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What China could expect from a Global Britain

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The National Interest, with Rob Clark, 17 August, 2018

As India celebrates seventy-two years of Independence from the British Empire this week, a grand historical milestone for the ancient nation, it is notable to see the Royal Navy sailing in India’s waters once more—however this time it comes as an ally to India to sail together in an increasingly troubled world.

Pulled from its forty-two-year involvement in the European project, the United Kingdom has begun a major re-think of its global posture. What does Global Britain mean? Where might it best orient itself in relation to a growing Indo-Pacific region, where trade, rising powers, and naval grand strategies reveal a region that is increasingly a central part of the global economy and political center?

Stretching from the Gulf of Aden to the Malacca Strait, the Indian Ocean is vital to international trade and commerce, with 50 percent of the world’s maritime oil trade passing through every day. It is a global market that the United Kingdom cannot afford to ignore. The global significance of this region has seen many vested naval powers transit this ocean to maintain their own interests.

But rather than coming as an imperial trading power—as it once did—the Royal Navy is coming to the region under a liberal democratic trading nation. The United Kingdom seeks to uphold an open and inclusive rules-based order, an order where all have rights—not simply great powers. And this commitment is more than just rhetoric.

Over the past year, London has committed to three separate missions across the Indo-Pacific region. HMS Albion, Sutherland and Argyll have all made their way through the Indo-Pacific region this year to carry out sanctions enforcement against North Korea and to conduct freedom of navigation operations to counter the growing Chinese naval activity. These missions have revealed the role the Royal Navy will play in a Global Britain strategy.

The sudden and rapid rise of Mahanian strategies among Asia’s powers has seen sea lane security re-emerge as a major geopolitical issue after three generations of U.S. naval preponderance. The most active driver of change in the Indian Ocean has been the Chinese People’s Liberation Army Navy (PLAN). Far from its traditional sphere of influence of the first island and second island chains, the Chinese navy has rapidly established itself as a naval power in the Indian Ocean, and beyond into theMediterranean Sea . Beijing has done this by developing blue-water capabilities and a port strategy that secures its Beijing’s trade routes and energy supply line from the Middle East.

The emergence of China’s blue-water navy and greater power projection has complimented China’s long-term grand strategy of becoming the Asian hegemon, an ambition not lost on India’s ruling elite. Beijing has sought to ensure that “all roads lead to China,” with the Belt and Road Initiative (BRI) and the Maritime Silk Road projects. Furthermore, China has encroached upon the territory and neighborhood of the region’s fastest-growing power—India—developing economic dependencies with nearly all of New Delhi’s neighbors.

As powers that are dependent on Indian Ocean trade routes, liberal democracies like Britain and India (and others) will have to learn to manage relations with Beijing. This will include balancing some of China’s more predatory behaviors such as the debt diplomacy.

The Royal Navy and Indian Navy will also have to learn to operate in close proximity to the PLAN, which has rapidly up-scaled its presence in the Indian Ocean, with recent estimates indicating a presence of at least fourteen PLA Navy ships throughout August 2017, including SSN class nuclear-powered submarines, with that number rising throughout 2018. There have already been positive examples of recent UK-Sino naval cooperation, including the arrival of two PLA Navy frigates in London last year for a ‘goodwill’ visit. It is precisely from these exchanges that the Royal Navy—respected for its long traditions—can impart best practices and norms to the still-young PLAN. Possible areas of planned cooperation might take place in the anti-piracy missions and with humanitarian responses to natural disasters.

As the Indo-Pacific once again takes center stage in global politics, we will see China and India each attempting to stamp their influence on the international order. This does not have to be confrontational, of course. As part of a wider Anglo-American security alliance which helped construct the current global order, the UK has a vested stake in seeing that these changes abide by the current norms underpinning the rules-based international system. This includes respect for national sovereignty, freedom of navigation, and free trade.

As Global Britain approaches the Indian Ocean, it will work closely with all navies, including the Indian Navy and the PLAN. No doubt, it will work more closely with some more than others. And, of course, it will have to ensure that its resources match its ambition. Should Beijing’s quasi-imperial approach toward the Indian Ocean continue, the UK and other European powers will begin to lend their support to the India-Japan-US-Australia Quad.

Regardless of geopolitical trends, the Royal Navy will seek to support joint naval drills and uphold the maritime principle of freedom-of-navigation. Bolstered by its own bases in Duqm and Singapore, the Royal Navy will seek to cooperate with all, including the United States, Australia, Singapore, and India. Global Britain as a philosophy will promote a collaborative approach toward Beijing while aligning carefully with like-minded friends and allies

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AUKMIN 2018: The Future of Global Britain?

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RUSI Commentary, with Milia Hau, 14 August, 2018

Britain and Australia face an uncertain strategic landscape. But there is much they can do together, as they deal with the two big powers which appear determined to change the current status quo: China and Russia.

The scene for the 10th annual Australia-UK Ministerial Consultations (AUKMIN) earlier this summer was visually stunning. Australian Foreign Minister Julie Bishop and Defence Minister Marise Payne met with their British counterparts, Jeremy Hunt and Gavin Williamson, at the Royal Botanic Garden in Edinburgh for the AUKMIN meeting. While the visuals were good, it was clear that both liberal democracies came to these negotiations nurturing some very serious misgivings about their strategic environment.

For Australia, it has been an annus horriblis, as it has lurched from one diplomatic spat with Beijing to another, all of them driven by Canberra’s belief that Beijing has been meddling in its domestic affairs and waging an influence campaign among the Chinese diaspora, as well as Australia’s own political elite. For the UK – apart from the running sore of Brexit – the year has been dominated by the Skripal incident in Salisbury, which saw the use of a nerve agent on British soil, resulting in the expulsion of 23 diplomats, and a crackdown on Russian oligarch investments inside the City of London. As these two neo-authoritarian powers become increasingly bold, both London and Canberra have had to deal with a US that is seemingly less reliable, or perhaps more transactional.

It has been an odd time for Western liberal democracies, as they have slowly begun to react to the new geopolitical competition that has intensified in the wake of 2014, when China militarised islands in the South China Sea, and Russia invaded and occupied Ukrainian territory. As a result, the AUKMIN joint ministers’ statement resonated with concerns for the rules-based order with a noticeable emphasis on the Indo-Pacific ‘which is open, prosperous, and inclusive’.

While there is a sensible debate on how far the UK can extend its resources to the region, a Henry Jackson Society report sought to argue earlier this year that the Indo-Pacific presents economic opportunities as well as geopolitical challenges. The region accounts for 60% of the global population and accounts for nearly two-thirds of global economic growth; it is – according to the IMF – the world’s most dynamic region by a wide margin. The decision of the UK and Australia to strengthen their track 1.5 Asia Dialogue last year recognised these dynamics.

How Australia and the UK decide to interact in the Indo-Pacific will become an essential part of the Global Britain strategy. The two states already cooperate in the Five Powers Defence Arrangements and both have growing defence and intelligence ties to Japan. Additionally, they might develop other nodes of regional cooperation, such as a potential Australia–France–UK trilateral, or the already-existing US–Japan–India–Australia Quadrilateral.

While there are serious concerns about the UK’s budgetary capabilities – witness the searing disagreement between Defence Secretary Gavin Williamson and Prime Minister Theresa May about alleged proposed cuts to defence this past June – the Indo-Pacific region does at least present economic returns. The agreement by London and Canberra to pursue an ambitious bilateral free trade agreement once the UK has left the EU and its interest in joining the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership are both opportunities, as is the budding defence industrial relationship. The recent revelation that the two signed a £20-billion deal for nine UK-designed warships might well be an indication of such returns.

As the region is set to lead global economic growth over the next 30 years, it makes sense for the UK to invest in capabilities and diplomatic reach in-region.

While distance still offsets the warmth found in the AUKMIN 2018, the fact is that working together can help both overcome this. The Royal Navy already has one base in Singapore. Perhaps basing rights might be exchanged between both navies; if successful, rights might even be extended reciprocally with the French, which have bases in New Caledonia and French Polynesia. In return, French and Australian marines may dock at British facilities in Singapore.

Another area that might be of mutual interest is that of the South Pacific. While it is a part of the world that few – if any – foreign secretaries think about, we could see this begin to change. Over the past few years, Beijing has been pouring money and developments into these tiny Pacific Island states. While development has traditionally been viewed as benign, the possibility of Chinese submarines docking at a recently built dock in Vanuatu – an island sitting on Australia’s shipping route to its ally, the US – has become a serious concern in Canberra this year. Britain’s decision to massively expand its economic and diplomatic footprint on Vanuatu, the Solomon Islands and Tonga will be warmly welcomed in Australia.

While it is true that the ‘tyranny of distance’ will keep the UK from becoming an Indo-Pacific regional power, Britain can become a significant player. There are multiple nodes of access available, including the Five Powers Defence Arrangements, the Commonwealth and the Five Eyes intelligence-sharing structure. One excellent bit of news from the AUKMIN Ministerial statement is the prospect that London and Canberra will begin coordinatingmuch more closely on foreign direct investment into sensitive digital infrastructure, hopefully avoiding another debacle similar to that which occurred when London allowed the sale of a British data cloud centre to a Chinese consortium in 2017, causing the Australian Department of Defence to remove its data from the company.

Looking into the future, we see that the traditional picture of a US-led Western alliance confronted by Russian and Chinese authoritarianism has returned to mainstream global politics. Only this time, it is not always clear that the US will be as willing to ‘bear any burden’. This requires those great powers and middle powers to band together all the more tightly.


The Daily Mail, Rachel Millard, July 25, 2018

Dr John Hemmings, director of the Asia Studies Centre at the Henry Jackson Society, a foreign policy think-tank, said: “Authoritarian powers like China and Russia have sought to buy and steal sensitive technologies in the West… this White Paper looks like a step in the right direction.”


Our companies have been wide open to foreign espionage for too long – now that is changing

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The Telegraph, 24 July, 2018

Today’s news that the Government is enhancing its powers to protect national security from hostile foreign actors by blocking corporate investments, mergers and acquisitions looks like madness. Can we really afford to be turning away investment at a time like this, with Brexit on the horizon??

Yet not only is this change long overdue, it will actually help with inward investment – quite the opposite to what its critics allege.

Though it may seem pernickety to some, the debate on investment screening has rattled all through Whitehall and the City since the summer of 2016 when the Prime Minister sought to review the nuclear power plant deal agreed for Hinckley Point with Paris and Beijing by her predecessor.

Among those tasked with protecting Britain, the fact that George Osborne had rejected a proposal put forward by Ed Davey – then Energy Secretary in the coalition government – for extra safeguards, without explanation, set alarm bells ringing. This worsened after an engineer working with the Chinese partner on the project (CGNP) was indicted by the US government for nuclear espionage.

Despite this, Downing Street was forced to submit to Chinese pressure after the China business lobby and Chinese Embassy filled British newspapers with stories. Liu Xiaoming, the Chinese Ambassador to the UK, wrote that British openness and mutual trust were keys to future collaboration, hinting that Chinese investments to the Northern Power House would be at risk. The “Golden Share” solution ultimately devised by the Government did little to hide the fact that an authoritarian power had just successfully pressured a British prime minister into accepting foreign intrusion into a sensitive part of Britain’s energy infrastructure.

While much of this sounds rather alarmist, the fact is that nearly every advanced economy has implemented new investment screening measures over the past few years. Germany passed new legislation in July 2017, which sought to check foreign direct investment into key sensitive areas such as telecommunications, cloud computing, IT, and critical infrastructures, while a similar EU screening mechanism was passed this past June.

Likewise, the new White Paper advises scrutiny on areas such as cloud computing, AI, quantum, and other high-tech areas. Notably, it recognises that the war-fighting technologies of tomorrow may not even be known yet, therefore giving the Government space to constantly check new technologies coming from the high-tech industry.

The overall reason has been the Chinese policy known as Made in China: 2025. This policy has become a major point of contention between China and the West, particularly the Trump administration. In a US government report, released in March, the US alleged that the policy is a form of mercantilism, designed to transfer the most advanced Western technologies to Chinese “national champions”, state-subsidized firms, which can then make them at cheaper prices.

To top it all off, once Chinese firms are able to master these technologies, their foreign competitors find themselves being pushed out of the Chinese market, the victims of trumped-up corruption charges, tax changes, or anti-trust investigations. According to Merics, a German think tank, the policy “aims for substitution: China seeks to gradually replace foreign with Chinese technology at home – and prepare the ground for Chinese technology companies entering international markets.”

In a report published by the Henry Jackson Society last year, we noted how Chinese investment has changed in scope and character over the past few years. Previously, Chinese investment had been dominated by private companies seeking raw resources and commodities from the developing world. From 2015, however, investment into the Western economies surged by 44 per cent, much of it into infrastructure and high-technology.

Worryingly, much of this shift in foreign direct investment was led by Chinese state-owned enterprises, with Rhodium Group – a consultancy firm – noting that they accounted for nearly 60 per cent of the value of all deals in late 2017. Problematically, while China was busy buying up companies like British cloud computing giant Global Switch or aerospace firm Northern Aerospace, it was barring British investors from those same areas.

The Government was absolutely right to get this White Paperimplemented in the meantime. The UK cannot afford to stop inward-bound investment; but nor can it afford to allow British businesses to fall prey to malicious investment, designed to extract and supplant British industry and design.

Nor can Britain’s security services allow any foreign power – particularly one that is building an Orwellian secret state at home – to embed itself into Britain’s digital infrastructure. The high level of intrusion that China’s citizens must bear at home must not become the lot of Britons at home.

Finally, and perhaps most importantly, the UK’s new White Paper will actually help with inbound investment by giving the security aspect a process and transparent standards. To give China due credit, the whole Hinkley Point debacle could have been avoided if there had been a process by which screening could take place – instead of fighting in the court of public opinion.


Europe can still salvage this Nato summit – here’s how

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The Telegraph, 11 July, 2018

The first day of the Nato summit has confirmed the worst fears of Nato’s alliance managers. Despite a seemingly promising Summit Declaration confirming defence for Ukraine and adherence to the Wales 2014 commitments, many problems remain unresolved.

Nato’s latest gathering risks turning into a sham, but Europe can still turn it around

In a similar vein to the letters sent to specific Nato member states thought to be shirking their contributions, President Trump launched into a surprising attack on Germany, asserting that they are “controlled by Russia”. The remark – and the large helping of irony that came with it – provoked German leader Angela Merkel to respond in kind, stating that Germany did quite enough for the alliance, contributing the second largest number of troops to the alliance.

While most Nato leaders will most likely be lining up behind her in this unstatesmanlike confrontation, the fact is – as I have written before – Trump is completely correct: Germany is not doing enough. Given its size and leadership role in Europe, its buck-passing cannot continue indefinitely without pulling the alliance into disarray and eventually decline.

At a recent closed door round table hosted by the Henry Jackson Society in cooperation with Nato in Westminster, Sophia Besche, a research fellow from the Centre for European Reform, admitted as much, citing a recent report on Germany’s military. The report, issued by the German Parliament’s Armed Forces Commissioner, Hans-Peter Bartels in February this year found that overall

  • the Bundeswehr lacks basic equipment (like winter clothing and tents) for Nato missions
  • Germany has a shortage of operational tanks and helicopters and does not have enough parts to maintain those it does have at full readiness (it went from 5,000 tanks in 1990 to 236 in 2017, with many of these being non-operational)
  • Germany lacks enough ships to take part in Nato, EU, and UN missions

​However, rather than chiding the Germans endlessly about not meeting the two per cent, what is necessary is a bold start by all sides in order to rescue the situation in short order. We are speaking about the future of the Western alliance, one of the largest and most advanced military alliances in the modern world. And it’s democratic and filled with overarching liberal ethos. We simply cannot let it walk itself into oblivion. What is required on all sides is some steps toward each other’s position.

We are speaking about the future of the Western alliance, one of the largest and most advanced military alliances in the modern world

First of all, get rid of the two per cent benchmark. Despite the ease of this benchmark, it has become so politically toxic as to be useless. It seems only to get backs up and there are lots of good reasons on why it is not useful.

Second, replace the two per cent benchmark with a capabilities agreement, where member states agree to not only implement the four 30s plan (30 battalions, 30 fighter squadrons, and 30 naval vessels to be read in 30 days), but also to have a baseline of capability, based on meaningful force plans.

Third, create a mechanism by which a new mechanism within Nato the organisation monitors the capability commitments of states to Nato own’s force structure, including whether all states are meeting or failing to meet their targets. This agency should be compelled to make an annual public report.

Fourth, stop grandstanding about the US President. Despite Merkel’s lofty rhetoric about Germany defending the liberal order, German spending has barely grown while Trump has doubled US spending for the European Defense Initiative from $3.4bn in 2017 to $6.5bn.

Fifth, stop pointing to development aid as a contributor to security. The fact is that when all states do this, Germany still does not rank particularly high in this regard. Attempting to use aid to sideline one’s commitments to one’s allies is bad alliance politics. Aid won’t stop Putin’s aggressive foreign policy.

Sixth, be willing to engage on the importance Nato with national publics. One gets the sense from German policy analysts and commentators that those who argue for increased military spending are considered to be “far right” or extreme. The only thing extreme in this scenario is Germany’s complete detachment from the concerns of its Eastern neighbours. Germany’s political leadership has completely failed to make these arguments in a meaningful way to their own people.

Attempting to use aid to sideline one’s commitments to one’s allies is bad alliance politics

As one report by CSIS – a Washington think tank reveals – when one looks at the actual force numbers, it is clear that there is a serious problem in Europe. Even when one considers the shrunken Russian military, it is frightening that in 2014, Putin was able to throw a “snap exercise” with 150,000 men right on Europe’s doorstep. Mustering everything they had and planning for nearly a year, Nato threw its own large exercise – with just under 40,000 men.

As one of Europe’s primary defence providers and one of Nato’s founding nations, Britain must act as a bridge between a hardening US position and Germany’s entrenched stubbornness. Pulled between the both, the alliance could fragment, losing any serious capability to provide security for the continent. This would be a disaster for the UK and a windfall for Moscow and Beijing. Despite our own domestic travails – does any good news come from the Continent? – London must continue to help keep Nato together.


Sydney Morning Herald, Latika Bourke, 30 June, 2018

“I think the British government has now woken up to the fact that the Chinese are not on our side on a number of issues,” [Lord] Howarth says.

John Hemmings, a close observer of China at the Westminster think tank the Henry Jackson Society, agrees.

“Despite Brexit, some aspects of UK government have quietly begun to shift into the new paradigm vis a vis a rising geopolitically ambitious China,” he says. “On the home front, they have begun to follow the lead of countries like the US, Germany and Australia in screening Chinese state-led investing into sensitive sectors of the economy.”

 


It’s not just Rolls-Royce: China is stealing every technology that isn’t nailed down

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The Telegraph, 16 June, 2018

The arrest two days ago of a Rolls Royce engineer for allegedly spying on his employers on behalf of China did not shock many in aerospace. It’s no secret that China is attempting to develop an indigenous aerospace industry and will do everything it can to get its hand on modern Western-designed jet engines. Such is the complexity of these engines that they are virtually impossible to reverse-engineer.

But this story has become a bit of a motif of late. Nearly every week, we hear of another story of alleged hacking of corporate secrets by some Chinese entity – or, worse, resorting to outright robbery, as might have happened to Pelamis Wave Power, a Scottish alternative energy company that saw a Chinese start-up appear only months after its offices were burgled.

So what’s behind it all? What is driving these stories? Well, to some extent, China is a driver of its own success and a driver of its own reputation. Over the past two decades, China has been implementing policies that some say unfairly help its firms to acquire foreign technology, either at home in the Chinese market, or abroad, when they invest in overseas markets, including the British one.

Rather than developing indigenous technologies, they prefer to steal, beg or borrow those of others, leapfrogging up the technology ladder. And they don’t mind stooping to different means: China’s current domination of solar energy technologies is alleged to have come after Chinese hackers stole files on panel technology from Solar World America. The subsequent government support for Chinese firms to build solar panels at much cheaper prices than US and European firms put many Western solar power companies out of business.

Are these policies illegal according to the World Trade Organisation? Indeed, they are, but getting them to that stage takes political support from their own governments.

The Chinese government policy most associated with this issue is Made in China: 2025, which has been widely criticised by the US government, the German government, among many others. According to James Lewis, a technology expert at the Washington-based Center for Strategic and International Studies (CSIC), the policy seems to have three stages.

The first is to require foreign firms attempting to enter China’s market to hand over their intellectual property in critical sectors such as robotics, alternative energies, quantum, and new energy vehicles. The second is to provide government subsidies to Chinese firms to go out into the international market and sell these newly-acquired products for cheaper prices. The third is to dominate these sectors by driving out foreign competitors.

According to Peter Navarro, an economic advisor to Donald Trump, these sectors have a strategic implication for the future of Western security, as national governments look more and more to the high-tech sector for the next generation of military technologies.

The news this week that the European Council and European Parliament have passed investment screening mechanisms shows that Western governments are seeking to maintain a level playing field for their own firms and stopping buy-outs that either seem driven purely by the desire of China to gain intellectual property with military connotations. Germany passed legislation last year screening investment and the US has also tightened up its own Committee for Foreign Investment in the United States (CFIUS), making sure that Chinese firms cannot simply swoop in and buy high-tech firms and give their IP to Chinese competitors.

The May government is current considering a White Paper on investment-screening, having already tightened up the current Enterprise Act (2002) and broadened the remit of the Competition and Market Authority (CMA). Given China’s voracious appetite for British high-tech and the impact its theft has on British companies, this is a welcome and appropriate response. Britain is open for business, but in a fair way that gives all sides a level playing field.

Jeremy S. Maxie

Energy & Political Risk Consultant

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