Margaret Thatcher: The Autobiography (67 page)

Al Haig joined me for a late lunch at Downing Street on Friday 29 January. I told him that the single most important aim must be to keep the western alliance together. The most recent meeting of the NATO Council had gone well. But the measures now being proposed by the United States were causing concern. I said that whatever the Americans felt about the matter we had to face the fact that the French and the Germans were never going to abandon their contracts for the Siberian Gas Pipeline. Nearer the bone, I noted that the Americans had not included a grain embargo which would hurt their own people. Indeed, few of the measures adopted by the United States would have any serious
effect at home – but they would hurt Europe. I gained the strong impression that Mr Haig basically agreed with my analysis.

Out of the blue, however, the Americans announced on 18 June that the ban on the supply of oil and gas technology to the Soviet Union was to apply not only to US companies but also to their foreign subsidiaries and to foreign companies manufacturing American-designed components under licence. I was appalled. The reaction of the Europeans generally was still more hostile.

Britain took legislative action under the Protection of Trading Interests Act to resist what was in effect the extension of US extra-territorial authority. Then European irritation was increased still further by the news that the Americans were intending to renew grain sales to the USSR on the pretext that this would drain the USSR of hard currency – but transparently because it was in the interests of American farmers to sell their grain. It was left to America’s excellent new Secretary of State, George Shultz, to find a way out of the difficulties, which he did later in the year, allowing the existing contracts for the pipeline to go ahead. But it had all been a lesson in how not to conduct alliance business.

The summer of 1982 saw some useful international diplomacy. Between 4 and 6 June the heads of government of the G7 countries met amid the splendid opulence of Versailles and my most vivid recollection of the proceedings is of the impression made by President Reagan. At one point he spoke for twenty minutes or so without notes, outlining his economic vision. His quiet but powerful words provided those who did not yet know him with some insight into the qualities which made him such a remarkable political leader. After he had finished, President Mitterrand acknowledged that no one would criticize President Reagan for being true to his beliefs. Given President Mitterrand’s socialist policies, that was almost a compliment.

From Paris President Reagan flew to London for an official visit where he addressed both Houses of Parliament in the Royal Gallery of the Palace of Westminster. The speech itself was a remarkable one. It marked a decisive stage in the battle of ideas which he and I wished to wage against socialism, above all the socialism of the Soviet Union. Both of us were convinced that strong defence was a necessary, but not sufficient, means of overcoming the communist threat. Instead of seeking merely to contain communism, we wished to put freedom on the offensive. In his speech President Reagan proposed a worldwide campaign for
democracy to support ‘the democratic revolution [which was] gathering new strength’. In retrospect, however, that speech had a larger significance. It marked a new direction in the West’s battle against communism. It was the manifesto of the Reagan doctrine under which the West would not abandon those countries which had had communism forced upon them.

By the time I visited the Far East in September 1982 Britain’s standing in the world, and my own, had been transformed as a result of victory in the Falklands. But one issue on which this was, if anything, a drawback was in talking to the Chinese over Hong Kong. The Chinese leaders were out to demonstrate that the Falklands was no precedent for dealing with the Colony.

On the morning of Wednesday 22 September my party and I took off from Tokyo, where I had been visiting, for Peking. Fifteen years remained of the lease to Britain of the New Territories which constitute over 90 per cent of the land of the Colony of Hong Kong. The island of Hong Kong itself is British sovereign territory, but, like the rest of the Colony, dependent on the mainland for water and other supplies. The People’s Republic of China refused to recognize the Treaty of Nanking, signed in 1842, by which the island of Hong Kong had been acquired by Britain. Consequently, our negotiating aim was to exchange sovereignty over the island of Hong Kong in return for continued British administration of the entire Colony well into the future. This I knew from my many consultations with politicians and business leaders of Hong Kong was the solution which would suit them best.

The immediate danger was that financial confidence would evaporate and that money and in due course key personnel would flee the Colony, impoverishing and destabilizing it well before the lease of the New Territories came to an end. Moreover, it was necessary to act now if new investment was to be made, since investors would be looking some fifteen years or so ahead in judging what decisions to make.

I had visited Peking in April 1977 as Leader of the Opposition. The ‘Gang of Four’ had been deposed a few months before and Hua Guo Feng was Chairman. Deng Xiaoping, who had suffered so much during the Cultural Revolution, had been ousted by the ‘Gang of Four’ the previous year and was still in detention. But on the occasion of this, my first visit as Prime Minister – indeed the first visit of any Prime Minister while still in office – Deng Xiaoping was indisputably in charge.

On the afternoon of Wednesday 22 September I had my first meeting with the Chinese Prime Minister, Zhao Ziyang – whose moderation and reasonableness proved to be a great handicap to him in his subsequent career. We had a discussion of the world scene in which, because of the Chinese hostility to Soviet hegemony, we found much to agree about. However, we were aware that the following morning’s meeting on Hong Kong would be a very different matter.

I began that meeting with a prepared statement setting out the British position. I said that Hong Kong was a unique example of successful Sino-British co-operation. I noted that the two main elements of the Chinese view concerned sovereignty and the continued prosperity of Hong Kong. Prosperity depended on confidence. If drastic changes in the administrative control of Hong Kong were to be introduced or even announced now there would certainly be a wholesale flight of capital. This was not something which Britain would prompt – far from it. But nor was it something we could prevent. A collapse of Hong Kong would be to the discredit of both our countries. Confidence and prosperity depended on British administration. If our two governments could agree on arrangements for the future administration of Hong Kong; if those arrangements would work and command confidence among the people of the Colony; and if they satisfied the British Parliament – we would then consider the question of sovereignty.

I had hoped that this practical and realistic line of argument would prove persuasive.

However, it was quite clear from the Chinese Prime Minister’s opening remarks that they would not compromise on sovereignty and that they intended to recover their sovereignty over the whole of Hong Kong – the island as well as the New Territories – in 1997 and no later. The people of Hong Kong could become a special administrative zone administered by local people with its existing economic and social system unchanged. The capitalist system in Hong Kong would remain, as would its free port and its function as an international financial centre. The Hong Kong dollar would continue to be used and to be convertible. In answer to my vigorous intervention about the loss of confidence which such a position, if announced, would bring, he said that if it came to a choice between sovereignty on the one hand and prosperity and stability on the other, China would put sovereignty first. The meeting was courteous enough. But the Chinese refused to budge an inch.

I knew that the substance of what had been said would be conveyed to Deng Xiaoping whom I met the next day. Mr Deng was known as a realist,
but on this occasion he was obdurate. He reiterated that the Chinese were not prepared to discuss sovereignty. He said that the decision that Hong Kong would return to Chinese sovereignty need not be announced now, but that in one or two years’ time the Chinese Government would formally announce their decision to recover it. At one point he said that the Chinese could walk in and take Hong Kong later today if they wanted to. I retorted that they could indeed do so, I could not stop them, but this would bring about Hong Kong’s collapse. The world would then see what followed a change from British to Chinese rule.

For the first time he seemed taken aback: his mood became more accommodating, but he had still not grasped the essential point, going on to insist that the British should stop money leaving Hong Kong. I tried to explain that as soon as you stop money going out you effectively end the prospect of new money coming in. Investors lose all confidence and that would be the end of Hong Kong. It was becoming very clear to me that the Chinese had little understanding of the legal and political conditions for capitalism. They would need to be educated slowly and thoroughly in how it worked if they were to keep Hong Kong prosperous and stable. I also felt throughout these discussions that the Chinese, believing their own slogans about the evils of capitalism, just did not realize that we in Britain considered we had a moral duty to do our best to protect the free way of life of the people of Hong Kong.

For all the difficulties, however, the talks were not the damaging failure which they might have been. I managed to get Deng Xiaoping to agree to a short statement which, while not pretending that we had reached agreement, announced the beginning of talks with the common aim of maintaining the stability and prosperity of Hong Kong. Neither the people of the Colony nor I had secured all that we wanted, but I felt that we had at least laid the basis for reasonable negotiations. We each knew where the other stood.

Winning the argument and formulating the policies for a second term 1982–1983

I
T IS NO EXAGGERATION
to say that the outcome of the Falklands War transformed the British political scene. In fact, the Conservative Party had begun to recover its position in the opinion polls before the conflict, as people began to realize that economic recovery was under way. But the so-called ‘Falklands factor’ was real enough. I could feel the impact of the victory wherever I went. It is often said that elections are won and lost on the issue of the economy, and though there is some truth in this, it is plainly an oversimplification. Without any prompting from us, people saw the connection between the resolution we had shown in economic policy and that demonstrated in the handling of the Falklands crisis. Reversing our economic decline was one part of the task of restoring Britain’s reputation; demonstrating that we were not the sort of people to bow before dictators was another. I found that people were starting to appreciate what had been achieved during the last three years. I drew attention in my speeches to the record and to the fact that none of it would have happened if we had followed the policies pressed upon us by the Opposition.

The Opposition itself was divided between Labour and the new ‘Alliance’ of the Liberal and Social Democratic parties. Though we were not to know it at the time, Alliance support had peaked and it would never be able to recapture the heady atmosphere of late 1981 when it had led in the opinion polls and its supporters had claimed they had truly ‘broken the mould’ of British two-party politics. In fact, of course, the one thing you never get from parties which deliberately seek the middle
way between left and right is new ideas and radical initiatives. The SDP and Liberals hankered after all the failed policies of the past and though the SDP’s instincts on defence were sound – as opposed to the Liberals, perpetually tempted by unilateralism – and they were contemptuous of Marxist dogma, I always felt – and still do – that the leaders of the SDP would have done better to stay in the Labour Party and drive out the Left. The risk was that by abandoning the Labour Party they might actually let into power the very people they were seeking to keep out.

As for Labour, the Party continued an apparently inexorable leftward shift. Michael Foot is a highly principled and cultivated man, invariably courteous in our dealings. In debate and on the platform he has a kind of genius. But the policies he espoused, including unilateral disarmament, withdrawal from the European Community, sweeping nationalization of industry and much greater powers for trade unions, were not only catastrophically unsuitable for Britain: they also constituted an umbrella beneath which sinister revolutionaries, intent on destroying the institutions of the state and the values of society, were able to shelter. The more the general public learned of Labour’s policies and personnel the less they liked them.

The opinion polls and by-election results confirmed what my own instincts told me – that the Falklands had strengthened our standing in the country. On the eve of the war we had already moved just ahead of the Alliance parties in the polls. Between April and May our support rose ten percentage points to 41.5 per cent, well ahead of all the other parties. It rose again in the wake of the recapture of the islands and then fell back a little during the second half of the year. However, on only one occasion between then and the election did it dip below 40 per cent. I never took much notice of what the polls said about me personally. Too much concentration on this sort of thing can be a distraction. But it was also true that my own standing in the polls had gone up substantially.

Inevitably, defence was the political issue on which the Falklands War had the greatest bearing. During the Falklands campaign itself the nuclear issue was almost entirely edged out of public debate, though my speech at the UN Special Session on disarmament in June 1982 was an attempt to show how the same fundamental principles underlay the whole of defence policy. However, in the autumn of that year, I began to be more concerned about the presentation of our nuclear strategy. Although public opinion was with us on the principle of the nuclear deterrent and
opposed to unilateralism, there was a good deal of opposition to Trident II, mainly on grounds of cost, and to the stationing of Cruise missiles. Underlying both was a disagreeable streak of anti-Americanism. Accordingly, on 20 October and 24 November I chaired meetings of the Liaison Committee of Ministers and Central Office officials to explore the facts and refine the arguments.