Japan cautions UK on Brexit

Japan cautions UK on Brexit

By ANTONIA FILMER | London | 10 September, 2016
Theresa May
Japan also expects the EU-Japan Free Trade Agreement to be accomplished this year.
UK Prime Minister Theresa May will not be taunted or intimidated by either heads of state, members of any Parliament or the pugnacious Laura Kuenssberg, political editor of BBC News, into prematurely indicating her Brexit intentions. May and her Brexit team have not changed their stance since she took office three weeks after the EU referendum — Brexit means Brexit and not Brexit-Lite, UK will not Bremain, there will be no second referendum and no vote on Article 50 in the House of Commons. Much has been made of Boris Johnson’s recommending the Australian points system to curb the free movement of people, but this was never one of Mrs May’s promises (it failed its trial in the UK when May was Home Secretary), nor was a Norwegian or Swiss solution. It is more likely May and her Brexit department, the FCO and International Trade Department, will go for a bespoke option with a portfolio of separate agreements covering trade and tariffs, defence, security, pensions, aviation and data protection. Article 50 cites two years for the period of negotiation and exit but this could be flexible depending on the spirit of co-operation from both sides.

Just prior to the G20 Hangzhou summit, Japan’s Ministry of Foreign Affairs threw down a solemn gauntlet jointly to May’s and EU’s governments, documenting Japan’s expectations for the EU-Japan Free Trade Agreement to be accomplished this year and for a “seamless Brexit”. The 15-page wish list, prepared by the “Hagiuda Task Force” chaired by Koichi Hagiuda, Deputy Chief Cabinet Secretary, was well timed not to disappear in the wider G20 Brexit questioning and no doubt echoed the sentiments of others both in Europe and the Pacific basin. If local lore is to be believed, Japan typically spends 80% of time planning and 20% effecting; the document reflects just this. Mindful of the existing uncertainty of their economy and the added uncertainty of Brexit, they are asking for a predictable, uninterrupted and transparent Brexit process, time enough for the transition and the publication of any institutional changes. Their point is Japan’s economy can ill afford the fluctuations or contractions of trade, investment and credit.

For years the UK has been soliciting, successfully, Japanese investment and promoting Britain as a hub for the EU single market, but “trade” is also about free movement of goods and services within organisations across member states (what the report calls value-chains), as well as commercial deals. The Japanese are worried about the detail: visas, intellectual properties, rules of origin, cross-border investment and the free movement of capital between associated companies, harmonised standards between UK and EU, the location of the European Medicines Agency (presently in London) regarding the certification system for medicines and whether EU’s research and development budget still applies to participating EU-Japan research institutions in the UK.

Japanese businesses operating in Europe have created 440,000 jobs; many firms are concentrated in the UK. Nearly 50% of 2015’s Japanese direct investment intended for the EU gushed into UK. UK was one of the major destinations for Japan’s investment stock within the EU at the end of last year.

The language the document uses is carefully chosen with diplomatic references to trust, admiration and respect but the emphasis is that it is in the common interest of all Asian countries as a whole to continue to have access to the free market of Europe, including the UK. Japan does not want the British people’s independent thinking to rock the rules-based global order of peace, stability and prosperity in the international community. Japan has offered a thoughtful, honest, optimistically collaborative notice, but the message is Asia is watching and Japan is prepared to lead the Brexodus from London if co-operation is found wanting.

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