The Impact of Brexit on Japanese Companies
The issue of Brexit has been running for decades now. The relationship between Brexit and Japanese companies is explored in this essay as a case study. Specifically, the article will look at some of the impacts that will be felt by Japanese car manufacturers located in the UK. Some of them have even started contemplating relocating. Again, the paper looks at how the EU affects business operations in the UK. The EU itself is a part of the political environment. The theory that best applies to the Brexit and Japanese companies' case study has to be the neoclassical theory. The Neoclassical philosophy is a blend of the classical theory and the Neo-realism. The theory was first formulated by Gideon rose in 1998 in a review article about World politics reviews (Dhingra, Ottaviano, Sampson, and Van Reenen, 2016, p.24). It is merely an approach to the analysis of foreign policies.
The Neoclassical Theory
The theory states that individual states do not just seek power or control for the sake of it. Additionally, they do not retract in cases of confrontations just for the sake of it. The actions of individuals states are influenced by the characteristics of the particular state (Sperling, 2015, p.61). This means that the way a nation reacts is affected by its prevailing conditions. The UK exit from the EU was affected by a set of particular circumstances in the UK. Those factors influenced the UK's approach to foreign policy. For long proponents of Brexit in the UK felt that the EU had outlived its purpose. It was not maintaining stability as all the individual states of the EU were bound by the NATO accord. Again, they felt that the sovereignty of the UK as a state was severely compromised by the EU. To some extent, they thought that the actions of the UK were under the guidance of either above arguments best epitomizes the application of the neoclassical theory to the case study (Hadfield, 2010).
Applications of the Theory to the Case Study
Brexit main impact on Japanese companies would be the reduction in sales and rise in the overall costs of production (Dhingra et al., 2016, p.24). The depreciation of the Sterling pound and the appreciation of the Euro best explain this. However, to best understand the issue at hand, it is worth noting that UK joining EU was followed by many foreign car companies setting production plants in the UK. The main reason being that the UK is strategically located. However, this coincided with the fall of some of the car companies native to the UK; for example, Leyland. The increased competition demanded innovation to fit in. Thus from a neoclassical point of view, it can be postulated that Brexit was geared towards reviving the already dead car industries in the UK at the expense of foreign companies.
Again, as a result of Brexit, most likely the UK will not enjoy the free trade agreement it used to enjoy under the EU. The currency factors also play a role, as it is highly likely German will resort to its strong Deutsche currency, which will chase away the United States-based investors (Sperling, 2015, p.61). The above factors have made most companies consider relocating from the UK lest they are affected by the high levies being imposed on them. Again, this can be viewed from a neoclassical point of view, as the UK trying to re-establish itself and revive its already dead industries. However, whether this will happen is subject to speculation. Evidently, the EU membership is part of the political environment. The standard trading block is seen as a way of increasing the collective power of the states. As earlier said this comes at the expense of the individual states. A neo-classic would argue the desire to have the exclusive power not tied to a group is one of the reasons that motivated the UK in moving out of the EU.
Conclusion
In conclusion, it is worth noting that despite us applying the neo-classical theory in explaining the case study of Brexit and Japanese company; it does not explain the underlying reasoning and thinking behind some of the actions, for instance, the resignation of David Cameron. The Game theory can explain the UK and the EU actions on the negotiation table, and it will be interesting to know who will emerge the eventual winner.
References
Dhingra, S., Ottaviano, G., Sampson, T. and Van Reenen, J., 2016. The impact of Brexit on foreign investment in the UK. BREXIT 2016, p.24.
Hadfield-Amkhan, A., 2010. British foreign policy, national identity, and neoclassical realism. Rowman & Littlefield Publishers.
Sperling, J., 2015. Four Neo-classical realism and alliance politics. Theorising NATO: New Perspectives on the Atlantic Alliance, p.61.
