Brexit, Japan, China

At the G20 summit in September, Japan handed over a strongly worded message to the representatives of the United Kingdom. If the UK’s withdrawal does not move forward smoothly, it will cause major disturbance to the world economy. The European integration has great importance outside the continent as well: the integration, deepening for decades, appears as a model for different regions. What future will Brexit cast on Asia? How will Japan and China choose their strategies to maintain European relationships?

The world was badly shaken by the referendum of the United Kingdom on withdrawing from the European Union. It is especially true for East Asia, where the outcome of the vote caused quite a stir. This analysis intends to highlight why the Japanese government reacted so sharply, what the Japanese expect from Brexit, and whether their concerns have proven to be true since then.

It is important to have a look at the Chinese opinion, too, since Japan evaluates the implication in the light of its regional rival. The appearance of the great Asian competitor is an important factor in Japan’s European policy, since China has already surpassed the European presence of the country regarding economic partnerships. Therefore, it is important for Japan’s foreign policy to find common ground to raise the importance of its partnership with the Union.

After the analysis of the document issued at the G20 summit the current Japan-EU, and more specifically, Japan-UK relationships are scrutinized, and then these relationships are also examined from China’s perspective. The comparison of the East Asian and the European integration forms an important part of the context of relationships.  Then the short- and long-term consequences of the referendum and the future prospects for Asia are discussed.

Message of the G20 Summit

The Japanese delegation prepared a specific message to the British and the Member Countries of the EU for the G20 meeting. The Ministry of Foreign Affairs penned a rather dire letter, reflecting how alarmed Japan was by the possibility of Britain’s withdrawal from the EU. Japan was not the only country to voice this opinion. At a press conference with Theresa May, Barack Obama also expressed open criticism.

It is in the interest of the entire world that Japan, the EU and the United Kingdom will share the responsibility to be the leaders of the free trade system. It is enhanced by a particular step: they announced to reach agreement in principle on the Japan-EU Economic Partnership Agreement (EPA) during 2016. They call upon the UK to actively participate in the process; it is a kind moral obligation, keeping their given word.

They regard uncertainty extremely harmful to the economy, therefore they wish to see the transition as a transparent process. A considerable number of Japanese businesses operating in Europe are concentrated in the UK, and they informed the Japanese government of a variety of requests. Uncertainty concerns the smooth flow of duty-free trade, investments, services and financial transactions and harmonised regulations and standards.

There is a considerable number of Japanese businesses operating in the United Kingdom, and nearly half of Japanese direct investment intended for the EU in 2015 flowed to the UK. The fact that other countries in Asia as well as of Japan are major trading partners also constitutes a reference. They refer to the fact that a number of Japanese businesses were invited by the British government and these companies, exploiting their opportunities, have established value-chains across Europe, and upsetting the entire system would not be regarded ethical at all. The Ministry of Foreign Affairs warned Britain that its banks, pharmaceutical companies and car manufacturers may leave the UK if Brexit happens and leads to the loss of tariff-free trade.[i]

The Japanese government attached to the document a list of their detailed requests ranging from the most general issues focusing on transparency to the measures targeting the free flow of factors of production and characterizing the basic values of the Union.[ii] If it would completely be adopted by Britain and the European Union, it would suppose almost completely unchanged economic circumstances before the withdrawal from the EU, and evaluate Brexit as such a provision that is only applicable to political institutions.

Relationships between Japan and the EU

Shared values, such as democracy, respecting human rights, the rule of law and market economy have a prominent role in the relationship between Japan and the European Union. These values serve as a reference base for the Asian country when speaking about he importance of maintaining cordial relationships. The rhetoric built along values, however, does not imply a closer political cooperation on behalf of either parties.  Although Japan has been a partner of the European Union since the beginnings of the organization, European countries do not usually place to much emphasis on a better understanding of the country and incorporating this knowledge into political decision-making. Political partnership often does not match the level of economic partnership, despite the fact that the “old Japanese paradox” of Japan being economic giant and a political dwarf is outdated.[iii] There are remarkable similarities in the way Japan is perceived across Europe: as a trustworthy partner, a defender of international order.

“Since Japan loses his role of being the number one Asian strategic partner, they hope they will be back on the agenda in the Union after Britain’s withdrawal.”

The reform of Japan’s military is received relatively positively across Europe and seen as a rational adaptation to a changing balance of power in Asia.[i] China is concerned about the initiative of the Abe administration, regarded excessively right-wing and entailing an amendment to the constitution. The military dimension may provide a new context to intensify Europe-Japan relations. For Japan, the expansion of the relations is also important because new ways would open to become independent from American military defence.  For the future of the relations, enhancing cooperation within international organizations would be favourable. The close Europe-Japan cooperation at the UN on the situation of human rights in North Korea has set a precedent.[v]

Economic relations

In 1987, the EU-Japan Centre for Industrial Cooperation was set up as a cooperation between the European Committee and the Japanese government. It still has an important role in conducting technological transfers as well as scientific and technological collaborations. Within this context, special attention should be paid to the relations between Japan and the United Kingdom. Britain regards Japan as an important economic partner, especially as the importer of high-tech and high-quality goods.

The first reaction after the referendum was disappointment, which especially seemed to jeopardize their hopes expressed at the G7 summit organized by Japan in May this year. In 2016, they seek to fulfil their aim expressed towards Britain, Germany and the EU to become an economic partner in 2016, and by now, initial insecurity has been replaced by the self-confidence demonstrated also in the message penned in September.[vi]

China has its say

China has been a major partner to the European Union for years. The EU replaced the United States as China’s biggest trading partner in 2006: Sino-European trade exceeded the Sino-U.S. trade volume by some 5.7 billion dollars.[vii] European companies such as Airbus, Siemens, Nokia and Volkswagen, made the EU the fourth largest investor in China, it was revealed at the second Hamburg Summit – “China meets Europe” in 2006.

Regarding today’s economic relations, China and the EU are each other’s biggest source of imports, and China, with its dynamically growing purchase power, is becoming an increasingly important market for Europe. The EU records a significant trade deficit with China, due to, in part, global and Asian value chains, and in part to remaining market access barriers in China.[viii] China’s role as a partner also continues after a successful economic restructuring and the accommodation to the new normal of growth pace.

It is especially true in the case of the United Kingdom. During Xi Jinping’s visit in 2015, considerable results were achieved regarding deals on nuclear power, and the atmosphere of the meeting was much more cordial than the former visit to the USA. During the visit, the parties signed deals worth 40 billion pounds, for example, China will hold a one-third stake in Britain’s new nuclear plant.[ix] The two countries declared to form global comprehensive strategic partnership for the 21^st century, and, regarding the result achieved, they talked about the new “golden era” of Britain-China relations.[x] However, the Chinese partners pointed out their expectations from the British several times: in September, 2015, Xi Jinping told David Cameron he wanted to see a united European Union, and Foreign Minister Wang made a similar statement in May this year, when a China-EU free trade deal was negotiated.[xi]

Since the crisis and the indebted countries of the Eurozone put a heavy burden on the British, it was especially important to settle relations with China positively. The deals, however, were not favourable only for the country but promising for the entire European economy.

East Asia and the European integration

Japan’s interests promote the integration of Europe, but the question arises:  what do other countries in the region think about integration? Is there any sign that the European integration model is a shared value?  We will now examine what East Asia thinks of the European integration and the integration in their own region, and we will look at the potential implications of Brexit in this context.

The Asian financial crisis in 1997 drew attention to the economic interdependency of East Asian countries. The difficult situation made the countries realise that they needed more profound regional integration in order to avoid similar problems. And a successful example, the case of the European Union, was an obvious model for integration.[xii] The integration, however, was pursued completely differently, because of the characteristics of internal policies; a so-called “open” or “soft” integration started, centred around the Japanese economy.[xiii]

Integration primarily meant aligning financial sectors, which also created the base for tightening political relations in the future. The EU, however, cannot be a complete model for integration, given the different historical backgrounds of the two regions, and their past lacks an effect to promote. In addition, the principle of non-interference in internal affairs on which ASEAN countries and other countries in the region in general focus will remain an obstacle to influence each other’s policymaking,[xiv] and will further promote bilateral relations.

The integration of the European Union adopted an institutionalized model, which will not take place in the Asia any time soon, considering the current circumstances in the region.[xv] Today, Asian integration can be best described as market-driven integration, which does not regard institutionalised political integration necessary.  While in the 1980s, these aspirations centred around the Japanese economy, today China has taken this role. China is more open to free trade deals, especially if they involve a reduction in the duties of agricultural products. It would be especially advantageous for significant exporters, such as Vietnam and Thailand, to promote their economic integration.

The question what arguments, apart from economic considerations, exist in favour of further Asian integration arises. These include tackling such problems in the region as poverty, environmental pollution, and securing a sustainable supply of energy, since East Asia is anticipated to be the largest net importer of crude oil by 2020.[xvi] The prevention of crises could have a greater role: with controlling short-term capital flows, the incidents similar to the 1997/1998 Asian financial crisis could be eliminated.[xvii] As opposed to official institutions, integration can possibly be pursued through networks, making use of interpersonal relations; however, former crises very clearly showed the limits of the Asian “network-style” integration strategies.

The Aftermath of Brexit

Without achieving integration, East Asia is much more dependent on other regions, such as the USA and the European Union. The situation is aggravated by the wavering of the European integration. China would like to see its most important commercial partner’s integration process further develop, and, as Lu Kang, director- general of the information department of the Chinese Ministry of Foreign Affairs said, his country still welcomes the advancement of European integration.[xviii]

For China, one of the possible consequences of the British withdrawal is a setback of its commercial relations, which have been thriving in recent years.  In the period between 2009 and 2012, China’s export volume to the United Kingdom increased by 47.9 percent, and the view in Beijing is that the UK will only be a potential commercial partner outside the EU single market.[xix] Increasing Chinese investment in the UK would be reversed too, since the UK’s independent monetary system and stable regulatory market mechanisms make it an appealing destination within the larger European market, which would quickly vanish if customs have to be paid, especially, because the UK’s role is being a gateway to the European market.[xx]

An advantage of the country is that its ideals about free trade deals have remained unchanged and they hope the cooperative British will not abandon their initiatives. However, regarding the fact that Britain has not independently implemented any trade policy for 43 years, bilateral trade agreements will require extra efforts.

Post-Brexit prospects

China may become the centre of East Asian integration if Japan is not willing to play a leadership role. Since Chinese economy became the world’s second largest economy in 2010, exceeding Japan, Chinese economic growth has been serving Japanese interests too. Economic integration is definitely important for the region, and in the future, Japan should pay special attention to the further integration of China, representing a huge market, into the international community of which Japan has been a member for quite a while.

In fact, this leads to Japan’s greatest concern and, at the same time, greatest opportunity too. Since Japan loses his role of being the number one Asian strategic partner, they hope they will be back on the agenda in the Union after Britain’s withdrawal. Regarding the recent implications of the UK-China relations outlined above, we can conclude that Japan, despite its economic interests, is no match for the offers of the Chinese partnership. Today, China’s role in Asia is more important than that of Japan, as an important partner in foreign policy, since it pursues protectionism, and has serious economic problems. In addition, as an ally of the USA, its future has become even more insecure, and there are doubts whether the next presidency will continue to provide defence to maintain the status quo in East Asia.

Speaking about the Asian status quo, another viewpoint arises: apart from the economy, what other changes will Brexit bring about to this status quo? Yuichi Hosoya, a professor at Keio University, who has participated in the amendment of the Japanese constitution to reform the military, expects changes in Asia’s security due to Brexit. The researcher thinks the new situation may affect the South China Sea disputes, since the British, now becoming independent from the Union, have joined the Asia Infrastructure Investment Bank, which, though voluntarily, Japan and the USA have refused to join to date.[xxi] Their interests, including already existing ones in energy supply, indicate that the UK will opt for China in the future, which may mean a weaker alliance between G7 countries.

China is still a firm supporter of European integration, and for this, it is ready to seek new partners within the Union. One example is the summit held in Riga in November, with the participation of Central and Eastern European countries and China, as part of the so-called “16+1” concept. Premier Li Keqiang highlighted that China particularly counts on this region to manage its European relations, especially the Belt and Road initiative.[xxii]

 No one can tell whether Japan will have a similar  strategy focusing on a smaller unit in the future, or it will regard the whole of the EU and its central organs as a primary partner.

Summary

One of the expectations about Brexit is that Japan can establish a better relationship with the rest of the European Union. The policy based on shared values has particular importance: the British, leaving the EU, will withdraw from the integration determining the European economy, and causing turmoil may be regarded as upsetting the system of values. China, however, will continue to handle Great Britain as a distinguished partner, due to the economic relations, and Japan can enter this empty scene.

They should continue to pursue an international policy based on shared values, and as many interfaces must be sought as possible. The role of regional integrations remains decisive in the 21th century, since historical examples demonstrated that this is one of the most effective ways of preserving political and economic stability. Japan still hopes the British will not refuse the integration and further support the peaceful operation of the Union.

Forrásjegyzék

• Berkofsky, Axel: Comparing EU and Asian Integration Processes – The EU a role model for Asia? European Policy Center: EPC Issue Paper 23. 2005. január 18. http://www.epc.eu/documents/uploads/606968147_EPC%20Issue%20Paper%2023%20EU%20Asian%20Integration.pdf
• Casarini, Nicola (2008): What Role for the European Union in Asia? An Analysis of the EU’s Asia Strategy and the Growing Significance of EU-China Relations. In: Current Politics and Economics of Asia. Volume 17, Issue 1, pp. 59-82. http://profile.nus.edu.sg/fass/polwongr/2008%20RW%20in%20CPEA%2017(1).pdf#page=63
• China wants more European integration ahead brexit vote. In: Breitbart. 2016. május 26. http://www.breitbart.com/london/2016/05/26/china-wants-european-union-integration-ahead-brexit-vote/
• Duchatel, Mathieu: The new Japan paradox. In: European Council on Foreign Relations. 2015. december 7. http://www.ecfr.eu/article/commentary_the_new_japan_paradox5044
• EU replaces U.S. as biggest trading partner of China. Embassy of the People’s Republic of China int he United States of America. 2006. 09. 15. http://www.china-embassy.org/eng/xw/t272113.htm
• Feng, Zhongping: Brexit has little impact on China-Europe Cooperation. In: China U.S. Focus. 2016. július 21. http://www.chinausfocus.com/foreign-policy/brexit-has-little-impact-on-china-europe-cooperation
• Frontini, Andrea: Advancing the EU-Japan strategic partnership in a transforming global environment: challenges, opportunities and prospects. European Policy Center. Policy Brief. 2016. március 3. http://www.epc.eu/documents/uploads/pub_6363_eu-japan_strategic_partnership.pdf
• Hosoya, Yuichi: Asia and the liberal international order, post-Brexit. In: The Strait Times. 2016. augusztus 26. http://www.straitstimes.com/opinion/asia-and-the-liberal-international-order-post-brexit
• Hu, Yongqi: Premier Li: China is a Firm Supporter of European integration. In: China Daily. 2016. 11. 06. http://www.chinadaily.com.cn/world/2016liattendsSCOCCEEC/2016-11/06/content_27288347.htm
• .. and the UK. In: European Council on Foreign Relations. 2015. december 2. http://www.ecfr.eu/article/commentary_japan_and…the_uk
• Japan’s Message to the United Kingdom and the European Union. http://www.mofa.go.jp/files/000185466.pdf
• Mie, Ayako – Thomas, Beatrice – Osumi, Magdalena: Brexit Could Hamper Japan’s Efforts On Eu Deal: Analysts. In: The Japan Times. 2016. június 24. http://www.japantimes.co.jp/news/2016/06/24/national/brexit-hamper-japans-efforts-eu-deal-analysts/#.WD87BbLhDIV
• Möller, Almut – Oliver, Tim (szerk.): The United Kingdom and the European Union: What would a „Brexit” mean for the EU and other States around the World? DGAPanalyse. September 2014. No. 16.
• Session III Regional Cooperation: Relevance of EU Model to East Asia? http://www.nira.or.jp/past/newse/paper/japan-eu/html/06.html
• Swinford, Steven – McCann, Kate: G20 Summit: Japan warns it will take banks and car makers out of UK – unless it gets Brexit trade deal. In: The Telegraph. 2016. szeptember 4. http://www.telegraph.co.uk/news/2016/09/04/g20-summit-us-president-barack-obama-says-britain-was-wrong-to-v/
• Tian, Shaohui: Big power diplomacy: China, Britain enhance trust and trade. In: Xinhuanet. 2015. 10. 26. http://news.xinhuanet.com/english/2015-10/26/c_134751864.htm

Jegyzetek:

[i] Swinford, Steven – McCann, Kate: G20 Summit: Japan warns it will take banks and car makers out of UK – unless it gets Brexit trade deal. In: The Telegraph. 2016. szeptember 4. http://www.telegraph.co.uk/news/2016/09/04/g20-summit-us-president-barack-obama-says-britain-was-wrong-to-v/

[ii] Japan’s Message to the United Kingdom and the European Union.

[iii] Duchatel, Mathieu: The new Japan paradox. In: European Council on Foreign Relations. 2015. december 7. http://www.ecfr.eu/article/commentary_the_new_japan_paradox5044

[iv] Duchatel, 2015.

[v] Japan… and the UK. In: European Council on Foreign Relations. 2015. december 2. http://www.ecfr.eu/article/commentary_japan_and…the_uk

[vi] Japan’s Message to the United Kingdom and the European Union.

[vii] http://www.china-embassy.org/eng/xw/t272113.htm

[viii] China –  Countries and regions. European Commission. http://ec.europa.eu/trade/policy/countries-and-regions/countries/china/

[ix] Tian, Shaohui: Big power diplomacy: China, Britain enhance trust and trade. In: Xinhuanet. 2015. 10. 26. http://news.xinhuanet.com/english/2015-10/26/c_134751864.htm

[x] Tian, 2015.

[xi] China wants more European integration ahead brexit vote. In: Breitbart. 2016. május 26. http://www.breitbart.com/london/2016/05/26/china-wants-european-union-integration-ahead-brexit-vote/

[xii] Session III Regional Cooperation: Relevance of EU Model to East Asia? http://www.nira.or.jp/past/newse/paper/japan-eu/html/06.html

[xiii] Berkofsky, Axel: Comparing EU and Asian Integration Processes – The EU a role model for Asia? European Policy Center: EPC Issue Paper 23. http://www.epc.eu/documents/uploads/606968147_EPC%20Issue%20Paper%2023%20EU%20Asian%20Integration.pdf

[xiv] Session III Regional Cooperation: Relevance of EU Model to East Asia? http://www.nira.or.jp/past/newse/paper/japan-eu/html/06.html

[xv] Berkofsky, 2005.

[xvi] Berkofsky, 2005.

[xvii] Berkofsky, 2005.

[xviii] Hosoya, Yuichi: Asia and the liberal international order, post-Brexit. In: The Strait Times. 2016. augusztus 26. http://www.straitstimes.com/opinion/asia-and-the-liberal-international-order-post-brexit

[xix] Möller, Almut – Oliver, Tim (szerk.): The United Kingdom and the European Union: What would a „Brexit” mean for the EU and other States around the World? DGAPanalyse. September 2014. No. 16.

[xx] Möller – Oliver, 2014.

[xxi] Mie, Ayako – Thomas, Beatrice – Osumi, Magdalena: Brexit Could Hamper Japan’s Efforts On Eu Deal: Analysts. In: The Japan Times. 2016. június 24. http://www.japantimes.co.jp/news/2016/06/24/national/brexit-hamper-japans-efforts-eu-deal-analysts/#.WD87BbLhDIV

[xxii] Hu, Yongqi: Premier Li: China is a Firm Supporter of European integration. In: China Daily. 2016. 11. 06.  http://www.chinadaily.com.cn/world/2016liattendsSCOCCEEC/2016-11/06/content_27288347.htm