EVENT TRANSCRIPT: How Mongolia is Transforming into a Beacon for Foreign Direct Investment in East Asia
DATE: 12:30 pm – 1:30 pm, 27 June 2024
VENUE: Online
SPEAKERS: Darren G. Spinck, Dr Elizabeth Fox, Daniel Kawczynski
CHAIR: Daniel Kawczynski
[0.06] Daniel Kawczynski
Good afternoon, everybody, it’s Daniel Kawczynski. I’ve been the Member of Parliament for Shrewsbury for 19 years. We are in the middle of a very difficult election campaign at the moment, but I’ve taken time out to chair this webinar about a subject of particular interest to me. When I was asked by the former Prime Minister, what role I wish to have in government, I instinctively asked to be not a minister, but a trade envoy. The Prime Minister has 30 trade envoys, both from the House of Commons and the House of Lords who are appointed and report directly into the prime minister. And for something in total of 35 countries that have been identified by the United Kingdom as being of strategic importance to Britain. And of course, there are just a handful of us actually, in the House of Commons, who studied Business Studies and who worked in exports. The House of Commons is a very eclectic mix of people from all sorts of different backgrounds, but there’s just a handful of us who actually work in exports. Britain has just become the world’s fourth largest exporter. We’ve moved up three rankings over the last three years, from seventh to fourth. And at this time, when we have a lot of demands on us from the electorate- the Fire Service wants more money, the Police wants more money, the education system wants more money, the health system wants more money- there are massive demands on the exchequer, much more so than your average European country, because of course, Britain is one of them, the five nations, which is a permanent member of the UN Security Council, with that responsibility comes huge additional financial burdens and costs. And therefore, we have to grow our economy at a faster rate than our major competitors, in order to satisfy those requirements, and to try to pay for all the demands that quite rightly the electorate make of us in terms of their public services. At a time when we have just been through a horrendous pandemic, where we had to borrow 450 billion pounds to get everybody through this national crisis, money is very tight and will continue to be very tight for the for the foreseeable future. Therefore, exports and hard currency coming into the country is absolutely critical. We’ve just joined the CPTPP, the world’s largest trading bloc in the Far East, and I’ve shared with Thomas today my report; we spent a few months earlier this year writing a report about British entry into the CP TPP, the world’s largest trading bloc, which has some of the fastest growing economies in the world. Japan, South Korea, in Vietnam, Malaysia, Singapore, Australia, all of those far eastern countries, huge opportunities. And the report which, if anybody is interested in reading, Thomas has a copy of it and can share it with you. The report is an analysis of British entry into the world’s largest trading bloc, the CPTPP, and whether or not Mongolia ought to emulate us in joining this trading bloc. Now whether or not the Russians and the Chinese will tolerate and accept such a such a supreme act of sovereignty by Mongolia and joining us in the CPTPP, only time will tell. Now, also we need to use our entry into the CPTPP to recalibrate our important export policy. We have become far too dependent on trade with the Chinese who are starting to act in the most belligerent way, particularly in the South China Sea, but there are other areas of conflict and expansionist tendencies. So that is one point which I hope to make during the course of the debate. And of course, the two countries to finally I’d like to say in my introductory remarks, the two countries that have particularly struck me in this region that I visited extensively, having been the trade envoy to Mongolia for the last four years, is obviously Mongolia. But it also is Kazakhstan next door, Kazakhstan where I was an election observer in Astana earlier this year. Two post-Soviet satellite states, who, in my view, their societies, and whether it’s you’re talking to young journalists, or whether you’re talking to ordinary people in the street, or whether you’re talking to politicians or their opposition counterparts, I get the strong impression that both the Kazakhs and the Mongolians are doing everything conceivable to nurture their democratic process, cognizant that on either side of them, they have two authoritarian regimes that suppress the rights of their people and do not practice an internal or external rule of law. I think we ought to be supporting Mongolia and Kazakhstan, in this very brave attempt to nourish, cherish and nourish that fundamental priority, which is democracy and the rule of law. And finally, obviously, I have visited Rio, the third largest copper mine in the world Oyu Tolgoi, in the Gobi Desert 40 miles from the Chinese border. Rio Tinto, a British Australian mining company, has invested over $20 billion in the world’s third largest copper mine, I spent a day one and a half kilometres underground, inspecting the labyrinth of tunnels, their tremendous bilateral investment. And of course, Mongolia has a huge number of rare earth minerals, opportunities. And when you bear in mind that China controls today 80% of the world’s rare earth minerals, seeking partnerships with key countries like Mongolia, to try to ensure that our supply chains of rare earth minerals, which will become more important to us than oil was for previous generations, is absolutely essential. Now, I’ve been given 2 billion pounds in export credits, to help British companies to enter the Mongolian market. So, the government is afforded 2 billion pounds, and we are trying to spend that as quickly as possible. We don’t know who the next trade envoy will be, we don’t yet know the outcome of the general election. But if you come across any British entity that is seeking to enter Mongolia, I would be very happy to signpost them to the appropriate individual after the election. So, with those introductory remarks, let me first of all, introduce our two guest speakers. First of all, I’d like to introduce Darren Spink, who is Associate Research Fellow at the Henry Jackson society, Asia Studies Center. And he’s the managing partner of Washington consulting solutions, a US public affairs agency, which focuses on policy analysis, strategic message development, and public advocacy programs. I notice that he has written extensively on Taiwan, a subject very close to my heart. And of course, I started to ask my own government questions about the conduct of the Chinese and the South China Sea some nine years ago. So very keen to speak to Darren afterwards about our perceptions about what is going on in the South China Sea. So Darren is our first guest speaker who has written this very interesting report, and our second speaker is Dr. Elizabeth Fox, anthropologist and researcher on Mongolia. Her work has covered circus contortionists, Kashmir factory workers and Ger District residents. Her doctoral thesis between iron and coal and acting kingship bureaucracy and infrastructure in Ger Districts of UB, I think would be a fascinating read. And obviously, having visited the Genghis Khan Museum, all eight floors of it in Ulaanbaatar the Mongolian society, its history and how and its achievements are remarkable, and something that we could certainly learn a great deal from. So with that introduction, may I hand over please to Darren Spink to make his initial comments. Thank you.
[10.02] Darren G. Spinck
Thank you very much for the introduction, Dan. It’s a pleasure to introduce this report on the importance of strengthening ties with Mongolia for the United Kingdom and the UK as partners. While Mongolians head to the polls tomorrow for the parliamentary election, just as Brits will later in July, and us Americans will be doing in November. I’m not going to touch upon the expected election results, and we’ll leave that to the other experts on the call. Instead, I’m going to focus on the growing importance of Mongolia as a UK trading partner, and a source for Western foreign direct investment, which was underscored by Lord Cameron’s late April visit to the country. Mongolia has been hailed as an oasis of democracy by a former US Secretary of State, a democratic nation that proposes to play an important role on behalf of world peace by the Pope. And the Mongolian government has been praised by the UK ambassador for its leadership on biodiversity, climate issues, feminist foreign policy, peacekeeping contributions, and culture. Mongolia’s strategic location between Russia to its north and China to itself and the country significant democratisation and anti-corruption efforts make Mongolia an ideal partner as London builds upon a strategy to shape economic and cooperative ties in the Indo Pacific region. The United Kingdom has long seen the value of deepening relations with Mongolia becoming the first Western government to establish diplomatic ties with the Mongolians in 1963. In recent years, the Mongolian government has undertaken an anti-corruption strategy focused on the protection of whistleblowers, anti-corruption reforms, and building upon the transparency of state-owned enterprises. Mongolia’s year of anti-corruption campaign from 2022 to 2023, led to an 83% reduction in corruption. Mongolia’s democratisation efforts including reforms to electoral processes and pluralism, function of government, political participation, and protection of civil liberties has led to the Economist Intelligence Unit ranking Mongolia in the top 35% of all countries for its global democratisation efforts. Reforms have included increasing the size of the Mongolian Parliament by 50 seats to better represent all communities and amending the law for the minimum quota for participation of women in Mongolia’s election from 20% to 30%. Freedom House has recognised Mongolia for its political reform efforts as well, declaring Mongolia free with a rating of 84 out of 100 in the most recent Freedom in the World reports. Heritage Foundation, a US-based think tank has praised the Mongolian government for its regulatory efficiency and market liberalisation. Despite Mongolia’s reform efforts, and its entering the international debt market in 2023, with the successful issuance of 650,000,000 and 350,000,000 5 year bonds, foreign direct investment into Mongolia remains low unfortunately, totalling only $2.5 billion in 2023. Mongolia is low foreign direct investment is indicative of a global decline of foreign investment into developing countries due to rising public debt in developed countries. As Dan pointed out, and according to the UN Conference on Trade and Development, a global context of weak investment and global uncertainty, which will hopefully begin to alleviate after the November elections in the United States. As the United Kingdom continues its post Brexit tilt toward the Indo Pacific, the next UK Government should prioritize engagement with Mongolia. Doing so is in the national interests of the UK, its citizens, and its commercial entities which will benefit from the additional diverse, secure, and resilient supply chains in the region. UK objectives vis- à-vis Mongolia should recognise the efforts undertaken by the Mongolian government and aim to shield Mongolia’s economy from coercion from its neighbours, China and Russia. Suggested policies, first and foremost, should include the next UK Government accelerating negotiations with Mongolia for a UK-Mongolia partnership and cooperation agreement. While not a Free Trade Agreement, such a pact would aspire to meet many of the issues agreed upon in Mongolia’s similar 2017 agreement with the European Union. The primary objective of such an agreement should be strengthening bilateral ties between the two countries, including greater market access through the elimination of non-tariff barriers. London, however, should view its relationship with Mongolia through a pragmatic lens, while unabashedly pursuing stronger bilateral ties as a priority of the UK as Indo Pacific salts. The next government and parliament should not pursue stronger ties with Mongolia, with a mistaken assumption that an influx of British investment will somehow alter the reality of Mongolia’s geographic proximity to China and Russia. Second, the UK’s Critical Minerals Intelligence Centre, and Critical Minerals Committee should identify how UK economic vulnerability and supply chain risk can best be mitigated through increased cooperation with the Mongolian government on the export of Mongolia’s rare earth elements and minerals. Third, the UK is development finance organisation, British International Investment, along with the US International Development Finance Corporation should prioritize the certification of select infrastructure development projects in Mongolia through the Blue Dot Network. An infrastructure development certification platform comprises of the UK, US, Japan, Australia and other partners. The UK and its Blue Dot Network partners should work cooperatively with the City of London and Wall Street and help prioritize which potential infrastructure projects merit the attention of private sector investment rather than public sector investment, which would be best meet the national interests of not only the UK, its partners but the Mongolian people, most importantly. Fourth, the next UK Government should finalize air routes for the export of unprocessed rare earths and minerals to the United Kingdom and key UK partners in East Asia, as Mongolia is currently entirely dependent on China’s port of Tianjin for the export of these critical minerals. Fifth, London should also prioritize finalizing the air service agreement between the two countries to enable regular Mongolia to London passenger and cargo flights, and allow the freer flow of people and goods, helping lead to improved cultural ties. In addition, as the UK accounts for approximately 20% of global offshore wind production, and as Mongolia continues its transition toward clean energy. The UK should encourage the Mongolian government to reduce non-tariff barriers to Mongolia’s Clean Energy sector and allow greater market access for UK renewables manufacturers. The UK is Foreign Office and Mongolia’s foreign affairs ministry should coordinate increased intensive language training to enable early career diplomats and commerce officials to learn both Mongolian and English. The UK is Department of Business and trade along with the Mongolian British Chamber of Commerce and Mongolian Ministry of Economy and development should identify which Western fast food and convenience store franchises have successfully entered the Central Asian market and organise a delegation of UK business executives to attend a Mongolian franchise exposition to promote opportunities for UK businesses. The next UK Parliament’s Mongolia all party parliamentary group should work with Mongolia’s incoming parliament to coordinate parliamentary visits and enhance commercial ties between the two countries. The next Secretary of State for Environments, Food and Rural Affairs and recognition of Mongolia’s vast conservation efforts should discuss the potential for a visit from the British Royal Family to Mongolia in recognition of these strong efforts. Finally, the UK Department of Business and trade should focus attention on Mongolia’s advances related to digitalisation, including the Mongolian Ministry of digital developments E-business portal for business solutions and corporate registration and MineGolia for software solutions procurement. Once again, thank you for the opportunity to present these very brief remarks from today’s report release and I look forward to questions at the end of all the presentations.
[19:53] Daniel Kawczynski
Thank you very much, Darren for that fascinating outline of your report. And now I’d like to ask Dr. Elizabeth Fox for her introductory comments, please.
[20:08] Dr Elizabeth Fox
Thank you very much. Thank you for the introduction, Daniel. And thank you to the Henry Jackson society for inviting me to this event. I, as Daniel mentioned, I’m a social anthropologist, I’m a research associate at the Mongolian inner Asia studies unit at the University of Cambridge. I focus on Mongolia and conducting research in Mongolia since around 2012, and it’s a country that’s very dear to my heart and I spend a lot of time there so it’s always good to be involved in events with other people that share that passion for Mongolia. My current research is looking at the re-intensification of the Mongolian livestock sector, meat production, domestic supply chains, access to meat and oil and butter, along with a team of colleagues that are more focused on the export side of the meat sector and its ongoing revival now. Thank you to Darren for his very fascinating report. I have a really enjoyed reading it and I thought it covered a lot of interesting points, I thought it was extremely pragmatic and practical. And I have some loosely organised comments on the report and on the general situation. Like I said, I think the reports takes a very pragmatic approach to recognising the realities of Mongolia’s geopolitical position and give some sound assessment of possibilities for strengthening ties between the United Kingdom and Mongolia. There’s no changing where Mongolia is located in the world. It has to and it deals with its two neighbours, its two huge powerful neighbours, Russia and China. And the third neighbour policy enables Mongolia extra flexibility, given its physical location flexibility in terms of policy, in terms of other connections outside of its direct neighbours, but no third neighbour is going to be able to move Mongolia from where it is or move its physical and geopolitical position, so I thought that was very pragmatic. And as we know, tomorrow, Mongolians are going to the polls, and the recognition of Mongolia, as others have mentioned, as a democracy for its other civil freedoms and rights is long been recognised and is extremely important. And if there’s elements of democracy and corruption at the moment, which the measures have stalled, and it’s always good to see the fight against corruption being picked up, because obviously democracy doesn’t automatically erase corruption and it’s very important for that to remain on the forefront of the political agenda. and to keep the democracy healthy. As the report notes, economic health, in Mongolia, and, you know, in a general sense, for a country is related to its capacity for political independence. Obviously, independence is not the same thing as isolationism, Mongolia needs to work with its economic partners, and those on whom it’s currently dependent, but independence means having relatively relative capacities to negotiate with external foreign powers, and also in terms of its internal social structure, that basically the struggle against oligarchy and undue influence in politics and business that will strangle the economy from within if it’s not, if things aren’t properly regulated, and also kept fair for everybody in society. So, I think, in general, the infrastructure projects that are suggested for foreign investment and for a focus by the UK, business and investment community make a lot of sense, of course, but they need to provide sustainable and widespread benefits for the people of both societies, and not become co-opted by a small group, and it sounds like the Blue Dot Network is an excellent starting point to make sure that the types of projects that are invested in are sustainable and well vetted. As everyone is probably aware, socioeconomic inequality in Mongolia has grown since the 1990s. And it would obviously be imperative that the investment and policy including domestic policy attends to this issue and doesn’t exacerbate it. As the report noted, there’s clearly great potential for two-way exchange between the UK and Mongolia. As an anthropologist, we’re particularly aware of the cultural and social differences between places, and the particularities of places, and it’s pretty rare that you can take any kind of model or system or project and take it from one place and apply it directly to another without needing to adapt anything, so I think, again, as an academic and a researcher, I think it would be imperative always to research the local context, as well as possible before trying to apply things and make sure the actual issues that are supposed to be being fixed by any type of scheme are actually properly well understood and not being assumed to be understood, and I think that the aspects of the exchange being two way is also extremely important, you know, the UK, I believe, has a lot to learn from Mongolia and things really need to be considered a two way exchange, and not an imposition from one state to another, which is not what I think the report suggests is just in general, one of the issues that can happen. The issue of infrastructure that’s raised in the report is clearly absolutely critical. The other big trend in Mongolia over the last decades is the rural urban divide, which is getting increasingly wide and the centralization of urbanization in Mongolia in Ulaanbaatar and how well is the city of Ulaanbaatar really understood, and what can be done to slow down this process of over centralization in an overcrowded city at this point. So better understandings of both rural and urban life and contemporary Mongolia are needed. In terms of rural life, of course, the idea that mining is necessary for the Green Energy Transition can’t be used as a carte blanche to justify ecological destruction. We have to navigate the path to sustainable energy production and storage very carefully and try to maintain the balance between protecting livelihoods health and prosperity. But in terms of a green energy transition, it’s absolutely imperative in Mongolia. Clearly, the situation of air pollution in Ulaanbaatar is extremely serious, it’s been going on for an extremely long time now, and the children and the people of Ulaanbaatar, living through winter after winter with such unhealthy levels of air pollution, it’s something that has to be changed urgently. And I would urge us a strong focus on that particular issue. As the report also notes, for Mongolia the one of the central issues, for a long time has been economic diversification. And that always has to be at the forefront of economic and social policy, because the reality is that it’s been long known that the over reliance on the mining sector causes a number of economic and social issues that can’t be fixed unless there is diversification. So, yes, as the report notes, investments in other sectors would ameliorate this issue. The only things that I would add to the report would perhaps be it’s a biased comment to make as an anthropologist but perhaps more of a focus on people, particularly herders. Mongolia is a country that still has a significant proportion of nomadic pastoralists; they add great value to the country in every possible way and I would like to know or hear more about how UK investment could safeguard the unique livelihoods and ecological conditions that pastoralists rely on to preserve the possibility of a pastoral way of life for Mongolia, it would be a great tragedy if, if that was overlooked, and that feeds into this question of agricultural cooperation as my research now it’s a new project on the meat sector in Mongolia. It’s raised a lot of questions, and very interesting new topics for me personally, but this question of agricultural cooperation between the UK and Mongolia, I can see huge potential for two way engagement on this issue, because I think the intensification of agriculture in Mongolia can bring a lot of benefits, which I won’t go into in detail now but the path to that development or the path along which Mongolia chooses to redevelop its agricultural sector, export focus, livestock sector, it would be excellent if we could avoid some of the pitfalls, that, for example, the UK is now trying to reverse in terms of biodiversity, animal health, there’s a whole range of things and other ways of raising livestock, that is more sustainable for people and animals. But at the same time, you know, the UK has such a deep agricultural history. So, I’ve met herders who would really like to learn more from well, sheep farmers about winter shelters for the animals, they’d like to improve stocks in Mongolia, do more crossbreeding, that I see is a great opportunity, but again, has to be done very delicately and carefully to make sure that it’s really a sustainable development that doesn’t lead to the destruction of what exists in Mongolia right now. And the only other thing I have connected with that is, of course, franchise opportunities are going to look very attractive to businesses, but I would be a little concerned about increasing the fast food presence in Mongolia, because Mongolia is facing apart from the health crisis of the air pollution, obesity and overweight is increasing, and I think having more fast food, there is a lot of fast food available in Ulaanbaatar now, and access to quality food is also extremely important. Half the population of Mongolia is now classified as overweight or obese, and one in five adults are obese, so that’s one thing to think about. And finally, would be the education sector. I mean, Mongolians have a very long history of really valuing education, they’ve got a famously high literacy rate, and particularly high levels of education among women. And I think it would be great if these new air routes and enhanced air routes for minerals that are being suggested could be complemented with more options for people to travel to the UK; visas are not always very easy to acquire, and I think that it would be great to have more people being able to come to the UK for tourism and education. Those are my general thoughts. But thank you very much. And I really appreciated reading the report and I learned a lot.
[34:02] Daniel Kawczynski
Thank you very much for that. And of course, we will now come on to in the remaining time that we have to questions being submitted. The first question that we have is should Mongolia, oh, actually, another ones come through now. Sorry, I, we’ve got closer alignment with the EU single market. There’s a question about closer aligned, which has disappeared, and I can’t find out who it is. Would closer alignment with the European single market inhibit our ability to trade with Mongolia? Before I ask both of our speakers to answer that, I would like to just say a few comments myself. Because obviously this is a very controversial issue. We went through a very painful somewhat traumatic, highly controversial referendum campaign when we left the European Union. But I just wanted to make a couple of points because there is the prospect of a different government coming into office next month with a very different perception to our relationship with the European Union, then has been the case from my government. But let me just put on the record that we have signed 97 bilateral trade agreements, all of which are commensurate or slightly better than we have through the European Union. Now, how an island of 65 million is able to sign copy and paste agreements with 97 countries to the same degree that it had, through an artificial supranational state six times its size, I think is a point for discussion and debate. Some of the deals and the Japan deal I can reference is slightly better than we had through the European Union, and my office is very happy to share these bilateral trade agreements, we’ve been taking a great interest in reading them. But in 1980, the European Economic Community represented 25% of the world’s economy. Today, it represents 10% and falling. So, our own continent is going through the biggest economic decline, which I think any continent has been through in the history of the world. And the fastest growing area is the CPTPP in the Far East. I will personally be fascinated to see what happens to the United Kingdom if we remain the sole European country within the CP TPP, or whether we returned to the European Union, as some people would like us to do. And finally, JCB, I visited JCB in Mongolia on a number of occasions, one of the most important British manufacturing companies, that makes excavation, equipment diggers and all the rest of it, many of you will have heard of JCB, they’ve gone from 0% market share to 21% market share in Mongolia over the last decade. And so impressed was I with the operations that I saw out there that I invited the deputy prime minister of Mongolia to visit the JCB showroom with me, and we asked the Mongolian couple who are running it, how have you managed to go from naught percent to 21% market share in such a short space of time and bearing in mind that you are competing against Japanese and Chinese products, which are cheaper than yours, and much closer to their Mongolian market than we are? The response was quality of the goods, the durability of the products and after sales service. So, I just referenced that at one particular extraordinary success case that I’ve come across whereby a British company, exporting mining equipment to Mongolia has seen a lightning expansion of its products. And Mongolia isn’t even yet in the CPTPP where products between the United Kingdom and CPTPP countries are 99% tariff free. But anyway, that’s me getting a few things off my chest as a politician here. Can we have our speakers answer that question about alignment with the EU single market vis-à-vis opportunities with Mongolia? Can we start off with Darren please?
[38:52] Darren Spinck
Thank you, Dan. Dan, you raise two great points. First, the UK is the sole European power in the CPTPP. So closer economic ties by bilateral trade and other market access policies, leading to reduction of non-tariff barriers between the UK and Mongolia would be in the Mongolian government’s best interest because that will eventually potentially open up greater access to the whole of the Indo Pacific through the UK’s relationship with the CPTPP and may eventually lead to the potential for Mongolia’s initial discussions for them joining the trade pact as well. Second, as you rightfully point out, closer economic ties with the European Union also leads to increased regulatory requirements as part of becoming too close to the supranational Brussels. So, in that regard, Mongolia would face greater restrictions particularly on environmental laws, labour regulations, etc, which could negatively impact their economy. Third, and I think it’s actually the most important, as I pointed out in the report is the investment potential of closer economic ties with the United Kingdom and the potential for tapping into the private sector through the city of London. My personal feeling is, if Donald Trump wins election in November, there’s probably a high likelihood that the United States and the United Kingdom will also begin re-negotiating a potential free trade agreement that could lead to not only increase private sector opportunities for Mongolia, through the city of London, but through Wall Street as well. And the only thing that I do caution the Mongolian government on should there be increased economic ties with the United Kingdom is being wary of the potential for the reexport of Chinese goods into the United Kingdom or the United States that could be manufactured through forced labour. That is an issue that other countries are looking at the United States is becoming increasingly strict on that, for example, through the USMCA, which is the US Mexico, Canada free trade agreement. That agreement is going to be up for renegotiation in 2026. And whether it is the Biden administration or the Trump administration, they’re going to be looking very closely at whether or not auto parts, the Rule of Origin on auto parts coming from Mexico originally originated in China through full potential forced labour. So that is my only strong recommendation to the Mongolian government is, you know, as we’ve all agreed that their relations with China and must be looked upon through a pragmatic lens. Neither Washington nor London is going to dictate to the Mongolian government, whether or not they’re able to have warm commercial ties with Beijing. But at the same time, if the Mongolian government does desire greater economic ties with the United Kingdom or the United States, they need to be wary of labour laws in both countries related to forced labour.
[43:06] Daniel Kawczynski
Thank you. Thank you, Darren. And can we have Elizabeth please?
[43:12] Dr Elizabeth Fox
Thank you. Um, this is certainly not my area of expertise. But I would think I’m, you know, working on the agricultural sector at the moment, I think this has been a very hot topic for questions of staying in the EU leaving the EU, the benefits of leaving the EU the potential of downsides of leaving the EU and trying to protect local farmers and meat producers. There seems to always be something that comes up in this topic, where it’s less in the Mongolian case, it’s less about it tariff barriers to trade, but the problem of disease-free status at the moment, and that prevents Mongolia from widely exporting meat internationally. And it’s a bit of a, it’s a complex problem, because the types of systems that currently exist that could give Mongolia disease free status in terms of particularly foot and mouth disease would involve transforming agricultural production, meaning nomadic pastoral livestock production to such a degree that it would lose all the benefits of this, you know, extreme free range free grazing, high animal welfare, etc, types of elements that people are looking for when they become interested in eating or purchasing Mongolian meat. So, I think looking at ways that the UK and Mongolia could come to a bilateral agreement on livestock production that would allow export could be something to look at but I’m also aware that, you know, meat imports and exports are a hotly debated topic. I know that Mongolian producers would be very interested in the possibility of exporting meat but that’s not necessarily something that the UK would like to invite.
[45:32] Darren Spinck
And I could just add one other point, just going back to the Blue Dot Network, it’s important to note that the European Union itself is not on the steering committee for the Blue Dot Network, Spain is a member individually as is Czechia but the EU as a whole is not so if Mongolia is seeking to increase foreign direct investment other than through the public sector, which is lagging as I pointed out, private sector engagement is critical and the best way to do that, particularly for infrastructure development, is to identify sustainable projects certified through the Blue Dot Network, which the US and the United Kingdom are on the steering committee of, and therefore can tap into the capital markets in the City of London and Wall Street, as I pointed out.
[46:35] Daniel Kawczynski
Okay, well, we have, I think we’ve got, not sure until what time it finishes, is it 13:30? But we’ve got two other questions, so I want to get through them in the limited time that we have. The one point I would say, of course, is that I think it’s very important for people to analyse and understand the bilateral trade agreements that Britain has signed. The concept is, you know, potentially size does matter; If we were Malta, or Lithuania, could we, outside of the European Union have signed those 97 bilateral trade agreements to be commensurate or slightly better than we had through the European Union? I suspect not. But it is your own global networks and your own international reputation and your own internal market size, which influence whether or not other countries are prepared to give you preferential trading terms and certainly, at the very least, analysing how Britain as an independent sovereign nation has signed these bilateral trade agreements, is a very interesting academic exercise, because of course, we don’t need to protect things that we don’t produce or grow. And whether it’s oranges, or whether it’s olives, or whether it’s reindeer meat, or whether it’s the other 1000s of things that we can’t either produce or grow. We are then as an independent sovereign nation able to negotiate on a more bilateral, one-on-one basis within which with each individual country, to be able to make sure that the trade agreements are tailor made, and specific to the two interlocutors within those negotiations. We certainly have experienced EU companies coming to Britain and investing in Britain in order to use Britain as a trampoline or a springboard to enter the CPTPP. Now, I find that fascinating, and if Britain’s position within the CPTPP is protected over a period of a decade or more, then it will be very interesting to see how that develops. Now coming on to question two, I will be quiet now and let our guests answer. Question number two, Mongolia has substantial uranium resources. How is that impacting the country’s relationships with superpowers who have put nuclear energy at the heart of their energy strategies? For Darren please.
[49:27] Darren Spinck
Sure, as I pointed out, in the report, there are vast, untapped, rare earth deposits and critical mineral deposits including uranium. The export of uranium is entirely dependent not only the export of uranium, but the export of any critical minerals or critical rare earths from Mongolia is now entirely dependent on export through China through the port of Tianjin, as I pointed out, making these air routes critical. Now, of course, the devil is in the detail; is it cost effective to freight forward vast sums of rare earths via air transport to either the UK or other partners? That is yet to be determined and is at a far higher pay grade than I am at the moment, but, in my opinion, investing resources from the both the public and private sector is critical for determining the exact quantities of all rare earth elements and critical minerals, including uranium, tapping into the private sector, public sector for mining, and then the transport and export of these minerals is going to be through the infrastructure development, and then the processing will be through a third party country, including potentially the United Kingdom and the United States. But this is why private sector investment is critical just to determine the exact quantities in these deposits so investors can make determinations on whether to move forward with greater sums of investments in the future for the actual mining.
[51:37] Daniel Kawczynski
Thank you. Elizabeth, would you like to, there is another question specifically for you, but would you like to add anything on this nuclear issue?
[51:45] Dr Elizabeth Fox
Just in the general sense that, of course, we had the visit from Emmanuel Macron in Mongolia last summer and I think the big question for Mongolia, with the minerals and all its great reserves, is whether it can find a way to keep value added processing in the country or build it’s capacities for processing in the country, because as long as it’s a war exporter, that puts it at a disadvantage. So just a general point on that.
[52:20] Daniel Kawczynski
Okay, thank you. I mean, interestingly, just on the point of processing, we have found a rare earth minerals opportunity in Mongolia, which is so vast, and it is British owned, so vast that it could potentially produce 5% of global demands for rare earth minerals, which is extraordinary in Mongolia itself. We went to war in 1956 under the misapprehension that Colonel Nasser would restrict the flow of oil through the Suez Canal. It actually blew up in our faces and led to a massive retrenchment of British power, east of Suez for decades to come. There is no doubt in my mind that China could potentially in the future, restrict the flow of rare earth minerals in order to put pressure on Western democracies at a time of acute political tension, whether it’s over Taiwan, whether it’s over the Uyghurs, whether it’s over Hong Kong or the South China Sea. So, getting access, direct access, to rare earth minerals in Mongolia is very important. And I’d like you to know that we are also bringing in processing opportunities, British processing opportunities to Mongolia, so that the rare earth minerals are turned into magnets in Mongolia, and air cargoed out of Mongolia directly to the United Kingdom so that there is this direct supply potentially, in the future of these essential thing because, of course, as we all know, not a single one of these wind turbines that we see scattered around our coastline, and we have more offshore wind turbines than any other European country, not one of these will operate without the magnet, which is made from rare earth minerals, so that product is absolutely critical for us. Now coming up there’s a question specifically here for Dr. Fox. How might greater trade between Mongolia and the United Kingdom influence the cultural, social and economic interactions between our two societies, and what potential changes could this bring to the traditional lifestyles and modern developments in Mongolia? Dr. Fox.
[54:57] Dr Elizabeth Fox
Thank you very much for the question. Well, I think the starting point is the fact that, you know, culture is always changing, and society is always in flux. Mongolian herders use solar power regularly, they have TVs, they have freezes now quite commonly, to store meat through the summer. There’s ever greater internet access across the countryside of Mongolia. So, I, yeah, don’t start with a picture of two static cultural monoliths that you know, may change each other by coming into contact, these are already fluctuating and flexible social situations and cultural milieu. And of course, greater connection between the UK and Mongolia would bring changes, but that would bring, that wouldn’t be something new. That’s something that’s already in place, and already developing. That would be my general answer.
[56:03] Daniel Kawczynski
Okay, thank you. We do, I think, have time for another question. There aren’t any more than the three questions that have been posted, so if you haven’t posted a question, now’s your time to please post one. But before we take any more, would you like to make any additions to that Darren?
[56:25] Darren Spinck
I actually did want to go back to the point that you made regarding magnet processing in Mongolia. There are great geopolitical risks associated with processing with over reliance of the processing within Mongolia. I know as I stated, the costs are uncertain; the viability of actually exporting the raw rare earth out of Mongolia to a third party country for the processing, it has not been determined whether it’s cost effective or even possible, but over reliance on processing within Mongolia does pose a risk similar to the semiconductor risk in Taiwan so that is something that I hope UK policymakers do give additional thought to, because as you pointed out, should a conflict arise in the future, God willing, that does not happen, there is the always the potential for such facilities to be seized by adverse competitors.
[57:51] Daniel Kawczynski
Thank you. Thank you, Darren, we have one more question that’s, I think, just come through. But obviously, it’s interesting with the points that you make about the possibility or likelihood of China expanding in this area. I speak as the only, I’ve been a member of parliament for 19 years, but speak as the only member of parliament who was born in a communist country, Poland. So, I think in a very different way to my colleagues in the House of Commons, because I lived under a communist system, I know what communism is and I know what communists are capable of. And I used to return to Communist Poland in the 1980s, to see my beloved grandfather and I experienced what a society was like, an authoritarian communist society and what the ramifications of that were. So, I have a very healthy scepticism to the Communist Party of China and indeed, what is happening with in Russia, some might call me a hawk on these matters but then are there of course, many British entities that see trade with China as being, as trumping those bilateral security considerations. So, this is a debate that we will continue to have, depending on how our relationship with Russia and China evolves. Now, the last question is going to be from because we’re running out of time, is the United Kingdom complacent in building relationships with countries like Mongolia? Is the United Kingdom complacent and building relationships with countries like Mongolia? Shall we start off with the author of the report, Darren?
[59:46] Darren Spinck
I guess I would ask you for a little clarification on that word, complacent in…
[59:53] Daniel Kawczynski
Well, it says complacent. It just says, the question says, is the UK complacent in building relationships with countries like Mongolia. So, I would say that’s across the piece, across the board. We’ve just got one more question that’s come in which I’d like, so a quick answer to that one, please.
[1:00:11] Darren Spinck
Well, it’s in the UK as best interest, as I pointed out for a vast number of reasons, and not only does it, is it in the national interest of the UK, its people its commercial entities to grow relations with countries such as Mongolia, but it’s also in the best interests of the Mongolian people because it will help improve their economies, their quality of life, and their security in the long run.
[1:00:39] Daniel Kawczynski
Okay, thank you. Dr. Fox, would you like to make any comment before we take our last question?
[1:00:47] Dr Elizabeth Fox
I would echo Darren’s answer. And just of course, both parties should not go into this type of engagement in any kind of complacent way. But I don’t think the idea of increasing collaboration or cooperation could be complacent in and of itself.
[1:01:09] Daniel Kawczynski
Okay, thank you. We have this last question that’s come through when it comes to foreign investment in Mongolia, do you see any issues arising from Mongolia’s economic and political relationship, not just with China, but also with Russia, particularly with reference to energy? So, touching on the sensitivities of, and this is something that I’ve come across myself in my numerous visits to UB, and when you get to know the Mongolians, and you spend time with them, in their homes, when they invite you to their own homes, make dinner for you. And you’re getting to know them, not just as a fleeting person, but as somebody who goes back there over and over and is showing a genuine interest in the strategic partnership, I’ve had many, many discussions with my Mongolian hosts about their rather sensitive situation that they find themselves in, there are 200 countries in the world, but only one with no access to the sea with the Russians to the north and the Chinese to the south. So, they are in a unique situation in the world. Darren, what’s your answer to that very interesting point?
[1:02:33] Darren Spinck
As I pointed out that their geographic proximity to both China and Russia is never going to change, and because of this, and because China is their largest trading partner by far, it is simply not pragmatic to expect that they’re going to dial back economic cooperation or commercial ties with Beijing at this point. I also don’t think it’s realistic at this point to expect Washington or London to ask Mongolia to adjust their investment policies greatly either at this point. Other countries, of course, are embracing investment restrictions, limiting the amount of investment from Chinese entities into, first and foremost, into the United States, into the United Kingdom, into the European Union. But it can’t at this point in time, when China is Mongolia’s largest trading partner to expect any vast investment restrictions to be placed upon the Chinese ability to invest into Mongolia. I think in the long run, it’s up to Washington and London to determine that they are both serious enough to eventually come close or hopefully even eclipse the potential of Chinese investment into Mongolia. And this will have to be undertaken not only through the public sector, which will be increasingly difficult as the deficits are growing for other expenditures, but as I’ve pointed out numerous times by tapping into the private sector, explained to investors in Wall Street, in the City of London about the vast opportunities in Mongolia and certifying that through the Blue Dot network and other platforms.
[1:04:45] Daniel Kawczynski
Thank you. Elizabeth?
[1:04:48] Dr. Elizabeth Fox
I think Mongolians are well aware of the dangers of being reliant or the potential dangers of having this over reliance on Russia for their energy needs, and that definitely was included in the report as something that is key to the national security strategy, to find ways to have more energy independence for that particular reason. But that’s always been, you know, the kind of, the benefit of where Mongolia is located, is in that being so tightly wedged between the two has been this kind of paradoxical source of security in terms of maintaining its space as an independent nation, because the idea is that if one party from north or south would move, the other one would respond. So, it’s that balance of power, and that balance that has maintained the status quo up until now, but the world is changing world has been changing quite rapidly. So, it remains to be seen and that’s the motivation for the third neighbour policy and for making Mongolia’s presence on the international stage and awareness of Mongolia ever greater for countries like the UK and the US and European nations, because I think it makes sense that the more people are aware of Mongolia, the better protected it will be in, light of its vulnerabilities.
[1:06:25] Darren Spinck
And just to quickly add, even if a second Trump administration will bring about greater fossil fuel production, increased liquefied natural gas exports, getting the LNG to Mongolia will always be dependent on going through the port of Tianjin so that is not even a remote possibility, making the investment in the renewable sector all the more critical. So hopefully, the Mongolian government will be able to reduce any barriers to UK investments specifically in wind production investment, and there will be suitable increases in renewables in the years ahead.
[1:07:13] Daniel Kawczynski
Okay, thank you very much. Um, I believe we have to, I mean, I could carry on all afternoon. It’s not often that we get such, you know, fascinating interlocutors who clearly understand this country so well, but we’ve run out of time. I’d like to thank Darren and Elizabeth very much for taking the time in their busy schedules to join us for this webinar. Please, Darren, you are based in the United States, aren’t you?
[1:07:13] Darren Spinck
I am yes, but I come to London occasionally and it would be wonderful to sit down and speak about Taiwan in the near future, or feel free to get my contact details from HJS and I’d be delighted to speak with you further about Taiwan and Mongolia and the Indo Pacific as a whole.
[1:08:07] Daniel Kawczynski
I would love to invite you over and of course, the invitation to Elizabeth as well. I can’t say I can invite you to the House of Commons because I don’t know the outcome of my own election on July the fourth but we’re awaiting the results. But I will end with one funny story, which is just a little funny sort of thing that happened. I was in the London street. I mean, being six foot nine, I’m the tallest MP ever, at six foot nine. So, I can’t just go into a shop, I’m afraid and buy a suit because I can’t find anything that will fit me. And when I was in Mongolia, I went to the Gobi cashmere company, and they made me a suit, a Mongolian cashmere suit. And I fell over in London, three young people pushed me not deliberately but by mistake into the road, and I fell. And it’s one of those moments when you are flying through the air, and you know you’re going to crash, and instinctively, I picked myself up after falling and all of my skin on my knee was scratched and torn off, but the Mongolian suit was intact, not a scratch. So, I think Mongolian cashmere is the best material I’ve ever come across. Because it gets through major incidents like that, quite extraordinary material really, and an extraordinary country. It’s been a great privilege to serve as the Prime Minister’s trade envoy to Mongolia for the last four years and instinctively, increasingly convinced that this should be a very important strategic partner for the United Kingdom as we reach out to fledgling democracies around the world, and give them that support that we once gave to countries in Eastern Europe, my own country of birth included when they were trapped behind the Iron Curtain and they relied on that Radio Free Europe and support from Western liberal democracies when they were struggling against Soviet oppression. So, thank you very much to you, both sincerely, and very much hope to have the privilege of meeting you again in the future. And I will ask Thomas from the Henry Jackson society to close the webinar. Thank you very much. Thank you