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Japan’s British investments

by Hugh Cortazzi

The Japanese government recently presented a memorandum to the British government — in response to a request for the views of other interested parties — concerning a British government audit of “what the European Union does and how it affects the United Kingdom.”

The Japanese memorandum, after noting that the issues were primarily matters for the British government, expressed its appreciation of the role which Britain played in the EU and its expectation that Britain would maintain “a strong voice and continue to play a major role in the EU.”

It noted that Britain as “a champion of free trade is a reliable partner for Japan” and is playing a leading role in leading the process of deregulation. Japan expects that Britain will “continue to strive for the completion of the single market.”

The memorandum noted that more than 1,300 Japanese companies have invested in Britain as part of the single market and have created 130,000 jobs, “more than anywhere else in Europe.” This fact demonstrates that the U.K. as a gateway to the European market has attracted Japanese investment. The Government of Japan expects the U.K. to maintain this favorable role.

This memorandum has been taken by some commentators as a warning to Britain that if, as advocated by Euroskeptics, Britain were in the future to decide to leave the EU this would lead to many Japanese companies with investments in Britain deciding to relocate their investments away from the U.K. with a consequent fall in British employment. It is in fact a statement of what should be obvious to all except the blindly prejudiced.

A few Euroskeptics have criticized the memorandum as a patent attempt to intervene in Britain’s internal affairs. It is nothing of the kind. Japanese views were sought and there is nothing in the Japanese memorandum to which any right-minded person can object.

Statistics about Japanese investment in Britain quoted in the memorandum speak for themselves, but understate the importance and value of Japanese investment in Britain.

No one who knows anything of the history of the automobile industry in Britain can be in any doubt about the huge impact of the investments made in Britain by Nissan, Toyota and Honda and the parts suppliers who followed these major companies. The British-based automobile industry as a result of these investments, which were followed by investments from Germany and other countries, is now a leading exporter with cutting edge technology. British productivity has been transformed and quality enhanced. This has led to a significant improvement in the image of British manufacturing industry.

The first wave of Japanese investment was in electronics and consumer electrical goods. Some of these investments have been superseded, but Japanese electronic investment, spearheaded by such companies as Sony in South Wales and Toshiba in Plymouth, had a significant impact on unemployment in areas where the decline in traditional industries such as coal mining had left many out of work. Wales indeed would not be what it is today if Japanese investment had not come there.

British efforts to attract Japanese investment were backed by regional organizations, including the Scottish and Welsh development authorities, and had the wholehearted support of the British Embassy in Tokyo and British Trade and Investment in London.

The late Prime Minister Margaret Thatcher, who had a healthy respect for Japan as “a great economic power and a leading democratic nation,” played a key role when she intervened personally in wooing Nissan to invest in Sunderland. In her memoir “The Downing Street Years” (Page 497) she records that she was “convinced that the Nissan project made as much sense for Japan as it did for us. By exporting investment to Britain they would undercut protectionist pressures against them, bring in income for years ahead as well, of course, as providing income and jobs in the recipient country.”

The Japanese government is aware that Britain is a strong advocate of a comprehensive and revitalized trading relationship between the EU and Japan and knows that Britain is opposed to the protectionist attitudes, which still lurk in some EU countries.

It would be madness for Britain to sacrifice the benefits, which membership in the EU brings, in pursuit of the chimera of “independence” from Brussels. Of course it is sensible, as the present British government is trying to do, to seek improvements in the way in which the EU institutions operate and to protect British national interests within the EU framework.

Prime Minister Shinzo Abe on his recent visit to London emphasized in a speech his wish for greater foreign (including British) investment in Japan. Much needs to be done by the Japanese government within Japan to attract more foreign investment. The weaker yen alone is not enough.

Japan needs, as Abe seemed to recognize, to do much more to deregulate the Japanese market, in particular the service sector, to foster competition and to deal with near monopolies that keep prices of utilities and such too high.

Japanese participation in the Trans- Pacific Partnership suggests that the advocates in Japan of freer trade may be winning against the protectionist elements that cannot adapt to the changes being forced on the industrialized world by globalization.

Japan needs to keep a close eye on what is happening in China and the Republic of Korea, which are also attracting foreign (including Japanese) investment.

Foreign investors could understandably be deterred from investing in Japan if nationalist sentiment in Japan or China stirred up further trouble or an incident near an uninhabited island led to even a temporary rupture.

Britain must ensure that its relationship with Europe is not undermined by Euroskeptics, while Japan needs to keep in check nationalist extremists from complicating its relations with its Asian neighbors.

Hugh Cortazzi served as Britain’s ambassador to Japan from 1980-1984.