Are we ready for an Asian future?

This week, Theresa May set out her 12 principles for Brexit. She pledged that Britain outside the European Union will be a “great, global trading nation” that is “respected around the world and strong, confident and united at home”.

Fast-growing economies in Asia will be a key part of this strategy.

George Osborne famously ramped up the UK’s relationship with China and heralded the beginning of a new golden era of UK-China relations. The UK has been fast to support new global governance institutions like the China-led Asia Infrastructure Investment Bank. More recently Theresa May has reached out to countries like India to establish the groundwork for post-Brexit trade deals.

The imperative to build relationships with these countries is clear. The world economic centre of gravity has shifted distinctly eastward, and Asian countries are playing an increasingly prominent role in global political and economic affairs. But building these relationships does not come without its challenges.

Asian countries are facing their own economic, demographic and political changes, whose impacts have yet to be fully understood and manifested. On our side, the necessity to balance trade, diplomatic and security considerations has posed difficulties and at times pitted us at odds with the policies of our US and EU counterparts. Domestic politics in the post-Brexit era will also affect our negotiating hand.

The Fabian International Policy Group hosted a lunchtime fringe at the Fabian New Year conference to discuss the major challenges and opportunities in our engagement with the region. Three of the big challenges that came up include:

1. Peace and stability in the region – A secure and peaceful Asian future is not guaranteed. China has been increasingly bullish in its treatment of its regional neighbours. We’ve seen the rise of populist leaders in the Philippines’ Duterte, China’s Xi and Japan’s Shinzo Abe. Long-standing conflicts in Kashmir, Balochistan and Afghanistan will not be going away. What will happen on the Korean peninsula is anyone’s guess. These tensions are compounded by slower economic growth and the financial strains of dealing with aging populations.
2. Donald Trump’s foreign policy – The world waits with baited breath for Trump’s inauguration and more clarity on his foreign policy priorities. Whilst he is expected to take a more isolationist and protectionist stance, particularly towards China, he also has the potential to antagonize conflict within and with the region. The US’s relationship with China will have knock on effects for the UK.
3. Brexit – The UK’s negotiating position is potentially weakened outside of the EU trading bloc. Countries like China, who already are heavily invested in the UK may seek to exploit this. Japan has already been famously anti-Brexit. The UK’s stance on visas will also impact our trade negotiations with China and India. On the other hand, a weaker pound will also encourage more investment into the UK, but will aggravate tensions in sectors like property, energy and manufacturing.

Despite these challenges there are also some opportunities we can harness:

1. Progressive engagement – At Davos this week, President Xi signaled his commitment to making globalisation work for all and has reiterated his commitment to tackling climate change – pitting himself firmly against the regressive policies of Trump. This may be an opportunity to work with China and other countries in the region on these issues and others like developing new technologies and innovation, in tackling the drivers of conflict, in achieving the UN’s Sustainable Development Goals, and reforming global governance systems. The UK’s experience of dealing with de-industrialisation and ageing populations, our governance systems and developing our higher education sectors are also in high demand.
2. One Belt, One Road – OBOR is China’s flagship infrastructure investment initiative designed to increase trade across China’s southern and western borders and connect it to Europe. Activity is designed to ramp up over 2017, and today the first freight train direct from China arrived in the UK. The UK is investing in the initiative through the AIIB and will likely continue to do so as a signal of support to China’s global engagement.
3. Building better understanding of the region – Finally, if we truly want to develop greater trading relationships with the region we also have to develop a greater understanding of their cultures and language. UK education institutions and culture are a key export to the region. Similarly, we should seek to encourage students to learn languages from the region.

Asia is an exciting region and will continue to play a greater role on the world stage. We should harness the opportunities that exist to help better integrate these fast-growing economies into the global economy but also play a role in helping to address some of the challenges, which will certainly affect us all.