Saturday,
HONGKONG TELEGRAPH
February 1, 1941.
United States and Japan:
Now that the Administra- tion's policy in the Far East seems to be moving toward a showdown, it becomes necessary to examine the economic consequences of a. break with Japan. This article is in a sense an ad- vonture in statistics; but be- hind the figures lie those stark realities in terms of which our political and mili- tary policies must in part be based
As the economist looks at the complex situation pro- voked by Japan's demand
Adventure
in
Statistics *
By SEYMOUR E. HARRIS
maximum reclamation, economiles of consumption to be imposed on non- essential Industries, and.. addition shipments through the R. E. C, and the British agreement. This 12- month interval'would provide on opportunity to investigate more fully the synthetic rubber situation and South American possibilities,
It must also be remembered that i much depends on the acceleration of imporks from the Netherlands In- dies and the Malay States. In this aftuation, the attitude of the Inter- national Rubber Regulatiop Commit- 100 Is Important. This committee, largely British controlled, determines the amount of rubber-to-be released, In the past year, its policies have been dictated partly by a desire not to annoy American · Interests; and rolenses have, therefore, been high relative to current consumption.
United States has made in the mean-
The following article, which appeared in the prices have been maintained at a for a "new order" in the Far "Christian Science Monitor," was written at the invita reasonably low level. East, he is aware of two tion of American Defence, Harvard Group. Mr Harris One concludes that the rubber problems. The first
con- is Associate Professor of Economics at Harvard Univer- problem is serious, but not insolubic. cerns the probable impact of sity and a widely known monetary expert. He is the Much depends on the timing of the a cessation of trade between author of "Twenty Years of Federal Reserve Policy," interruption of rubber shipments 1933; "Monetary Problems of the British Empire," 1931, and on the preparations which the the United
States and and "Exchange Depreciation: Its Theory and History," white. Japan. The second relates 1931-1935, 1936.
Now let us turn briefly to a dis- to the possible interference by Japan with American im- culated supplies, economies of use sources be sufficient to counteract the cussion of tin. This product is, of course, Indispensable for numerous and the intensification of production shortages?
Here again the chief ports of those two raw ma- In Japan proper and in vecupied ter-
How much rubber does the United milliary usen. ritories; but the net result would be, terials, rubber and tin, over to say the least, a serious dislocation States use annually? According to a dificulty arises from dependence whose sources, as an
und rise of costs, which would recent report of the Tariff Commis- upon Abiatle supplies. Furthermore, un- markedly reduce the effectiveness of sion, the United States in 1930 con- smelting a largely done in this area, sumed 502,000 long tons of rubber, although the United Kligdom smells It paid about 17 cents a pound. The
a significant amount. An Inter neighbour, Japan may soon of the picture. The following table 20 cents a pound.
But let us look at the other side price in October, 1010, was nearly
national cartel controls the volume of have at least potential con- shows the per cent, of United States
rates and also enforces a policy which trol.
discourages ameiting in the United imports from Japan compared with Imports from other sources:
States. Availability of large amounts
friendly and acquisitive. Japan's war efforts,
If all trade between the United States and Japan' were cut off, Japan would be the heavier loser.
Per Cent.
Fish scrap and fish oil China and porcelain Slik manufactures Rags
02
01
42
09.5
Cotton floor covering
DD
Crabmeat, sauce, ele.
81
Tuna fish in oli
77
.
Insect flowers
72
Toys
£6
55
Hal materials
Bleached cotton cloth
milk-of which 94 per cent (in sales to controlled countries, i.e., value) came from Japan in 1938. other members of the "Yen Bloc." For one of Japan's two
How much rubber have Amerl- of tin in Bolivia has not been of cans contracted for during 10417 By much help because, among other rea- an agreement with the United King- dom in June, 1930, the United States purchased 85,000 long tons of crude rubber in
in exchange for 600,000 bales of American cotton, By
ons, this tin has to be smelted in Great Britain,
Numerous measures have
been
1840, about half of this con taken by the United States in an at-
rubber had been delivered. The tempt to prevent a shortage of tin. Rubber Reserve Company, an asso- An agreement has been made with clation of rubber manufacturers the International Tin Committee supported to the extent of 50 per through on organisation sponsored cent. of its capital the Recon-
by
First, Japan obtains from the United States a large part of its required foreign exchange. In
Obviously, none of these commo- struction Finance Corporation, hay by the R. F. C. to purchase 75,000 the year 1939, the United States ditles can be classified as vital, al- ing received a loan of $140,000,000 tons (roughly a year's consumption). absorbed roughly one third of all though one serious problem arises from the Government, has contracted Provisions are beginning, to be made Japanese exporta exclusive of from United States finports of raw for the purchase of 180,000 tons lo for domestic smelting. Finally, sub- be delivered in 1941, at a price of stitutes for tin are beginning to re- from 17 to 20 cents a pound. -
celve attention. However, the size What other sources for rubber of available tin stocks to-day is not are there? Synthetle rubber is not generally known, and it is possible an important factor, since, cost aside most important exports, more- The analysis is not complete, how (the average present price is 65 cents that an early interruption of ship- over, the United States offers ever, until we consider the possibi- a pound, though
has been estim- ments would prove an embarrassing, almost the exclusive market; lity of the United States isolation ated that a sumclent quantity to though not insurmountable obstacle, from its chief rubber and tin re supply American needs could be from 1937 to 1939 it imported sources through interference by the produced at a raic of 30 cents),
ilirce
years would be required to (by value) 83 per cent. of all Japanese Navy.
construct a series of plants adequate Japanese exports of silk. A loss About 08 per cent, of the world's to meet the huge requirement. of this market would injure crude rubber is grown in the Far
East,
The United States in 1930 im- Of reclaimed rubber, 170,000 Jong Japanese economy, depriving it ported $107,000,000 worth of crude tons were consumed in 1030. Actu- Japan and the United States, es- of indispensable means of for- rubber-the Imports in rubber being and be produced-in-an-emergency, taken by the United States-in-en-
ally 300,000 tons of reclaimed rubber pecially if such action should larger-than-those-of-any-other-pro-- cign exchange,
duct. Of this. 57 per cent. came experts. feel. from British Malaya, 28 per cent.
In conclusion, one may say that cessation of trade relations between
be
operation with Great Britain, would Second, Japan is dependent from the Netherlands Indies, and the to stimulate production in South Japan should be able to stop Ameri- While it would be highly desirable prove the more serious. to Japan. If upon the United States for a remainder chiefly from French Indo- America, it Ig estimated that can imports of rubber and tin, the significant proportion of its im- China and Ceylon.
large investments and a lapse relative gain of the United States poris, 34 per cent, of which the Of the total world production of of ten years will be required before would be reduced-though far from
quarters is ac- substantial supplies can be obtained United States provided in 1938, tin, roughly three
counted for by the Federated Malay there. Success in this aren must This dependence becomes drama- States, Bolivia, and the Netherlands also be used on the assumption that tically obvious when illustrated Indies. United States Imports of tin, leaf disease can be eradicated.
by quantity, in 1038 were distributed
eliminated
It is not my desire either to ad- vocate a trade break with Japan or against a backdrop of Tokyo's as follows: 74 per cent from British
to appear to favour an Admünistra- war aims, since the United Maloya, 7 per cent. from the United
tion polley which might provoke a 7 per Kingdom, States is Japan's chief source of Netherlands Indies and Hongkong, clusions concerning the rubber situa- and tin shipments. Being an econo-
tlie cent. from
One may draw the following con- Japanese move to blockade rubber import for the most important and 13 per cent. from other coun- tion. Stocks on hand in the United mist concerned herein with a ques- classes of war materials-oil, tries.
States are not high. The amount as tlon strictly economic in iron materials, metal-working In view of this evidence, the de- on August, 1040, was the equivalent
pendence of the United States upon of but four months' consumption. though necessarily conditioned by machinery, and copper.
the Malay States and the Nether-.The most optimistle estimate is that Certain political and strategle con- lands Indies for vast suppiles of a year's supply of rubber may well tingencles, I shall leave any infer- these two materials inay clearly be be on hand, if and when Imports ences to be drawn about the United seen. But would loss of these Im- have stopped. This estimate Is States' future policy in the Far East poris be calamitous? Would other based on major economies to effort to others.
*
Eight strategic materials con- stituted 98 per cent. of Japan's "war" imports from the United States, The following table shows Japan's imports of these materials from the United States, as against supplica from all sources:
Scrap Iron
Ferrar-alloys
Copper ....
Metal and alloys Automobiles and parts
FRENCH
INDO Bangkok CHINA
KEY OIL WELLS
асоре,
est
HR
ere's THE
"This is all wrong
-but H.B.'s all right!'
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+
BURMA Rangoo
SMELTERS
Per Cent.
00
11
THAILAND (SIAM)
15
PHILIPPINE
¿(UNITED STATES)
92
99.0
Mergul
77
ISLANDS
TIN DEPOSITS
REFINERIES
RUBBER MICRONES
GUAM
Renang
Candon
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SULU
SEA
Berak
Labuan
Meder
E? FEDERATED,
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CELEBES
SEA
*CAROLINE IS.
JAPANESE MANDATE
ELECTRIC WATER
HEATERS
STATES
BORNEO
Metul-working machinery. 70 Aircraft and parts
13
Japan is in a difficult position. Or the 32 "essential" war materials, Japan has exportable surpluses in only two; obtains adequate supply at home of three more; obtains inade quate or partial supply at home of 10; and totally dependent on foreign sources for the remaining 11. The astringent effect possible
by means of British and American co- operation in embargoes is clear when It is added that in 1030 Japan "re- ceived 50 per cent of its wor materials from the United States; 21 per cent from British Malaya, Canada, and the British Indies; and 8 per cent: from the Netherlands Indies.
Such co-operation would deprivo Japan of its essential supplies of iron. and steel, oil, machinery and, less Important, copper. This might be offack to some extent by purchases on other markets, the drain of ac-
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