU? Of course they want trade, technology transfer and investment. These are a cornerstone, as is the education link, but crucial to real progress, in China's view, is support for market economy status for China and lifting the arms embargo.

On the market economy status, China still thinks that the West is not playing by the rules and is adopting double standards. Why should Russia have market economy status but not China? Why have some 97 countries given market economy status to China, while major economies such as the EU, the US and India have not? China also considers that it has been subject to an unjustified barrage of anti-dumping cases. Above all it believes-the report makes this quite clear-that the EU speaks with different voices. Chinese leaders express genuine frustration at the multiheaded European leadership structure and the lack of a single voice. This, I believe, is genuine and, like the committee, I do not accept the Fox/Godement thesis mentioned in the report that China is intent on playing one EU country off against another or, indeed, that there really has been a practice of unconditional engagement on the part of the EU.

China sees the US/China interface as much preferable, because it can get answers and decisions that stick. Unless we are to play second fiddle in every case to the US, the EU needs, as my noble friend's committee's report points out so eloquently, to get its act together. One of the questions is whether Europe takes a lead or simply follows the US. This is particularly acute in respect of both the arms embargo and the MES. I shall be interested to hear what my noble friend has to say on this subject at the end of the debate.

There is much to be done, but the Lisbon treaty has improved matters somewhat. I have great respect for the EU's High Representative for Foreign Affairs and Security Policy, our colleague the noble Baroness, Lady Ashton, whose trip to China earlier this year was well received and made the Chinese Government feel that progress was possible with the EU. I am therefore optimistic that we can make progress.

At the end of the day, there is the question of what we can expect from China as a superpower. The former ambassador, Madam Fu Ying, was fond of talking about how the Chinese see China from the inside as a mouse, whereas we on the outside see it as an elephant. Of course there is a big gulf between the way in which China is perceived from the inside and the way in which it is perceived from the outside. There is growing evidence of a more actively interventionist approach, but China still lacks the confidence that it really is the superpower that we think it is. There was greater engagement at Copenhagen, even if it was not seen as satisfactory from an EU point of view. As the noble Lord, Lord Anderson, mentioned, the agreement over Iran sanctions could prove extremely important. Above all, I believe that the role played by China at the G20 last year was extremely constructive. In the EU we should not be afraid to bargain. If that is done coherently, we can exploit our technologies, our creativity, our education and our research quality. In key areas such as trade policy and climate change, we need to agree strategies within the EU and to speak with one voice, which is the welcome message of this report.

What of Britain's role? As my noble and learned friend Lord Howe pointed out, there is a long history between us, which is still regarded as important by the Chinese. Our ambassador is one of only five vice-ministerial ambassador posts. Ambassador Liu Xiaoming continues this pattern. I recognise the achievements of the previous Labour Government in having established relationships with China on a firm footing. I believe that the successful Hong Kong handover had a major impact and was beneficial for our relationship. I also welcome the desire of the coalition to have closer relations with China, as set out in the coalition agreement.

However, both our parties are a relatively unknown quantity to the Chinese Government. I hope that a high-level visit by the Prime Minister or the Deputy Prime Minister will take place soon, perhaps coinciding with the close of Shanghai Expo. The Chinese have many matters in common with Britain. Belief in free trade above all is the link, as well as an admiration for our higher education system. None the less, Britain is still underperforming in trade and investment flows. France and Germany in particular outperform us in energetic trade promotion. However, perhaps our salesmanship is entering a new era. Out cultural diplomacy seems to be improving by leaps and bounds. The Shanghai Expo pavilion is evidence of that. The Chinese are taking genuine pleasure in the success of the pavilion designed by Thomas Heatherwick and have taken very much to heart what they call the "Dandelion". UKTI deserves huge credit for having the imagination to deliver a strikingly original symbol of British creativity at Expo. I hope that we will celebrate the way in which Britain can help the EU's objectives in its relationship with China.

Photo of Lord Crickhowell Lord Crickhowell Conservative 5:37 pm, 9th June 2010

My Lords, our sub-committee was well chaired by my noble friend Lord Teverson, who introduced the report clearly. First, I should like to express my thanks to Kathryn Colvin, our admirable clerk, and all those who helped us to prepare that report. It was a very big job, which was well done. I was one of the sub-committee members fortunate enough to go to China. We went 25 years after my last visit, during which I had watched on Chinese television the signing of the Hong Kong agreement. The fact that my noble and learned friend Lord Howe of Aberavon, present at that ceremony and playing a central role, has been able to contribute to this debate, and give a very personal account of involvement with a changing China over more than half a century, has been very welcome and is a good example of the unique quality of this House.

The transformation of China during the 25 years since I was there has been remarkable. On my previous visit, we travelled to the old city of Beijing from a very simple government guest house along a bumpy, unlit road, which was hardly wide enough for two vehicles to pass, to a city where there were few cars but thousands of bicycles. Beijing, Guangzhou and, I believe, the even more spectacular Shanghai, which we did not visit on this occasion, have taken their places among the world's great modern cities. The bicycles have given way to a vast number of motor vehicles which choke the huge highways that have obliterated the old buildings. Perhaps even more significant than the construction programmes is that people's lives are better than they were. They have improved in terms of disposable income and economic and job choices, and with those improvements have come greater freedoms.

It was not just the scale of the development taking place that struck me so forcefully on this visit, but the changing character of the political leaders of modern China. We had meetings with men I can best describe as old fashioned commissars. They were not very productive meetings because our attempts to intervene with questions seldom generated helpful responses. On the other hand, we had meetings with two senior vice-Ministers, Liu Jieyi and Zhang Zhijun, who were the kind of men one would expect to find holding with great distinction senior positions in government, business or academia around the world: informed, perceptive and intellectually of the highest calibre. They were prepared to give us shrewd personal judgments and observations while they also clearly set out their Government's official position. We met a number of people from the universities and think tanks who impressed us in a similar way. With men and women of this kind increasingly taking leading roles in China, I find it hard to believe that the country will not undergo fundamental changes quite quickly.

Having said that, there are some issues about which even the most creative and flexibly minded Chinese are unbending. In the report we describe them as China's "lines in the sand". First, China will not accept any questioning of its territorial integrity, whether over Tibet, Hong Kong or Taiwan. There are signs that both Taiwan and China are feeling their way towards better relations within the One China concept, and my noble friend Lord Inglewood had some wise words to say on that topic and how it might, in the future, be the way through for Tibet as well.

The second immovable line in the sand is China's need for development and economic growth. The Chinese Communist Party depends for its legitimacy on guaranteeing prosperity for its citizens. No other policy area will take precedence over the need for continual growth and all EU policy has to recognise this immovable fact. Because of China's need for the natural resources that it does not possess, it will continue to extend its supply contracts and involvement in Africa and other places where its needs can be met. That will have implications for Europe.

Chinese attitudes to government and democracy have a good deal more in common with imperial administration developed over the millennia than to communism as it has been generally practised. As one witness, Dr Steve Tsang, put it, the party,

"has imposed what amounts to a social contract ... the Party delivers stability, order, rapid growth and general improvement to the living conditions of the people in return for its continued dominance".

Despite the achievement of amazing levels of growth and the prosperity of the coastal areas, we were repeatedly reminded that China sees itself as a developing nation with a high proportion of its vast population still with some of the lowest incomes per head in the world.

The EU is China's largest trading partner. That fact provides a central reason for each wanting to understand and have good relations with the other. The noble Lord, Lord Mandelson, told us that the EU has huge leverage because Europe provides the market destination for a vast quantity of Chinese exports, and keeping Europe's markets open to those exports is fundamental to China's economic and political strategy. It was, however, pretty clear from his evidence that, as my noble friend Lord Teverson pointed out, the leverage has not been exercised very effectively. While the UK and the other European nations will have their own policies and compete strongly with each other commercially, it is entirely in the interests of all that the EU should act as one on trade conflicts covered by the WTO, and on the need for China to open its markets more widely and to respond positively to European concerns about intellectual property rights and commercial law. To speak with one voice and to be mutually supportive is equally desirable over human rights, international development, climate change, and in sensitive areas such as the treatment of the Dalai Lama.

It is equally true that strong European backing for British efforts in Hong Kong is important if the promised implementation of the Basic Law and moves to wider democracy there are to be achieved. Hong Kong is a hugely important conduit for foreign investment into China and the EU needs to reinforce its diplomatic efforts in the Hong Kong SAR.

Events have moved on since we prepared our report. The euro is under threat, which must alarm the Chinese, and the economic recovery from the banking crisis is far from secure. If some have had doubts about the ability of China to maintain its phenomenal rates of growth in these conditions, events have proved them wrong. While the Chinese authorities are finding it necessary to contain inflationary pressures, the chief executive of HSBC in China says that the financial crisis has only made the country stronger, with its exporters becoming leaner and more efficient. There has been huge investment in new plants and infrastructure and manufacturing is being moved inland to where housing and wage costs are much lower than in the coastal belt. This ability to move to these huge regions where wages are low means that China is likely to maintain its competitive edge for many years to come.

There has been an unfortunate tendency by some in the EU to lecture China. We are much more likely to make progress, even on sensitive issues such as human rights, by finding those areas in our relations where it will be in China's national interest to change. Nowhere is this truer than on climate change. On re-reading our conclusions on this topic, I doubt that we got the balance quite right. Certainly we must enter the next round of negotiations as a player but I do not believe it is wise to set an example on cuts in isolation. While I differ with quite a lot of the analysis made by my noble friend Lord Lawson of Blaby, I share his view that to impose huge burdens on our own industry which none of our competitors will follow is not the sensible way to proceed. Like my noble friend Lord Jenkin of Roding in speaking on the gracious Speech, I think we need to find a way forward that is politically more attractive and, I would add, economically less masochistic.

In the Chinese context, that means tough negotiations in which our contribution is realistic and is made as others make theirs and not in advance in the vague hope that they will follow. We need to exploit the fact that while China needs to continue growing, it faces grave threats from climate change. It is threatened with acute shortages of water in some regions and the threat of floods in others. Pollution from its coal-fired power plants is smothering Guangzhou and Hong Kong. Natural disasters when they occur in China tend to be even more devastating than in other countries.

Those are some of the reasons why China may choose to move further than the pessimists believe, and there are positive reasons as well. China, I am sure, wishes to be a massive player in the developing industry in low-carbon technology. There is real scope for Europe and China to co-operate in this vital area, despite fears about transferring technology without better licensing. The successful development of carbon capture technology is hugely important for both Europe and China, and particularly important for this country. The lack of urgency or drive in taking forward the joint carbon capture and storage project represents a shocking failure of EU policy.

I shall make three other brief points. First, as already referred to by my noble friend Lord Teverson, the formal exchanges on human rights are more ritualistic than effective, but we found that real progress was being made in different parts of China, with lower profile rule-of-law and civil-society projects. Here we are working with the grain in areas which are entirely in China's own interests.

Secondly, I draw attention to paragraphs 146 and 147 of our report about the caution that needs to be exercised in sharing some technologies with China and the need for close co-operation with the United States and NATO on the subject of cyber technology, in particular, and the possible need to take strong countermeasures if our interests are threatened.

Thirdly, it is important that we continue to encourage far more of our own citizens to obtain real knowledge of all aspects of modern China, including, of course, its language. My noble friend Lord Sassoon, in a notable maiden speech winding up yesterday's debate on UK competitiveness, commented that it is easy to be complacent about the language question. I am sure that he was right. Those vice-Ministers to whom I referred knew and understood our culture and institutions so much better than most European politicians know or understand theirs; perhaps that was one reason why I found them so impressive.

Photo of Lord Alton of Liverpool Lord Alton of Liverpool Crossbench 5:50 pm, 9th June 2010

My Lords, Stars and Dragons: The EU and China deserves to be widely read. It is a comprehensive and engaging report to which the noble Lord, Lord Teverson, did great justice in his introductory remarks.

Paragraph 43 of the report rightly states:

"It is unrealistic and undesirable that a single EU-China relationship will replace relations between China and individual Member States. The two will rightly continue in parallel".

There is a great deal that is unique in the extraordinarily rich and historic relationship between our two countries, a point touched on by the noble and learned Lord, Lord Howe of Aberavon, in his wise and penetrating speech. There is also much in our contemporary relations that remains unique. We must not sublimate those interests in the desire always to hunt as a pack. I shall talk about China and her relationship with the United Kingdom and China's domestic challenges.

Ambassador Liu Xiaoming, China's new and accomplished ambassador to Britain, presented his credentials on 26 May. When diplomatic relations were established 38 years ago in 1972, bilateral trade was worth just $300 million. Last year, it was worth $39.1 billion, a theme addressed in chapter 6 of the report. Thirty-eight years ago, there were just a few dozen Chinese students in the United Kingdom; today, their number has reached 100,000, our largest source of overseas students. Thirty-eight years ago, a meagre 1,000 people travelled between China and Britain every year. Today, each and every day, thousands of visits are made, with 200,000 Chinese tourists visiting the UK last year.

On coming to office, the Prime Minister, Mr Cameron, rightly made one of his priorities a telephone conversation with premier Wen Jiabao and the Foreign Secretary, Mr Hague, spoke to his opposite number, both discussing the further expansion and advancement of the China-UK strategic partnership and looking at ways of developing that vital relationship further.

The oldest Chinese community in Britain outside London is to be found in Liverpool. My first visit overseas as a young Liverpool MP was to stay with Chinese families in Hong Kong. Two years later, I travelled to mainland China, to Shanghai, which the noble Lord, Lord Anderson of Swansea, mentioned. I met some of those to whom he referred who had suffered grievously for their religious faith. It is significant that only yesterday, and I welcome it warmly, the authorities in Beijing recognised the underground bishop, Matthias Du Jiang, as Bishop of Bameng in Inner Mongolia. I also mention the constructive role played by Ma Yingling of Yunnan, one of the remaining bishops of the official church yet to be recognised. Last year, I met the Bishop of Beijing, now officially recognised by both Rome and Beijing. Anyone who has followed the issue touched on by the noble Lord, Lord Anderson, and how, for instance, Cardinal Kung, the former Bishop of Shanghai, was imprisoned for more than 30 years, knows that these are historic, momentous, significant developments which we should all warmly welcome. That is not to say that there is not still much to be done; indeed, there are several underground bishops who remain in prison as we meet today. However, we should not underestimate the changes that have been under way. The scars of the years of the Cultural Revolution, to which the noble and learned Lord, Lord Howe, referred, are healing. China has made many fundamental changes, but it is a great work in progress and, economically, it has undergone an extraordinary transformation-and that we must admire.

In 1999, Liverpool twinned with Shanghai, which opened the way for commercial and entrepreneurial opportunities for both cities: commerce, development and jobs. Perhaps every town in Britain should consider twinning with a city or town in China. Liverpool's story is a good illustration of the benefits of good fraternal relations. It had many reasons for twinning with Shanghai; it shares many characteristics with Shanghai, not least the architectural similarities between the waterfronts. Shanghai, of course, has grown exponentially, with a population of more than 21 million people, and a stock exchange of 74 million investors, but the two cities retain many similarities, including the waterfronts, maritime industries, football, and a history of innovation and change.

The relationship between the two cities has prospered so much that Liverpool was invited to participate at no charge at Expo 2010, to which the noble Lord, Lord Clement-Jones, referred, which began in May and ends in October. China's expo is four times larger than any previous expo and is expected to attract around 70 million visitors from 140 countries. The Liverpool team running the Shanghai pavilion tells me that an average of 3,000 people come to its stand each day, with as many as 5,000 people at the weekend. From all this, I hope that both cities and both countries will see Expo 2010 as an opportunity for even closer economic and commercial relationships and inward investment, along with more educational exchanges and tourism. Here I declare an interest, as I hold a chair at Liverpool John Moores University. Education should be a two-way street. I should like to see more of our students travelling to China with Mandarin and Cantonese more widely offered in our schools and universities.

None of these positive developments should occlude the way in which Britain is still perceived by some Chinese-and I would like the report to have touched on this. One hundred and fifty years ago, on 18 October 1860, at the command of Lord Elgin, Britain's High Commissioner in China, one of the most shameful episodes of British history occurred: 3,500 British and French troops torched China's Old Summer Palace in Beijing-the Gardens of Perfect Brightness. It was a vindictive and philistine act which aimed to humiliate China's Qing Dynasty and assert the hegemony of the British and French occupying forces. Its consequences still reverberate today, and it is another of those unforgotten and unhealed chapters of history.

The burning of the palace was the culmination of the second opium war, waged by the British in China, a war whose lessons have contemporary resonance. The French writer, Victor Hugo, in his Expedition de Chine, described the pillaging and burning of the palace as akin to two robbers,

"breaking into a museum, devastating, looting and burning, leaving laughing hand-in-hand with their bags full of treasures; one of the robbers is called France and the other Britain".

So what was Britain's objective in pursuing the second opium war-or arrow war-of 1856 to 1860? The pretext which was given was the killing of a French missionary, Father August Chapdelaine. In reality, the British Empire and the Second French Empire pitted themselves against the Qing Dynasty with the objective of legalising the opium trade and expanding the trade in coolies-a derogatory slang expression used to describe the virtual slave labour and exploitation to which Chinese labourers were subjected. The trade in coolies was the forebear of the human trafficking which continues to this day. Along with the opium trade and the trade in people, Britain was determined to open up all China to British merchants. The opium war concluded with the British, French and Russians demanding and getting a permanent diplomatic presence in Beijing. China was forced to pay reparations of 8 million taels to Britain and France. Britain acquired the territory of Kowloon, adjacent to Hong Kong, a territory taken at the end of the first opium war. The opium trade was made legal, and Christians were given the right to evangelise-a sad and discrediting linkage of religious freedom to the worst excesses of imperialism.

Most scandalous of all was the trade in opium itself. Vast numbers of Chinese had become addicted to opium and Britain, instead of helping to eradicate the addiction, became the supplier. The Chinese Government said:

"Opium has a harm. Opium is a poison, undermining our good customs and morality".

Instead of upholding China's policy, however, Britain decided to play the part of pusher and profiteer-the equivalent of today's urban heroin and cocaine pushers, not only government-sponsored and sanctioned but backed by force of arms. In the House of Commons, the young William Ewart Gladstone rebuked the British Government. He said,

"a war more unjust in its origin, a war more calculated to cover this country with permanent disgrace, I do not know".

By the conclusion of the second opium war and the burning of the Old Summer Palace, Britain had achieved its strategic objectives but its reputation was left in the ashes and charred remains of the Gardens of Perfect Brightness. As we approach the 150th anniversary of these events and catch a glimpse of drug addiction, human trafficking, theft, arson, violence and humiliation, we might pause to consider how these unhealed and unforgotten events continue to play into the times in which we live now. As we exhort China to take its place in the world and consider its development role in Africa, which has been mentioned, or how it should be a major broker in countries such as Burma and North Korea-and I hope that that will be the case-we should have regard to how China has traditionally perceived foreign powers, how it has been treated itself and how it sees its own interests.

Above all, China cares passionately about its own domestic stability. It is acutely aware that social cohesion and stability are two great prizes. How to achieve that without repression is daunting. I shall now say something about China's domestic challenges. On 22 May the Spectator drew attention to the plight of a Beijing academic, Professor Yang Zhizhu, who had lost his job and become an outlaw after refusing to pay a second-child fine of £18,000. At paragraph 15 of its report, the committee rightly draws attention to some of the consequences of China's one-child policy which, it says, has led to,

"significant distortions in gender and generation balances, with men outnumbering women, and difficulties supporting the elderly, which will affect Chinese views and policies in the future".

It is estimated that there are now 37 million more men than women. The British Medical Journal says that the overall sex ratio for China is 126 boys for every 100 girls. Nine provinces had ratios of more than 160 boys for every 100 girls, for second children. The article stated:

"Sex selective abortion accounts for almost all the excess males".

The Economist described this as "gendercide". This gender imbalance is a major force driving sexual trafficking of women and girls in Asia.

China also has the highest female suicide rate of any country in the world. It is the only nation in which more women than men kill themselves. According to the World Health Organization, approximately 500 women a day end their lives in China. This extraordinary suicide rate may well be related to the campaign of forced sterilisation and compulsory abortion. I was particularly grateful to the noble Baroness, Lady Verma, who is on the Front Bench today, for the reply that she gave me yesterday to a Written Question, where she said that last year alone £770,000 had been provided by DfID to Marie Stopes International, and that this will be reviewed as part of the process of looking at overseas funding. I would point out to your Lordships that MSI might claim to disapprove of compulsion but recently gave a red-carpet welcome in its London headquarters to Ms Lin Bin, Minister of China's National Population and Family Planning Commission, which is responsible for the one-child policy. I also hope that the noble Lord, Lord Wallace of Saltaire, will be able to confirm that the Government will follow the previous Government in upholding the case of Chen Guang Chen, the blind human rights activist who in the Xiandong province exposed the compulsory abortion and sterilisation of more than 130,000 women and is now into his fourth year in prison for having done so.

Last year, under the auspices of the All-Party Parliamentary China Group and with the assistance of the Government of China, I was able to organise a small all-party visit by four British parliamentarians-two Members of the Commons and two from your Lordships' House, the noble Lord, Lord Steel, and myself-and we subsequently published our report, Tibet: Breaking the Deadlock, which can be viewed on the all-party group's website. We travelled with the blessing of the Dalai Lama, who, in the aftermath of the March 2008 riots, trenchantly condemned violence as a means of procuring change in Tibet. He has also accepted, as the British Government have done, that Tibet is part of China, but believes that it should be allowed significant autonomy. He has repudiated any return to feudalism and has stated that he is willing to accept a spiritual role, rather than a political one. We concluded that these four principles could form the basis of a firm settlement with the Government of China. The noble Lord, Lord Steel, said to me at the beginning of the debate that he is disappointed not to have been able to take part in it because of commitments elsewhere. If noble Lords look at paragraph 269 of the committee's report where it rightly calls for mutual respect, they will probably agree that terms such as "splittist" and "feudal", which are regularly used to describe the Dalai Lama, do not encourage that mutual respect that we should all try to encourage.

It is not too far-fetched to consider the making of a religious concordat with the Dalai Lama that sees him as a spiritual rather than a political leader and designates Lhasa's Potola Palace as a holy city, comparable perhaps to the standing enjoyed by the Holy See. Were the Chinese to initiate such a move, it would show a new and welcome openness to the principle that each man and woman should be free to determine the religious belief of their choice. Instead of undermining the unity of the state, invariably the state becomes the beneficiary of the good that religious faith and spiritual endeavour are then free to promote.

Last year the Lhasa Evening News said that a "strike hard campaign" had been launched. Perhaps a "think hard" campaign would now be more apposite. How much better it would be if the Dalai Lama were invited to have direct discussions in Beijing with President Hu Jintao. The fourteenth Dalai Lama, Tenzin Gyatso, now aged 75, is willing to find a solution and is in a position to make a lasting settlement. His word and his judgment will be accepted by disparate groups of Tibetans. When he dies there will be no similar focus for unity, risking a more radical and intractable conflict. If agreement is not reached during his lifetime, it could leave a dangerous vacuum which could threaten China's cohesion.

The Chinese ideogram for "crisis" also means "opportunity". There is an opportunity to use Chinese genius, as happened in the case of Hong Kong and is now happening in the area of religious liberties, to find creative and durable solutions to some of the issues that I have touched upon.

Photo of Lord Selkirk of Douglas Lord Selkirk of Douglas Conservative 6:06 pm, 9th June 2010

My Lords, the noble Lord, Lord Alton, has spoken with conviction and clarity. In my speech, I will deal with some of the matters that he has mentioned, but first I should declare a past interest: when I was a student at Oxford University, I visited Singapore and wrote a thesis in the 1960s on the overseas Chinese in Singapore, which dealt with the process of transition from colonialism to self-government. I was particularly interested to discover that the Chinese students whom I met there were extremely proud of the prowess of mainland China and that that pride was accompanied by a great loyalty. This was all the more remarkable to me since Singapore had moved from a colonialist regime towards a democratic one and a thriving capitalist economy. I therefore hoped that one day I would get the opportunity to visit mainland China to better understand its attitude and, more important, to appreciate the constantly growing economic importance of China in the world.

The most important conclusion that I believe must be drawn from our visit is that the European Union should pursue a wider policy of constructive engagement and develop a collaborative relationship with China. We emphasise that the member states need to decide the key issues on which in practice the EU should stand firm on a united approach. This ought to cover a great many areas, including climate change, co-operation over science and technology projects, Operation Atalanta to prevent piracy and dealing with the enormous trade imbalances between China and the West. We have said that, to add substance to this policy, the EU and its member states should encourage-this is a point that the noble Lord, Lord Alton, made-the study of Chinese languages, culture and institutions within the countries of the EU.

When our delegation visited China last summer, what struck me most forcefully was the way in which the Chinese Government were geared to obtaining maximum development and economic growth with all possible speed. China has some of the most highly developed cities in the world on its eastern seaboard, but on the other hand, with its 1.3 billion citizens-nearly one-fifth of the world's population-it has a great deal of rural poverty in its vast western areas. The report rightly proposes that the EU ought to establish a stronger presence outside Beijing and Hong Kong.

The policy of rapid economic development in China has now taken priority over everything else, including issues involving human rights. As my noble friend Lord Teverson said, while China has commendably raised millions of its citizens out of poverty, the Chinese leadership has shown no great enthusiasm for extending democratic rights, and political dissent is quite simply not tolerated. That was amply demonstrated by the events in Tiananmen Square and by China's treatment of Tibet, to which the noble Lord, Lord Clement-Jones, referred. More recently, there was widespread disappointment when a UK national was executed in China on drugs charges despite pleas from the British Prime Minister for clemency. Indeed, I was told when we were in China that the death penalty is still on the statute book for the smuggling of cigarettes.

I believe that the Chinese Government correctly understand that the EU will continue to assert its deeply held commitment to human rights and will wish to raise such issues in a consistent and practical manner. On this subject, we recommended that the EU delegation in Beijing should consider increasing the number of those working on human rights. However, we should strive to ensure that our approach does not cause other key negotiations on the future of the world's environment and trade to be derailed. It is a difficult and delicate balance to strike, but progress, even if slow, can be achieved on a variety of fronts. In that connection, I strongly endorse the perceptive and far-sighted words of the leader of our delegation, the noble Lord, Lord Teverson, who said on 23 March:

"It is also important that the EU sticks to its principles on Human Rights when dealing with China, but we feel more progress will be made in this area by pursuing a frank and detailed private dialogue rather than EU leaders grand-standing with public condemnations".

One reality about China that I knew before I went and was confirmed to me when I was there is-the noble Lord, Lord Hannay, emphasised this in his speech-that the Chinese Government plan on a very long timescale. One distinguished Chinese professor and former ambassador revealed China's perspective when he declared to us that human rights in China had never been better for the past 5,000 years. I therefore fear that human rights issues will continue to be raised by the EU with China for many years to come.

The second important message that came across to us strong and clear was that China is totally committed to its territorial integrity, to which the noble Lord, Lord Crickhowell, referred in relation to Tibet, Hong Kong, India and especially Taiwan. Our view in relation to Taiwan was that,

"a military solution must not be contemplated and would lead to severe repercussions".

Indeed, we describe Taiwan as,

"a potential flash-point for the whole region, which could bring the US and China into open conflict".

My conviction is that a possible war over the status of Taiwan would be a disaster for the world, as any such conflict could rapidly escalate. Our report recommends:

"The EU should state its support for the one China policy but its rejection of reunification by anything other than peaceful means. It should discourage China and Taiwan from taking any unilateral actions that would infringe these principles".

My final point is that we are having this debate against a background of heightened tensions between North and South Korea. As the noble Lord, Lord Crickhowell, stated, we had a constructive meeting in China on this subject with the Minister of Foreign Affairs and the senior official representing the Communist Party. I express the hope that the Chinese Government will use their good offices to try to bring about a reduction in tension. They have the capability to act as a major restraining influence on the unpredictable North Korean leadership.

There is no doubt that our report points towards the EU needing to establish an effective relationship with China based on trust and mutual respect. It will be a long road and there will almost certainly be potential pitfalls on the way and perhaps even a few daunting distractions. However, China's illustrious philosopher, Confucius, offers guidance for us all with these wise words:

"It does not matter how slowly you go so long as you do not stop".

Perhaps that statement of principle, too, was indirectly recognised in our report-compiled under the able leadership of the noble Lord, Lord Teverson, with the dedicated assistance of Kathryn Colvin and her team-in wanting a long-term dialogue and a policy of constructive engagement by the EU. This evening, I not only commend the wise words of Confucius but strongly support the recommendations in our report.

Photo of Lord Faulkner of Worcester Lord Faulkner of Worcester Deputy Chairman of Committees 6:15 pm, 9th June 2010

My Lords, I am pleased to follow the noble Lord, Lord Selkirk of Douglas, because I agree with almost everything that he said, particularly on matters of human rights in China and relations with Taiwan. I start by declaring an unpaid interest as the newly elected chairman of the All-Party Parliamentary British-Taiwan Group. I have on a number of occasions had the good fortune to visit Taiwan in recent years and I shall say something about relations with Taiwan in a moment.

First, I join others in congratulating the noble Lord, Lord Teverson, and his committee on producing such an excellent report and the members of that committee who have spoken in this debate on their contributions. The report is informative, thoughtful and well argued. Indeed, in many respects it is a model of what a good Select Committee report should be.

I think that the noble Lord is aware of this, because I had a word with him before this debate, but I feel that one thing missing from the report is any detailed reference to the disproportionate and excessive use of the death penalty by the People's Republic of China. I agree completely with what the committee said about the execution of our fellow British citizen, Akmal Shaikh, in December 2009 and I was pleased to see repeated at paragraph 235 of the report the EU statement reaffirming its,

"absolute and long-standing opposition to the use of the death penalty in all circumstances".

However, I could see no reference in the report to the annual reports from Amnesty International on the use of the death penalty worldwide, particularly in Asia. The 2008 report on death sentences and executions says that in that year more people were executed in Asia than in the rest of the world put together. It states:

"At least 1,830 (76 per cent) of all total reported executions were carried out by Asian states".

Of these,

"at least 1,718 were carried out in China", and,

"at least 7,003 people were known to have been sentenced to death".

Amnesty International continues:

"These figures represent minimum estimates-real figures are undoubtedly higher. However, the continued refusal by the Chinese authorities to release public information on the use of the death penalty means that in China the death penalty remains shrouded in secrecy".

The report continues with a damning description of how those facing capital charges do not receive fair trials, with failings including the lack of prompt access to lawyers, a lack of presumption of innocence, political interference in the judiciary and failure to exclude evidence extracted through torture. I listened carefully to what the noble and learned Lord, Lord Howe of Aberavon, said and I hope very much that the description that he gave of how things are improving turns out to be the case. In this House, however, where there is such strong opposition to the use of the death penalty, it is right that we should express our concern about the situation that continues to exist in China.

The use of the death penalty in Taiwan, by contrast, is almost unknown-I cannot say entirely unknown because, regrettably, it was used earlier this year. However, I admit to a sense of disappointment when reading the various references to relations with that country. I had hoped that the committee would have taken this opportunity to question some of the basic assumptions that underlie western Governments' thinking on this matter and recognised that the 23 million people who live in Taiwan also have rights that deserve to be taken into consideration. I refer particularly to the assertions in the summary with the heading "China's lines in the sand". The report states:

"First, 'one China'. China will not accept any questioning of its territorial integrity whether over Tibet, Hong Kong or Taiwan. It is the Taiwan issue that presents a threat to regional security".

That sentence has been quoted by a number of noble Lords in this debate. From that, one might assume that Taiwan is somehow threatening its neighbours militarily. That is clearly an absurd proposition. The only threat in the region comes from the People's Republic of China, which has stationed 1,500 missiles on its coastline, all targeted at Taiwan, and has passed an anti-secession law, which, it claims, gives it the right to invade Taiwan if that country declares independence.

Almost 20 years have passed since the Kuomintang last claimed that it was the legitimate Government of the whole of China and during that time Taiwan has evolved from a one-party dictatorship under martial law into a genuine parliamentary democracy where Governments are changed through the ballot box. I remind your Lordships of what the Foreign Affairs Committee in another place said in paragraph 173 of its August 2006 report East Asia. It stated:

"We conclude that the Chinese military build-up across the Taiwan Straits threatens peace and stability in East Asia .... We further conclude that the growth and development of democracy in Taiwan is of the greatest importance, both for the island itself and for the population of greater China, since it demonstrates incontrovertibly that Chinese people can develop democratic institutions and thrive under them".

By contrast-I hope that the noble Lord, Lord Teverson, and members of his committee will not take offence at this-the tone of the report that we are debating seems to be that we must do nothing to promote relations with Taiwan that upsets the PRC. Paragraph 171 of the report states:

"The EU should continue to support Taiwan in areas which China would regard as non-threatening and should encourage the Chinese to be more flexible, seeking to persuade them that Taiwan's participation in some international organisations, such as observer status at the World Health Assembly, will not damage the Chinese case on reunification".

If it is right for Taiwan to participate in these international bodies-I would add to that list the International Civil Aviation Organisation, the United Nations Framework Convention on Climate Change, the Inter-Parliamentary Union and others-why should the People's Republic of China be given a veto?

The case for Taiwan to be given observer status at the World Health Assembly-finally granted in May 2009-was overwhelming because of the significant contribution that the country had made over the years on world health issues such as the SARS epidemic and earthquake relief. If a visitor arrived from outer space and examined the various relationships between Britain and Taiwan-in financial services, in industrial investment by British companies in Taiwan and by Taiwanese companies here, in the provision of places for Taiwanese students at British universities, in collaborating on tackling financial crime and terrorism, in combating disease, in coping with national disasters, and much more-that visitor would come to the conclusion that here were two friendly countries working together closely in virtually every area that mattered.

However, we know that life is not quite like that. I well recall an exchange in your Lordships' House in January 2003 on a Question that I asked on WHO membership. The noble Lord, Lord Avebury, asked my noble friend Lady Amos, then a Foreign Office Minister, whether she could think of any of the attributes of a sovereign state that Taiwan lacked. Her reply was:

"My Lords, the noble Lord will be aware that we do not recognise Taiwan. The majority of countries in the UN also do not recognise Taiwan".-[Hansard, 20/1/03; col. 432.]

That was a truthful answer, but it was not quite an answer to the question that the noble Lord, Lord Avebury, asked.

However, I pay tribute to the previous Government, whom I was proud to support, for one very important decision that they took in relation to Taiwan. On 3 March 2009, they granted visa exemption for six months to Taiwanese passport holders. We were followed by Ireland and New Zealand, and Taiwan has offered similar rights to British passport holders. There is no evidence that this has created any problems in the countries involved.

I was interested to see the letter that Ivan Lewis MP, the former Foreign Office Minister, sent on behalf of Her Majesty's Government to the noble Lord, Lord Roper, on 6 April. I am delighted that the noble Lord has been sitting through this debate and is listening carefully to all our deliberations. Paragraph 10 of the letter states:

"The Government agrees that the EU has a significant stake in the maintenance of cross-Straits peace and stability. In line with the East Asia Policy Guidelines, the EU should continue to welcome positive developments and initiatives aimed at promoting dialogue, practical co-operation and confidence building. It should also encourage both sides to pursue pragmatic solutions to Taiwan's involvement in international organisations, especially where Taiwan's practical participation is important to EU and global interests".

Perhaps I may ask the Minister a simple question: do the new Government agree with what their predecessors said on that matter?

I have a couple of further questions for the Minister. The first relates to the EU arms embargo on China, to which the Select Committee report refers. Can he give an assurance that the Government will not support the lifting of the arms embargo until the PRC has abandoned its threatening stance towards Taiwan and has removed the missiles from its coastline?

Secondly, do the Government stand by what the Minister's new noble friend, the noble Lord, Lord Howell of Guildford, said during the exchanges on the Question to which I referred a moment ago? Speaking from the opposition Front Bench, the noble Lord said:

"I am sure that we all appreciate that because of respect for the 'one China' policy and our relations with the People's Republic of China, we do not accord Taiwan full diplomatic status. Can we at least be assured that we give Taiwan representatives in our country and the sort of causes that we are discussing in this Question the same support and encouragement as are given by our neighbours, particularly France and Germany, in their dealings with Taiwan? Are we as effective as they are in maintaining good relations with this remarkable democracy?"-[Hansard, 20/1/03; col. 432.]

His reference to the support offered to Taiwan's representatives in the UK is important. Is the Minister aware that practice differs markedly from one EU country to another in terms of Taiwan's offices' legal status, the immunities granted to their staff, the rules on vehicle ownership, use and taxation, and so on? I do not expect the Minister to give me an answer today, but perhaps he will institute a review of the situation and, where possible, ensure that, where the UK practice is behind that which is followed in other countries in the EU, we will attempt to match that. Perhaps he could write to me about that in due course.

I thank the noble Lord, Lord Teverson, again for his brilliant introduction. I am grateful to the Minister for his attention throughout our debate and I look forward to his reply. I congratulate all members of the committee on pursuing such an excellent study.

Photo of Lord Cobbold Lord Cobbold Crossbench 6:30 pm, 9th June 2010

My Lords, I intervene briefly in this debate to congratulate the noble Lord, Lord Teverson, and his committee on an excellent report. European committee reports always achieve a high standard. The only problem with this one is that it is physically difficult to read because of its very tight binding. I agree with the report's principal call for the EU to raise its game substantially and forge a strategic relationship with China based on trust and mutual respect. Like the noble Lord, Lord Alton, I think that one of the most important statements in the report is in paragraph 43. It reads:

"It is unrealistic and undesirable that a single EU-China relationship will replace relations between China and individual Member States. The two will rightly continue in parallel".

We in this country already have a special relationship, as many speakers this afternoon have mentioned, because of Hong Kong and, more particularly, the English language.

I first visited Hong Kong in 1959, but my first visit to the People's Republic was a business trip in 1990. It was a revelation at that time to learn that China's economy had been growing by around 10 per cent per annum since 1979. It was clear that if this rate was to be maintained China would be the largest economy in the world by the middle of this century. In spite of the current global recession, China is still on track.

On my return in 1990 I went to the University of Hertfordshire, of which I was then a governor. I told the university that it must develop a relationship with China; I am happy to say that it now has around 1,000 students from China. I think there is a total of around 77,000 in Britain and, according to paragraph 50 of the report, as many as 190,000 in the EU as a whole. These are important numbers. Happily, at alumni parties organised by the university in China, graduates have been enthusiastic about their experience in Britain, and have said that it had helped them to get good-quality jobs on their return.

It is also important to arrange for more education in the Chinese language in this country. I think some of my children and grandchildren are being taught the Chinese language. Education is just one of the many links that we have with China. These links are well covered in the committee's excellent report. My one concern is over the statement in the gracious Speech that the Government look forward to an "enhanced" relationship with India. I have nothing against India, but what about China?

Photo of Baroness Kinnock of Holyhead Baroness Kinnock of Holyhead Labour 6:32 pm, 9th June 2010

My Lords, I also congratulate and thank the noble Lord, Lord Teverson, and the members of the sub-committee, who have provided a detailed and persuasive case on how the European Union can better co-ordinate its policies towards China and maximise its leverage over China. Most of the speakers have played around with those points. It remains quite difficult to pinpoint exactly how we will do it but at least we are charting some paths. My one carping observation is that, from the evidence sessions, it is apparent that the committee took no evidence from a single member of the European Parliament on the several visits that it would have made to the Commission. With the Human Rights Sub-Committee, the Development Committee and others there, the committee might have sought that useful contribution.

The context that we are dealing with in these issues is the increased assertiveness which China is showing. That assertiveness increases the case for a more coherent strategic approach to our relationship with China. On Burma, Iran and North Korea, we know that China has been-and continues to be in most cases-less than helpful. On trade and investment policy, industry and technology, climate change, proliferation and human rights, the European Union clearly needs to refocus more strategically on how it deal with its concerns.

As the report says, Europe must raise its game. The reality that we have more influence when we work together is well understood in the report. Charles Grant has observed that we should bear in mind that China, as an ultra-realist, respects power. Therefore, uniting European member states are far more likely to have that influence over Chinese policy than we have when there seems to be too much of a focus from many member states on bilateral efforts to build special relationships between them and China. We need to insist, at European Union level through the new high representative and the European External Action Service, that we develop a system of joint messages-with more clarity-from the European Union to China.

It is also time to end what China clearly perceives as Europe's rather patronising approach to it. Its economy grew by 9 per cent in 2009. For China, this is hardly evidence of any need to emulate our economic model. The European Union must get to grips with identifying the critical issues central to building a more constructive relationship with China. We need, for instance, to promote the objectives of the Doha development round. China is a member of the WTO and has an important role to play. It well understands the need for open trading systems and would look for support on this. There is also climate change, which several noble Lords have mentioned. It means building a consensus at EU level on fewer issues than we currently focus on, and ensuring that our views are clearly understood. We should be clear with China that Europe is ready to do more on such issues as technological transfer, in which China has an interest. We understand the clear benefit for China, and the European Union is ready to be more co-operative and engaged in such issues.

China regularly expresses its interest in a partnership and co-operation agreement with Europe. However, in reality, as many noble Lords have said, nothing much seems to be happening. We see continuing intransigence on several issues identified in the committee's report. The conclusion is that as China's economic power has grown, our diplomatic contact with it seems more, not less, difficult. China continues to foster relations with developing countries and, increasingly, with authoritarian regimes. Nor do we see many signs that China is keen to integrate further into international systems. In the absence of Chinese support for Resolutions 1718 and 1874 on North Korea, and Resolutions 1737 and 1803 on Iran, the UN's effectiveness was severely diminished by the intervention of China, which voted against these resolutions.

Europe has limited opportunities at its disposal. However, it has been argued that the tensions between China and the US, and China and its neighbours, must mean that Europe now has a better chance to focus on building that G3 relationship which would be preferable, as the noble Lord, Lord Teverson, suggested, to the G2 relationship which most people seem to think is the likely outcome. This is a critical time for relations with China. The option of working on a G3 relationship is perhaps more possible for us at this time than it has been in the past.

China has an impressive grasp of public diplomacy, which it has developed with the United States and the European Union. Contrary to the impression that some people have given today, China understands public diplomacy and how to manage it. The European Union has shown an aversion to open and public acrimony between Europe and China because it leads to the judgment that we are failing to handle China. The bottom line is that, like Europe, China needs global trade, monetary standards, security and access to resources. The high representative now has the opportunity to argue for careful policy co-ordination with the United States to use the opportunities that the Lisbon treaty and the European External Action Service have brought about. Insufficient mention is made of that service, which will facilitate the momentum that we need.

China's change of tack on Iran shows the importance of exerting influence on China. Russia's change of policy and the involvement of the Gulf states influenced China in that regard. We should try to emulate those actions in other ways to exploit the fact that China is open to influence. That, in turn-I repeat the point I made earlier-reflects the fact that levering change could be dependent on how we work with others. Indeed, there will be no change unless we work with others.

On climate change, we should acknowledge Europe's success in building up global momentum and agreement on a legally binding treaty. It was not the case that Europe was not engaging, but what happened in Copenhagen resulted from the fact that we had nothing to engage with because we had the maximum on the table, and China reacted to that. What we saw before Copenhagen was that China was prepared to reject the deal with the BASIC group. That action was the result of influence on China. Copenhagen was certainly not a diplomatic success for China. I know for a fact that China is now busy working to rebuild bridges, particularly with African countries and small island states in the developing world, which feel badly let down by it. China is now busily trying to repair those relationships. We should not expect much progress beyond the Copenhagen accord before the Cancun meeting. However, the ball is most definitely in the European Union's court and that is an opportunity which we must grasp.

European solidarity on human rights is essential when we put forward our arguments. We must continue to focus on Tibet and the Dalai Lama but we should give much more attention to the plight of political dissidents in China. The imprisonment and difficulties that dissidents experience get very little of our attention compared with Tibet and the Dalai Lama. It should not be a case of one or the other, but we should place more emphasis than we do at present on the plight of political dissidents in China. The European External Action Service must work to ensure that there is a strategy on how to maintain consistent pressure on human rights. We have many strong European Union Council positions-we have the common positions on China and other countries-but they are not being followed through sufficiently with strong and concerted European Union action. As with all the policies covered in the report, there should be incentives of a positive kind on the table when we have our discussions with China, but, in tandem with that, there should be clarity on what action the European Union will take when there are clear breaches of international human rights law and, very often, of Chinese law as well.

Noble Lords have touched on Africa and China. I know from my experience of working in Africa how the activities of the Chinese there preoccupy many people who are involved in development and human rights. Beijing combines state investment in Africa with economic incentives to attract private investment. China displays hard-nosed self-interest but successes have resulted from its resource-backed development loans. For instance, reconstruction in Angola has been helped by three oil-backed loans, which have been used to build roads, railways, hospitals, schools and water systems. Angola required Chinese companies to subcontract 30 per cent of the work to local firms. People are not generally aware of that. The Congo will receive $3 billion worth of copper-backed loans from China. According to reports that I have read, the Congolese Government have stipulated that 10 to 12 per cent of all infrastructure work undertaken under the arrangement must be subcontracted to Congolese firms, that no more than 20 per cent of construction workers involved can be Chinese, and that at least 0.5 per cent of the costs of each infrastructure project must be spent on worker training. That represents considerable progress on what I observed in the 15 years during which I travelled frequently to Africa. There are still many concerns but we have to accept as a fact that Chinese teams are building a hydro power project in Congo in exchange for oil and another in Ghana to be repaid in cocoa beans.

Chinese aid to Sudan is relatively small, but the joint venture on oil regrettably allows al-Bashir to maintain his power and Chinese arms continue to flow into Sudan in spite of the UN arms embargo. However, other aspects of the relationship are not so well known. China was pivotal in getting Khartoum to accept a joint UN-AU peacekeeping force. It agreed to the al-Bashir case being referred to the ICC. As a member of the Security Council, China could have vetoed that but did not. Beijing is working with the United States and the European Union to build joint strategies in Sudan. Again, that is progress on which we should build in future relations.

As the report says, we must continue to ask for more transparency on official aid and other flows of finance. As noble Lords have said, there are concerns about China's relations with resource-rich countries in Africa, but claiming the high ground will not result in the progress being made that we need to see in China's dealings with these Governments, who, as we know, need huge investment in infrastructure. China provides the assistance that they need. It increasingly understands the importance of good governance in Africa, and that it is not in its interests to fail to support and encourage that.

We are discussing the findings of this excellent EU committee report. We know that we have seriously to analyse what we have to do better in our dealings with China, a strong and powerful state protected by its status as a developing country, as others have said. Europe needs to have a comprehensive, strategic, persistent, concerted and well co-ordinated approach. The conclusion we reached is that the European Union must develop and refocus its foreign policy to meet the promise of the Lisbon treaty and the European External Action Service. Europe has moved on from past approaches and from the assessment of the Centre for European Reform that Europe's policies were,

"a ragbag of opportunistic, allergic, poorly co-ordinated and panicky policy action".

Europe will have to do better. I believe that that is possible and I hope that this excellent report will make a contribution.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Liberal Democrat 6:48 pm, 9th June 2010

My Lords, it is a pleasure to follow the very thoughtful and constructive speech of the noble Baroness, Lady Kinnock. The Foreign Secretary has made it clear that China is an area where there should be continuity of foreign policy. It is very much an area in which there is consensus among all the main parties on what British and European policy should be.

The Government welcome this extremely helpful report which contributes to the British and European debate. Like other reports from the Lords' EU committee, it will no doubt be read in Brussels and other capitals. I apologise for the delay in the ministerial reply. There have been one or two hiccups in the middle, such as the general election. Some of the committee members, at least, will be aware that the Minister responsible wrote to the chairman on 3 June:

"I hope that a time-frame of two months from the State Opening of Parliament on 25 May would be acceptable".

So a full and detailed ministerial reply will be on its way well within that timeframe. I should perhaps also apologise and say that I hope my voice does not give out before the end of my speech. I have a rather bad cold.

The report and the speeches in this debate have been balanced between EU/China issues and UK/China issues. I loved the comment in paragraph 35 that,

"it was not always clear for China where the locus of governance was in dealing with Europe", referring to Chinese confusion over where the balance of authority lies between national capitals and Brussels on trade, intellectual property, technological co-operation and everything else. Of course, Members of this House are entirely clear where the balance lies between Brussels and Britain. This is part of the constructive ambiguity with which we all deal within the European Union, and the Chinese are learning to navigate their way around it.

On the other hand, there is a useful emphasis in the report that China, in its turn, is not a monolith. We need to pay more attention to the Chinese provinces, and we need to make sure that there is representation for the United Kingdom and, indeed, for the European Union as a whole in the major Chinese provinces. When being briefed, I was told that Guangdong province now has an economy larger than that of Saudi Arabia, for example, with 30 other provinces to add. So far as China is concerned, the future of the EU External Action Service is very much a matter of coming to grips with a complex entity.

China is a priority for the noble Baroness, Lady Ashton. We fully support her objectives and her efforts there. She visited China at the end of April, and one notes that this is a dual relationship. President Sarkozy made a major visit. The Chancellor was in Beijing on 3 and 4 June for economic discussions and then, I remind the noble Lord, Lord Clement-Jones, went to the Shanghai Expo to visit our excellent exhibition there.

The noble Lord, Lord Anderson, asked about collocation and secondment. I remind him that the British Government have collocated a number of their missions with others-in particular, German ones-and I think in at least one case with a European Commission office. Therefore, there is no objection in general and, indeed, there is a huge advantage in doing so, often on economic grounds. The European Union External Action Service is in the process of development. We are busily training and seconding officials to it, but we will have to write to the noble Lord about the development of the structure of the EU External Action Service in China.

It may be appropriate to say a little about the new coalition Government's approach to co-operation on foreign policy within the EU. The noble and learned Lord, Lord Howe, referred to William Hague's maiden speech at the Conservative Party conference. The noble and learned Lord reminded me the other day that on the famous photograph so often reproduced of the 15 year-old William Hague, there are only three other recognisable faces, one of which is his. So a number of people go back that far with William Hague.

In the Queen's Speech debate in the Commons, the Foreign Secretary said:

"The Government will be an active and activist player in the European Union ... while working to make the European Union as a whole a success ... It is also in our interests and in the EU's general interest for the nations of the EU to make greater use of their collective weight in the world".-[Hansard, Commons, 26/5/10; cols. 187-88.]

This report is, after all, about making greater use of the EU's collective weight in its relations with China. In a couple of days' time, the Deputy Prime Minister and the Foreign Secretary will be speaking together in Berlin about Britain's European policy.

The noble Lord, Lord Cobbold, asked whether an enhanced partnership with India, mentioned in the coalition agreement, would mean that China would be downgraded. We do not see it as one situation versus the other; we very much want to continue to build on the previous Government's approach to China and to extend their strategic dialogue as far as we can. We already have a fairly developed structure of annual summits, the economic and financial dialogue and, now, the strategic dialogue. Therefore, we are currently talking to the Chinese at many different levels.

There has been much reference in this debate to history. The noble Lord, Lord Alton, went the furthest back-150 years-reminding us that the western treatment of China, with years of humiliation, western arrogance and complacency, is still very much in their minds. That explains part of the intense sensitivity with regard to sovereignty, outside criticism of domestic affairs, including on human rights, their treatment of minorities and the management of Tibet and Xinjiang, and so on. Perhaps we also have to be a little more humble in remembering that when we were behaving in Beijing in the way that the noble Lord suggested, our treatment of our national minorities in Ireland was not entirely above criticism. Therefore, we are moving along a certain path.

The noble Lord, Lord Hannay, talked about the opening of contact with the EC in 1975. We are, after all, still struggling with a trade agreement of 1985 and are making efforts to move that forward into a more constructive partnership agreement. However, I think we all recognise that the transformation of China since then-economically above all but also to some extent socially and in some ways even in terms of human rights and the rule of law-has been remarkable. The noble Lord, Lord Alton, talked about the changes in the freedom to worship. The noble Lord, Lord Selkirk, quoted the claim-which perhaps is quite correct-that the Chinese have better human rights now than they have had over the past 5,000 years. There may be some way further to go but there are signs of movement in the right direction.

The noble Lords, Lord Clement-Jones and Lord Crickhowell, both said that it is a great mistake to preach at the Chinese. It is far better to appeal, as far as we can, to their enlightened self-interest. That is clearly true in relation to the rule of law. On my first visit to Beijing in 1981, I met Professor Gerry Cohen from Harvard, who was giving introductory lectures on international law to Chinese trade officials. They did not want to learn about that out of a sense that it was important intrinsically; they wanted to negotiate over trade-enlightened self-interest. Similarly, the Great Britain-China Centre, to which the noble and learned Lord, Lord Howe, referred, has made very important contributions to work on rule-of-law issues in China. We have to persuade the Chinese that a stronger rule of law, a stronger recognition of the importance of whistleblowers in providing for better industrial relations and better sustainable development is in their own interests and not just a question of value. That has to be the way forward. The same is true of their attitude to intellectual property, which is still a sensitive issue, to the market economy and to energy use.

We will, if we may, write to the noble Lord, Lord Alton, on the specific human rights issues that he mentioned. We raise specific cases of concern within our human rights dialogue with China. The last round of the EU human rights dialogue with China took place last November and the next round is due to take place in Madrid in June. In that dialogue, we will again focus on freedom of expression, freedom of the press, human rights defenders, the situation in Tibet and Xinjiang, and the death penalty, torture and so on. Therefore, we continue to raise these issues and slow progress is made.

Similarly, on climate change, we have some leverage because the Chinese themselves are increasingly worried about the environmental damage they are doing to their economy. Therefore, we welcomed the focus on climate change during the recent visit to Beijing by the noble Baroness, Lady Ashton. We are also engaged with the Chinese in work on carbon capture technology and on other forms of reducing the energy intensity of their economy.

We have to explain to them that, because of its special status, it is in their interests that Hong Kong continues to remain an economic and financial driver for the entire Chinese economy. In the introduction to the 2009 EU annual report on Hong Kong, just published, the noble Baroness, Lady Ashton, welcomed the EU's strong support for early and substantial progress towards the goal of universal suffrage in accordance with their Basic Law. So we are doing our best to persuade them that their enlightened self-interest goes along with the values that we ourselves wish to promote. This is more difficult in some areas than others.

Several noble Lords mentioned the arms embargo issue. It is a sensitive issue partly because it is one for both sides. Indeed, in some ways it is more symbolic than real. It was imposed because of the abuses of human rights, above all in the Tiananmen massacre. It was not originally linked to the Taiwan issue, although we are conscious of the Taiwan dimension and there is broad consensus in Europe that now is not the right time to lift the arms embargo. We need to see clear progress on those matters before the issue is raised again.

Cyber crime strategy and the whole question of what is happening is one of the most sensitive issues with which we are dealing with the Chinese and with companies such as Google operating in China. We agree that we should continue to work closely in this area with all our partners in the EU, NATO and other relevant organisations. A number of noble Lords raised the much broader question, which is in the report, of how to encourage China to become what some call a more responsible power or to shoulder a larger share in the responsibility for maintaining global order and prosperity. Again, the report notes that China is gradually becoming more engaged in all sorts of ways. It is the largest contributor to peacekeeping within the P5, although most Chinese peacekeepers I understand are still in the logistical, medical and support dimension. They do not yet have combat troops in UN peacekeeping operations, unlike India which is the largest contributor to UN peacekeeping operations at present. When I looked at how many British ships were taking part in the anti-piracy operations off Somalia, I was struck by the fact that there was one British ship and three Chinese. So the Chinese are beginning to take a larger role.

In Africa, too, as the noble Baroness, Lady Kinnock, said, the Chinese now find themselves moving up a learning curve on how they need to co-operate with African states to preserve their longer-term interests. Sudan is an interesting case in point, where the possibility that there might be a secession in Sudan in the next year-possibly accompanied by further conflict-must directly affect Chinese interests. We therefore have an interested basis on which to discuss with the Chinese how we help to prevent future conflict. We see ourselves as working with the Chinese on peacekeeping and peacebuilding and there is more to be done to encourage the Chinese to take full part in multilateral approaches to conflict prevention, post-conflict reconstruction, and so on. We will be ending the British bilateral aid programme to China next March and we see ourselves moving towards a strategic partnership with China in international development, which will be working with China on issues such as African development. The International Development Secretary has asked that a global partnership fund be established within DfID to provide resources to work with countries such as China on the exchange of experience and mutual learning in support of other developing countries. I hope that noble Lords think that that is a useful step forward.

We have to recognise that as we adjust to China taking a larger role in international institutions, that may in time raise some painful issues for Britain and other European countries. We are all-the Italians, French and Dutch, as well as the British and the French-conscious that we wish to retain our positions in the IMF and elsewhere. There is much to be done in terms of how we adjust.

On North Korea and Taiwan we are conscious that China is the only country that can significantly influence North Korea. China pursues a policy of economic engagement to encourage stability in North Korea and avoid the threat of a collapse, which would hit China more strongly than anywhere else except for South Korea. We have to ensure that Chinese policies do not undermine UN Security Council resolutions designed to prevent proliferation. On Taiwan, again we do all that we can to encourage China to recognise that a peaceful relationship and further development of the relationship of two countries within one state should be developed. So far, again it is clear that that is also in China's interest as well as in ours.

Several noble Lords mentioned the question of the considerable attention to China from within the United Kingdom and the extension of British and other European students studying in China. More young people are being encouraged to study Mandarin elsewhere. Again, these are encouraging signs. The last time I was in Beijing I was lecturing on a joint London School of Economic graduate degree course in China made up of half British and European students and half Chinese. The University of Nottingham is doing much more than that, so there are a number of initiatives under way, not all of which are government-led, helping to encourage that. I know that a number of independent schools, in particular, are encouraging more people to study Mandarin.

In conclusion, the Government are happy to accept many aspects of this report's analysis. We see that a more coherent and effective EU-China relationship should be a priority for the EU High Representative for Foreign Affairs and for the European External Action Service, supported by a more consistent approach to China from the different member states. Constructive engagement with China can deliver huge opportunities for the people of Europe across our international, bilateral and trade priorities. I thank the EU Committee for this excellent report and look forward to the next one on this subject.

Photo of Lord Teverson Lord Teverson Liberal Democrat 7:06 pm, 9th June 2010

My Lords, I thank the Minister for his response and also for his undertaking to come back to us with a full Government response. We have had a response already from the previous Government and I want to thank the now Opposition for their positive response to our report when they were in government.

I particularly thank non-Sub-Committee C members for contributing to the debate. Their contributions were as excellent as those from members. Two noble Lords talked about the importance of the parallel role of EU and member states. That is absolutely right but most importantly, both understand what each other's roles are. They are consistent on that and it is not all about the way in which it is written in a legal treaty-Lisbon or whatever. It is around making that work in practice.

I take the point made by the noble Lord, Lord Faulkner of Worcester, about the death penalty in China. That should have been covered far more strongly. We did not cover Taiwan because this report was broad enough as it was, but the plain fact is that Europe has no effect on the strategic relationship and the risk of that conflict between Taiwan and China. That is an entirely Chinese-United States issue and, regret it or not, the EU has no leverage in any defence way over it.

I shall respond briefly to the noble Baroness, Lady Kinnock. I take her point about the European Parliament. I am not absolutely sure that we did not ask for help when we went to Brussels and asked for an interview. I may be incorrect. She is absolutely right about all these reports.

I was interested in the idea, which I take particularly from our history, that we might have a paternalistic attitude towards China. What concerned us most as a committee was the opposite of that-as if Europe in many ways has already said, "Game over. China is the future; Europe and the West is the past". It was that fatalism about the future that concerned us. We wanted to see Europe as a major player in the future. Various development issues are important and in many ways we were positive about China's future role there.

Finally, I join many fellow committee members in thanking our committee clerk, Kathryn Colvin, and Oliver Fox and Bina Sudra who gave us a huge amount of positive clerical and organisational assistance. In particular, I thank our special adviser, David Kerr, who gave us superb assistance during this assignment. I commend the Motion.

Motion agreed.