Nissan Dilemma

Britain's Brexit Promises No Bad Thing

  • Why it matters

    Why it matters

    By making private concessions to car maker Nissan, the British government has opened itself up to blackmail from big business and given a significant signal as to its negotiating position with the E.U.

  • Facts

    Facts

    • The British government gave a “last-minute written promise” to Nissan to protect the company from Brexit consequences.
    • The promises indicate that the British government believes it will be able to maintain access to the European single market.
    • Although the Nissan promises have been criticized, they have bought the British government time.
  • Audio

    Audio

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A worker is seen completing final checks on the production line at Nissan car plant in Sunderland
Nissan makes hundreds of thousands of cars in the UK. Source: Reuters

No matter what you do, you’re doing it wrong: That’s an idea the British Prime Minister, Theresa May, was forced to come to terms with over the past few days. A heated debate was raging in Parliament, the opposition was up in arms and there was criticism from all sides. But amid all the infighting, there was “fantastic news”, Ms. May said: Japanese carmaker Nissan would continue to invest in Great Britain.

Brexit or no Brexit, the firm will be producing two important car models in the country in the future. This secures almost 7,000 jobs in the northeast of England, a region hard hit by the decline of the mining and ship-building industries.

But the celebrations were short-lived when it was revealed that the British government had made certain concessions in a letter to Nissan to keep them sweet. Apparently London had assured the Japanese they would have no disadvantages to fear from Brexit, even if the exit from the European single market hasn’t yet been negotiated.

There was widespread indignation when the government refused to give in to calls from the opposition to reveal the details of those assurances. And now other companies have been inspired to try and claim similar advantageous conditions for themselves.

The British prime minister has secured jobs and calmed important investors. To do that, she made promises that she may not be able to keep.

It was a classic dilemma for a politician: Save thousands of jobs with the concessions made to Nissan, which opens the situation up to further attempts at blackmail. Or make no concessions and risk the departure of important investors.

The British prime minister settled on the former. Despite everything that came afterwards, it was the right decision.

The list of criticisms is long. Above all the refusal to make the letter public prompted outrage. That aroused the bad feeling that Ms. May is making commitments behind closed doors even though she promised there would be no such deals under her leadership. Britain is supposed to be a country that doesn’t just advantage the privileged. She has also made her position more difficult when it comes to negotiations with the European Union because obviously, the British do care about having access to the bloc’s single market.

Most of all though, Ms. May has opened herself and her government up to extortion. Every other company in Britain, every other industry, can refer to the Nissan letter and make their own demands for preferential treatment. Whether or not those demands can be met after the Brexit negotiations are finalized remains to be seen. Some managers, like the head of Aston Martin, have already rushed ahead and also asked for assurances. Similar requests have come from the pharmaceutical industry.

All this makes it look as though the concessions to Nissan are a big mistake. But they are not.

The prime minister has secured jobs and calmed important investors. To do that, she made promises that she may not be able to keep, although nobody can know this for at least another two years.

Ms. May has bought herself time. And that isn’t a bad move. Had Nissan actually pulled out of Britain, the prime minister’s problems would have been even bigger. And her negotiating position vis-à-vis the E.U. would not have been any better than it is now anyway.

She will be able to withstand the public censure she is being subjected to. Ms. May need not fear too many consequences, and not least because the next elections are a long way off.

The British government has laid its bets. The fact they could lose this gamble was evidenced by a decision made in the High Court Thursday. Judges ruled in favor of a lawsuit filed by the opponents of the Brexit, saying that before Britain could exit the E.U., parliament needed to approve of the date on which formal exit proceedings are officially triggered. This might make the whole Brexit process uncertain but it will also lead to more consideration of those interests who were against such a sharp break from the European community.

No one knows how it will turn out in the end but it does show that there’s a long way to go before any kind of real exit can happen. Ms. May had to decide between two evils. Being pragmatic, she chose the option that may be garnering a lot of criticism right now but that is also the most beneficial for the country. And right away, at that. Jobs are secured and the Nissan deal won’t be the last of its kind either.

Whether or not those compromises have come at too high a cost will only become clear over the next few years, and this will also depend on how the Brexit negotiations go.

 

To contact the author: leitel@handelsblatt.com

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