Japanese government battles for Japanese companies worried by Brexit
One of the key arguments that the TUC made when campaigning for a Remain vote in the EU referendum in June was that, outside the EU, we would find it more difficult to attract inward investment in manufacturing, including from the Japanese (who made similar warnings themselves!) Those warnings have been given stark endorsement by a quite remarkable, 15-page document released by the Japanese government as the G20 begins in China: Prime Minister Theresa May’s first international summit.
Drawing explicitly on concerns from Japanese businesses which in Britain and the rest of the EU employ nearly half a million workers (140,000 of them in the UK, making half our cars), the document states:
“In light of the fact that a number of Japanese businesses, invited by the Government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe, we strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses.”
And the document contains a stark threat which belies the Japanese stereotype of politeness and opacity:
“Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to Continental Europe if EU laws cease to be applicable in the UK after its withdrawal.”
The document sets out a series of issues that it wants the EU and Mrs May’s UK Government to address, starting with:
- maintenance of the current tariff rates and customs clearance procedures;
- introduction of provisions for cumulative rules of origin;
- maintenance of the access to workers who are nationals of the UK or the EU; and
- maintenance of the freedom of establishment and the provision of financial services, including the “single passport” system.
Essentially, the Japanese government is asking the UK government to negotiate a relationship with the EU which is closer than the Norwegian model, including freedom of movement, free access for goods and services and much more. As the Financial Times commented:
“Japan’s business wish list could be very difficult for Mrs May to deliver, since it closely resembles Britain’s current relationship with the EU, something that UK voters and many Tory MPs want to fundamentally reform.”
It is an exceptionally detailed document, and the presence near the top of the list of the issue of rules of origin (hardly a feature of current debates about what Brexit would mean) suggests that Japanese companies have done a lot more thinking than the Brexiteers. The imposition of WTO tariffs, which has been the main concern expressed thus far in debates about trade in goods, could add 10% to the costs of goods traded between a post-Brexit UK and the rest of the EU. Failure to maintain the current provisions on rules of origin could add up to 30% – and would do far more damage to our economy.
The document also seeks continuing UK conformity with the rules of the single market on issues like chemical safety, consumer and environmental protections, and while workplace rights aren’t mentioned explicitly, they are also single market rules, and their protection can be implied in the concern that
“if the UK were to establish regulations and certification procedures different from those of the EU, Japanese businesses operating in Europe would have to accommodate two different systems, creating disruption and increasing … costs.”
On free movement, the Japanese companies are clearly most concerned about managers and skilled workers – although the document also makes the case for unskilled workers. But the government clearly also backs the call from the TUC and others for all EU27 citizens currently living and working in the EU to be given the right2remain when it calls for “maintaining the access to workers who are nationals of the UK or the EU (especially protecting the status of those who are already employed or will be employed by Japanese businesses).”
The Japanese government’s intervention will help Brussels act tougher towards the UK over the deal to be done, and will cause Theresa May a severe headache as she tries to balance demands to protect the economy and regulatory standards with a call to tackle free movement and establish sovereignty. But, in repeating the concerns of Japanese businesses in the UK, at least one government has echoed many of the concerns of the TUC, too.