24 February 2019

Will Hutton: The Japanese aren’t daft – that’s why they’re getting out of Brexit Britain

[...]Today, a new Japanese consensus has formed. The Conservative party and its leaders cannot be trusted. They ignore warnings, break their word and do not understand business – personified by Old Etonians Boris Johnson and Jacob Rees-Mogg. Brexit is a first-order disaster, striking at the heart of how Japanese companies organise themselves as “lean manufacturers”. As Honda’s Patrick Keating, its European government affairs manager, briefed a meeting in Swindon in September, Brexit is likely to interrupt the just-in-time delivery of 2 million parts a day – a fifth of which come from EU suppliers. Those suppliers would have to fill out 60,000 customs declaration forms a year, he warned. One in five of its UK workforce are EU nationals. The world of tariff-free barriers – access to the EU’s free-trade agreements with other countries, and ability to move staff between countries promised by Thatcher – has evaporated in front of Honda’s eyes. Yes, it was operating below capacity, but within the EU Honda could have taken a long-term view and braved the downturn. Brexit forced the plant’s closure and the decision to produce in Japan.

[...]Its decision is part and parcel of the gathering consensus. In the past six months Panasonic, Sony and Nomura – all part of separate keiretsu conglomerates with their in-house banks and close relationships with MITI – have moved their European headquarters from Britain to the EU mainland. The decision by Nissan, member of another keiretsu which includes Canon, Sapporo and Yamaha, not to build its new X-Trail model in Sunderland but at its Japanese production hub in Kyushu was inevitable.

British Conservative ministers are regarded by many Japanese as alien creatures locked in a 19th-century time warp. The letter from the international trade secretary, Liam Fox, and the foreign secretary, Jeremy Hunt, to MITI, saying “time was of the essence” in concluding a free-trade agreement and urging “speed and flexibility” was seen as rude, impolitic and inviting Japan to disregard its interests – echoing an imperial mindset but with none of the accompanying economic clout. Japan intends to be ultra-tough in any trade deal it strikes with Britain.

It will want the same preferential tariffs on imported manufactures as it has with the EU, and intends to give as little away as possible on British financial services and food exports. If Fox wants better, best drink sake in the Kaitokaku, build trust and find something Japan needs – such as staying in the customs union and single market, or better still, inside the EU. It would never cross his mind. It is a purblind ignorance that extends to Justin Tomlinson, MP for North Swindon, claiming that Honda’s decision had nothing to do with Brexit.

The president of Honda Europe and the Japanese ambassador tried to soften the blow: Brexit was only one factor in the Swindon closure driven by wider trends in car manufacturing. It is important in Japanese culture to give face to people in public to avoid their embarrassment. But no one should be in any doubt. The Japanese car industry, Japan’s ambassador and its government have repeatedly warned of the implications of Brexit and been brushed aside. They are incandescent with anger – and feel betrayed.

Brexiters will argue that the impact of Japan’s withdrawal from a UK which last year created some 440,000 jobs can be handled easily. But that was in a UK economy of which Japanese investment was a part. The British economy is an ecosystem: high-paid jobs in car manufacturing in towns such as Swindon and Sunderland sustain other less well-paid jobs, while growth in business and financial service relies on company headquarters being here and not in Europe. Lose them, and apart from particular towns being hard hit, everyone is deflated. Of course, it would be better if there were more indigenous big British employers – but the same daffy rightwing thinking that produced Brexit has undermined British capitalism for decades. Japanese inward investment mitigated our own failures: and is now on its way out. Britain has many more bitter pills to swallow before this whole contemptible business is over.

Full article on The Guardian

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