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254. Japan is a difficult market for iron and steel and engineer- ing products, and the first essentials to maintaining and increasing the sale of British goods in this market are expert selling and low prices.
THE WOOL TEXTILE INDUSTRY.
255. Wool for the Japanese textile industry is all imported, the chief sources of supply being Australia and New Zealand.
256. There are some 15 large mills with combing and spinning plants. The growth of the wool textile industry in Japan is shown by the reduction in recent years of the imports of tops, yarn and piece goods, and the increase in the imports of raw wool.
257. There has been a rapid decline in the imports of yarn since the imposition of the duties in 1926. The maximum import of woollen and worsted yarn into Japan was nearly 26 million lb. in 1923, but in 1930 the import was just under 8 million lb. Great Britain's share of imports of yarn has declined from 25.1 per cent. in 1927 to 10.1 per cent. in the first eight months of 1930, and this decline coincides with a great decline of total imports of yarn. The share in this trade of Germany and Poland combined has risen from 46.6 per cent. in 1927 to 74.1 per cent. in the first eight months of 1930. The decline in the import of crossbred yarns from Great Britain is chiefly due to the competition of Japanese mills. The decline has been further accentuated in the last 12 months by the fact that fine wools have fallen in price more than the lower qualities. This has enabled some European spinners (notably Poland) to offer dry spun yarns in finer qualities and counts at lower prices than British crossbred yarns in oil. The trade has consequently turned more to the Continental yarns. The Continental spinner is able to beat the British spinner largely because of (1) lower rates of wages, (2) longer hours, (3) the large saving in overhead costs consequent on the above, and (4) lower taxation.
258. Japan's total imports of woollen and worsted cloth have decreased from over £6 million in 1924 to £1 million in the first nine months of 1930. Great Britain's percentage share in this trade has decreased from 95.8 per cent. in 1924 to 78.9 per cent. in the much diminished trade of the first nine months of 1930.
259. Japanese production has steadily increased and it is obvious that Japan is already able to make almost the whole of her require- ments. She will probably be able to supply herself completely in the near future, except in respect of certain high-class cloths in the specialty class.
260. In that class of trade where quality is the only considera- tion, more or less regardless of price, British cloths hold their own
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against all others. This quality market is, however, compara- tively insignificant, and for other type of cloth Japanese makes are good enough and are sold at much lower prices than British goods. Whilst it is probable that in high-class cloths British goods will continue to hold the market for some time to come, the Japanese manufacturer has a greater advantage in medium and low quality cloths from the tariff protection afforded to him, and in this branch of trade price is the deciding factor.
261. We conclude that the import of tops, yarn and cloth into Japan will continue to decrease and may, in the future, become comparatively insignificant. Continental competition with Great Britain, although to some extent a factor, is not the vital one, and it appears to be only a question of time for Japan to be able to satisfy the whole of her own needs by her own production.
262. While Great Britain has the advantage of her domestic wool clip and comparative nearness to South America and South Africa, Japan is in a better position so far as Australian wool is concerned owing to nearness, the difference in freight in her favour being about 1d. per lb. on the cost of the top. The question of freight rates both on raw material imported into Great Britain for our industries and on finished products exported from Great Britain, particularly to the Far East, calls for serious investigation. British industry should, in this matter, suffer no disability in com- petition with that of other nations. We saw nothing to indicate that the efficiency of the Japanese woollen and worsted industry is seriously lower than our own. In view of the longer hours worked in the Japanese industry, the smaller number of rest days in a year, and the lower wages paid, we calculate that, allowing for all possibilities (including possible lower efficiency in Japanese mills in certain respects), Yorkshire wages costs per unit of pro- duction are at least 20 times and may be as high as three times the Japanese costs.
263. As regards marketing, the method by which the Japanese are able to do the bulk of their business for export is the most economical and results in a saving over cost of handling British made goods through British houses in England and China. No estimate of this advantage can, however, be offered.
264. Japan undoubtedly constitutes a serious potential menace to Great Britain's export trade in wool textile products so long as the low production costs referred to above can be maintained. It is Japan's definite policy to become at least self-providing in wool textile products. She will achieve this in the near future, except as regards a limited quantity of materials of what may be termed the luxury or speciality class. The market for these in Japan must always remain small, even if her general standard of
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