National / Politics | ANALYSIS

Brexit may carry costs for Japan, making EU more pro-China: experts

by William Hollingworth

Kyodo

Britain’s decision to leave the European Union may weaken the continent’s relations with both Japan and China and leave all parties looking to realign their relationships, analysts have said.

A European Union without Britain may, for example, take a softer line on China’s human rights record and territorial claims.

But Britain itself will have a diminished presence. Analysts say the June 23 referendum will leave the nation unable to improve its trading relations with Japan or China, as London will lack political credibility outside the bloc.

For years Britain has been seen as Japan’s cheerleader inside the European Union, taking the lion’s share of Japanese investment, and has championed liberalizing the bloc’s economy.

Some analysts believe Japan will now try to build closer links with France and Germany instead of Britain.

“I think the European Union will miss Britain’s presence in negotiations with Japan and China. It is a major world economy and a force for global liberalization,” said David Warren, a former British ambassador to Japan and chairman of the Japan Society in Britain.

“I think that, without the U.K., the EU is in danger of becoming a body that is less attached to liberalizing global trade and therefore less attractive to Japan.

“And I believe Brexit weakens the EU-U.S. alliance (against China) because an EU without the U.K. is inevitably a weaker political agent in the world. A weaker EU is in no one’s interest.”

The London-based Center for European Reform recently noted that Britain has been influential in ensuring the EU is reminded of the wider Asia-Pacific security environment when dealing with China.

Warren said if Britain were to leave the European Union’s single market it may become less attractive for Japanese investment.

He said Brexit has worried many of his Japanese friends who traditionally saw the country as a “consensual, coherent and cohesive” society. However, he said many Japanese companies have acted “pragmatically” by not making any hasty decisions and will be keen to try and shape the terms of Britain’s divorce from the EU bloc.

He said the British government is working hard to maintain close relations with Tokyo.

Volker Stanzel, who formerly served stints as German ambassador to Japan and China and is currently a senior adviser to the European Council on Foreign Relations, said he believes Brexit could “weaken” the bloc’s negotiating clout with Japan and China in all areas, including discussions on the proposed Japan-EU free trade deal.

He predicts Japan will be keen to strengthen its relationship with Germany, where he admits there is a “deficit” due to Berlin’s close links to Beijing.

As for Britain, he said, “Britain was always seen as having enormous influence by Tokyo on EU policies — much more than by Beijing — but now that may have gone. Perception matters, and it will no longer have that credibility.”

“Japan and China may start to think that ‘If we do too much with Britain, what will France and Germany think?’ “

Stanzel fears a weakened European Union could be less self-confident with China on issues like human rights and territorial aggression.

“There was a large degree of glee in China over Brexit,” he said. “China may now become more assertive. Beijing may now return to the lingering issue of the EU arms embargo. And how will Beijing react if Britain wants to secure its own free trade agreement with China?

“China will be more demanding and use its leverage on the weaker EU members in the east and in the south.”

Marie Soderberg, director of the Stockholm-based European Institute of Japanese Studies, believes Japan will start to look elsewhere for European allies.

“I think the Japanese government will deal more directly with Germany and France on a bilateral level and less with the European Commission,” she said.

“Germany and Japan already have strong connections in terms of development assistance, and France and Japan have links in the nuclear field. But I’m quite convinced it will take time for these new relationships to be established.”

Soderberg believes Britain could eventually become a less attractive investment destination for Japanese companies, which may consider relocating offices or putting new ventures into the European Union. But the fact that fewer Japanese speak German and French than English could weigh on their decisions, she said.

John Farnell, a former senior European Commission official and senior adviser to the EU-Asia Centre think tank in Brussels, believes that without Britain, the European Union could take a “more defensive” view toward China on issues like overcapacity in steel and subsidies to emerging industries.

However Farnell believes tensions may emerge as London and Brussels compete for trade and investment opportunities with Beijing and Tokyo. But he also predicts any new trade deal between Britain and China will be “limited” as Beijing is reluctant to open up its financial services and energy markets, sectors where British firms could benefit.

Farnell doubts that the European Union or Britain will soften their approach to China on human rights or arms.

He said a weaker stance would annoy Washington and undermine the bloc’s approach to Russia over Ukraine. Without the cover of the European Union, Britain will also feel that its foreign policies are under greater scrutiny than before, Farnell added.