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Report upon the Probable Position of British Trade in the Far East after the War.
SECTION 1.-The Straits Settlements.
Sources of Information. The information contained in this section has been obtained at personal interviews with the heads of the most important Straits mercantile firms in London. Memoranda have been received from the Penang Chamber of Commerce, and from the Hong Kong and Shanghai Banking Corporation, Singapore.
General. The phenomenal growth of the foreign trade of the Straits Settlements during the past 40 years, from an almost insignificant amount to the present huge total, which places it ahead of all British Crown Colonies, may be said to be due to three main causes :-
(1) The economic development of the Federated Malay Straits under the beneficent influence of British rule, and the comparatively recent exploitation of the natural resources of the Malay Peninsula, particularly as regards tin and rubber, which has been rendered possible by the influx of British capital, and a wise management of immigration, particularly from China and Southern India. (2) The unique position of Singapore as the emporium for the archipelago and Siam, and the collecting and distributing centre, not only for its own hinterland, but also for Java, Sumatra and the other Dutch islands, Borneo, Siam, and to some extent French Indo-China, and the Philippine Islands; and
(3) The possession of a far-sighted policy of free trade, ample facilities for shipping, and a tolerant attitude towards Asiatics of all races and creeds. These three factors have attracted the Chinese and Malay merchants, who form the pivot on which the trade turns.
The foreign trade of the Straits Settlements is practically focussed on the two ports of Singapore and Penang, of which the former is by far the most important. It is estimated that two-thirds of the trade of the Malay Straits passes through Singapore, but the real importance of that port lies in the fact that it is the one great free entrepôt of the East Indian Archipelago, lying on the direct steamship routes from Europe and India to the far East, and from it subsidiary steamer services connect with Siam and the various islands, and serve as feeders to the through steamship lines.
Position of the Chinese Trader. In the Strails, exactly as in Burma, Siam, and the Netherlands Indies, the pivot of the whole trading system is the Chinese merchant. Established in Singapore under the wise and tolerant rule of the British Government, and frequently a naturalised British subject, he is able to carry on his activities throughout all the subsidiary markets, and centralise the control in the security and freedom of a British Colony. The trade is, to all intents and purposes, a barter trade. The Singapore Chinese Firm has its agencies in Siam, Borneo, and the Dutch islands for the purchase of native produce. This produce is shipped to Singapore, and is sold to the European merchant at that port for export to Europe or the United States, and in return, European piece goods, metals, and sundry goods are purchased in Singapore and shipped to the island agencies for distribution. It would not be an exaggeration to say that fully 75 per cent. of the trade of Singapore is an entrepôt trade, which is secured by that port solely on account of its exceptionally favourable position on the main east and west through steamship route, on which most of the subsidiary steamship services throughout the archipelago converge, and on account of the absence of all restrictions on trade and traders, and the presence of more elaborate shipping, storage, and credit facilities than are possessed by any other port in the Malay archipelago.
Danger of Placing Restrictions on what is really a Transit Trade.--It is con- sidered advisable at the outset to lay the greatest stress on this imperative necessity for the preservation of Singapore as a free port in order to retain its position, and to emphasize the danger of any artificial restrictions on an entrepôt trade which is peculiarly sensitive. For example, to take the case of Siam-so long as the large shipments of rice are made from Bangkok to Singapore for account of the Chinese merchants at the latter port, there will always be a steady trade in British piece goods and other articles in return. Any artificial restrictions which might result in deflecting the outward trade would also deflect the return shipments of British goods. The ramifications of native trading are most involved. To cite one case only-a British firm in Singapore actually sell Turkey red shirtings to an Arab dealer for shipment from the United Kingdom to Aden, this being the dealer's method of paying for his imports from Aden to Singapore.
The leading British Mercantile Houses in the Straits Settlements are unanimous in expressing their grave concern at the prospect of any tariff or other restriction on the trade of the Settlements, and in this view I entirely concur.
The prevalent opinion in Singapore was expressed by the Chairman of the Singapore Chamber of Commerce at the Annual Meeting held on March 20th, 1916. He said :-
"Luckily we have not much to fight against here. Imports from enemy countries were in 1913 worth only six and a half million dollars out of 345 millions, less than 2 per cent., and exports to enemy countries were 14 millions out of 275 millions, or 5 per cent. If it is possible to stop this trade without damaging our other business, well and good. If, on the other hand, in order to prevent this trifling turnover (a turnover which will in any case be reduced to a still more negligible quantity after the war), we run any chance of hampering our other trade, we must ask to be consulted.
We must not lose sight of the fact that measures which may be eminently desirable in the old country may be quite unsuitable to conditions and the nature of our trade here."
Method of Conducting Foreign Trade.-The foreign trade of the Straits Settle- ments is conducted by several powerful European merchant houses controlling large financial resources. They are mostly British firms with headquarters in London, These houses hold shipping, insurance and general agencies, conduct both an import and export trade, and frequently act as managers and secretaries of rubber and other estates in the Federated Malay States.
In Singapore and Penang, as in the other ports throughout the Far East, the local European merchant is the connecting link between the native and the markets of the world, but it is a striking fact that the Straits trade is centred in the hands of a few powerful and wealthy firms, who act as merchants rather than commission agents, who, as a rule, are of sufficient stability to finance their own goods, and who can therefore hand over those goods to the native dealers on credit terms. Banking facilities are received in the form of overdrafts (with or without collateral security as the case may be) against the general credit of the House, rather than by the pledging of specific shipments, documents against payment, which is the method of the small merchant on the China coast, but which keeps him very much under the control of the banks, and renders the granting of credit impossible. This centralisation of the trade in the hands of wealthy and powerful houses such as—
Boustead & Co.,
Paterson, Simons & Co., Adamson, Gilfillan & Co., The Borneo Co., Ltd., Guthrie & Co., Syme & Co., Barlow & Co.,
has given British trade a firm hold in the Straits, and has made conditions such that only the more powerful German firms were able to compete on anything like equal terms. It, however, tends to create strong vested interests with a somewhat conserva- tive outlook, and a disinclination to accept troublesome, difficult business when a good profit can be secured on the large staple lines of trade. This somewhat easy-going attitude has undoubtedly stimulated German and other foreign competition during recent years.
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