The Visegard countries should pay more attention improving relations with Japan, a democratic and reliable partner, and whose trade deal with the EU has meteoric potential with the combined markets accounting for a third of the world’s GDP.
Back in 2012, at the inaugural summit of the so-called “16+1” grouping – China plus sixteen Central and Eastern European countries – Beijing proclaimed that the continent’s emerging markets had a “golden opportunity” to share in the riches of China’s then-newly launched trillion-dollar Belt and Road Initiative (BRI).
Not long after, Czechia described itself as the “gateway” for Chinese investment into Europe and, while on a state visit to Beijing in 2016, President Miloš Zeman said he had come to “learn how to increase economic growth and how to stabilise society” for his country. (Just 20 years earlier, he had asserted that anyone who sought closer ties with Beijing was “ready to go under plastic surgery to slant their eyes.”)
Hungary, under the illiberal Prime Minister Viktor Orbán, also offered itself as the ideal location for China to extend its BRI projects into Europe.
Reality vs expectation
Yet, today, faith in China is waning amongst the four Visegrad (V4) nations – Czechia, Hungary, Poland and Slovakia. The old paradigm persists with China still tending to sell more goods to the V4 nations than it buys. In fact, China’s imports from Czechia decreased last year while its exports increased.
Meanwhile, the principle destinations of Chinese investment in Europe remain the UK, France and Germany. As of the end of 2018, China has invested some $5.1 billion in Hungary – more than half of its total investment in the 16+1 nations – but just $1.89 billion in Poland and $960 million in Czechia, according to the Heritage Foundation’s China Global Investment Tracker.
Ukraine, with a GDP ranked just below Czechia’s, has received almost nine times more investment than the V4 country. In April, Czech President Zeman called the lack of investment “a stain on Czech-Chinese cooperation.”
If there is now greater scepticism about China – though still a desire to attract considerable investment from outside the the European Union – the V4 nations should look instead to Japan.
Tokyo tends to engage in “submarine diplomacy”. It is rarely visible but always present.
It marked the 100th anniversary of diplomatic relations with Poland this year, an event that saw the Japanese Crown Prince Fumihito and his wife visit Warsaw in June. A few months earlier, the third V4-plus-Japan summit took place, further cementing diplomatic between the five nations.
Japan’s businesses are also well-established in the region. Asahi Group Holdings, for instance, owns Pilsner Urquell, one of the most famous Czech beer brands, as well as Poland’s Tyskie and Hungary’s Dreher Breweries.
Toyota has long built cars in Czechia, and with the French Groupe PSA plans to build three new minicars at their Czech factory, making it the largest supplier of the vehicles in Europe.
As of the end of 2018, Japan had invested $3.8 billion in Czech Republic, almost three and a half times more than China, according to Japanese Ministry of Foreign Affairs. As of early 2017, Japan had reportedly poured some $4.4 billion into Hungary – only a little less than China did in the same year.
Admittedly, Japanese trade with the V4 tends to be smaller than China’s.
However, the February enactment of the EU-Japan Economic Partnership Agreement, a major trade deal signed last year, will bring together roughly a third of the world’s total GDP.
The European Commission reckons it could boost EU-Japan trade by nearly €36 billion ($40 billion) by removing a combined $1 billion worth of duties previously imposed on bilateral trade.
The second reason for this increase could be Brexit. A number of Japanese firms which had invested in the UK are currently in the process of or considering moving operations to Central Europe in light of Britain leaving the EU. Japanese automotive manufacturers like Tsubakimoto, Sanko Gosei and NP Automotive Coatings are thought to be relocating their operations to Czechia in the coming years.
Toray Industries announced in July that it will invest $225 million to build a factory producing parts for electric-vehicle batteries in Hungary, the first of its kind in Europe. Likewise, a few months earlier, Mitsui High-tec announced a $40 million investment to build its first European factory in Poland.
Other, non-trade issues, should also be considered.
Trade with Japan comes without the political baggage of trade with China. Many western European politicians, fretting about China’s growing influence of the continent, have hardened their resolve.
A “strategic outlook”, published in March by the EU, branded China a “systemic rival” and economic competitor for the first time. January saw the arrest of a Huawei executive in Poland on allegations of spying for Beijing, while the Czech cybersecurity agency has warned against using Huawei software.
Perhaps most telling is that the Central European public remains sceptical about China.
A Pew Research poll conducted in early 2018 found that only 9% of Hungarians and 6% of Poles thought having China as the world’s leading power, as opposed to the US, would be better for the world; these were the two lowest scores of the 10 European nationalities surveyed. In the same poll, only 43% of Hungarians and 36% of Poles held favorable views of China.
In this setting, Japan could offer the long-promised foreign investment Central Europe has been hoping to attract.
*Disclaimer: This article was amended on 10.9.19. It had incorrectly stated a sharp increase in trade between the V4 and Japan already this year. Instead of doubling, in the first six months of this year, Japan’s trade with Czechia rose 8.3%, Hungary -32%, Slovakia’s 19.3% and Poland’s 4.7%.