Asia must learn from Brexit chaos

With negotiations floundering over Britain’s imminent departure from the EU, Humphrey Hawksley reflects on the lessons that Asia can take from a continent in flux

Once a confident nation that ran an empire on which the sun never set, Great Britain is today a fractious place, split within families, villages, Parliament and from cabinet post to cabinet post.

Meanwhile, many in Asia are shaking their heads, wondering what is going on and how much they should care about or plan for unpredictable outcomes.

Nearly three years after the UK’s referendum to leave the European Union, the issue of Britain’s place in Europe and the world remains far from decided. Both the fine-print of negotiations and aspirational rhetoric have a long way to go before the nation once again feels comfortable with itself.

The world’s biggest trading bloc, the European Union is also a political experiment in creating an umbrella of shared values over nations that have routinely been at war. Britain’s decision to leave has had an immediate impact on its international reputation, its domestic politics and on the EU itself.

By watching closely, Asia could learn much about how far to go with its own regional institutions and the risk and opportunity in any integration that attempts to go beyond trade to impinge on sovereignty and government.

At the heart of the Brexit debate are two irreconcilable truths. First is that a critical mass of British voters no longer wish to live under what they view as control by powers outside their borders. The second is that the ease of trade that the EU offers had led to higher standards of living.

Britain’s conundrum is to find a balance between these two forces. Similar debates simmer within Asian institutions such as the Association of South East Asian Nations, the South Asian Association for Regional Cooperation, the China-led Shanghai Cooperation Organisation and others, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, newly named after the United States withdrew.

All of these seek in some way to establish a workable balance between trade and politics and, until a few years ago, they had looked to the EU as a study in forging trans-national agreements between regional sovereign governments.

But now, with increased nationalism, separatism and authoritarianism, the EU’s model template is fractured while Britain has yet to prove itself a successful example of what becomes of a nation that wants out.

This is where Asia plays a crucial role. It is home to numerous emerging economies and three global powers with which Britain will have to increase its trade if it is to show voters it can replace what it has lost from the European single market.

China, India and Japan all have substantive investment in Britain and each views Brexit through a different prism.

Beijing is calculating that both the EU and Britain will be more dependent on it

Shortly after the referendum, Japan made an unusual intervention with a detailed letter to the British government, outlining what was needed to retain business confidence – essentially staying in the European single market.

A Japan-EU trade agreement is coming into force this month and has taken seven years to negotiate. Once out of the EU and single market, Britain will be excluded. Japanese diplomats say it would take several years to finalise a separate bi-lateral agreement.

Britain used to absorb about 40 per cent of all Japanese investment into Europe and it hosts more than a thousand Japanese-funded companies. Most have been freezing investment while waiting to see what will happen.

‘If you are proposing in your board meeting in a company that you need to invest more and build more cars in the UK today there will be questions,’ says the Japanese ambassador to London, Koji Tsuruoka. ‘Those are questions that are very difficult to answer with certainty and therefore decisions are put off.’

India is in a similar situation. In Britain, there are about 800 Indian companies, including the Tata Group, which is the country’s biggest employer. Like their Japanese counterparts, they are playing a waiting game with their cheque books temporarily closed.

Britain has made no secret of its attempt to court India’s favour. Prime Minister Theresa May chose Delhi for her first overseas trade mission in 2016. It went badly because of her hard line on immigration. India made clear then that it wanted freer visa access. But, given that a core Brexit issue is immigration, Britain would be hard-pressed to comply.

Britain has made India central to its plan for reform of the Commonwealth and, in a surprise turn, its newly appointed Cabinet Secretary, Sir Mark Sedwill, even left London at the height of Brexit arguments in January to fly to the Raisina Dialogue conference.

‘Sedwill’s decision not to cancel shows how desperate Britain is to keep in favour with its old colony,’ says South Asia political analyst John Elliott.

The fastest trade deals a post-Brexit Britain would be able to strike are with those countries that already have a deal with the EU. Unlike with Japan, an EU-India trade agreement is nowhere close. Talks began back in 2007 but were slowed in 2013 because of too many disagreements.  It is difficult to see how Britain could agree one in the near future with India

Cabinet secretary Sir Mark Sedwill at January’s Raisina Dialogue in Delhi
Cabinet secretary Sir Mark Sedwill at January’s Raisina Dialogue in Delhi

For India and Japan, Brexit is mostly an inconvenient business and trade issue. For China, however, it takes on wider political dimensions.

A Europe fractured by internal issues is seen as fertile hunting ground for Chinese money and political influence. Chinese investment has flooded in since the 2008 financial crisis and Beijing sees Europe as an intrinsic part of its global infrastructure building Belt and Road Initiative.

According to the European Council for Foreign Relations, Chinese scholars expect that Brexit will weaken the EU’s position on its own values, leading to a softer European posture on Chinese human rights abuses.

Some evidence of Beijing’s success is seen through a Beijing-sponsored trade grouping of poorer Eastern and Central European countries set up in 2012. Known as the Sixteen Plus One, some of its governments are openly veering towards more authoritarian systems of government that challenge EU values.

Asia has long experience of the pain that can arise from unpredictable political change

In short, Beijing is calculating that both the EU and Britain will be more dependent on it and, therefore, more accepting of its non-democratic system of government.

Yet with that comes a paradox. While Britain is courting Chinese trade, it is also challenging Beijing by increasing its military presence in Asia. It has made a point of deploying its navy close to China’s new bases in the South China Sea, drawing a sharp rebuke from China, and there is talk of building a British base in either Singapore of Brunei.

From Japan to Singapore to Delhi, Asia has long experience of the pain and challenge that can arise from unpredictable political change. Now, from its distance, it can see how Brexit is playing out among former colonial powers.

Questions about sovereignty, wealth distribution and government control are universal ones. When they are dealt with badly, the consequences can be lethal.  For the moment, at least, Asia has the opportunity to watch and learn from Europe.

Humphrey Hawksley is a former BBC Asia Correspondent. His latest book is Asian Waters: The Struggle Over the Asia Pacific and the Strategy of Chinese Expansion

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