Leading article

Global race? Lack of air routes means we're already on the slow boat to China

Trade missions are useless, Osborne - just let businessmen get on with their job

19 October 2013

9:00 AM

19 October 2013

9:00 AM

Trade missions are almost comically pointless nowadays, as George Osborne’s visit demonstrated this week in Beijing. He is right that there are serious problems in our trade relations with China — an emerging economic superpower that buys more from Switzerland than it does from Britain. In fact, we export depressingly little to any major emerging market. It’s a matter of real concern — but flying off to China won’t fix it. There’s no evidence that trade missions make a blind bit of difference.

When Richard Nixon made his historic visit to China in 1972, it did represent an economic breakthrough. It was far harder, back then, for companies to break into well-protected markets — especially if trade was curtailed for political reasons. But in today’s globalised world, businessmen are quite capable of buying their own ticket to Qatar or Shanghai. Those who accompanied the Chancellor this week will have certainly enjoyed the trip: it allows them to pose as ambassadors and represents a great chance to lobby the government. But this is corporatism, not capitalism. Free markets work best when politicians keep a safe distance from chief executives.

David Cameron seems not to recognise this. He regularly travels with a coterie of pin-stripes, and the Foreign Office has issued instructions to promote British trade as its first priority. But there is a difference between the interests of big business and the interest of a nation. There are many rich regimes willing to place big orders (or donate pandas), and we should treat them with caution. A trade-first foreign policy can make Britain seem chiefly interested in buying cheap oil or selling expensive equipment.

Shortly after the Arab Spring began, Mr Cameron visited Egypt and several Gulf states, impressively promoting freedom. But his message was a little compromised by the fact that he was on a prearranged tour accompanied by arms dealers. Last year, during another tour with weapons manufacturers, he posed with Aung San Suu Kyi in Rangoon. Britain’s defence industry brings jobs and wealth to the economy, and it is true that the French government gives massive corporatist support to its ‘national champions’. But Britain should hold itself to a higher standard. What’s good for defence firms is not necessarily good for Britain.

In fact, it’s far from clear that these trade missions are even good for businesses. Research into the efficacy of politicians’ trips in recent years suggest that there is no relationship between visits and extra trade. A Canadian study into the visits of Stephen Harper’s government (then billed as bringing billions in jobs and investment) showed that the effects were ‘small, negative and mainly insignificant’. Other studies show that, if anything, politician-led missions lessen trade a little. All that such trips do is help ministers brandish their pro-business credentials.

The best way for ministers to help Britain’s exports is to stay at home and come up with the right policies. Take for example Theresa May. The Home Secretary’s decision to simplify the visa requirements for entering Britain is a bold and long-overdue step. For some time, China’s shoppers have been taking to the Champs-Élysées trade that could have gone to Bond Street (or Bicester Village) if the UK Border Agency had not treated them as potential spies. The Home Office’s next step should be to reduce the shameful passport control queues for non-EU visitors.

But the best way of increasing trade with the rest of the world is air routes. Until very recently only two of China’s three big cities — Beijing, Shanghai and Guangzhou — could be reached directly from Britain. Frankfurt has 25 per cent more flights to these cities than London Heathrow; Paris Charles de Gaulle has almost twice as many. Over the past ten years, Paris, Frankfurt and Amsterdam have put on 1,500 more flights a year to China than London. They have responded to the changing world economy. Britain has not. So is it any wonder that, as a share of GDP, our exports to emerging economies are the lowest in western Europe?

The coalition government is in a state of permanent indecision about expanding air travel because of Mr Cameron’s earlier  belief that this would inflict an unacceptable cost on the environment. He has now commissioned a review on airport expansion, but has told its author, Sir Howard Davis, not to conclude until after the general election. All the trade missions in the world will not compensate for this abdication of responsibility.

It is quite possible to be pro-business and pro-free market and still be dismayed at the way in which British foreign policy has been  reduced to flogging kit. Cameron is a natural statesman, with bold instincts on foreign policy. This makes it all the more important that next time he jets off, he should leave the businessmen at home.

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  • Anatole Pang

    This has some serious flaws. We simply do not know yet how the statist emerging markets will be opened up to our companies but common sense tells us that where they are state-led, our initiatives will have to be likewise. It is also not accurate to say that China is an easy place for private enterprise to get into and do business. Lastly, the end-game for British exports will be to get onto the procurement lists of the SOEs – something which necessarily dictates government-to-government dialogue in the medium-term.

    On the subject of flights, they are important although perhaps not as much as the author is making out. But it should be obvious that bottlenecking on this will not be (only) a matter for London but for Beijing, since air routes are seriously controlled. Again, this argues very much for diplomatic trade discussion. In the meantime, we need to learn from those such as the Germans which are much better at getting SMEs into the mission and presence in front of the Chinese buyers.

  • Peter Cobrin

    What happenhed to the “Dim Sums” headline. One of the very best I have ever seen!!