Theresa May is set for disappointment on her visit to Tokyo this week after Japanese officials signalled they would not rush into free trade talks with Britain.
The British prime minister, who is hungry for new trade agreements to show the benefits of Brexit, is expected to discuss a UK-Japan version of the deal Tokyo agreed in principle with the EU last month when she meets her Japanese counterpart Shinzo Abe. But Japanese officials say their priority is completing the deal with Brussels, while negotiations with Britain will be difficult until there is clarity about its future relationship with the EU. “I don’t think there will be substantial progress,” said one Japanese trade official. “We haven’t finished [free trade] negotiations with the EU, just agreed at the political level, and many issues still remain.” The official said the UK side was being “quite aggressive” in pushing for a commitment on a future trade deal with the world’s fourth-largest economy. Mrs May will argue that such an arrangement would be mutually beneficial. “We were big supporters of the EU/Japan trade deal and were engaged in negotiating it,” said one of Mrs May’s allies. “It would make sense for that deal to be replicated for us.”
However, Yoshiji Nogami, president of the Japan Institute of International Affairs, and a former ambassador to the UK, said: “We can’t negotiate until Britain is out of the EU. I think what Mr Abe wants to hear from the prime minister is where she hopes to land on Brexit.” RECOMMENDED Brexit free-trade illusions from the 19th century EU-Japan trade deal poses risks for post-Brexit UK Mrs May’s two-day visit, where she will be accompanied by a business delegation, comes as more Japanese companies begin discussions about moving their European headquarters from the UK to continental Europe. The first wave of moves involved Japan’s financial institutions, most of which have opted to establish hubs in Frankfurt and Amsterdam.
But as negotiations between the UK and Europe take shape, other Japanese trading houses and industrial companies have opened talks with European governments about shifting their bases from the UK, say lawyers and other advisers. “Now that the banks have worked out their strategies, there is a second wave of Japanese companies with European HQs in the UK currently looking carefully at their options elsewhere,” said one person familiar with the discussions of two major Japanese companies. Japanese companies are encountering strong inducements from rival European countries. Hitachi Rail, which took a controlling stake in the Italian rail group Ansaldo STS in 2015, is under pressure from Rome to move its European headquarters from the UK to Italy, according to Italian officials. Mrs May’s team believe that a transitional period between Brexit in 2019 and the entry into force of a new EU/UK trade deal would provide a period of up to three years in which to agree a new trade deal with Tokyo. In private, Mr Abe will urge Mrs May to minimise disruption for Japanese companies in the UK.
They are growing increasingly concerned about Britain’s plans to leave the EU customs union and single market. “We need transition arrangements so business has time to plan,” said a senior official of Keidanren, Japan’s biggest business organisation. “We want both sides to show flexibility, but in particular, we’d encourage the UK to recalibrate its basic position.” Many Japanese companies were encouraged to use the UK as a base to sell into the European single market by Margaret Thatcher in the 1980s. British ministers have been anxious to reassure them they are seeking to minimise the impact of Brexit. One minister said Japanese companies in Britain were treated as “home companies” and were fully involved in discussions about Brexit; companies including Honda, Nissan and Toyota have signalled their commitment to the UK in recent months. Nissan, which operates a large plant in Sunderland, was given personal assurances by Mrs May in October that the plant would not be affected by Brexit.
