Ben Everitt: How the United Kingdom is leading the international struggle for freedom

4 May

Ben Everitt is the MP for Milton Keynes North.

The horrific scenes we have seen from Mariupol to Bucha show the barbarism of Russia’s war in Ukraine. We have an entered a period of global disruption, where the post-Cold War order has frayed and fractured.

From the provision of lethal aid, to world leading sanctions, Global Britain is at the forefront of the international response.

In the face of resurgent autocracies, now is the time to refresh our historic alliances. As the Foreign Secretary said this week: “we must reboot, recast and remodel our approach” and secure “a world where free nations are assertive and in the ascendant”.

This means a NATO that is flexible, agile, and integrated. A strengthened relationship with the US, to support freedom and economic security around the world. Embracing our Commonwealth ties from the Caribbean to India, and looking across the Channel and using Emmanuel Macron’s re-election to ensure the Entente really is cordiale.

Ukraine has shown the necessity of a joint approach between old friends. The UK has led the way in strengthening NATO’s eastern flank by increasing our troop presence and deepening our defence cooperation. We’ve doubled down on regional security by providing more troops to the region.

This week it was announced over 8,000 British troops will be deployed from Finland to North Macedonia as part of the Joint Expeditionary Force/NATO exercises.

It also means exciting new alliances around the globe. The tilt to the East means pre-empting threats in the Pacific. By working with allies like Japan and Australia, we can ensure the region is protected and democracies, like Taiwan, able to defend themselves.

Through joining the Trans-Pacific Partnership we the UK will cement its place as the hub of a global network of freedom and democracy.

Now we have left the EU we are able to establish partnerships with allies like Israel, India, and Indonesia. By building these economic and security partnerships we can set the rule book of the future. No longer will there be a free for all, but rather membership of the international order will need to be earned.

Dean Acheson, a post-Suez US Secretary of State, quipped that Britain had “not yet found a role” and was “about played out”. These days Britain is back. From trade to aid, from diplomacy to military support, the UK is present in the four quarters of the globe.

But with great power comes great responsibility. This means integrating foreign and domestic policy. While Britain leads abroad it needs to ensure security at home.

This means robust supply chains, so we are not in hoc to China and other countries who may not play by the rules. As countries struggle with the decimation of Ukrainian agriculture, we need to put land into production and reduce our dependency on foreign grain.

We’re entering a new era, but the adversaries remain the same: arevanchist Russia whose autocratic nature hasn’t changed from the days of the Tsars or Soviet Commissars, and a China that thinks the rules don’t apply. Britain must be assertive in the face of constant, and often unfair, competition.

This means being clear to China that they must play by the rules. They’re not afraid to take a role on the world stage, be it neutrality in the face of Russian aggression, coercing Lithuania, or commenting on potential NATO membership. But being a player means playing by the rules.

The G7 represents over half the global economy. If China wants to trade with us it needs to make a choice. Ukraine has shown that we will make the difficult decision when the rules are broken, and we’ll take security over short-term gain. There is a cost to doing nothing and the UK isn’t prepared to pay it.

Most of the world is willing to play by these rules and we need an offer to those who want to do so.

That is why the Government has launched British International Investment to provide a source of honest and reliable finance that will counter China’s Belt and Road initiative. While China has clients, we have partners.

We are standing up for democracy, transparency, fairness, compassion, and a respect for sovereignty. That is why we are building economic and security partnerships with likeminded nations around the world. While Russia has proxies, Britain has friends.

While Russia and China may see our values as a weakness, they are our greatest strength. In an era of global disruption our values and resolve is more important than ever. Freedom-loving democracies like Britain will lead the way, and we will win

Gerry Lyons: How the Bank of England has failed to control inflation. And what should be done to reform it.

3 May

Dr Gerard Lyons is a senior fellow at Policy Exchange. He was Chief Economic Adviser to Boris Johnson during his second term as Mayor of London.

This week sees the Bank of England celebrate 25 years of independence. Quite rightly, the current rise in inflation has raised questions about whether it is time to reassess its remit and governance.

There has been a rise in inflation across western economies. That this is more than a UK issue should not divert attention from where the problem lies.

If you are driving a car and approach a red light and decide to not only ignore the signal to stop but put your foot down on the accelerator, you are driving dangerously. That some other cars may do the same does not change that fact. It is not safety in numbers, but is more likely to cause greater carnage. Last year, in monetary policy terms, central banks went through the red light – with their feet down on the accelerator. The Bank of England was near the front.

At that time, it was clear that our economy was recovering and inflationary pressures building. The supply-side shock triggered by the pandemic was already evident. The correct policy would have been to tighten policy, not add fuel to the fire by increasing Quantitative Easing to a mammoth £895 billion.

The question I posed then was: which ‘p’ was this inflation? Would it pass-through, persist or become permanent. The Bank strongly believed it would pass through quickly. It was evident it would persist. It was unlikely to be permanent because of intense global competition but, even if inflation persists, once it then eases it may settle at a higher level than before, say nearer three per cent to four per cent than one per cent to two per cent.

The danger, as was clear at the time, was that even if the initial cause of inflation is a supply-side shock, action needed to be taken to prevent cost-push inflation by which firms raise prices to pass on higher costs, or second-round effects allowing prices and inflation expectations to creep higher. Effective communication as well as clear actions were called for. We got neither.

What are the lessons and implications?

Consider the 1970s. It may be hard to believe, but Britain began the 1970s as the low inflation country of Europe. Monday 15th February 1971 was Decimalisation Day, when we moved from 240 pennies in the pound to 100 new pence.

Ahead of that day, I remember paying my bus fare with pennies that had been minted not just in the early part of the twentieth century but some in the nineteenth century too, with Queen Victoria’s head on them. That such old coins were still legal tender was testimony to how well Britain had kept inflation under control.

Apart from the First World War, when annual inflation averaged 15.3 per cent in the UK, only the 1970s saw high inflation, averaging an annual 12.5 per cent during that decade. There is no reason why, with the right policies we cannot return to being a low inflation economy.

The 1970s showed that inflation is deadly. That’s why the complacency with which the Bank treated it last year was wrong. It is felt by everyone, with the poor and those on fixed incomes like pensioners suffering the most.

Another lesson is that the measures necessary to control inflation are deeply uncomfortable, often requiring sharply higher rates, with damaging economic consequences. Nowadays, with borrowing higher, the economy is not only vulnerable to higher rates, but can be impacted sooner as policy tightens.

UK policy rates are currently only 0.75 per cent, while annual consumer price inflation in March was seven per cent, ten times higher than its rate of 0.7 per cent a year ago. And it will head higher.

Harold Wilson, Edward Heath and Jim Callaghan all lost elections because of their inability to control inflation. A central feature of the two general election campaigns in 1974, and even of that of 1979, was the use of a shopping basket to show how the Government had failed. Don’t be in any doubt as to who pays the price for a failure to control inflation.

Given this background, and how important monetary policy is in everyday life, one might think Westminster would pay more attention to the Bank of England – to how it is governed and keeping inflation under control. It is now as the cost-of-living crisis bites and the economy slows sharply.

The weekend saw much coverage of the 25th anniversary of the Blair landslide in 1997. An early decision – on 6th May 1997 – was to award operational independence to the Bank of England.

Although a surprise – having not been mentioned in the campaign – independence had been a topic of discussion for some time among economists. Indeed, I remember a well-attended Society of Business Economists debate early in 1997 where David Currie gave the case for central bank independence and I argued against. There were pros and cons. It would embed low inflation expectations, but there was a need for transparency and democratic accountability.

Even the Bank’s own Quarterly Bulletin in 1995 had carried an article by a leading economist, Robert Barro, showing that it was not independence but often an external factor that was the driving force behind inflation. Indeed, China’s entry into the World Trade Organisation in 2001 contributed to intense competition – helping to drive inflation down globally and in the UK for much of this century.

Inflation has averaged two per cent over the last quarter century. While welcome, this should not divert attention from how the economy has suffered the consequences of three major policy mistakes from the Bank.

First, monetary policy has fed rampant asset price inflation, in financial markets and property. Alongside low property supply, this has fed intergenerational inequality.

Second, a cheap money policy through low interest rates and Quantitative Easing has fed financial instability as markets do not price properly for risk.

Third, the Bank’s recent policies have fed inflation.

Attention usually focuses on the Monetary Policy Committee and interest rates. Thus, the Bank’s other policy committees on prudential regulation and financial policy are too often freed from scrutiny – as is the interaction between these policies. The economy, after all, is significantly affected by the prudential controls placed upon on banks, and peoples’ ability to borrow has been impacted by micro-prudential regulations.

While the Bank, in recent years, has played a welcome role in how finance can help achieve the green agenda, there are other important areas that the Bank should confront. Not least among these is the low level of commercial lending to small firms. It should also be more of a cheerleader for the Square Mile.

Now, it is time to ask whether the Bank’s inflation targeting regime has run its course. I favour a new remit based on a target for nominal GDP. An anti-inflationary monetary policy remains critical, but change is well overdue.

In this much-needed review of the Bank there needs to be a reassessment of its governance, transparency and accountability.

The Bank’ governance is overseen by the Court, but this is rarely held to account, and would appear to pay only lip-service to diversity, not least in thought. Groupthink can be a problem with policymakers. In my view, one might ask if the Bank’s historic underrepresentation of those from working class backgrounds in senior positions hinders how it sees its policies affecting those on low incomes. Its communications too have caused problems. Yet, effective communication is critical – not only to the public and financial markets, but to global audiences too.

John C Hulsman: Putin’s war casts a bright, cold light on a new geopolitical era

21 Apr

Dr John C Hulsman is the Founder and Managing Partner of John C Hulsman Enterprises, a global political risk firm. He is also a life member of the US Council on Foreign Relations.

Crises clarify, and none more so than the tragedy of war. Wars sometimes directly change the geopolitical trajectory of the world. But they always, as a bolt of lightning illuminating the darkness, make clear the geostrategic landscape around us.

In the present case of the Russian invasion of Ukraine, before the war the dim geostrategic outline of our new era was becoming clear.

The seminal global competition of the age was a bipolar conflict between the world’s only two superpowers, the only two countries with a genuine global reach: the United States and China.

However, infinitely complicating things, beneath this overarching contest a series of great powers (unlike in the 1945-1991 Cold War) had a good deal of strategic autonomy, having it in their power to either side with one of the superpowers or follow their own independent/neutralist path.

Before the fighting, great powers Japan, India, and the UK/Anglosphere firmly sided with the US while the EU veered between neutralism and its traditional ties with America, even as Russia oscillated between neutralism and a junior role alongside China.

But war, as ever, has scrambled things, as geopolitics – so often glacially slow – has moved along at a torrid pace where recently weeks have felt like decades.

Three changes in the global order

With the coming of the war, three decisive geopolitical trajectories have changed at the global great power level. The wobbling of both Russia and Europe has come to an end, definitively ending their collective flirtation with neutralism.

First, a vengeful, humiliated, cornered, and economically threatened Russia now has no choice but to definitively side with China, needing Beijing’s help to economically survive the overwhelming American-inspired global sanctions put in place against it, and the effective weaponization of the dollar.

As we recently wrote here, for Putin it is better to be China’s junior partner – Robin to Beijing’s Batman – than to be isolated as an international pariah. So, Russia has moved definitively into Beijing’s superpower camp.

Second, and at the same time, the EU, shockingly, has at last awoken from its generations-long strategic slumber. Pivotal Germany has, incredibly, committed to re-arm (along with Poland and Sweden) which, if carried out in the medium-term, gives the continent the combined military dimension it has sorely lacked since the 1950s.

After years of former Chancellor Angela Merkel’s disastrous, somnambulant energy policy, leaving Berlin utterly dependent on Russian natural gas, painfully a new EU-wide approach to energy—at last taking security of supply into account—is in the works, with natural gas from the US, Qatar and Norway diluting Russia’s stranglehold on a heretofore-oblivious Europe.

Finally, and profoundly, after Merkel’s ruinous flirtation with mercantilist isolationist neutralism, the new government of Olaf Scholz is firmly back into the Atlantic camp, in a way that was unthinkable, even just months ago. The West, with US, Japan, the Anglosphere, and the EU all onside, has a decisive edge over the revisionist autocracies of China and Russia.

For those of us who prefer to live in such a western-dominated order this is very good news, indeed.

And now the bad news

But there is more ambiguous, even ominous, news beneath this positive geopolitical headline. At the next layer down from the great powers, looking at regional power configurations across the globe, the West’s dominance is not the real story.

For while the West is united, the developing world is hedging over the Ukraine war, and its ultimate strategic orientation. Beguiling India – where Boris Johnson is making an official visit as we speak – is the canary in the coal mine, illustrating that all is not well.

Since the end of the Cold War, and with the subsequent rise of China, New Delhi has steadily drifted towards the American orbit. New Delhi’s strategic fears regarding the threat of Chinese adventurism were decisively confirmed when Beijing attacked India along their de facto border in the Himalayas in May 2020, a clear act of Chinese aggression.

Before Ukraine, due to their developing ties in the Indo-Pacific balancing against the common Chinese foe, India has been increasingly confidently seen as fitting snugly in the overall US-dominated, democratic great power camp.

But the subcontinent has a way of upending facile Western characterizations. Over the Ukraine War, New Delhi – despite a lot of American and European diplomatic pressure – has steadfastly clung to a policy of neutrality, refusing to castigate Russia for its obvious aggression.

Strikingly, India (unlike Japan, the EU, and the Anglosphere countries) has not quickly and reflexively jumped on Washington’s pro-Ukrainian bandwagon.

There are numerous interest-based reasons for this strategic divergence.

First, historically, India long sided with the USSR during the Cold War; support for Russia even after 1991 is a long-ingrained habit.

Second, Russia remains New Delhi’s largest source of weapons imports, even as the US, Israel and France have gained market share.

Third, an oil-hungry and energy-poor India has spotted the chance to obtain Russian oil and natural gas at bargain-basement prices, as the US and UK energy blockade of Moscow comes into effect, and the Kremlin looks to divert its overall energy supply from a suddenly hostile West.

These basic points of national interest were all present before the Russian invasion, but it took the crucible of war for the world to see that maybe India was not yet prepared to march in lock-step with the American-dominated world after all.

Worse, from a Western perspective, India is not alone in disdaining the American lead. Significant regional powers in the Middle East (including traditional US allies Saudi Arabia, and the UAE, as well as usual suspect Iran), and outliers North Korea, Venezuela, Cuba, and much of Africa, have studiously clung to a path of neutrality regarding the conflict. I

n fact, over Ukraine, it would be far more accurate to say that while at the great power level the West is presently dominant and that it is united around a pro-Ukrainian policy over the war, the rest of the developing world, epitomized by emerging great power India, are far from being in the Western camp.

The good news for the West then, is that it is surprisingly united as the new era dawns. The bad news is that the rest of the world has yet to follow its lead. Worse still, the developing world’s two great power champions, China and India, while increasingly hostile to one another, share an antipathy for merely going along with the West in our new era.

It will take realism, and a Bismarck, for the West to maintain its dominance in the decades ahead. But it can and must be done.

John C Hulsman: The Ukraine war solves China’s ‘Batman Problem’ with Russia

13 Apr

Dr John C Hulsman is the Founder and Managing Partner of John C Hulsman Enterprises, a global political risk firm. He is also a life member of the US Council on Foreign Relations.

There has always been one giant intellectual problem with a fully-fledged Sino-Russian revisionist alliance coming to challenge the present Western-dominated world; someone would have to be Batman and someone would have to be Robin.

‘The Batman Problem’ has always stopped these two great powers from fully coalescing into a cohesive alliance.

Yes, they share a hatred of the American-dominated world, as well as the urge to revise it into a more autocratic-friendly multipolar construct, where they are free to dominate their immediate regions: In the case of China, East Asia, in the case of Russia their ‘near abroad’ (the Caucasus, Belarus, and, above all, Ukraine).

Together in power terms, they alone jointly have enough geostrategic wherewithal to actually challenge the present order.

Russia, for all that it is overall a fading great power, has more nuclear weapons than any other country, and – following strategic reforms implemented after the Georgia War of 2008 – was seen as possessing an increasingly capable military.

In Vladimir Putin (and in direct contrast to the Tower of Babel that characterizes EU decision-making) it was also seen to have a ruthless, capable leader at its helm, one not afraid to deploy troops and take casualties, as he did in 1999 in Chechnya, 2008 in Georgia, 2014 in Crimea and eastern Ukraine, and 2015 in Syria.

While Russia provided the military muscle, China was simply the world’s most important rising power, with an economy that has increased in size a whopping ten times since only 2000.

At present, only these twin autocracies in tandem pose any real threat to the established order. As both are also revisionist powers, their structural alliance was always a real possibility.

Also, in macroeconomic terms, an energy-ravenous, booming China beautifully complements a one-crop economy like Russia -along with the US, and Saudi Arabia/OPEC, one of the three global energy great powers – even as Chinese manufactured goods can fill the Russian market.

Earlier on, Russia’s sophisticated weapons export market also helped a rising China begin to catch up with a militarily dominant America, as Beijing provided Moscow with desperately needed trade.

So, for ideological, strategic, and macroeconomic reasons, the two seemed to be a geopolitical match.

Yet, practically, while the two did tend to side with one another over the past years, and while the chemistry between Xi Jinping and Putin is very good (oddly, the characteristically unemotional Xi often speaks warmly of their genuine rapport) a fully-fledged alliance has never blossomed.

Much as in the new era (up until the Ukraine war) the EU tilted toward the US while also flirting with a neutralism in the brewing Sino-American conflict – based upon a mixture of French Gaullism, German mercantilist isolationism, and general incoherence – Russia tilted toward China, while maintaining a certain geopolitical distance.

The reason for this is ‘The Batman Problem.’

For Putin’s too-often unremarked-upon domestic popularity (presently the latest independent Levada Center poll gives him a stratospheric 83 percent approval rating) is founded on his ironclad desire to ‘Make Russia Great Again.’

Following in the footsteps of his hero, Peter the Great, Putin has restored Russia to great power status after a weak tsar (Boris Yeltsin) left it a mendicant, even as he has shaved the aristocratic Boyars’ beards, in his case corralling the oligarchs who had run roughshod during the later shambolic days of Yeltsin’s reign.

However, as was true for the Russian Tsar, it is through the cauldron of war (in 2008, 2014, and 2015) that Putin has made it clear that, at least as a regional great power, Russia is once again a force to be reckoned with.

As a true believer in Great Russian nationalism, it was neither in Putin’s own biography or character, or in his political interests, to play second fiddle to China, as assuredly he would have to do in any ironclad alliance, giving the yawning differential in their power capabilities.

At best, Russia is a power on the wane, beset with intractable economic, demographic, corruption and political problems, while China is indisputably a rising superpower. For an alliance to work, Russia would have to play ‘Robin’ to China’s ‘Batman,’ serving as the weaker, less important player in any alliance.

Until the advent or Russia’s catastrophic miscalculation in the Ukraine War, this is something Putin desperately did not want to do, given his Great Russian Nationalism power base, as well as his own inclinations.

Historically, ‘The Batman Problem’ has caused the Sino-Russian alliance trouble before. Following the death of the (in Communist terms) revered Stalin in 1953, Mao broke with Soviet leader Nikita Khrushchev over precisely this issue, no longer content serving as second banana to a USSR with a new, untested leader.

Simply put, Mao was happy to play Robin to Stalin, but not to his lackeys who succeeded him, given China’s own gigantic power potential.

Until Ukraine, the shoe has been very much on the other foot, as Putin refused to swallow the bitter pill that second-class status in any Sino-Russian alliance would make necessary. But that was before Ukraine.

Now, militarily discredited, economically beset by unprecedented sanctions (and with the real threat of the West turning off the natural gas spigots in just a few years), and an international pariah (at least in the West), Putin’s freedom of geopolitical maneuver is extremely limited.

His only real play is to join with China and challenge the present world order. But he is doing so as ‘Robin,’ to China’s ‘Batman,’ from a position of increased weakness. But, for China, at last, Ukraine has solved ‘The Batman Problem’ preventing a formalized Sino-Russian alliance, which will now come into force, very much on Beijing’s terms.

However, for Beijing, Ukraine’s re-ordering of the global power configuration is very much a mixed blessing.

On the one hand it is pleased that its superpower rival, the US, must now keep more military resources in Europe than it would have otherwise, tempering Washington’s ‘pivot to Asia,’ as China strives to expand its power in the Indo-Pacific. America no longer has the luxury of facing only one hostile, revisionist power at a time.

The biggest strategic benefit China and Russia gain from their joint alliance is perhaps that it frees both countries from the necessity of vast military deployments along their shared 4000-kilometer border. This allows Russia up to face Nato in Europe and China to face the US and its allies single-mindedly in the Indo-Pacific, while leaving this critical internal border largely unmanned.

But, far worse for Beijing, the European Union has awoken from its long strategic nap. As a result of the Ukraine War, economic powerhouse Germany has committed to re-arming after two generations, and Brussels (mirror-imaging what is happening in Russia) is firmly back in the western alliance camp, along with the US, the UK/Anglosphere countries, and Japan.

Gaining a quasi-neutralist Russia while losing a quasi-neutralist EU to America is not a good geopolitical outcome from Beijing’s point of view. While the Batman problem has been solved for China, its ‘alliance of autocracies’ is still very much the lesser force at the global level, to the ‘alliance of democracies.’ That is, if they can get their act together.

Stephen Booth: The Ukraine war has revived American leadership and dashed dreams of European autonomy

7 Apr

Stephen Booth is Head of the Britain in the World Project at Policy Exchange.

In the 1990s, Mark Eyskens, then Belgium’s foreign minister, described the EU as an economic giant, a political dwarf, and a military worm. This depiction has since been invoked in dozens of articles and speeches about EU foreign and security policy.

The unprecedented speed and scale of the EU’s response to the Russian invasion of Ukraine therefore displayed a surprising degree of unity and capacity to act, from what was admittedly a rather low base. The EU agreed to provide Ukraine with €450 million worth of weapons, and joined the US and the UK in imposing significant economic sanctions on the Russian financial system. Josep Borrell, the EU’s High Representative for Foreign and Security Policy, described it as the EU’s “geopolitical awakening”.

Maintaining a unified EU response will be increasingly difficult as the crisis goes on and tougher decisions are called for. For example, this week, the EU agreed sanctions on Russian coal and shipping but was unable to extend this to oil, amid resistance from large energy importers such as Germany.

And while some in Brussels might hail the response as giving fresh impetus to the concepts of “European sovereignty” and “strategic autonomy”, in many ways the crisis has only underlined and intensified the EU’s reliance on the US and NATO.

The first references to the concept of EU “strategic autonomy” date back nearly a decadem but Emmanuel Macron has sought to put the idea at the heart of French and European foreign policy since assuming office. He first drew on this theme early in his presidency in a 2017 speech at the Sorbonne as a response to what he described as “gradual and inevitable disengagement by the United States”.

While pitched as a “complement” to NATO and the transatlantic alliance, Macron was clear that the concept meant equipping the EU with the tools to take decisions and action independently based on its own interests, from foreign and security policy to energy and technology. In 2019, Macron described the “brain death” of NATO.

The EU institutions in Brussels were keen to run with the theme. In 2019, the incoming Commission President, Ursula von der Leyen, promised a “geopolitical Commission”. This promise was made in response to the decline in multilateralism and growing great power rivalry between the US and China. Brexit, and the loss of one of the EU’s two major foreign policy and security players, no doubt also acted as a catalyst for the renewed emphasis on developing the EU’s geopolitical role.

However, the EU has struggled to define what strategic autonomy means in practice. Economically, the French desire to create European champions clashes with the instincts of more liberal member states. Clément Beaune, France’s EU minister, said last month that the war should push the EU “to reduce our interdependence with the outside world, to create not an autocracy but a form of European independence.” Mark Rutte, Holland’s Prime Minister, has stressed the need for “open strategic autonomy”.

On security, there has been a renewed focus on increasing investment in defence capabilities, which has been accelerated by the Ukraine crisis, particularly dramatically in Germany. However, there had remained an unresolved tension between those states for whom strategic autonomy is a means of regaining political independence from Washington, and others for whom it should be avoided precisely for fear of accelerating US disengagement. The Ukraine crisis has strengthened the hand of those in the latter camp, including the Eastern and Nordic states.

Observers have noted that, on assuming the EU’s rotating presidency at the start of this year, Macron dropped the term “strategic autonomy” in favour of “European sovereignty”, precisely because the term autonomy risked becoming divisive.

The EU recently published its Strategic Compass for Security and Defence, which was supposed to be the centrepiece of the French EU presidency and a landmark signpost towards a more geopolitical EU. Based on the “first-ever comprehensive EU threat analysis”, conducted in 2020, it has been rather overtaken by events.

The Compass has been hastily updated to reflect the Ukraine war, but the major threat analysis was conducted before the Russian invasion changed the geopolitical landscape, and that threat analysis also did not anticipate the risk of Russian military action. Notably, US and UK intelligence warnings of an imminent Russian attack proved to be correct, whereas French and German agencies appeared unconvinced, leading to the departure of the head of French military intelligence.

One of the key proposals of the Strategic Compass is the development of an EU Rapid Deployment Capacity of up to 5,000 troops for different types of crises. However, the Ukraine crisis has only underlined that, for hard power, NATO is the only game in town. In the words of NATO’s Secretary-General Jens Stoltenberg, “so all these efforts – as long as they complement NATO – we welcome them, but the EU cannot defend Europe.”

The crisis has amplified the voices of the more Atlanticist member states, particularly in Eastern Europe. Estonia has called for a larger permanent presence of NATO forces on the eastern flank to act as a stronger deterrent. Romania has also called for more troops and has pledged to increase defence spending to 2.5 per cent of GDP. Meanwhile, Poland has quietly lowered the temperature in its legal disputes with Brussels, giving it the opportunity to rekindle ties with the Biden Administration and urge the EU to do more on sanctions and support for Ukraine.

The US is also poised to play a significant role in the EU’s transition away from dependence on Russian energy. The US and the EU recently reached a deal to secure greater shipments of US liquified natural gas up to 2030 to help reduce energy dependence on Russian gas in the coming years. Von der Leyen noted that the target to import 50 billion cubic metres per year “is replacing one-third already of the Russian gas going to Europe today.”

If the horrors of the crisis in Ukraine have finally revealed the dangers and consequences of strategic ambiguity towards Putin’s Russia, European policies (in the EU and in the UK) towards China are also likely to come under increased scrutiny. During the recent EU-China summit, Xi Jinping reportedly called on the EU “to pursue an independent policy towards China,” in a thinly veiled warning to Brussels not to coordinate too closely with the US. But if China continues to support Russia, currently Europe’s gravest security threat, then greater proximity to Washington is the only likely answer.

This crisis has demonstrated the enduring power of the US. If this gives fresh momentum to Atlanticism within the EU and a greater focus on improving capabilities rather than stressing autonomy, this would be good for the West. It would also provide a more productive atmosphere for UK-EU cooperation on shared threats and challenges.

David Green: Now is the time to break the United Kingdom’s commercial dependence in China

25 Mar

David Green is CEO of Civitas.

The age of unfettered globalisation is now over. It is now widely accepted that buying whatever we want at the lowest price available anywhere in the world now comes second to national security. Above all, nations that fight wars of conquest against weaker neighbours are not worthy trading partners.

But is this change of direction just a temporary response to Vladimir Putin’s unforgivable aggression, or are permanent changes in the world order implied?

The great champions of free trade in the Nineteenth Century, such as Richard Cobden, used to argue that trade led to peace. The First World War shattered that illusion. But what we can call the naïve theory of free trade came back in the 1980s and 1990s, symbolised by Thomas Friedman’s famous claim that ‘No two countries that both had McDonald’s had fought a war against each other’.

He reasoned that the prosperity that resulted from free trade created a middle class that had too much to lose from war. The wars in the Balkans soon contradicted his hypothesis.

It turns out there is a causal connection between trade and peace, but champions of the naïve theory got it the wrong way round. Trade does not necessarily make peace more likely, but a commitment to peace does make free trade more likely. The underlying imperative is that nations that want peaceful existence are more likely to seek mutually beneficial trading arrangements.

It has been well recognised at least since the time of Adam Smith that trade can be looked at in two ways. It can be a method of gaining advantage at the expense of others, usually called mercantilism, or it can be a means by which both parties benefit from transactions.

Russia has been storing up its gains from trade in order to expand its empire. The question we now need to confront is the motivation of China.

Is it wise to allow Beijing to become even more powerful through trade so long as it is an authoritarian dictatorship with openly declared ambitions to expand its territory, with Taiwan the next target? Moreover, its Belt and Road initiative is not a device for spreading prosperity in less-developed parts of the world, but rather a way of creating conditions of dependency that can be used to exert political pressure when the need arises.

Our reliance on Chinese imported manufactures is now so great that every foreign policy decision has to take into account the preferences of the Chinese Communist Party (CCP). All Chinese companies are under the influence of the CCP, whether they are nominally private or not; a Chinese company controls about 25 per cent of North Sea oil, and others own suppliers of gas, water and electricity.

A study in 2020 estimated our ‘strategic dependency’ on China. Such dependency arose when a nation was a net importer of a product and imported more than 50 per cent from China when China controlled more than 30 per cent of the global output. The conditions were met for 57 categories of goods and services.

Moreover, Chinese economic power is partly a result of Western investment. A 2017 study by Professor Michael Enright of the University of Hong Kong looked at the contribution of foreign direct investment,  ‘foreign invested enterprises’, and foreign affiliates, and estimated that it accounted for about one-third of China’s GDP and over one-quarter of China’s employment in the years up to 2014.

We should reconsider all our trading relationships and ask whether we are empowering a potential aggressor, or putting ourselves in a position that allows us to be strong-armed. The case for free trade remains strong – but only with peace-loving peoples.

What should we do? First, we should stop investing in China. Second, we should end our reliance on China for so many goods. We should aim to have at least one home producer so that we can’t be pressurised. Third, we should exploit all our own resources, notably oil and gas.

Fourth, we should trade with countries committed to peace and who have renounced wars of conquest. This rules out China until it gives up all claims to Taiwan. And fifth, we should press for China to be expelled from the World Trade Organisation while it remains a state-dominated economy.

Daniel Kawczynski: Russia’s expulsion from Europe leaves our Commonwealth allies vulnerable

25 Mar

Daniel Kawczynski is the Conservative MP for Shrewsbury and Atcham and a former member of the Foreign Affairs Select Committee.

The Government fast-tracking its Economic Crime Act through Parliament earlier this month was another strong move by an administration that has led from the front in clamping down on Russian influence in the UK since Ukraine’s borders were first breached.

While we must acknowledge Russian money has coursed through London’s veins for too long, let us also cast an eye over to Europe where the European Union has been undermined by the morally corrupt governments of its smallest nations.

Citizenship by investment schemes – more commonly known as ‘golden passports’ – have been peddled by the likes of Cyprus and Malta for many years. Between 2011 and 2019 130,000 individuals made use of these schemes, generating north of €21.8 billion for the fifteen nations selling their souls to the highest Russian oligarch bidder.

Golden passports are a slap in the face for the EU’s heavyweights that have welcomed their far smaller counterparts into the trading Bloc despite paltry economic contributions.

The European Parliament recently voted overwhelmingly to ban the golden passport, but still faced opposition from certain pockets of MEPs. Given the scheme has provided a window through which Russian influence has been able to seep through right under the nose of the EU, one must ask: how it was not stopped sooner?

First a nod to Cyprus. For a country with an annual GDP of $26.4 billion, the Cyprus Investment Program (CIP) brought in €9.7 billion in just seven years. In 2020 however, after extensive scrutiny from the EU and Cypriot citizens, the government cracked down on the programme.

However the country is still enjoying the fruits of Russian investment, despite distancing itself from past shady dealings, with over €100 billion in investments coming from Russia in 2020 alone. Cyprus’ economy is facing an existential crisis by cutting off this flow of investment, a clear indication of the hold an external power can have over smaller nations.

A more concerning case study lies in Malta, whose government has fought tooth and nail to stop the banning of golden passports as the Ukraine crisis has unfolded. As near as the day before the European Parliament announced they would be outlawed Robert Abela, the Prime Minister, was declaring the scheme would continue in all its glory. All four MEPs representing Malta’s ruling Labour Party voted against the bill.

Not even Roberta Metsola, the new President of the European Parliament and Maltese national who led efforts to ban golden passport schemes, could sway her compatriot. The EU’s inability to reign in a country with such close ties to its leadership lays bare the deficiencies of a bloc that falters when undermined by the sovereignty of its member nations.

Abela faces a general election next week that he is widely expected to win. A prime minister who has been accused of participating in fraudulent property deals involving an alleged kidnapper, and whose own wife has been revealed to have been active in the process of handing out golden passports, may have wooed voters, but he cannot be the antidote to rife corruption amongst the country’s elite.

So now the citizen-by-investment schemes have finally been suspended, is that job done? Not even close.

By expelling Russian influence and stemming the tide of investment, a vacuum will form. Smaller EU states are dependent on what has become institutionalised corruption, and without proper rehabilitation they will merely seek alternative suppliers in the form of equally hostile nations like China.

It is imperative that the West does not simply allow a changing of the guard from Russian to Chinese influence. Unfortunately, this may already be occurring.

It may surprise people to know that Malta enjoys ironclad ties to China that go back decades. In 2019, the Maltese government was among the first European states to sign up to China’s ‘Belt and Road’ initiative. In the past year alone, Chinese exports to Malta skyrocketed by 367 per cent. Knowing which side their bread is buttered, Malta – alongside Cyprus – was one of four EU nations to refuse to condemn China’s human rights abuses in Xinjiang last June.

This, of course, is part of a wider foreign policy directive from the Chinese government, quietly inflating its influence abroad in recent years through the sponsorship of key infrastructure projects. As the polarity of the world order continues to shift over the next decade, the West must be wary not to allow division to be sown by our adversaries.

The UK should take an active role in protecting and facilitating the rehabilitation of Malta and Cyprus who are, after all, fellow members of the Commonwealth. Golden passport schemes may have been scrapped, and Russian tendrils clipped, but that does not mean something bigger and nastier cannot grow in its place.

Ryan Henson: Levelling Up and Global Britain are two sides of the same coin

18 Mar

Ryan Henson is Chief Executive at the Coalition for Global Prosperity, and was the Conservative candidate for Bedford in the 2019 General Election. 

Levelling Up and Global Britain are two sides of the same coin. The Levelling Up agenda exists because the UK voted to leave the European Union. Brexit voters like me took a hard look at the UK’s relationship with the world, and its impact on our lives at home, and decided business as normal would not do.

Something had to change. The UK needed to be bolder and less constrained on the world stage, and ferociously determined to improve the lives of those in left behind areas of Britain. If Global Britain succeeds, Levelling Up will too.

For as long as the world collectively fails to address the root causes of migration, desperate souls will seek refuge in Europe. For as long as viruses have no regard for national sovereignty, and millions of people overseas continue to lack access to basic healthcare, all of us will be at risk from future pandemics. What we choose to do or not do overseas directly affects what happens at home.

Michael Gove’s ambitious Levelling Up White Paper fired the starting gun on a decade-long project that will spread opportunity and prosperity to the parts of the UK where it is needed most. Getting Global Britain right will make Levelling Up more resilient and more likely to succeed.

Take overseas aid. It was always short-sighted to suggest international development spending prioritised helping foreign people ahead of those struggling in Britain. Increasing trade boosts living standards in the UK, improving healthcare abroad helps stem the spread of viruses, while tackling conflict at its source makes extremism and violence less likely to spread to our streets too.

Prevention is always cheaper and more effective than cure. Helping people overseas helps Britain too.

Our values are also being challenged. Authoritarian powers are on the rise, and their vision of how the world should look is very different to our own. The likes of China and Russia see democratic values and liberal principles as dangerous to their own existence. Putin’s despicable, unjustified, and unlawful invasion of Ukraine is tragic evidence of this.

But we can be enormously proud of the fact that the UK is the largest bilateral donor of humanitarian aid to Ukraine, along with the leadership shown by the Prime Minister and the Cabinet in rallying the international community in opposition to the Russian invasion. This is Global Britain in action.

China meanwhile has weaponised international aid with its Belt and Road Initiative, as well as its economic and geopolitical push into Africa and South America. Underpinned by a trillion-dollar budget over the next thirty years, China will provide investment for developing countries while seeking to capture their political elites so they support, or at least do not challenge, China’s broader international objectives.

In partnership with our allies, we should continue to use our soft power tools of development and diplomacy to contest this advance, every inch of the way.

The Government’s Integrated Review was right to identify the fundamental national interests that bind together the citizens of the UK. Sovereignty, security, and prosperity – alongside our values of democracy and a commitment to universal human rights, the rule of law, freedom of speech and faith, and equality.

The battle for ideas is being played out from the Baltic to the Sahara, and we will need every weapon and asset at our disposal to ensure freedom and democracy wins.

Levelling Up and Global Britain are inextricably linked. With a smart and effective aid budget working hand in hand with defence and diplomacy, the UK can transform lives, spread prosperity at home and overseas, and truly deliver on Levelling Up, and Global Britain.

Bob Seely: Russia and the war. 3) Tactics.

17 Mar

Bob Seely is a member of the Foreign Affairs Select Committee, and is MP for the Isle of Wight.  He has written a definition of new Russian warfare and a study of Kremlin activity in eastern Ukraine.

The tactics with which the Kremlin started this war are not the tactics with which it will end it. Initially, Russian forces sought to fix Ukraine’s most battle-ready troops in the east whilst conducting a relatively quick strike to Kyiv to seize the Government and install a puppet regime.

That has failed. The war is now likely to evolve into a series of city sieges. To minimise Russian casualties (it is noteworthy that this may already be a factor), mercenaries will be increasingly used – hence the recruiting now taking place in Putin’s client state, Syria, and elsewhere.

What is clear is that the Russian army is not living up expectations. In particular, it seems unable to conduct simultaneous advances along multiple axis. This is slowing, but not stopping, its advance.

Soviet/Russian tactics have historically been based around clear concepts: deception, unity of purpose, psychological manipulation of the enemy and the ability to use surprise and speed. These are underpinned by theories such as Operational Art – combining military capabilities into a seamless whole – and Deep Battle – self-sustaining, shock offensives driven deep into the enemy – developed by Soviet thinkers in the 1920s and 30s, which remain influential today.

However, Vladimir Putin’s ‘surprise’ strike resembled the military equivalent of a disorganised bimble. Whilst this looked shocking on social media, it could, albeit generously, be interpreted as ‘reconnaissance by attack’, whereby Russia pushes forward secondary units into initial contact with enemy forces. Higher-calibre units then follow up, aware of Ukrainian positions.

However, this next wave fared little better, in part because armed drones and anti-tank weapons supplied by Turkey, the US, the UK and others have taken a toll on Russian armour. One has to ask if this war, and the 2020 Azerbaijani-Armenian conflict, herald the end of the age of armoured/tank warfare.

Russia now appears to be encircling cities for prolonged artillery and air strikes prior to entering them. Kharkiv and Kyiv may follow the example of bombed-out Mariupol in southeast Ukraine. This tactic is not new to Russia. Whilst the Soviet Army liked to portray itself as a fast-moving tank army, it used artillery and air power to pulverise when coming up against an immovable objective. Some experts argue that Russian/Soviet armies were not so much tank armies as artillery armies.

Ground forces are recalibrating as we speak. Where possible, urban assaults following bombardment will likely be conducted by the Kremlin’s mercenary forces. A counter-tactic for Ukrainian forces, therefore, must be to continue to target Russian forces rather than just its mercenaries.

Nuclear and chemical weapons remain options for the Kremlin, but with potentially very high political costs. Would Russia’s alliance with China survive the use of such weapons in Kyiv?

There is no public doctrine on chemical weapons because, technically, they do not exist. However, their successful use in Syria will not be lost on Putin. His ally, Bashar Assad, besieged Aleppo for four years with conventional weapons without success. With chemical weapons – chlorine barrel bombs – he raised the siege after a dozen days. Heavier than air, the chlorine gas flowed into basements, silently suffocating civilians driven to despair and madness. Chemical weapons induce panic.

Finally, Russian military tactics are highly integrated with politics. Military tactics are designed, not as an end in themself, but to regain the political initiative. The Kremlin will now try to create a series of puppet mini-republics, like the separatist enclaves established in 2014 (in reality Kremlin front organisations, as my 2019 report showed) which will then demand a federalised, pro-Moscow Ukraine, with the threat of violence and secession ever present until Kyiv effectively submits to Moscow’s dominance.

Talks are still ongoing. Russia will likely pocket any Ukrainian concessions already offered whilst preparing mercenaries for a new phase of the war. Without a deal, for which we can hope but which may be unlikely, the siege of Kyiv will soon begin. At its worst, and with the potential tactics on offer, it is likely to present images unseen in Europe since the raising of Berlin.

Shanker Singham: A four-point plan for (re)building the global network of liberty

14 Mar

Shanker Singham is CEO of Competere. He is a former adviser to Liam Fox when he was Secretary of State for International Trade, and to the Office of the United States Trade Representative.

It is understandable that policymakers are responding to the immediate aftermath of Russia’s invasion of Ukraine in tactical ways. However, the forces that gave rise to these events have been brewing for some time, and we urgently need a strategy to correct the mistakes we have made in ignoring these forces in the past.

That strategy should, first of all, recognise what we have missed. The fascistic cronyism that prevails in authoritarian states like Russia, China, and Iran has not been arrived at random.

Cronyism is the method by which dictators like Vladimir Putin ensure that they have the resources to act in nationalist ways that defy economic rationality. It is built on government control of the means of production and distortion of markets, so that the inefficiency which is inevitable from such state-owned and state-influenced enterprises is not subject to the discipline of ordinary market forces.

The ill-gotten gains that arise from such distortions can then be deployed by the likes of Putin in ways that damage the fabric of liberal democracies themselves.

It is a mistake to think that this current situation arises merely from the malign proclivities of the Russian president. Forces, economic and cultural, are applied to countries, and these countries react in various ways, from time to time producing leaders that express the collision of these forces.

In order to achieve the goal of more of the world’s people living under a liberal democratic system, we need to take the following immediate steps:

All institutions of government starting with the Cabinet should be put on a war footing

We must recognise this salvo (Russia’s invasion of Ukraine) as one of a series of economic (as well as hot) wars between countries in the ‘network of liberty’ (NOL) and the new autocrats on the other side of an emerging global divide, and that we must take immediate steps in order to secure a strategic response which we will have to have the patience to deliver.

This will require a robust economy at home and stronger ties with NOL countries. The regulatory reform agenda in the UK needs to be accelerated. Only a robust economy at home will enable the UK to play the global role that is required of it at this time.

We also need stronger economic ties to NOL countries through a concentric set of circles starting with stronger economic and security partnerships with the most trusted core (AUKUS, potentially including Japan), then moving beyond that through CPTPP and the Atlantic Charter with the US. This should then extend to the UK-EU FTA which should be upgraded from a relatively modest agreement to a fully comprehensive agreement across services, as well as goods, that is truly best-in-class.

There is also a group of countries presently outside of this grouping, such as the GCC, Korea, India, and Brazil, where we need to reinforce pro-market policies and encourage a reduction of distortions. Some EU members fall into this category also.

In the WTO, and even in regional and bilateral trade agreements, we have been unserious about disciplines on market distorting activities, including the impact of SOEs and state-controlled enterprises on the global economy, as well as those private firms that benefit from distortion. This needs to change immediately.

Full disciplines mean a mechanism to tarifficate proven anti-competitive market distortions. Market distortions have led to ill-gotten gains, which have fed the dictators and autocrats and can be used to pursue hot wars as well as cyber-attacks, finance terrorism, and other illicit activities. Many of these nefarious activities are linked and the money to support them is fungible.

We need to starve SOEs and regimes that engage in market distortions from obtaining Western sources of funding in London, NY, Tokyo and other centres. Where distortions are proven, we must limit access to finance for the firms that benefit from them. Right now, those same firms use those distortions as proof that investors should invest in them. We are currently allowing investors to underwrite the fix.

Finally, our sanctions regime must in egregious cases enable network of liberty countries operating in tandem to ban the exports of products wherever produced using our technology.

Integrate our aid and development more firmly into our trade and international economic policy above

We need to fast-track the prosperity agenda in the FCDO recognising the lifting the world’s poor out of poverty will protect all of us from dangerous ideologies.

Our aid should not be agnostic about whether countries cleave to liberal democratic principles and therefore should be conditional on achievement of key objectives which should be benchmarked, in a similar way that the Millennium Challenge Account is in the US – a Platinum Challenge Account.

Ministers should prioritise the Commonwealth for this development funding to bind them more tightly into the Commonwealth network, and enable them to leverage its network effects.

We should drive British Investment International at pace, including through the development of Special Economic Zones in Africa, Latin America, and Asia working with partners to secure objectives in 1 above, as an alternative to China’s Belt and Road.

Step up a massive campaign domestically and globally explaining classical liberal democratic principles

We need to be clear, at home and overseas, why our system us better for people than living in autocratic, cronyist and heavily distorted societies. Domestically because this fight is never over – the UK almost elected an avowed hard core Marxist to be its Prime Minister in 2019.

Globally because many people in poorer countries equate liberal democracies with inequality and injustice, and cleave to autocratic leaders and their false promises.

Step up our energy production domestically and in other classical liberal democracies

We will need to pursue the full range of energy production options as we transition to more climate-friendly fuels, but the urgency is on weaning ourselves off fuel produced in autocratically controlled countries. There is no point in limiting the access to finance for those foreign firms that benefit from distortion if we simply pay them vast amounts for their energy.

Both the US and UK must ramp up energy production and eliminate the barriers to technologically-neutral energy production. This is critical to ensure that LNG and other sources of energy can be exported to the EU to make it less energy dependent on Russia.

In addition, the US and UK should work with the US and Japan on key nuclear technology. All technologies should be promoted in a technologically neutral fashion; and on AI, space, and quantum computing, including driving the global standard setting debate.

The new global divide is not a rigid “iron curtain”. But that countries on the other side can be pressurized to change, provided we apply both carrots and sticks.

Reforms in those countries should be encouraged by ensuring we have very focussed, narrowly -auged tools to deal with elements of cronyism and distortion. These should be centred on making them pay for a market distortion in their own market that gives them a market advantage at home or abroad, and move away from penalties that cannot be directly correlated to the scale of their distortions.

We must be reasonable, and they should believe that their firms can succeed on the competitive merits and not on distortion. This is the way in which we will be able to give oxygen to the reform-minded people in those countries who presently exist as a tiny, and silent, minority.