Interviewer
You are going to Japan. What will you be telling Prime Minister Kaifu about the state of the British economy bearing in mind that we have some fairly unpleasant figures coming out at the end of the week? We understand that the money supply figures will not be very good, we hear already the CBI has got some rather disturbing things to say about trends in the economy, and prospects for British growth are not so hot at the moment. What are you going to be telling Prime Minister Kaifu about the British economy?
Prime Minister
That the British economy has been growing extremely strongly, that it is deregulated, that it is enterprising, its success has been very great indeed in the last seven or eight years. Whereas we were in decline and declining in relation to other countries, now we are closing the gap between us, that we have a temporary problem which is that of inflation but that inflation, as you will see from the figures on Friday, is coming down and we have another problem, partly because we have got inflation, that we have an adverse [end p1] balance of payments and they have a colossal balance of payments surplus, that part of that is because our markets are far more open than theirs and they must open their markets more.
So the enterprise has returned, the liberal markets, the deregulation, the tax incentives have worked, we are strong again, we have a temporary problem which we are tackling and shall tackle and we shall get inflation down.
Interviewer
If this is just a temporary problem then, can we see interest rates in Britain coming down in the fairly near future?
Prime Minister
No, we shall not see interest rates coming down until the problem of inflation is well and truly dealt with.
Interviewer
Are you going to be able to explain to Prime Minister Kaifu how it is that after ten years of Thatcherism the British economy is still not performing anything like the Japanese economy?
Prime Minister
The British economy is performing very well except in the two respects that I have indicated and the Japanese know the British economy is performing very well because their companies choose to come here more than they choose to go to any other country in [end p2] Europe. That is because of the kind of economy we run and because we have regulations, yes of course every country does, you have to have some, but we do not have overweening regulations, we have enough to let enterprise work.
Now certainly the Japanese and the Germans have this colossal balance of payments surplus. We say it is because they have certain structural differences, among other things, but let us face it they are very very successful in the products they export. They do not export, incidentally, anything like as much per head of the population as we do so do not run down our exports, our exports are good. We are importing too much.
Let me give you just one example that I have been on about whenever I have been to Japan. We have a highly efficient distribution system in our retail shops, extremely efficient, we are one of the most efficient countries in the world at retail distribution and so if Japan, with her very good products, wants to plug into our retail distribution system she does not have to see that number of people, she can get into a few of the big chains and she has got her goods all over Britain, she can get into a few of the big motor dealers, she has got her goods all over Britain. There is nothing like that in Japan and they really ought to be getting it because otherwise it is an active stop to us being able to sell as easily to them and getting it all over Japan and it is stopping the Japanese consumer from having a proper choice. [end p3]
So yes I do tackle them about that. And then, as you know for example, on financial services we have been trying to get into their Stock Exchange with two of our firms for a long time. Do you know, I have tackled Mr Nakasone about it, I have tackled Mr Takeshita about it, I have tackled Mr Uno about it and now I shall tackle Mr Kaifu. He is my fourth Prime Minister to tackle on this subject, the fourth! They always have an explanation and it is an excuse, it is not an explanation.
I shall tackle him again and say: “Look, this is not right, you have got deliberate barriers there that have got to come down”.
Interviewer
Is that your principal objective in going to Japan?
Prime Minister
It is one objective but I think it is not the only one because look, we want them to open their markets to our exports so that our exports can do better, they are doing better, they have gone up quite a lot recently but from a comparatively low base. So they have to open their markets. We would like more Japanese investment here. They are particularly good at certain things, as you know, they are especially good at cars, we used to have a marvellous car business, we have not anything like the amount we used to have, we somehow got the structure wrong but we shall get up our production of cars in this country by more of them coming here. [end p4] We do not want it limited to that, more electronics, we are a good country to come to and they know that.
So it is exports, it is imports, it is also to talk to them on a much wider basis. Foreign affairs are not foreign affairs any more, they in fact affect your domestic life here.
Interviewer
Reciprocity really is what you are talking about. Are you confident you are going to be able to come back from Tokyo with some kind of a deal on greater reciprocity by Japan with Britain?
Prime Minister
One is not confident of solving all the problems, one has been at it too long and so have the Economic Summit countries, we have been at it a very very long time. But reciprocity, not in the strict reciprocity of goods because obviously you need to buy certain different things from those which you sell, but reciprocity in the sense that if you rely on other people's open markets for your prosperity, as Japan does, you must expect other people to be able to have their market as open as ours are. They cannot rely on our open markets unless they are prepared to have similar open markets there. [end p5]
Interviewer
In Britain, we have captured nearly one-third of Japanese direct investment into Europe, that is a very large chunk of Japanese investment in Europe, are we developing a special relationship with Japan which could be at the expense of our European partners?
Prime Minister
No, and why do you ask such a question? Why are you not very pleased when we are quite the best country in Europe for attracting inward investment? We are, it is because we are good, because they know we are good, because we are deregulated and do not tie people up with bureaucracy, because we deliberately try to get down barriers to trade, that is good and you really should be praising us for being the best country in Europe than saying: “Oh you must not do that, the other European countries will not like it”.
Now if other European countries want to attract investment that way, they must do what we are trying to do, to persuade Japan to do, and what we are trying to persuade Europe to do in 1992 - get down your barriers. The way to increase your trade and investment is to get down your barriers and believe you me we are still the most open country in Europe and they have to get down their barriers. And Germany included has to get down some of her financial barriers to trade with us, there are quite a lot there.
So we are good, we are best at this, and we would very much like a little bit of praise. [end p6]
Interviewer
Will you be taking an entirely British point of view when you go there or will you also be taking a European stance, will you be talking on Europe's behalf?
Prime Minister
Of course I always take a European stance as well, we are committed members to the European Community, we are one of those who are very anxious to get the Single Market in 1992 because this is what really we joined Europe for, one of the main things that we joined Europe for and we have not got it yet.
We are one of those who are saying that we must have competition on a fair basis. We have not yet got it in Europe. They still have a lot of barriers that we do not have. So in a way we are saying the same thing to some of the European countries as we are saying to Japan and we are quite prepared to tackle it on that basis.
For example, Japan highly subsidises her agriculture, far more than Europe does. But Europe subsidises it, so does the United States. Well when you have got differential subsidies you have got to tackle those through the GATT and we are prepared to tackle them through the GATT. [end p7]
Interviewer
On your return from Japan you are going to come back via the Soviet Union, you are going to see Mr Gorbachev. Are you going to discuss with hipeople were led to expect, that it would never produce that and therefore it had to be changed.
Prime Minister>
I think it has been he who has said that there can be changes in what had hitherto been much more rigid systems in the satellite countries of Hungary, Poland, and so on and he has said yes, that he is opening up democracy and he expects them to open up democracy too.
So he has been very bold and courageous, quite remarkable, it is a remarkable period of history with democracy on the move, so of course I shall be discussing that.
Interviewer
But nonetheless, it is highly likely that you will welcome what has been happening in East Germany rather more than he does? [end p8]
Prime Minister
I welcome the enlargement of freedom everywhere, including in the Soviet Union, especially in Poland where for the first time you have replaced a communist Tadeusz MazowieckiPrime Minister by someone who believes much more ihall be discussing that.
Interviewer
But nonetheless, it is highly likely that you will welcome what has been happening in East Germany rather more than he does? [end p9]
Prime Minister
I welcome the enlargement of freedom everywhere, including in the Soviet Union, especially in Poland where for the first time you have replaced a communist Tadeusz MazowieckiPrime Minister by someone who believes much more in freer and open markets and in liberty. Yes, so I welcome the enlargement of liberty.
Interviewer
Another far more domestic issue is that the Conservative Party has been lagging in the Opinion Polls recently in Britain. Do you expect your trip to enhance the Conservative Party's view in the country abroad?
Prime Minister
I do not expect that it will make very much difference. I think where you get the difference is as it comes up to an election and people realise then that they are actually going to have to vote for the government, for the group of people and the philosophy which will govern Britain for the coming years, then they start to look and compare with the success that we have had in this country, that we have changed from decline to an increasing and high reputation and as you get your economy going and going well so you are taken more notice of abroad.
And also, what is so significant is everywhere when I go abroad they say to me: “Look you were the first one to roll back the frontiers of socialism and once you did it many other people followed”. That really is very very significant. [end p10]
When I think that even Mr Gorbachev is doing it then it is the very very best recommendation, that it is the freer markets within a general regulatory framework, but not a detailed one, the freer markets that give people a higher standard of living, a higher standard of social services and a higher standard of dignity and responsibility for running their own lives.
And on that basis I am quite prepared that it will give us a good chance for the next election.
Interviewer
A final question. To what extent is your visit to Japan connected with the upsurge of potential socialism in Japanese politics?
Prime Minister
Not connected with that in any way. Japan is a very important country in the economic world, she is an important country in the democratic world, she has one fantastic capacity to a greater extent than we have, she can take the results of science, science which other countries may have discovered and put in all of their leading scientific articles, she can turn it into manufacturing products, she designs them well and she sells them well. Now we just have to learn from that. But it has nothing to do with the actual internal politics of Japan. [end p11]
Interviewer
What do you expect to come back from this trip with, do you expect to come back with anything concrete at all?
Prime Minister
I think by making these tours you gradually influence opinion in your own way and that after all is what has been happening with the tours I have done round the world when you think of the number of countries that are going to freer and more open economies and when you think of the influence that Britain has had by standing absolutely firm on defence and if we had not we should not have seen the changes in the Soviet Union that we are now seeing.
So you can say that in the last ten years Britain has had a very considerable influence on world affairs and I hope and expect and believe that will continue.