Webinar: Economic Diplomacy – The Future of UK Foreign Economic Policy

Dr Leslie Vinjamuri

Welcome to those of you who are on the webinar. We have a – quite an extraordinary crowd, I’m not surprised, given the absolute importance of this evening’s topic, and The Future of UK Foreign Economic Policy, and, of course, we’re here to talk about the vital work of the LSE Economic Diplomacy Commission. I’m Leslie Vinjamuri, I direct the US and Americas Programme here at Chatham House, and I’m Dean of our Academy. I’m also a Commissioner, although I should say not one of the most important ones, and I’m here really to Chair this and moderate this conversation, that’s being held between the – those who have really made this idea, and come up with this idea, and transformed it into a very, very important reality.

We have with us Professor Linda Yueh, and Professor Mick Cox, and Creon Butler. Let me just say a word about each of them and a word about the Economic Diplomacy Commission and the importance of this project, before I turn it immediately over to them to really tell us about the work, about the topic, and about what we can expect to hear from the Commission, perhaps, in the weeks and months ahead.

Linda is Chair of the LSE Economic Diplomacy Commission. She is very well-known to all of us for her writings. Her most recent book, The Great Economists, is – if you haven’t read it, you must read it. She is also a Visiting Professor at LSE IDEAS, and very well-known to all of us for her very astute commentary on economic affairs, and the most important issues in global economy on the BBC and many other broadcast networks.

Professor Mick Cox, of course, is mostly well-known to us for his intellectual and scholarly contributions to the understanding of US foreign policy and international relations, Britain’s role in the world. He is Director of LSE IDEAS, he is Professor Emeritus at the LSE, and he is the leading light of Chatham House, in the sense that he was one of the early leaders of the US and Americans Programme, and has a very long and important history on the programme and continues on as an Associate Fellow.

Creon Butler is the Director of our Global Economy and Finance Programme here at Chatham House. He is also Research Director of our Trade, Investment and New Governance Models, obviously one of our most important initiatives at Chatham House. Creon, who I consider a very dear colleague, one of our best thinkers, joined us from the Cabinet Office, he was most recently the Director of International Economic Affairs and the National Security Secretary.

Clearly, we have three very distinguished speakers to talk to you, not only about the Commission itself, but also, about the ideas that underscore it, the key topics, what can we expect of Britain domestically in this current moment? Remember that the Economic Diplomacy Commission was begun before the pandemic and before the economic crisis that has come as a result of that, so, like so many of the things that we’re doing, it’s been transformed by it. It’s also a very important day today. We’ve heard the announcement of a new government office, the merging of DFID with the Foreign Commonwealth Office. Merging might be not the term that some people feel is the most appropriate, to decide – to understand this announcement, but it’s clearly very significant for the work of the Commission.

So, Linda, let me turn it over to you first, to perhaps tell us what the Commission is, what the most important issues are, as you see, and perhaps if you could also tell us what it is that surprised you most, during the various sessions that have been held across the UK. What has unfolded that you hadn’t expected to unfold, apart, of course, from, you know, the pandemic and all that that has brought?

Professor Linda Yueh

Lovely. Thank you very much, Leslie, and just let me add my thanks to you for chairing this session. Couldn’t think of a better moderator, and also, of course, you’re a Commissioner, and, in fact, both Mick and I are Associate Fellows here, and I’m very delighted that we can do this joint event, and you and Creon, the terrific programmes at Chatham House, and so I think this is going to be a fantastically interesting discussion. I think that on any topic, but particularly with this panel on this topic. I think it’s extremely timely, and let me just, kind of, maybe rattle through, what is the Commission? A bit about our work, and as I say, I’ll address some of the questions that’s come out through the evident session.

So, I think this Commission, the LSE Economic Diplomacy Commission, is really an initiative of LSE IDEAS, so the Foreign Policy Research Centre and think tank founded and led by Mick, so he and I started talking about it, probably a couple of years ago now, to really think about how do you position Britain in a 21st Century global economy? So, in other words, what kind of trade and investment policies would best suit the 21st Century? What would be the UK’s global role? And then, of course, there have been lots of events that have influenced it in the interim: Brexit, the pandemic, but I think the underlying questions remain some of the most important ones, which is, you know – and I really think of these questions in probably threefold.

So, the very first thing ism what does a 21st Century global economy look like, and how should a country set its foreign economic policies? Broadly defined, so not just trade and investment, but when I say global role, I also mean global norms, global rules, all of the things that really is about strategic positioning.

And I think a second question that comes from that, and this is a question, I think, that, with today’s news and increasingly, everyone is beginning to think about, is how do you make a commercially open country’s policies around trade, investment, as I say, kind of, global policies, international policies, writ large, consistent with the values and the aims of non-economic policy? So, for instance, making it consistent with environmental policies, foreign policies, development policies, and national security, defence intelligence policies. So, I think it’s that sort of refining of what the international positioning of a country should be.

And I think the third part of the Commission, I mean, there’s obviously a lot more prongs, but I think the third part that’s really just important to stress is that all economic policy is domestic. So whether you’re talking about any of these things, it has to – you have to look, and the Commission does look, at what the impact of that is across the UK, across the nations, across sectors, across regions, because distribution of impact is so important, and that we need to ensure that that is always front and centre.

So, with that, perhaps I could just summarise the midpoint, and then handover back to you. So, we are literally at the midpoint of the Commission’s work. We’ve had five evidence sessions across the UK before the pandemic moved us online. So, we had three sessions to open the Commission’s work, and then, we’ve had two more sessions. So we’ve got another five sessions, and we’re aiming to finish the report in early 2021, and it covers, as I say, these issues, and actually, many more, and so, today’s event really marks the midpoint, and, to us, it’s an opportunity to gain your expert views, the expert views of the participants, the invited attendees, to help us refine the work of our – of the Commission, of our thinking, and to craft some concrete recommendations for how the UK can best position itself and its international structure and global policies to be consistent with its long-term goals, economic and non-economic.

So, I’m just going to quickly summarise where I think the first, kind of, half has taken us, and, Leslie, don’t worry, I haven’t forgotten about the most interesting things, you mentioned, that I’ve seen on this journey. So, I would probably say, and, you know, do – and these are just, sort of, my, kind of, selective points, and the – I should say that the interim report’s already published on the Commission website and LSE IDEAS, if you just go – google LSE IDEAS, you can actually read these reports in full, so I’m not going to do it justice. But I think, in the first sessions, we really, I think, picked out the importance of distribution, so we need to look at, you know, should all international policy, whether it’s trade or investment, or taking a global role, have a distributional analysis behind the legislation? So, in other words, who does it affect and how much? And I mean, sectors, as well as people.

And if you want to think about a more holistic approach to economic diplomacy, you need to have some type of international structure that does that. So, does that mean a central department, which becomes more of a co-ordinating body? And we looked at, for instance, some potential models there, the US [inaudible – 09:39] that’s – you know, may not be the model, but, you know, some type of body, and then some type of parliamentary oversight on economic diplomacy, ‘cause it does touch all of these different policy areas. I think a second, sort of, strand is, you know, taking a leadership role on services trade liberalisation, and doing that by embedding consultation points, in terms of stakeholders, whether that’s businesses, trade unions, consumer groups. So, in other words, just making sure that, if you do take a leadership role, it’s done with the widest possible consultation, because these days, no agreement, whether it’s trade or investment, is just about tariffs and rules. It’s about much more, it’s about standards, environmental standards, labour standards, it’s about standards, and I think all of that is important to bear in mind.

And then, finally, what I said was one of, kind of, the big questions, and very timely for today, is aligning economic policies with foreign and other aims. So, I think one of our preliminary discussions is around aligning these goals, but maybe don’t align them too closely for development. So, there are a lot of nuances here to think about. I think – so, I think I’m just going to pause there and just say what I have found most surprising is the degree to which people may think, oh, what is economic diplomacy, how does it affect me? But, actually, once you start talking about the issues, it does affect – you know, it does affect many sectors, many different areas, because, ultimately, you know, in a – especially in an open economy like Britain, and these policies, you make a decision and it has a wider implication. So I think that part has been, you know, good to see, and I guess the most surprising thing is what we started off with, which is defining economic diplomacy, which, I think you know, itself is an interesting, intellectual question. Let me pause there.

Dr Leslie Vinjamuri

I mean, it is interesting, isn’t it, because when you began your work, there was one debate, say, on, you know, the big question of Britain’s relationship with China, technology, and specifically on Huawei, and a number of the issues that you’ve looked at have moved, right? Britain’s position has moved during the course of your evidence sessions, so, presumably, as you’ve gone around the country, whether, you know, on trains or with Zoom, you’re, sort of, playing with a moving target, because the context and the policy and the issues are rapidly developing.

So, I mean, I’m quite keen, as we move to Mick, and we’ll come back to you, Linda, obviously, but Mick, as we come to you, what surprised you – what is your – you know, what are the big issues that emerged that you didn’t expect to emerge, or, you know, was there a lot of consensus, or did you find deep disagreements and contestation? And, to the extent that you saw a lot of disagreement, how much of it was predictable? You know, did people line up where you imagined they would line up, or did you go off to Wales and Scotland and where – and, you know, across the UK, and find that, you know, this was regional or regional differences, was it partisan different – what – you know, what were the dividing lines, or maybe, you know, everybody in the UK agrees?

Professor Michael Cox

Well, I mean, and a number of things haven’t surprised me, but one thing that I think has come through, loud and clear, and there’s been many things, so I’m only going to simplify. As you know, Leslie, I’ve lived in all four parts of the Kingdom, as they say, Ireland, Scotland and Wales, and when we went to Scotland and when we went to Wales, in particular, it was quite clear that some of the perspectives there about not just Brexit, but a whole bunch of things, were rather different to what we found in London. And I think being sensitive to those issues of – you can call them regional variation, maybe you prefer to call it national variation, within the United Kingdom.

That’s one thing that did come out quite strongly to me, when we went down to Cardiff, very interesting, but we were hearing things we were not necessarily hearing in London, from the centre, and equally in Scotland. Their worries and their concerns were very, very great indeed, particularly about a no-deal Brexit, which they feel would affect them very, very badly. And I think that also brings up another thing, which I know Creon will talk about, namely how – there is no such thing as foreign economic policy, because, in a sense, everything that’s foreign is also domestic, and I think Creon’s going to pick that one up. What you do domestically has an enormous impact on you externally, and what you do externally is going to have a huge impact on what goes on within the UK, and it’s building that domestic consensus, whether across the four nations, or, indeed, across the peoples of Britain, North, South, East and West, I think is going to be very, very difficult.

What I was going to say, just by way of generalising a little bit beyond the Commission, a little bit, if you don’t mind me doing that just, Leslie, very, very quickly, is I – in the old days, do you remember, you said I did US foreign policy, which I still could try to do today, it’s increasingly difficult, I think, and in the old days, I used to work at two – we had two concepts, intentions and capabilities, you remember. What’s the intention of a country and what’s the capabilities? And you always start with capabilities. At one level, of course, you look at the UK, from the point of view of capabilities, it isn’t bad, you know, we’ve got good u – we’ve got great universities, the English language, London is situated in the right part of the world, in a sense, between Europe, United States, Africa and the Middle East, and we have the city of London, we’re still the fifth or sixth largest economy in the world.

So, on one level, the capabilities, it seems to me, do need to be stressed, and the strengths of the UK overall within the world, you know, are very, very real, and I always want to say that by way of optimism, because the next part is a little bit less optimistic, and I think you just need to keep that fundamental points in mind. But it seems to me – what’s come out to me doing this work, Leslie, not as an Economist, like Linda or Creon, but what’s come out to me aren’t just the capabilities, but are the huge challenges that the UK faces, not just because of ineptness or incompetence or bad choices, but simply because the world out there has become, it seems to me, much more difficult place to live in. And that’s for three big reasons, as I would see it, and I’ll be very brief on each of those.

One, of course, is the thing we’ve been talking about within international relations, international economics, for a very long time, namely the shift of economic power, you know, towards the East, towards Asia, towards China, towards India, towards other parts of the world. Now, of course, that means bigger markets, more consumers, etc., etc., etc., more tourists, but it makes the whole world a lot more complicated. It makes the whole world a lot more complicated and the world we used to know, the G7 world of the 1970s or the 1980s. So, there’s an upside to a shift of power, because it means it’s a wider world economy, with more consumers, more middleclass people consuming stuff. On the other hand, it makes the world altogether much more complicated, particularly when one of those actors in this shift of power clearly is China, and I think that is the crucial factor, as we’ve seen over the whole Huawei business.

I think the second thing, which has made the world much more complicated, much more challenging, of course, is simply Brexit. There’s no point getting away from it. We set up this Commission without thinking that Brexit was the central and only question. As Linda said, we set it up because we were looking at structural changes in the world economy, and how all they would feed into Britain and how Britain would relate to these larger structural changes, but we can’t get away from the fact that Brexit has, in a sense, made those choices far more difficult, it seems to me. You don’t have to be pro or anti, I think you can just stand back and say, look, this brings into play problems and difficulties and challenges you would never have had to deal with before.

And the third great challenged that have come in, and I – it’s pretty self-evident, ‘cause we’re all sitting at home, talking to each other across the digital devices, is the pandemic. And, again, the position of Britain, or, indeed, of any country in this pandemic, have been very great, except that the pandemic, let’s be honest, has hit Britain very, very badly. You know, the numbers of deaths, and we’ve seen all this, okay, the unemployment figures today were a little bit better, but nonetheless, it’s hit all countries in the world very, very badly, particularly the United States, but I think it actually has a parti – it’s had a particularly bad impact on Britain. And, by the way, London has been such a central part of the success of Britain, and London was the great attractive draw, it was the great magnet, now, because of the situation in London, and, again, I don’t want to talk it down ‘cause I’m a Great Londoner, but nonetheless, I think we’ve got to see that this is also problematic because of what’s been going on in London, in terms of the pandemic. So, I see Britain with huge capabilities, all sorts of possibilities, as we’ve discussed in the Commission, but at the same time, facing these three great challenges.

I also end up, finally, with dilemmas, and you wouldn’t expect me to end up with a straightforwardly positive note, would you, really, Leslie, knowing me as you well do? But the three great dilemmas are quite simple flowing from that. One is, what do we do about Europe? What do – who do we choose? We’re told that the world economy’s going regional, but at the moment, the UK is beginning to leave one of the great regional trading blocks, which is the European Union.

Secondly, our relationship to the United States. Everybody keeps talking about the special relationship as a security relationship, no, it’s not. It’s more than that, it’s an economic relationship. It’s a very powerful, economic relationship, in terms of investments and all sorts of other things. It goes back a very, very long way. But that relationship is more difficult now, not just because of the President in the White House, but because of all sorts of other things going on in the transatlantic relationship.

And thirdly and finally, and this, again, brings us up to the question of China, I remember a few years ago – do you – and I’m sure you all do, too, we were criticising Mr Cameron for kowtowing to China. I don’t think anybody today is talking about that. In other words, we’ve seen a huge shift of opinion in this country amongst certain political elites, and certainly in the Conservative Party, about China, which, again, is another dilemma for us, ‘cause we – if we want Huawei, if we want 5G, we want all the things and the benefits of that relationship with China, we may, indeed, have to choose. So, I suppose what’s surprised me most, coming back to your original question, is how complex this all is, and maybe, as an academic, I really shouldn’t have been so surprised by that.

Dr Leslie Vinjamuri

I am reminded, in listening to you, that I think we shared dinner the evening before the Brexit Referendum and the evening before the 2016 US Presidential Election…

Professor Michael Cox

And yeah.

Dr Leslie Vinjamuri

…and I have a feeling that you called both and I called neither, so perhaps my credibility is not quite. I think the digital divide, Mick, is between all of us and those other people who actually can’t come online, which also…

Professor Michael Cox

Exactly.

Dr Leslie Vinjamuri

…raises a question about your rather rosy view of what London had become, which I think is not something that I would necessarily share, which, again, I think it comes back to the current moment, the inequality, that we now know exists across a number of dimensions. The pandemic has highlighted that, and I’m sure it’s something that’s been widely discussed, across the meetings of the Commission, and something that I hope that we discuss more today, it’s certainly a concern of ours at Chatham House. But, before I say any more, Creon, let’s hear from you.

Creon Butler

Well, thank you very much, and thank you very much for inviting me to this discussion. I think the work of the Commission is fantastically important for the UK, and, you know, has been set out by Linda and Mick, you know, these are some really complicated and difficult issues. I really wanted to make, sort of, four quick points, essentially, and first of all, I mean, essentially trying to address some of the questions that were set out in the invitation to this meeting, and one of them was really around the link between foreign economic diplomacy and what goes on domestically, both in our economy and our society.

And, I mean, the links, as Mick was saying, are really strong, so, for example, if you have, as part of your foreign economic diplomacy, a decision to say that you want border carbon adjustment mechanisms, so in your trade policy, you want to introduce variable tariffs that take account of the carbon content of goods that are imported into your economy, clearly, you may do that, because, in the UK, we only account for 1% of global emissions. You may say that you want to push forward with very advanced work on low carbon adjustment, and you also want to influence other countries. But if you do that, there are some parts of the world where you will be able to have a strong trading agreement, not least the European Union, but there are other parts of the world, the US, certainly under the present administration, where that just wouldn’t be possible, and you could say, you know, we’re not going to be able to have a free trade agreement under those circumstances.

And so, that decision then, very much impacts on, you know, what is possible domestically, and you have to say to yourself, well, actually, is this the best way to achieve what I want? Because there may be other ways that you achieve the same influence on the world without, for example, limiting your possibilities for trading with the US, and I think this goes to the point that it is a really complicated structure, and if you want to optimise these decisions, you have to have a really complicated and sophisticated analysis within government to say, well, which of these tools do we want to use?

Now, if you look at it the other way, for example, that you might say, you know, we have a particular vision for our economy, as, indeed, Linda set out at the start, and that will influence your choices you make on your foreign economic diplomacy. So, you might say, for the UK, notwithstanding what’s happened with COVID-19, that we do – we really do want to double down on the UK being a global hub, and on our role as an exporter of international services, and there might be very good reasons for doing that. You might say, you know, in the medium to longer-term, you know, our sector is going to be just as important in the future. There’s no particular reason why that should not have the attraction in the future as it has now. There might be a period of adjustment, but we will get back to that role.

And, similarly, you know, we may feel, in the UK, that we can combine the use of digital technology and our existing strengths in services extremely effectively, but if you were going to do that, you then have to say, well, a crucial part of being able to fulfil that role is to be really, really good at dealing with pandemics, ‘cause we know that pandemics are going to come in the future, and what we need to do is take from our current experience the best possible lessons that we can learn, so that we are one of the most effective countries in dealing with it in the future. Because that is what’s essential, to deal with – to have that strategy for our economy, and also, you know, it’s partly about what we do ourselves, but it’s also about what we create globally, because if we want to limit the impact of pandemics on the UK, we need to have a very effective global system, and therefore, that will be one thing that we need to invest in, in terms of our foreign economic diplomacy. So, you know, these choices work both ways.

I think the third point I’d like to make is that, above all, I think we need to be realistic about the weight we have in the world, and this goes to Mick’s point about the consequences of leaving European Union. It gives us more flexibility, but, as a trade negotiating country, we are very much smaller bloc than we would have been as part of the EU, and so we need to work out what that means for our strategy, and to make some clear decisions. So, very often, it may well be the case that we are most aligned with the EU going forward, particularly on policies that relate to climate change, maybe also in terms of policies that relate to human rights. Notwithstanding the fact that we’re outside the EU, it may well be that that is the country with which we’re most aligned, and we need to, you know, articulate our policies with that in mind. We need to find ways of influencing the EU, and, you know, being close to them will be one way of doing that, but I think it’s unrealistic if we say, actually, we’re going to, on all things, have a separate and independent approach.

And I think the final thing I’d just like to say, really, is around the capabilities that we have. Now, to some extent, we have some very clear advantages already, so, you know, our role, in various international organisations, not least the IFIs, the G7, the G20, already gives us the influence to – the ability to influence the global agenda. And, through that, to deliver a number of our aims, whether it’s the global architecture that we want to create, strengthened international rules, or whether it’s an environment in which we can pursue the kind of bilateral discussions and agreements that we want. But we need to keep working on that, and we need to strengthen those capabilities, and I think one of the really important things to bear in mind is that the positions, in principle, we take on things like climate change, development, human rights, but also, on things like, you know, belief in free trade, are going to matter a great deal, in terms of the influence we have in future. You can’t, on the one hand, be a very effective negotiator on a particular topic, and yet, on the other hand, be acting in a way that’s inconsistent with that. So, I think we need to think not only about our existing strengths, but how we develop those future strengths, and, in particular, the role of, you know, oppositions of principle, in terms of increasing our influence overall. I’ll stop there, but I’m looking forward to the discussion.

Dr Leslie Vinjamuri

Terrific interventions, thank you very much for that, Creon. I’m going to ask one of the questions that has come from the Q&A, in fact, two people have asked this, but before I do, let me ask all of you, 114 people in the audience, we would love to hear some of your voices, so please write in your – just your name into the Q&A so that I can call on you, and when I do call on you, if you could unmute yourself. But, first, while you’re writing your name into the Q&A, I will ask the question, which won’t surprise you, but there are a couple of angles on it, and it is this question about the announcement today that so many of us understood may well be coming, but nonetheless, perhaps, we’re gripped by the conversation.

This afternoon – Hitoshi Tajima says this afternoon, “Prime Minister Johnson announced plans to merge DFID and the Foreign Office to create a new department. There were a lot of debates over this issue recently between the government and the parliament. How feasible is this, and what is your opinion?” And we also have another question on the same question, which I think really speaks to one of the issues that I noticed, as I was reading through the difference evidence sessions from the Commission, and it is, “Does today’s DFID decision” – this is David Walker, thank you, David, “today’s – does today’s DFID decision risk further fragmenting the Western countries’ response to emerging market support and development, and inadvertently hand China a stronger global role?” I think that speaks to one of the debates about BRI and whether or not there was an alternative form of co-operation, that Western nations could come together to provide alternative financing for infrastructure. So, what is your view? It’s inevitable that the panellists will be asked this question, what is your view on today’s announcement, and does it also play into China’s hands inadvertently, when it comes to the question of engagement, Britain’s engagement with emerging markets? Who would like to take that one first?

Professor Michael Cox

Well, we’re going to give this one to Creon to kick off, I think.

Dr Leslie Vinjamuri

Ah, okay, Creon, go ahead.

Professor Michael Cox

Pass the buck.

Creon Butler

Right, okay, well, I think – I mean, my key point, I think it all depends on the implementation, I mean, and that – you know, we’ll have to see how that goes forward. So – and I may not have got as much detail as others have on the announcement that’s been made. But, I mean, I think the first thing to say would be that there’s very clear legislation on how our development assistance should be used, and, you know, while that remains as it is now, you would expect that development assistance to be used in the same way, even with it being part of the same departmental organisation as the Foreign Office. I mean, there’ll clearly be scope for, you know, potentially, efficiencies in the way it’s delivered, but also, you know, increased flow of information between different parts of this new institution. But while the legislation is there and says this money should be used for poverty reduction, and there should be a certain amount of it, and so on, you won’t see a change. Now, obviously, that legislation could change in the future, but, as far as I’m aware at least, that’s not part of the announcement, as it stands today, but others may correct me. I think the other…

Dr Leslie Vinjamuri

Do…?

Creon Butler

…point I would – I’m sorry? Is that correct? Yeah.

Dr Leslie Vinjamuri

No, no, that’s fine.

Creon Butler

Yeah, the other point I would make, just very briefly, is that I think the other issue that needs to be looked at is, you know, quite how much aid we want to deliver and how we fix the amount of aid that we want to deliver. And the decision, ten years or so ago, to choose .7%, I think, made a lot of sense at the time, it was a clear target to aim for, and has been very successful in raising the level of the UK aid. But as we’ve got to and we achieved that target, and as we go beyond it, you do get into a situation where, as we’ve seen this year, if our GDP falls, then our aid falls as well, so it can work both ways. Similarly, you can face a situation where, in order to try and fit as much as possible within the .7%, you find that there are, kind of, distortions in the way that funds are spent, because the desire is to use it for one purpose, but to cast it as being part of the .7%. So, I think there are a number of practical problems that arise from having a .7% target, which is quite separate from how much effort you want to put into that, and I think that’s an issue that’s worth looking at, as well. Thank you.

Dr Leslie Vinjamuri

Professor Cox, Mick, let me ask you a question on this. You know, Creon’s first comment, that it shouldn’t really change where development priorities are and where spending goes, it doesn’t really align with what we heard from the Prime Minister today, who made it very clear that this decision should really allow Britain to align its priorities, to amplify its influence, to really bring together its different ways of spending money and direct them, and if that’s the case, you would expect to see changes. It’s almost an indication that things haven’t been in line, that there hasn’t been a clear prioritisation, that things haven’t been aligned, they haven’t been leveraged in the way that they could. So, what do you make of this decision and do you think it will lead to significant changes?

Professor Michael Cox

Well, I mean, I would be somewhat concerned, to be perfectly blunt about it, about a merger between two very different kinds of institutions, with a, kind of, different ethos, different backgrounds, different expertise. And if you put one and one together, it sometimes can add up to two, but it can sometimes add up to less than two, and I would simply be worried, I must be honest, without seeing any of the details, so I’m really, kind of, flying by my pants here a bit, but to worry about that. And certainly people I know in DFID have never looked too enthusiastic in the first instance about this, thinking that they would lose their identity, and, indeed, maybe part of their budget, ‘cause we always know what happens with a merger and acquisition in the business world, and I think, you know, there’s a worry therefore that an M&A, in this regard, may have some really problematic consequences as well, but we will have to wait and see.

Could I just pick up also quickly on the China point, ‘cause it was also raised? I don’t think China’s been following this very, very closely, perhaps they are, but somehow, I would doubt it. I mean, they’re far more interested, as we well know, in the whole debate in this country about Huawei, about 5G, high technology, that is what really, really concerns more than what’s been going on, I think, in terms of this particular merger going on between DFID and the Foreign Office. And the other thing I’d also – whether it puts China in a stronger role or a weaker role, I don’t think it really matters, to be perfectly honest. I think we’re far too preoccupied by what we do is going to affect how China sees the world and how China’s role in the world.

You know, China’s going to take its own view of what it’s going to do, and although there’s been a hugely, I think, exaggerated talk about, you know, the rise of China, I believe it’s been exaggerated anyway, and, you know, even China ruling the world. You know, China, as many of us in IDEAS, and I think also in Chatham House, would say, China’s got huge domestic problems, and those domestic problems have increased dramatically, as a result of this pandemic. Everybody keeps talking about China winning the COVID war, I just don’t buy into that. I think they face huge difficulties of transition out of this. The economy’s weak, and if the global economy is weak, China is in problems. I’m not underestimating China’s influence, but I think we’ve got to be a bit wary of, you know, either – exaggerating what this would mean for China, yeah.

Dr Leslie Vinjamuri

Linda.

Professor Linda Yueh

Thanks, Leslie. I think I would probably just add that, you know, the – one of the interim conclusions we came to, and, of course, this is all – you know, we’re only midway through, is to think about how you could begin to align, you know, goals better. So, if – and, of course, this is, sort of, you know, what Creon’s already stressed, you know, if the goal is primarily poverty reduction, then, unless a legislation around the structure that institution really begins to challenge the primary goal, then going back to a pre-1997 structure, in a sense, is almost part of a bigger, kind of, government shakeup. And if you had in alignment, and where areas you should not align are made clear, and every policy still has their main aim, by – you know, and, again, I’m not an expert on bureaucracy, we are actually going to have our session on how to deliver economic diplomacy as a session. But, you know, I would have thought that one of the things you have to think very hard about is, you know, once you have some degree of, I mentioned it at the beginning, a holistic approach to doing policy, you can make sure that policy is not inconsistent. Not every policy is going to further your aims, not every policy should further your overall aims, but are your policies inconsistent? Do they undermine your position as a values-based principle-based player in the world economy? And I think those are why, you know, the – this discussion is complicated.

And I suppose, you know, just a quick word on potential other mergers. Business and trade pays and DIT, that’s one of the other rumoured ones. So, I guess what I’m saying is, you know, I think we may well see more of this, and if I may, I actually just want to say that a number of Commissioners, who are actually participating in today’s seminar, the Commission is made up of academics, as well as leading practitioners, in a range of different policy areas. And so I always feel that, you know, it’s only by bringing together all these different approaches, can you come up with something sensible in the end, and then, of course, you know, taking comments and challenge, and that’s absolutely key, and why the reports are open for public comment, and why we’re here. You know, Creon’s already given lots of great ideas [laughs], and we’ll be noting your four points, so – but, Leslie, I feel, you know, you have considerable expertise yourself, and, you know, I do hope, time permitting, you’ll be able to share some of those, ‘cause obviously, you’ve also had experience in USAID, so…

Dr Leslie Vinjamuri

Let me come to one of the questions that – let me come to a couple of the questions. Mike Gapes writes “Is the divided political culture and current governmental institutional infrastructure of the UK capable of effectively meeting these diverse challenges, or will we have decades of fudge, delay and indecision?” Mike Gapes, Former MP, and let me read out one more question, while more people are putting their names in the box. Leticia Lim, “What is the liberal answer to the left behind regions? Is it possible to address these problems within the market?” And, sorry, one more, Richard Oblaff is asking “How prominent was climate change in the input you received so far and how concerned are you?” Who would like to begin? Mick, I can see that you’d like to begin.

Professor Michael Cox

Well, I’ll leave Mike Gapes’ open question for somebody else to deal with, about fudge and indecision. I’ll only reveal my own political prejudices, Mike, but, I mean, wherever thus, wherever thus, I think, to be perfectly honest. The idea that decision – anybody selling decision-making at any level, indeed in any country to think that it’s anything other than fudge and indecision, and decisions that are finally taken are the ones that create the greatest degree of consensus, rather than necessarily being always the correct and brilliant decisions, they looked at being after the event, I don’t know. But, anyway, I’ll leave Linda to deal with that very diplomatic question from Mike. Thanks, Mike, anyway, great admirer of you, by the way.

Is there a liberal answer to left behinds? No, and that’s a great question, actually. I think the left behinds, understanding that to mean those who have not benefited from globalisation, those who have lost their jobs, those who are living in the industrialised areas of the North East of England and Central Midlands, many of those who I know voted for the Conservative Party in the last general election, much to many – everybody’s surprise, I accept, and maybe, perhaps, for Boris, and Dominic Cummings, is there a liberal answer? I don’t think so. I think it’s going to require a high degree of government intervention. I think it’s going to require a high degree of state intervention.

And, indeed, one of the things that’s also come out of the pandemic, which may not run easily and sit easily with the Conservative Party, is, in fact, the pandemic has been handled by a massive degree of government and state intervention and underwriting of the economy. So, one of the ironies of the situation we’re in at the moment, that something which is about markets and market-driven decisions, actually could lead us actually into a situation with a much greater degree of role of the state, whether to deal with the left behinds, or whether to deal, as we are seeing at the moment, with this ongoing pandemic, and I’m not quite sure those regulations and controls and supports are going to go away very, very quickly.

On climate change, very briefly, we are dealing with climate change. Robert Faulkner, one of our Key Commissioners, has been very involved in this, and we’re going to take more evidence on this. Do we think it important? Of course we think it’s important. The question is, what is the relationship, and I’ll leave this one open for other people to think about, what is the relationship between the current pandemic and the climate change debate? Has it made the climate change – has it pushed the climate change debate down the list, or will it accelerate it to the fore in the future?

Creon Butler

Thanks very much. So, I would like to, kind of, respond on the question of the, sort of, liberal economic model and so on. I mean, I think the – I think, as we’re going forward, we will need to, and I think this is part of the, kind of, central tenants of the Commission, is to look very closely at both – if you like, the domestic measures that need to go alongside our international strategies. So, you know, when it comes to decisions on free trade, which mean that particular regions are going to either have a boom or will be under pressure, one needs to look very closely at what domestic strategies need to go alongside that. I guess one of the potential benefits of leaving the EU is that we will be able to optimise those policies much more clearly. Obviously, the exact nature of our, you know, eventual agreement with the EU is still to be determined, so how much extra flexibility we will get, but, in principle, on both sides, we will have some more flexibility, both in terms of the international agreements that we signed, and in terms of the domestic measures that we put alongside that.

On the question of the role of the state, I think it’s really important not to make the assumption that because there is, rightly, a very large state intervention at the present time, just because of the completely unprecedented nature of the COVID-19 crisis, that this necessarily will continue in the future. Because, in a way, as the reasons for the intervention disappear, then there is – there may well be legacy consequences, if the government has had to intervene through purchase of stakes in various companies, but, equally, those, as we’ve seen, with the financial crisis, and the stakes that the government bought in the financial system, they can be wound down over time.

So, I think one needs to look very objectively at what – in the world that we’re in, where you need state intervention on a continuing basis, as compared with – as part of the crisis response. And, personally, I’m not convinced that that is going to be dramatically different from where we are now, I think quite a lot of what we want to achieve is going to come through regulation and through strengthening and developing further our existing public health responses and the global co-operation that’s so important, in terms of developing new vaccines and so on. It’s not clear to me that you will actually need much bigger role of the state to deal with the world that we’re in, in the future.

Dr Leslie Vinjamuri

Linda, I’m curious to your reaction to that. That was a very – I mean, that’s a very big claim, and the truth will unfold over time, but what is your reaction to this?

Professor Linda Yueh

I think I would probably just stress, I think one of the points that’s been brought out very nicely by both Creon and Mick is that the reason you look at this holistically is because we’ve known for some time, for instance, that when you have adjustment effects from international trade, the solution is not entirely in trade policy. In fact, some Economists would argue, most of the solutions have to be found in domestic, redistributive or upskilling policies. So, this is why you have to, and this is why – you know, and I said at the beginning, I view this Commission’s work in really, kind of, three prongs. The third prong is hugely important, it’s about the fact that all economic policy is domestic, and trade is a great example of that.

So, rather than, yes, of course, you would want to have better labour standards, environmental standards, something that we’re going to pick up in this last internal report, about how you do that, because there are spillovers between what you do domestically to what happens, in terms of your external trade and investment position, but then, conversely, the – you know, the reverse is also the same. So – you know, so, I think I would probably just add when you deal with the left behinds, when you think about the hollowing out of the middleclass, all of these distributional reasons are why one of our interim reports suggests every time you have a trade or investment, foreign investment or, you know, some agreement on global norms and rules, you do a distributional analysis, like what the Treasury does after the budget, or some budgets, where they will put in, you know, how it affects different households at different income levels, for different regions and sectors.

So, I think that’s probably something to stress, and I know – I think Susan, one of our Commissioners, wants to come in, but I just wanted to, sort of – I think her mic is now sorted, but I think there’s just one more thing that I would want to stress, which is, you know, we live in a very different policy era, and I think this is why this debate is so important. So, you know, we also looked at how you reconcile some of these competing aims Creon pointed out very, you know, clearly. My guess is it’s going to have to be some type of – you know, it’s never going to be a one type of policy, so on some things, like supply chains, which I’m sure, before the pandemic, very few people spent very much time looking at, except us Economists, who were looking at reassuring and other things, is now – you know, is something which countries will look at with a policy angle.

And this is something we’ve discussed, a national security angle on it, either very important supply chains, whether it’s in medicine or defence, what is the resilience of those supply chains? So you’re taking a concept which, in economic terms, might just be, you know, offshoring and production and global value chains, but you’re actually now, today, having to view it in a more holistic way and the pandemic has really, I think, brought that to the forefront. But that is one of the things I think we – you know, we should expect going forward, and I think it’s actually – it’s a good thing to look at, step back, look at it holistically.

And then, I guess, you know, finally, and I hope Susan might pick this up, is how do you deliver it? It’s the structure, it’s the execution, it’s fine to have these, you know, big policies and we’re going to be strategic about it, but what’s the execution? What’s the structure? How are you going to end up, you know, doing this? So, yeah, no easy answers.

Dr Leslie Vinjamuri

Let me just read out a couple of ques – they’re just great questions here. Of course, I would say this, Stephen Cooney, “How does the bipolar outcome of the US Presidential election affect the UK’s perception of its role? Is it a prisoner of whoever wins in the United States?” I hope that it’s a bipolar outcome and not something in-between, and I have to editorialise there. And then we also have a great question here from Kieran Luebke, “How strong will the priorities of the regions feature in the UK foreign economic policy? How will Northern Ireland, Wales and Scotland make their divergent views heard in a system, which tends to make decisions at the centre?” This has clearly been a really important question for you. And then from Nicolas Sigler, “What would be the impact of UK foreign economic policy, if the government fails to extent the EU exit transition period?” So, those are three rather large, rather fundamental questions that people talk about a lot. What does the Commission so far have to say about this? What light can we shed, or what are your own views on one or more of these topics? Creon, would you like to begin?

Professor Michael Cox

Yeah.

Dr Leslie Vinjamuri

Mick, did you want to begin?

Professor Michael Cox

No, I was just going to…

Creon Butler

No, it’s fine, yeah.

Professor Michael Cox

…jump in on what is called the regional question, which I prefer to call the national question, having lived out in the various nations of these islands. As I said, in my opening comments, one thing that did surprise me, although maybe I shouldn’t have been so surprised, was simply the different perspectives that came when we were in Cardiff and when we were in Scotland. But I also know quite a lot about Northern Ireland, given that I taught at Queens University in Belfast, a fine university it is, too, for over 20 years, and therefore, I’ve kept very much in touch with what’s been going on in Northern Ireland, economically and how Brexit overall, if that’s the question, is going to also impact on this, or the more general consequences of current economic policies for Northern Ireland.

Now, of course, I think this has created all sorts of difficulties. In the end, Boris Johnson, we know, had to, kind of, almost be, like, sell the DUP, the Democratic Union Party, down the line, and draw the line actually down the Irish Sea and not across the border. I think it’s created all sorts of problem. I think, however, interestingly, not talking about Scotland and Wales here, but talking about N – Northern Ireland actually could be a little bit of a beneficiary of an outcome, because, in a way, it – well, it is going to maintain, obviously, its strong integrated relationship with the UK, whatever formalities are going to be erected.

On the other hand, it still remains, in some ways, as part of the Single Market. So, it could actually be a beneficiary of that, but I think the dynamics, and I’m going to be outlandish on this one, by the way, and it might offend one or two unionists out there, I think the dynamics of where we’re going in Ireland is actually over the long-term, towards something which will look more like a United Ireland than a United Kingdom, that’s my long-term feeling about the dynamics of this, ‘cause I think the longer-term relationship between the – this part of the world, namely London and England and Northern Ireland, I think it’s going to erode, and I think what’s going on with the Brexit vote is going to do that.

On the US elections, I’ll leave that to you, Leslie. I know who I want to…

Dr Leslie Vinjamuri

I’d prefer to hear what you have to say.

Professor Michael Cox

Okay, very…

Dr Leslie Vinjamuri

I already know what I think.

Professor Michael Cox

…quickly. I thought – until COVID, I thought Trump was a bit of a shoo-in, being perfectly honest on the economy, I know you didn’t agree with that. I think it is now much more open to where this election could go, but we all know this is going to be a dirty election. If Biden were to win, there’s already indications that the current President Trump will not accept the legitimacy of it. He’s already preparing for a post-November situation, which could get very – even worse than the lead up to it. What impact is it going to have on the UK? Which I think was the – I think it’s simply going to make it much more difficult. I think what the – if I might be blunt, I don’t give advice to governments very often, and not that they would ever listen I think, but I would also say beware, don’t choose winners or losers in this, ‘cause in the end, the UK is going to have to deal with the United States of America, whoever is in the White House, and that sounds terribly diplomatic for me, but that would be my advice. I’ll leave the other question to other people.

Dr Leslie Vinjamuri

Very diplomatic for you, Mick.

Creon Butler

Yeah.

Professor Michael Cox

Yeah, it was really, wasn’t it? Not bad.

Dr Leslie Vinjamuri

Creon.

Creon Butler

Yeah, thanks. If I can just, sort of, follow what Mick has been saying. So, I mean, this is a – kind of an objective assessment. I think one thing that will change, if there were to be a Biden Presidency, is a different approach towards international co-operation more broadly, and given that that’s an absolutely central part of UK foreign economic diplomacy, which is to maintain and strengthen international institutions and, you know, make – update international rules to make them more appropriate to the evolving nature of our economy, and so on. And I think that will be a situation, which it will be easier for the UK to push forward what it’s seeking to achieve, and particularly in fora like the G7, which the UK will be hosting next year, as well as in COP26. So, I completely agree with Mick, that one should prepare for every eventuality, but just as an objective statement, I think that that will make – that aspect of it would be easier.

I just wanted also just to pick up, because I feel really guilty, someone asked earlier about the importance of climate change and how worried we were, and how much evidence, and, I mean, I just wanted to say, I think this is massively important. It’s the next big existential threat and in the policies we’re developing to exit from COVID-19, we hope, and they – as we ease the lockdown measures, develop a new stimulus, we need to have policies, which actually jointly target not just the exit from COVID, but also, the low carbon transition and the factors that need to go along with that. Because it’s not that far off, when we will be facing the kind of threats from climate change that we’ve experienced from COVID-19, so I just wanted to make that point, in case people felt, you know, it had been neglected. Thanks very much.

Dr Leslie Vinjamuri

Thank you, Creon, and, Linda, I think, since we’re coming up to the top of the hour, or the end of the hour, you get the final words on these three very significant questions, which is entirely appropriate, given you’re on the Commission.

Professor Linda Yueh

Thank you very much, Leslie, and what a great discussion. I know we’re out of time and we won’t be able to do justice to them, so I think if I just may quickly pick up two points. I think one is, you know, Brexit is a source of uncertainty, and I think we need to watch, and the Commission is watching, over the next month, how that future relationship might pan out. So, I think it obviously will have impact on how the UK can set its trade and investment policy going forward, and because some countries will be looking to the UK-EU relationship. But I think the kind of – the overall point I suppose I want to conclude on is really that when we’re looking – when we say what is an optimal set of policies? It is really about defining the world in a more environmentally green way, in a more sustainable way, in a more values-based way, around democracy, effective rule of law.

So, basically, all the kinds of things that should guide policies, and I think for economic diplomacy, it’s about making all the different aspects of foreign policy, foreign economic policy, trade and investment, all of those things aligned, so if we want to be net-zero by 2050, how do you achieve that? How do you do it through your trade and investment policies? How do you do that? For instance, the UK taking a global role by creating a new group in the UN, which is, kind of, for COP26 just this month. Are there other initiatives? And that can be done, especially, you know, as the UK takes on the home of the G7, because it’s probably not a great time to be an economic superpower. It’s a weird statement to say, but, you know, as you see with the Head of the WTO, the US suggest somebody, China might object, if China suggest a new Head, the US might object. So, there is space for a rules-based, values-based power, especially a power like the UK, and I think that’s probably the final thought I wanted to leave on, is that, you know, we need to almost shed the 20th Century structures that we’ve grown used to, and think afresh about what the 21st Century could look like. Probably more platforms, probably more voluntary networks, probably all of these things, but what we absolutely need to do is to balance commercial openness with alignment with our other strategic aims, and, as we’ve been discussing tonight, maybe not too aligned on some things, but at least not inconsistent.

And I think that’s probably the final thing that I would stress, and also just to say thank you again for hosting this lovely session. We very much welcome comments. The interim reports on the Commission website are open for public comments, so please do give us your views, and we’re at the midpoint, we’ve had lots of exciting discussions, and we will have, I’m sure, many more. But the more input we can get, the more challenge we can get, we can make sure we produce something concrete and hopefully, useful for the UK’s economic diplomacy.

Dr Leslie Vinjamuri

I do think this is a tremendously important initiative. You know, we’re used to government commissions, we’re used to think tank commissions, but there’s something distinctly unique and very special about a public university and the LSE hosting this kind of commission, and taking it on the road, which is not something that’s always been done across the UK. I mean, there is no more important moment for it, it’s become even more important, during the course of the time. I’m glad to – it feels like the Commissioners, or at least Creon, who’s not a Commissioner, but is clearly very central to these debates, is more optimistic, perhaps, about us moving beyond the pandemic, I think. And – but these questions remain, and they are central, and I really do encourage everybody to follow Linda’s advice to read and to offer insights and evidence. It’s a tremendous opportunity, actually, to gather a broader range of expertise than we frequently have weighing in on these very important decisions. So, thank you all. Thank you, Mick, thank you, Linda, thank you, Creon, and thanks to all of you, and have a lovely evening, and carry on the conversation, and hopefully, also at Chatham House.

Professor Michael Cox

Thanks again for the invitation to Chatham House.

Creon Butler

Yeah, thanks very much.

Professor Michael Cox

Thank you.

Professor Linda Yueh

Thanks for your time.

Professor Michael Cox

Thank you, Creon.

Professor Linda Yueh

Brilliant session.

Professor Michael Cox

Linda.