Japanese Government Tells Brexit It Like It Is

Japan - Land of Rising Sun and Plain Speaking About Brexit

The most misleading arguments are those that are true most of the time but don't cover the full picture.  Gravity is a pretty good theory and generally a good guide to action.  But it doesn't cover balloons and aeroplanes.  One of the arguments that Brexit won't be that big a deal is that we'll still want to trade with Europe, and Europe will still want to trade with use.   Trade benefits both parties - so where's the problem?  We don't need to be in the EU to trade.
Well it is true enough most of the time.  We'll still export Scotch and import Beaujolais.  But international trade is a bit more complicated than that.  Take cars for instance.  We export a heck of a lot of cars.  We import a heck of a lot of cars.  In fact very few cars driven in Britain and built in Britain.  In the global car industry Britain has its niche that works well.  Brexit is inevitably going to upset the balance in these international markets.

This has been made very clear by a document produced by the Japanese government in response to Brexit.  Japanese car companies find the UK a very convenient gateway into the European market.  This isn't out of affection for Britain - it's a calm and considered judgement.  There are a lot of factors that affect this, but a big one is Britain's relationship with the EU.  If the EU puts a tariff on British produced cars, that is a problem for the Japanese.  Given the long lead times in that business even the possibility of tariffs is a problem.  Free movement of labour is another issue.  If British car plants have less access to skilled workers then that is a big disadvantage.  The much discussed points based immigration system is specifically proposed to reduce the ability of particular types of worker to work anywhere in the EU.  Again, it doesn't actually have to be implemented in such a way to actually damage the car industry.  The mere threat is enough.

The Japanese car industry has a lot of capital invested in the UK and it won't find it easy to up sticks and move.  But it is clearly considering it.  We may not see headlines about car plants moving abroad. But it is very possible that future investment will be lower than it would otherwise be.

The car industry is probably the one that is most integrated and most vulnerable to a poorly negotiated exit deal.  But the same kind of thing occurs in lots of other contexts.  I am working on a deal at the moment that involves bringing in some goods from outside the EU, doing some work on them and then selling them in the EU.  The work is being done in the UK, but it would take only a small tariff to make it unprofitable.  (Or rather to make it more profitable to do it in an EU country.)

The world is a complicated place and there are probably opportunities around from being outside the EU as well.   I can't think what they are, but I don't doubt they exist.  The only trouble is I do doubt whether they are going to be enough to balance what might be lost.  The safest strategy is to negotiate to keep our new relationship with the EU as close as possible to our existing one.  I have a feeling that wasn't what the outers voted for.

http://www.2br.co.uk/news/world-news/2085361/japans-unprecedented-warning-to-uk-over-brexit/