Grand Strategy on the Silk Road?

As the smoke clears on our disastrous retreat from Kabul, the Spectator’s James Forsyth rightly points in the Times, at the hole where there should be a foreign policy.

He is quite right. And nowhere is this challenge more acute than Eurasia, the centre of the world in the 21st century.

For some years now I’ve argued that Britain needs a place to ‘turn east’. Not simply because of the rising tide of American isolationism, but because this is where the money is – and the threat. Think of the ‘corridor of chaos’ which is the buffer zone of Russo-China; the Ukraine, Syria, Iran, Afghanistan, Kashmir, Myanmar, and North Korea. It’s quite the vortex.

But now think about the economic opportunity: by 2050, the major economies stretched along the silk Road will be around 2.4 times the size of the economies of the trans-Atlantic coasts – some PPP$193 trillion on the Silk Road compared to PPP$82 trillion along the Atlantic coasts. Simply put, the Silk Road is where the money will be, which is why it is of course now the centre of China’s geo-economic ambition: the creation of the One Belt, One Road initiative.

Once upon a time, faced with a challenge like this, Britain would be an initiative-shaper not a by-stander. But where is our grand vision, our strategy for the new Silk Road? It’s our absence, our failure of imagination that creates the space for others to shape the future.

Yet here’s an inspiration from the past: in post-war Europe, we knew we needed a huge reconstruction effort – and critically new institutions to help steward the work. And from that insight we created the OECD. So, why doesn’t Britain now lead the case for a new OECD for the Silk Road?

It wouldn’t be short of work.

First, let’s take infrastructure.

Today, we in the West have very little idea about what we think our priorities for trade-enhancing infrastructure might be. What is top of the list? And how do we make sure we develop infrastructure in a way that avoids all the mistakes of loading countries with debts they can’t afford – as happened in Africa in the 1980’s? How do we make sure that labour standards are high, in a way that avoids the early mistakes of the Qatar World Cup? In other words, how do we make sure that the infrastructure of the new Silk Road is built on rules that we agree?

Second, can we agree rules around infrastructure finance? Where should the bonds be listed? In what currency? What underwrites them? Can we get western and eastern bond buyers to ensure transparency and good standards of corporate governance?

Third, is the question of financial flows. Capital account liberalisation is one of the thorniest risks that China must grasp. But financial integration is inevitable if we trying to create a common trade zone. So how do we liberalise safely? What’s the pace? What are the rules?

Fourth, is data: the essential flow for more and more trade. In Europe, we’ve just agreed new rules for keeping data safe. How we spread agreements like this along the stretch of the Silk Road? How do we resolve disputes? In tribunals? In new courts? How do we work together to develop the case law? And train the judges? These are areas rich in the potential for cooperation.

Fifth, how do we agree the tariff rates along the route? Can we work together to bring them down? And how do we ensure that when businesses make money, they pay the right taxes to the right people? Can we bring g tax transparency into trade agreements? How do we agree the rules to make this happen?

Sixth, is the question of security cooperation. The New Silk Road is home to some of the most violent places on earth, with huge numbers of conflict related deaths in Syria, Afghanistan and Iraq. How do we ensure that we work together to help keep the peace that is so essential to trade? How do we cope with the new movements of people? How we offer new sanctuary to refugees? And how do we work together to redevelop countries smashed to smithereens in war?

Seventh, at the centre of this new web is the WTO; a place where the UK is re-establishing its seat.

These are all difficult thorny questions that must be solved. But helping solve them creates influence. Put it all together and we have the makings of an architecture for locking a critical part of the world into something resembling a rules based order. Of course it leaves huge question of democratic norms unaddressed. That is not an excuse for avoiding the difficult questions. It’s an argument for getting started on a practical agenda for change.

In Peter Rickett’s excellent new book, Hard Choices, there is a clear challenge to British leaders; re-discover the art of grand strategy. The catastrophe of Afghanistan shows us, we’ve not a moment to lose.