How Asia Views Brexit – OpEd

Asian countries were shocked at the June 2016 Brexit referendum result and since then have been struggling, along with the rest of the world, to try and understand the implications. The Japanese government was quick to issue a memo outlining the needs of Japanese companies. China was dismayed at David Cameron and George Osborne (the twin architects of the ‘golden era’ of UK-China relations) resigning. Many Chinese talked of ‘democrazy’ as they felt bemused at such an important decision for the future of the country being taken by a referendum. India was flattered that Theresa may chose India for her first overseas trip but made clear that there would be no trade deal without improvements in the visa scheme for Indians.

Asian investors, especially car manufacturers, had been attracted to the UK as an investment destination as the UK was part of the EU single market. If they were to face tariffs in future then this would have major implications for their investments.

China was quick to seek (and receive) assurances about the Hinckley Point nuclear deal. Many Chinese firms will remain interested in British assets, such as real estate, prestige brands and infrastructure, for their intrinsic value. Investment in these areas is likely to continue. But on political issues the Chinese are likely to look more to Berlin and Paris than London in future. Given the UK’s weakened position it is unlikely to stand up for human rights, whether in China or Hong Kong. It also desperately needs a trade deal with China to promote its ‘Global Britain’ strategy which means that the cards are stacked heavily in China’s favour.

The same analogy applies to India. Delhi has been dragging its feet on an EU-India FTA for some time. It understands the desperation of London for a trade deal and will thus exact a stiff price, if a deal can be struck at all. India and the UK are in competition over services and Delhi will not sign any agreement without a much more liberal approach on visas for Indian students and workers – something May strongly opposed as Home Secretary. If there is no progress on the sensitive visa issue, Delhi may seek British weaponry and support in its various disputes with Pakistan. Not an easy situation for London.

Japan has reacted strongly to the possible negative implications for its significant investments in the UK. Although a secret ‘sweetheart deal’ was agreed with Nissan in Sunderland other Japanese car companies have said that they would have to consider relocation to the EU if there was to be a tariff wall between the UK and EU. On the political side Japan hopes that the UK will pay more attention to the geo-political situation in NE Asia and support Tokyo in its disputes with China. There have been more military to military contacts between the UK and Japan and some joint weapons production but it is unlikely that the UK would take sides in any confrontation between the two Asian powers.

Korea had a similar reaction as Japan to Brexit concerning the large number of Korean firms in the UK. Most would prefer to stay under existing conditions but if there were to be tariffs between the UK and EU then many, including Samsung, would consider relocating to the EU. There were initially friendly noises from Seoul about a UK-Korea FTA but trade officials recognize that such a deal would be many years away and that negotiations could only start when the future EU-UK trade relationship was agreed.

For the countries of SE Asia grouped under the ASEAN umbrella the Brexit vote was a wake-up call regarding their own integration process. Having just agreed an ASEAN Economic Community they have no wish to see nationalist or populist forces seek to stop their own integration. Some ASEAN countries have individual FTAs with the EU and others are about to start negotiations. In addition there are prospects of an EU-ASEAN FTA trade deal. The ten ASEAN members will thus be reluctant, and many will simply not have the capacity, to launch further trade negotiations with the UK.

Conclusion

Brexit was a shock for Asia. It has led to considerable uncertainty about the future of their investments in the UK and raised doubts about the future of the EU project. But now, with a Macron victory in France and renewed growth in the EU economy, there is a recognition that the EU is here to stay. Asian countries will be constrained as to when they can start trade negotiations with the UK but when they do they will have by far the stronger hand. In an era of great powers, a diminished Britain will struggle to achieve influence in Asia. Most would agree with Chris Patten’s description of Brexit as ‘A Tragedy in One Act.’


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EU-Asia Centre

EU-Asia Centre

The EU-Asia Centre aims to fill a void and establish itself as the leading, Brussels-based research policy think tank on EU-Asia relations, covering developments in Asia and relations between the EU and Asia.

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