Having watched Japan in trade negotiations with the United States for more than a quarter century now, I would never have described the Japanese approach as direct. When confronted with a difficult trade negotiating problem, they always tended to obfuscate, delay and otherwise try to muddy the waters.
So it is rather astonishing, and refreshing, to see Japan emerging as the most courageous and articulate opponent of the new Donald Trump and Theresa May style of economic nationalism. Rather than trying to hide from the spotlight, Japan has been surprisingly forthright in challenging the facts and perceptions of the new nationalists, and forcing them to confront some of the logical and factual inconsistencies in their positions. With Trump poised to take office, both U.S. allies and multinational companies that do business in the United States and abroad should be paying close attention, and emulating Japanese leadership.
Three actions especially stand out. The first was the government of Japan’s surprisingly blunt intervention last fall on the issues at stake in Britain’s pending exit from the European Union. While the UK government of Conservative Prime Minister Theresa May seems to be inching ever closer to a “hard Brexit” that severs the UK’s link to the European common market, the operative policy is still the “having our cake and eating it too” approach, in the famous words of Foreign Secretary Boris Johnson.
But the 15-page memo from Japan last September – titled “Japan’s Message to the United Kingdom and the European Union” – was clearly intended to snatch away the dessert. In diplomatic language, Japan warned that a poorly-managed Brexit would have real costs for the UK. It noted that Japanese businesses had created some 440,000 jobs in Europe, with nearly half of Japan’s direct investment going to Britain. It laid out a clear Japanese wish list for Brexit: no new customs duties or restrictions, unfettered investment, free movement of financial transactions across borders, access to workforces with the necessary skills, and harmonized regulations between the UK and EU.
It called on the UK and EU to “heed such requests to the fullest extent…. so as to remain an attractive destination for doing business.” In other words, maintain something very close to the current economic framework in Europe or watch Japanese investment dry up. That tough and pointed message was badly needed at a time when May and other UK leaders are trying to persuade the British people to believe that leaving the EU will restore the full measure of British economic sovereignty with no costs to the economy. The global economy, the Japanese were politely noting, does not actually work that way.
The second example was the decision by Japanese Prime Minister Shinzo Abe to move ahead with ratification of the Trans-Pacific Partnership trade deal despite Donald Trump’s promise to pull the United States out of the agreement. Abe was not trying to pick a fight with Trump – indeed he was the first foreign leader to meet directly with the president-elect after Trump’s election. But instead of falling in line with Trump’s opposition to the TPP, Abe shepherded the deal through the Japanese parliament just days after his meeting with Trump.
“Japan’s population is declining. If Japan is to maintain growth, it has to tap into Asia, which has a growing population and an expanding market,” Mr. Abe said when the deal was ratified. The message to the United States was clear – Japan is going to continue moving forward on trade, including participating in the Chinese-led Regional Comprehensive Economic Partnership, whether or not the United States remains at the table. The United States is welcome and encouraged to return, but others will not stand still. It is a message the Trump administration needs to hear.
The final example was the reaction by Toyota Motor Corporation – Japan’s most important company – to finding itself on the receiving end of one of Trump’s Twitter bombs. To be clear, Toyota is not the Japanese government – it is a sophisticated, global multinational company that carefully tends its relationships with dozens of governments around the world. But having watched Toyota maneuver during trade disputes going back to the early 1990s, I again would never have described its approach as direct.
That is until Donald Trump unleashed one of his trademark Twitter blasts on the company January 5, writing “Toyota Motor said will build a new plant in Baja, Mexico, to build Corolla cars for U.S. NO WAY! Build plant in U.S. or pay big border tax.” Toyota’s shares immediately fell, as did those of other Japanese carmakers.
Faced with similar bullying, other companies – including Ford, General Motors and Carrier – quickly backed down, promising to alter investment plans to respond, or at least be seen as responding, to the president-elect’s bluster. Not Toyota. Instead, it immediately issued a statement that began with a factual correction, noting that the planned new factory was “actually in Mexico’s Bajio region, not Baja.” The company pointed out that all models of the current Toyota Corolla are built in either Mississippi or Ontario, Canada; the new $1 billion factory in Mexico will displace Canadian, not American, production. And the company noted that it “has $22 billion invested in the U.S., which includes 10 manufacturing plants and 1,500 dealerships that employ a total of 136,000 workers.” It went on to say: “Toyota looks forward to collaborating with the Trump administration to serve in the best interests of consumers and the automotive industry,”
There was no promise to change investment plans, no pleas for Trump’s forgiveness. It was a clear, firm and factual response. And Trump’s Twitter feed went silent.
The lesson from these incidents is that facts are the best weapons, and that America’s allies, and its leading companies, should not hesitate to speak up. For months now, before and following his election, Trump has dominated the political and economic debate in the United States, and will only be emboldened further when he occupies the Oval Office. America’s friends need to stand up to him, and Japan is showing the way.