Why Nobody Invests in Japan
Tokyo’s Failure to Welcome Foreign Capital Is Hobbling Its Economy
After years of wrangling since the referendum in 2016, the United Kingdom formally left the European Union at the end of January. “Leavers” were jubilant, claiming that the country had broken free of European “vassalage” and was now poised to rediscover its old strength. Many supporters see Brexit as a return to the proud traditions of British history. They invoke a national spirit of defiance and independence. Some compare Brexit with the country’s “finest hour” in 1940, when the United Kingdom stood “alone” against Nazi aggression. Recent movies such as Dunkirk and Darkest Hour reinforce that image of a United Kingdom standing tall and proud, defying the German juggernaut that had rolled across Europe. Conservative politicians have lauded the popular children’s book Our Island Story by Henrietta Marshall (first published in 1905 and still in print) for its heroic account of the United Kingdom’s past as a singular nation, taking on the world.
Prime Minister Boris Johnson and other Brexiteers like to think of the United Kingdom as that lone actor, bestriding the international stage. But the pro-Brexit, nationalist narrative misrepresents history. Brexit actually runs against a long-standing tradition of British foreign policy, which recognized that the United Kingdom’s vigor as a global player depended on European security and that the country could never afford to become isolated from the balance of power on the continent.
Even in the heyday of the British Empire, its leaders dared not take Europe for granted. At least since the Protestant Reformation in the sixteenth century, the country has worked to prevent the formation of a hostile bloc in Europe. That imperative meant using the United Kingdom’s wealth and manpower to build coalitions with like-minded states to frustrate would-be European hegemons. For its own security and prosperity, the United Kingdom always had to be immersed in European affairs.
The pattern of entanglement is clear if one bothers to contextualize some of those showcase moments from the nationalist narrative: the very events that Brexiteers use to spin a gloriously independent history actually highlight the necessity of the United Kingdom’s involvement in Europe.
Take, for instance, the defeat of the Spanish Armada in 1588. Our Island Story evokes Queen Elizabeth I addressing her troops ahead of the looming Spanish invasion: “I know I have the body of a weak and feeble woman; but I have the heart and stomach of a king, and of a king of England, too.” Bad weather and the English fleet thwarted Spain’s attempted invasion. But the story of the armada wasn’t simply one of England holding firm against a foreign foe. Elizabeth’s support, covert and then open, for the Dutch Revolt against Spain in large part precipitated the invasion. England hoped the Dutch rebellion would weaken the Spanish position on the coast of the English Channel.
More than a century later, in 1704, the English army fought alongside the Habsburgs near Munich and routed the forces of France and its allies at the Battle of Blenheim. The victory was one of England’s most celebrated, and its name lives on today at Blenheim Palace, a top tourist attraction in the United Kingdom. The battle was emblematic of how British leaders have pursued the national interest abroad—in this case, by waging war on the far side of Europe to check the French King Louis XIV’s bid for “universal monarchy.” In 1815, British forces vanquished Napoleon Bonaparte, another French autocrat bent on European domination, at Waterloo in Belgium. The British won the battle thanks only to vital support from the Prussians.
The cast list of allies changed over the centuries, but the script stayed the same: Britain remained deeply involved in European affairs.
The wars the United Kingdom fought in the first half of the twentieth century were similarly entwined with European affairs. In World War I, France was now the United Kingdom’s closest European ally in fending off a new would-be hegemon: Germany. Although British defiance in 1940 proved vital to frustrating Adolf Hitler, the total defeat of Germany was achieved only in partnership with the two emergent superpowers, the Soviet Union and the United States. And after 1945, the security of the United Kingdom depended on drawing the United States into a permanent Atlantic alliance with Western Europe against its wartime Soviet ally, now dominant in Eastern Europe.
Emerging from World War II a victorious nation and still a global force (even as it began to shed its colonial possessions), the United Kingdom stayed aloof for a while from the project of greater European integration. British policymakers deemed such efforts to be for “them,” not “us”—“them” being the defeated and occupied nations of Western Europe. But when six Western European countries successfully formed the European Economic Community in 1958 and embarked on further political cooperation, the mood in London changed abruptly, and the old diplomatic tradition kicked in. If current trends continued, an interdepartmental committee warned the cabinet in 1960, the EEC would become “the only Western bloc approaching the importance” of the two superpowers and “the influence of the United Kingdom in Europe, if left outside, will correspondingly decline.” Such diminishment would also likely damage London’s special relationship with Washington.
The United Kingdom took until 1973 to negotiate its way into the EEC, because of two vetoes by French President Charles de Gaulle. But the trigger for applying in 1961 was geopolitical, and the government’s reasoning followed the historic pattern of British foreign policy. The cast list of allies had kept changing over several centuries, but the script stayed much the same: the United Kingdom remained deeply involved in European affairs, both to preempt a European hegemon that might threaten its own security and prosperity and to build a platform of alliances for its ventures on the global stage.
Brexit runs against the historic pattern by trying to do the global without the European. The United Kingdom now leaves a European bloc numbering 450 million people and must try to hammer out a new trading relationship with the EU as one state against a group of 27, which, despite internal bickering, has so far maintained its unity. That gambit seems all the riskier as China has become more assertive since 2016 and the United States more isolationist.
The United Kingdom’s departure from the EU on January 31 is only the start of a long journey to an unknown destination. Until the end of 2020, the United Kingdom remains within the EU’s jurisdiction, but without having any say in EU decisions. During this transitional year, negotiators from the two sides are supposed to hammer out a new trading relationship. The issues involved are dauntingly complex, but Johnson has ruled out any extension of the transitional period beyond December 2020. Failure to reach agreement with the EU by the end of this year would precipitate the “hard Brexit” that British business dreads.
What’s more, Johnson has insisted that during 2020, the United Kingdom will also negotiate a trade agreement with the United States to prove that the British have escaped European vassalage. But U.S. President Donald Trump will drive a hard bargain, especially in this fevered election year. In any case, even Johnson’s government admits that a deal with the United States could at best increase the United Kingdom’s GDP by 0.16 percent. The EU remains far and away the United Kingdom’s largest trading partner in goods and services, accounting in 2018 for 45 percent of British exports and 53 percent of imports (the figures for the United States are 19 percent and 11 percent, respectively).
While trying to carve out new relationships with Brussels and Washington, Johnson must also guard his own rear, because in 2016 both Scotland and Northern Ireland voted to remain in the EU. He can now expect constant friction over Brexit with the Scottish nationalist government in Edinburgh. And he ended up having to accept a de facto customs border in the Irish Sea in order to secure the 2019 withdrawal agreement. That agreement effectively means that Northern Ireland must be treated differently from the rest of the United Kingdom, raising the prospect of future disunity.
As if all these problems were not enough, the world has plunged into a pandemic whose economic costs will be immense. On May 7, the Bank of England predicted a 14 percent fall in the country’s GDP in 2020, the sharpest annual contraction for over 300 years. So why does the United Kingdom want to shoot itself in the foot with the added disruption of a “hard Brexit”? Johnson, who had to be rushed to intensive care after he contracted COVID-19, the disease caused by the novel coronavirus, is now under pressure to relax his December 2020 deadline because of the virus. But his spokesmen keep insisting, to general disbelief, that the pandemic will not affect this timetable. Asking the EU for an extension would entail a humiliating loss of face for a leader who has built his political identity around “delivering” Brexit.
Johnson loves to present himself in a Churchillian mold: a charismatic patriot and a man of destiny. Undoubtedly, Churchill’s courage and obduracy were vital in the struggle against Nazi Germany, but they also got him into numerous messes during his career—his intransigent defense of British rule in India, for instance, and his romantic support for Edward VIII during the abdication crisis of 1936. Clement Attlee, then leader of the Labour Party, wryly noted the way Churchill “nails his trousers to the mast and can’t climb down.”
The current prime minister has nailed his trousers to the mast of Brexit. In the next months, he will have to decide whether to ride out the storm or trim his sails and change tack. But the course of Brexit already marks an important break in the history of the country. Johnson will not be restoring the United Kingdom to a former grandeur by taking it out of Europe. Instead, he’ll be turning his back on the hard-won wisdom of centuries of British foreign policy.