Japanese Warning Over Fallout From Hard Brexit Not an Idle Threat

Nissan cancelled of plans to build its X-Trail SUV in its Sunderland factory. Photo: Getty Images.
Nissan cancelled of plans to build its X-Trail SUV in its Sunderland factory. Photo: Getty Images.

Speaking to the BBC in Tokyo on 27 June, Japanese Foreign Minister Taro Kono warned that if Britain were to embrace a ‘hard Brexit’ by leaving the European Union without a deal, many of the 1,000 or so Japanese companies based in Britain, employing some 160,000 British workers, might feel compelled to relocate their operations to other parts of Europe.

This is not an idle threat and is particularly acute in the automobile sector where Japanese companies produce some half of the 800,000 vehicles produced annually in Britain. Already, following Honda’s decision to close its British factory by 2021, and Nissan’s cancellation of plans to build its X-Trail SUV in its Sunderland factory, the shock impact of Brexit on British jobs and manufacturing strength is being keenly felt.

The roots of this problem and its wider impact on relations between Japan and Britain are deep-seated. These are explored in a new Chatham House Report, The UK and Japan: Forging a Global and Proactive Partnership, in which 10 British and Japanese scholars analyze the historical background, current state and future direction of the bilateral relationship.

The British government’s support for Brexit and the willingness of Boris Johnson and Jeremy Hunt, the two conservative leadership candidates, to embrace the possibility of a hard Brexit is a sign of the rise of populist politics in Britain. A country once admired for its pragmatism and common sense now appears, at least in some quarters, gripped by a romanticized and irrational collective belief that cutting itself off from Europe and pursuing a new, independent role in the world can restore Britain’s lost imperial greatness.

The idea is delusional, a point underscored by Kono’s Brexit warning and also his sober-minded observation that any future bilateral trade deal between Britain and Japan will take time and will only occur once Britain has successfully negotiated its exit from the European Union, a process that is likely to take months, if not years, to be fully realized.

Even if and when such a bilateral trade agreement can be achieved, the results are likely to be modest. Britain’s exports to Japan represented in 2017 around 1.6 per cent of its overall export trade and the room for expansion into the Japanese market is unclear. Moreover, the modest benefits of more trade risk being wiped out by the potential loss to Japan’s substantial foreign direct investment (FDI) in Britain, which at $152 billion (16.478 trillion yen) in 2017 represents some 9.8 per cent of Japan’s entire FDI portfolio.

Of course, the bilateral picture is by no means entirely negative, as it is set out in some detail in the report. While the economic dimension to the relationship is a sign of vulnerability, on security issues there is much to celebrate between Tokyo and London. Through the ‘2 plus 2′ process of coordination between the two countries’ foreign and defense secretaries, and through regular summit meetings between the two prime ministers (for example, Prime Minister Theresa May’s visit to Japan in the autumn of 2017 and most recently Prime Minister Shinzo Abe’s visit to London in January of this year), the two countries have substantially enhanced their military and political cooperation.

All three branches of Britain’s armed forces have participated in joint exercises or visits with their Japanese counterparts. The two countries cooperate extensively in the sharing of defence technology, in enhancing cyber security and in working together to bolster the rules-based international system. Britain, in particular, has been especially active since 2018 in deploying its ships to east Asia to underline its commitment to freedom of navigation in the South China Sea and also in confronting the nuclear proliferation threat from North Korea.

Moreover, in principle, Britain has considerable material capacity to contribute constructively to global affairs in partnership with Japan. Britain is one of the few European countries to meet both its NATO target of 2 per cent of gross national income (GNI) for defence spending and its United Nations’ 0.7 per cent of GNI figure for development assistance. It is also, via its ‘All of Asia’ policy, committed to maintaining and expanding its presence in the Asia region, a point underscored by the British Foreign Office’s recent decision to appoint a permanent ambassadorial representative to the Association of Southeast Asian Nations (ASEAN).

However, deep financial pockets, while necessary, are not enough for real, sustained influence. Across Whitehall and among senior and retired officials there are serious doubts about whether the government can free itself from the damaging distractions caused by Brexit to think coherently and strategically about its foreign policy, whether with Japan or other potential Asian partners.

In the words of Sir Simon Fraser, former permanent undersecretary and head of the British Diplomatic Service from 2010 to 2015, ‘I cannot think of any time in my career when there has been less clarity, frankly, about the purposes and objectives of British foreign policy.’

The phrase ‘Global Britain’ has become a vacuous and rhetorical device, an aspirational hope rather than a meaningful strategy, designed to stem the rapid loss of Britain’s reputational capital as both its immediate neighbours and its friends in Asia scratch their heads in bafflement at its seemingly self-destructive turn inwards and detachment from economic and political common sense.

Johnson and Hunt, given their past and present government roles – Johnson is a former foreign secretary and Hunt is the current holder of the post – should be well placed to challenge these damaging perceptions.

However, Johnson continues to play the populist card while making wild promises on resolving the Brexit challenge in a way that seems increasingly detached from reality. His record at the Foreign Office was disastrous, and he inspires little confidence except among the Conservative Party faithful, the 160,000 or so predominantly white, over 50 party members who will determine Britain’s next prime minister.

Hunt, by contrast, has at least a track record of delivery in government at a ministerial level and an interest in and capacity to engage with detailed evidence. His support for open societies and his new campaign for enhancing media freedom resonates with the report’s core recommendation on the importance of Britain and Japan working together to protect democratic values given the global threat posed by extreme populist and identity-based politics.

Ultimately, however, the challenge of confronting populism must be engaged with at home as well as abroad. To do this requires a re-engagement with economic reality and avoidance of the sort of wishful thinking and magical realism that is at the heart of today’s Brexit discourse. Kono’s observations are a timely and sensible reminder of that simple truth.

Dr John Nilsson-Wright, Senior Research Fellow, Asia-Pacific Programme.

This article was originally published in the Asahi Shimbun.

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