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John Ross: Washington ties with pro-Brexit group could limit mutually beneficial UK-China relations

2019-08-05

By John Ross    Source: Global Times    Published: 2019-7-30


Two days after Boris Johnson became the UK's prime minister, the Financial Times noted that British Brexit Party leader Nigel Farage held a major New York fundraising event for a new lobbying body W4B (World4Brexit) to campaign for the UK to leave the European Union (EU). Farage added that he met with President Donald Trump at the White House on July 24, the day Johnson became prime minister, when Trump urged him to join forces with Johnson to "realign" British politics.


The Financial Times noted, "Mr. Farage said that W4B … had been organized 'at the American end' by Gerry Gunster, the American political strategist who in 2016 assisted Leave.EU, the unofficial referendum campaign for the UK to leave the EU." Farage's public fundraising brought out publicly what was clear from an analysis of the economic and social forces behind Brexit, and the relations between Trump and pro-Brexit groups in the UK.


Some Chinese media mistakenly treated Brexit as a domestic British issue without major implications for China. In reality, it has significant implications for China.


Not long ago, China-UK relations entered a "golden period" when David Cameron was British prime minister. The UK was then the first G7 country to join the Asian Infrastructure Investment Bank (AIIB).


Within that framework Cameron developed a rational strategy, from the viewpoint of both the UK's population and British capitalism, positioning the UK as the gateway for China into the EU. This aided the UK's prosperity as it had great advantages in pursuing such a strategy. London is Europe's most important financial center. It is the world's largest foreign exchange dealing center, establishing itself as the biggest market for the yuan trading outside China.


With many Chinese companies expanding abroad, they saw the UK as a suitable entry point into Europe. The UK could gain from Chinese investment, aside from its strong position as the EU's financial center - a "win-win" outcome for both the UK and China. To pursue such mutually beneficial economic relations, Cameron needed objective relations with China.


But such a "win-win" approach was not acceptable to those in the US hostile to China's development. The UK is the world's sixth largest economy, with a high technological level and, in London, the most important international financial center outside the US. "Win-win" relations benefitting the UK and China were unacceptable to anti-China US circles, which is why they opposed the UK joining the AIIB. These circles saw an opportunity to disrupt the UK's good relations with China through Brexit.


Historically, the US has supported Britain's EU membership - the UK was seen as a reliable US ally to influence EU policy. Despite this, the Trump administration reversed this policy to instead favor the UK's withdrawal from the EU.


This change in US policy followed an overall international strategy that US allies should increase the resources they provide to the US, to strengthen US ability to confront China. Germany resisted transferring its resources to the US, through increased defense spending and by accepting US tariffs. Trump therefore concluded that the UK should withdraw from the EU.


This strategy's key point opposed any UK-EU agreement in which the UK remained part of the EU's customs union - as the UK would not be free to negotiate a trade agreement with the US. Anti-China forces placed provisions in the proposed US-Mexico-Canada Agreement (USMCA). Defining China as a "non-market country," it states: "Three months prior to commencing negotiations, a Party shall inform the other Parties of its intention to commence free trade agreement negotiations with a non-market country." It further stated that Party "shall provide the other Parties with an opportunity to review the full text of the agreement." It also said that "entry by any Party into a free trade agreement with a non-market country shall allow the other Parties to terminate this Agreement."


The USMCA, which would replace the North American Free Trade Agreement (NAFTA), did not contain these provisions. In practice, it would give the US veto rights over Canada and Mexico on trade agreements with China. Anti-China forces would insist on such provisions in any trade agreement with the UK. The US would also want to block Huawei from participating in the UK's 5G telecommunications infrastructure.


Such anti-China measures would be against the UK's interests, and the economic interests of the Johnson government.


By blocking mutually beneficial China-UK relations, the British economy would be weakened. It would be against the interests of not only the UK as an EU member but also of the declared strategy for a post-Brexit UK - those supporting Brexit argue that it would allow the UK to pursue a more global economic orientation. But cutting off or limiting mutually beneficial relations with China, the world's most rapidly growing market, would clearly be against such a strategy of global outreach.


The author is senior fellow at Chongyang Institute for Financial Studies, Renmin University of China.

Key Words: China   UK   US   John Ross  

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