Theresa May has had a difficult start to the G20 summit as President Barack Obama said the UK would not be the priority for a US trade deal and Japan issued an unprecedented 15-page warning about the consequences of Brexit.
The prime minister had been hoping to pitch the UK as a global leader in free trade during her first major outing on the world stage at the G20 summit in Hangzhou.
However, she was immediately confronted with harsh warnings about the consequences of leaving the EU and diplomatic tensions with the Chinese over her concerns about their involvement in UK nuclear power.
After her first bilateral meeting with Obama, May was warned that the US wanted to focus on trade negotiations with the EU and a bloc of pacific nations before considering a deal with the UK.
This was swiftly followed by a message from Japan to the UK that there could be a string of corporate exits from the UK unless some of the privileges that come with access to the single market are maintained.
The lengthy document from Tokyo gives a list of possible consequences of Brexit and a series of specific requests from Japanese businesses. About half of Japanese investment in the EU comes to the UK, including from companies such as Nissan, Honda, Mitsubishi, Nomura and Daiwa.
“Japanese businesses with their European headquarters in the UK may decide to transfer their head-office function to continental Europe if EU laws cease to be applicable in the UK after its withdrawal,” the report concludes.
It says: “In light of the fact that a number of Japanese businesses, invited by the government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value-chains across Europe, we strongly request that the UK will consider this fact seriously and respond in a responsible manner to minimise any harmful effects on these businesses.”
Earlier, Obama had promised to work hard to stop “adverse effects” of Brexit and assured the UK there was still a “very special relationship” between the two nations.
But he also raised the risk of some trading relations unraveling and made clear that it “would not make sense to put aside” existing negotiations with big blocs of countries in order to do an immediate deal with the UK.
Asked whether he stood by his warnings against Brexit and claim that Britain would go to the back of the queue when it comes to trade deals, Obama repeated his belief that the world would benefit from the UK being a member of the EU.
“I’ve committed to Theresa that we will consult closely with her as she and her government move forward on Brexit negotiations to make sure we don’t see adverse effects in our trading and commercial relationship. Obviously there is an enormous amount of trade that already takes place ... That is not going to stop. And we are going to do everything we can to make sure the consequences of the decision don’t end up unravelling what is already a very strong and robust economic relationship.
“But first things first. The first task is figuring out what Brexit means with respect to Europe. And our first task is making sure we go forward on TTIP negotiations in which we have already invested a lot of time and effort.”
It comes after the prime minister warned on her flight to China that there would be “difficult times ahead” for the economy after leaving the EU.
The prime minister said the economy was in better shape than some had predicted following the vote for Brexit. However, May said she was not expecting an easy ride, as her ministers examine the possibility of a “fiscal reset” at the autumn statement –
potentially abandoning some of the financial strategies and targets of former chancellor George Osborne.
Speaking on the flight to Hangzhou, May said: “We have seen figures giving some different messages in relation to the economy. The reaction of the economy has been better than some had predicted post the referendum.
“But I won’t pretend it is all going to be plain sailing. There will be some difficult times ahead. We will be looking ahead to the autumn statement. So in terms of how we are going to position things, the detail will be coming out then. What I’m clear about is I am going to continue as we have done in government over the last six years ensuring we are going to live within our means.”
May also has to contend with diplomatic tensions with China over the country’s proposed multibillion investment in UK nuclear energy. She angered Beijing by placing the French and Chinese-backed Hinkley Point nuclear project under review in July, apparently over security concerns about Beijing’s involvement.
Since then, there has been a suggestion that she could be happy for the Chinese to be a passive investor in Hinkley Point nuclear power station in Somerset but does not want the country to have a more active role in developing a new plant at Sizewell in Suffolk or Bradwell in Essex.
On the way to Hangzhou, she confirmed that she would go to her first meeting as prime minister with the Chinese president, Xi Jinping, on Monday without having come to a decision about allowing Chinese investment in nuclear power to go ahead.
“I am going to be talking to President Xi about a whole range of issues. I am not going to be taking the Hinkley decision until ... it’s not going to be taken now. It is going to be taken later this month. I am clear that what I am doing is looking at the evidence.”
It is possible May is delaying the decision until after the issue can be discussed fully at the next national security council meeting of top spy and defence chiefs.
Asked whether she trusted the Chinese, the prime minister gave an unclear answer. “Of course we have a relationship with them,” she replied. “We are working with them. And we have seen significant Chinese investment into the United Kingdom. What I want to do is build on that relationship. But I also want to be able to build on relationships with other countries. I want to be unashamedly open to free trade and a global leader in free trade.”
May was at pains to stress that she wanted to talk to many other world leaders, not just the Chinese, in a signal that she does not intend to place such a heavy emphasis on the “golden era” of relations proposed by Cameron and Osborne.
“What’s happened in the last few years is that the government has built a new strategic partnership with China, the golden era of relationships,” she said. “We will want to continue to build on that.
“I will be meeting President Xi and talking to him but I will be meeting other world leaders as well and wanting to talk to them about the opportunities we can develop looking at free trade. We’ve already seen with some of the early conversations their interest in talking about trading arrangements, the Australians for example.”
May embarked on her first trip to China on the new prime ministerial plane used just once by David Cameron before he was replaced. After landing, she headed to the summit for meetings with Obama, the Saudi deputy crown prince, and the Russian president, Vladimir Putin, before the first official session at the summit on the economy.
May stressed that Britain was “open for business” and wanted to promote free trade but also argued world leaders must be mindful of concerns about globalisation leaving some people behind while others flourish.
“I want to be talking about the opportunities for free trade around the world, about how Britain can seize those opportunities and I want us to be a global leader in free trade. But we can’t ignore as we look at the G20 the fact there is a sentiment out there in a number of countries that is anti-globalisation,” she said. “That is something else we need to consider, looking at whether when we put these free trade agreements in place they are going to work for everyone.”
A UK official source said the meeting between May and Obama had been
warm, with both sides agreeing that officials would start talking about some of the issues around post-Brexit trade. Asked about the priority given to trade deals with other blocs, the source said: “He is a president who has invested a lot of
time in multilateral trade deals. I don’t think him talking up those and the focus and effort the US have put into those is that much of a surprise.”
On the Japanese warning, the source added it was “not unhelpful” to understand where the UK’s trading partners have concerns.
