LONDON – The decision by Nissan Motor Co. to reaffirm its commitment to manufacturing cars in Northeast England, despite the referendum in June in favor of leaving the European Union, was widely welcomed in Britain.
This decision will not have been taken lightly. It followed a meeting between the chairman of Nissan and Theresa May, the British prime minister, and a letter from Greg Clark, the secretary of state for industry, who visited Japan to speak with members of the board of Nissan. The letter confirming the oral assurances given to Nissan has not been published for reasons of commercial confidentiality.
As I noted in a letter to the editor of the London Times published on Nov. 1, the key factors for Nissan would have been the personal involvement of the prime minister and their assessment of the British government’s sincerity and determination to deliver on its undertakings.
I pointed out that when Nissan was first considering investing in Britain in the early 1980s and I was British ambassador in Tokyo, Margaret Thatcher, the British prime minister at the time, became personally involved in the negotiations and did her best to persuade Nissan to make a commitment to invest in Britain. This was a crucial factor for Katsuji Kawamata, then the chairman of Nissan.
Among the assurances given to Nissan at that time was a firm commitment that Britain would work hard to ensure that the obstacles then existing against Japanese car exports to the European common market should not apply to Japanese cars made in Britain. Despite objections from such nations as France and Italy, Britain eventually succeeded in securing access to the European market.
Clark has so far refused, despite pressure from other manufacturers and parliamentarians, to provide details of the assurances given to Nissan, but one key element seems to have been a government guarantee to ensure that the British car industry will remain “competitive” even if the British government is unable to conclude a post-Brexit deal to preserve free trade for the automotive industry. He has made it clear that the guarantee given to Nissan will apply to other Japanese automotive manufacturers with investments in Britain, namely Toyota and Honda.
Clark has denied that he made any promises of compensation if, for instance, tariffs are imposed by the EU after Brexit on vehicles or costs rise as a result of impediments to the trade in automotive parts. He made it clear that the British objective “is to have continued access to the markets in Europe and vice versa without tariffs and without bureaucratic impediments and that is how we will approach those negotiations.”
Japanese investment in the U.K. car industry has been of great benefit to Britain. It has brought employment to areas where there was high unemployment and Japanese manufacturing know-how and quality control have been significant factors in the revival of an industry that was moribund. Japanese manufacturing investment has been a catalyst for industrial revival more generally and has given an important boost to British exports.
Japanese investment in Britain has also contributed to the profits and expansion of Japanese industry, which has been able to tap into British science and technology. British scientific research remains outstanding and cooperation between British and Japanese experts benefits both countries. It is difficult to see how the commitment to Nissan can be achieved if the Brexiters get their way and insist on a “hard” Brexit involving withdrawal from the single market and the customs union.
The alternative of a “soft” Brexit, however, will be difficult to achieve without at least some significant concessions on such issues as immigration and sovereignty in relation to at least some aspects of trade. The British government appears to be seeking a specially tailored deal, neither hard nor soft.
The government is sticking to its refusal to be drawn on its negotiating strategy in the talks, which they will have to undertake with the EU once Britain invokes Article 50 of the Maastricht Treaty and formally declares its intention to withdraw. This has led some cynics to wonder whether the reason why the government will not reveal its negotiating strategy is because the Cabinet has not yet agreed on the policy to be adopted and still has not worked out “how to square the circle” and “how to have their cake and eat it.”
This is unfair to May, who has a difficult task in balancing all the factors involved and in keeping her Brexiter “prima donnas,” including Boris Johnson, under control. But she has complicated her task by asserting her “red lines.” A key red line for her has been the demand for full British control over immigration and for significant reductions in net immigration.
Foreign and British companies operating in key industrial sectors fear that their operations would be seriously hampered by controls limiting recruitment of overseas staff. British universities increasingly rely on overseas students for a significant part of their funding. Recruitment from overseas is also necessary for the National Health Service and for the providers of care for the elderly. British agriculture and horticulture likewise require seasonal workers from overseas.
The assurances given to Nissan and extended to the automotive industry generally have inevitably led to demands from other industries such as pharmaceuticals and finance for similar arrangements. Pharmaceutical companies argue that their industry is highly export intensive and makes a significant contribution to the balance of trade. The financial sector in the City of London asserts that it has created more employment than the motor industry and plays a key role in the economy.
The fundamental question is: How can Britain achieve the sort of settlement with Europe, which will not only meet British concerns over immigration and sovereignty but also ensure free trade and an open and outward looking economy? Japanese investment in Britain and British good faith are dependent on a satisfactory settlement being reached.
Hugh Cortazzi served as the United Kingdom’s ambassador to Japan from 1980 to 1984.
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