Despite their famous politeness, the Japanese know how to play diplomatic hardball. In September last year, after the Brexit referendum and ahead of a G20 meeting, Tokyo sent a punchy open letter to the UK and EU calling for certainty, clarity and protecting the business environment. Now, several months later, as Theresa May embarks on a three-day visit to Japan, Japanese concerns about potential ramifications of Brexit are again making political waves.
Over the weekend, Yasutoshi Nishimura, the deputy chief cabinet secretary, briefed that Britain needed to end the “sense of crisis” around Brexit. The Financial Times quoted an unnamed Japanese trade official dampening down the idea of “substantial progress” being made on a UK-Japan trade deal during this visit. A former Japanese ambassador to the UK also suggested that negotiations could not begin “until Britain is out of the EU”, and said the Japanese prime minister, Shinzo Abe, needed to know where May was aiming for Britain to “land” post-Brexit.
Where does all this leave the UK’s trade strategy and the prospects of a free trade agreement? About where it was before. Japan is a tough target for a trade deal, as Open Europe noted in our recent report on future UK exports, Global Britain. The EU itself has not signed an agreement with Japan, despite the much-vaunted recent progress on so-called Jeepa. In fact, the same official who tried to quash expectations of UK-Japan progress noted that the Japan-EU deal was only agreed at political level: “We haven’t finished negotiations with the EU … many issues still remain”.
So will Japan – and other countries – inevitably prioritise a large bloc of countries over the UK? Perhaps. The EU certainly represents a very important market. But the EU will always have difficulties reaching trade agreements. It’s hard to make one size fit 27 and the EU has strong producer interests, in agriculture for example, which limit its ability to get deals signed. Even if Japan and other economies would rather have EU trade deals, that won’t stop them signing on the dotted line with the UK. In the real world, it’s unrealistic to think the UK would be at the back of Barack Obama’s infamous queue. But it suits Japan to play hard-to-get with the UK for now.
We shouldn’t be jealous about the EU signing trade deals. First, if the EU is willing to offer Japan an agreement that removes tariffs, addresses customs issues and is liberal on rules of origin, it’s reasonable to think the UK could get such a deal with the EU. We should of course aim for a much deeper agreement. Second, trade is not a zero-sum game. A more liberal EU, trading more freely with other economies, is a good thing for the UK, Brexit or remain.
Overall, it’s important not to be too fixated about trade agreements – whatever Liam Fox’s department may think. Politicians love the ribbon-cutting that signing trade deals offer, and Donald Trump probably imagines them to be the political equivalent of opening a new luxury hotel. But narrow trade agreements are not necessarily the top priority. The UK already trades well with Japan, and average tariff levels are low at 4.2%. The priority for both governments should therefore be non-tariff barriers, focusing on things such as customs cooperation and investment opportunities.
None of that means that it’s not worth the prime minister visiting Japan. There had been a bizarre tendency recently to let the impression develop that Whitehall’s only interest in east Asia was China, and that we were happy to neglect the world’s third biggest economy and a major regional ally. When I visited Japan recently and spoke with senior officials, they were certainly initially perplexed by Brexit, but were nonetheless keen to deepen bilateral relations.
A major concern there is Chinese territorial expansionism, particularly in the South China Sea. Japan knows that the UK is the only European power seriously able to project power in the region, and will be looking carefully at what we say on freedom of navigation. They will also be watching closely the power dynamics within the EU, where countries such as Greece are increasingly reluctant to censure China.
Reaching a comprehensive trade deal with Japan will be a tough prize which may take time to achieve, but in the mean time we should invest in our crucial and historic friendship. We should prioritise easy wins – discrete agreements on specific bilateral matters – and the prime minister should take the opportunity of her visit to reassure Japanese businesses of her plans to keep the UK as a destination of choice for investment in Europe.
But ultimately the single most important thing the prime minister needs to do, both for Japan and more generally, is to update all of us about her plans for Brexit: it’s been over six months since her Lancaster House speech, and it’s time to put more flesh on the bones.
