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have recently been revealed. In short, it is hoped that they are taking advantage of the temporary lull in German competition to put their own house in order.
There are, however, one or two important questions arising out of the war, upon which it would appear desirable to make a few comments in amplification of the views expressed by the various trade organisations summarised under heading A.
Comments on the Suggested Restrictions on Trading with German Firms after the War.
It has been suggested in many quarters that inasmuch as a number of shippers (particularly of piece goods) in the United Kingdom depended very largely upon German distributors in China before the war, these connections will probably be re-opened unless post-bellum trade with such firms in the Far East is prohibited by legislation. Such legislation would give a powerful measure of protection to British merchants in China, but the point to be considered is whether such legislation Would--
(a) be effectual in practice; and
(b) contribute to the interests of Great Britain in the broadest sense.
There is a considerable cleavage of interest and opinion on this subject. In the first place there is the interest of the British merchants in China, who are strongly of opinion that they are both able and willing to handle the whole of the piece-goods trade, and that it would be in the best interests of Lancashire if all trade with non-British distributors were restricted by legislation for a period of years, on the laudable principle of "British distributors for British goods. Many of the goods formerly handled by the Germans before the war are now being distributed by British houses under new chops," and it is contended that unless some measure of pro- tection is afforded, the old German chops will probably be renewed at the close of the war if the goods are obtainable from Manchester and Bradford.
On the other haud there is the important interest of the cotton textile industry in the United Kingdom which calls for the greatest possible output of the products of British capital and labour. There is little doubt that the expansion of the piece- goods shipments to China of late years has largely fallen into the hands of German houses who have been most active and pushing distributors, and whose relationship with British shippers has been on a sound and satisfactory basis. The opinion of the China representatives of Manchester and Bradford houses is that the concentration of business in the hands of a limited number of hongs is not conducive to the extension of British trade, and that the development of the present British firms, and the encouragement of new British firms to establish themselves is essential to the development of the trade to the limit of its fullest possibilities in China. Taking all the factors of the case into consideration, I am disposed to agree with the contention of the Manchester and Bradford representatives, and hold that the remedy should be found in the action of the exporters and distributors themselves rather than by State interference. The prohibition of British trading with German firms in a great neutral market like China would present very grave difficulties in the time of peace:
(a) It would probably involve the continuation of the system of the black and white lists, and, in order to be effectual, would require the blacklisting of Chinese firms, which in normal times would creato friction with the Chinese Government.
(b) It would tend to stimulate American and Japanese competition by forcing the German distributing organisation into the hands of American and Japanese manufacturers.
In this connection the following extract from the report of Commercial Agent Ralph M. Odell to the United States Government, Special Agents Series, No. 107, page 153, dated 1st December 1915 is of peculiar interest :--
"There are a number of German firms in China which have hitherto done
a large business in English piece goods, but which will probably have to secure their supplies elsewhere owing to the restrictive measures with regard to trading with the enemy which have been taken by the British Government. The German importers are extremely thorough in their methods and dealings, and they have gone into the interior and established closer relations with the consumer than other firms. It is possible that the organisation and facilities
which they possess in handling trade in China might be utilised to advantage by American manufacturers and mill agents who are unable to establish satisfactory connections with American firms. If a good trade could be built up through German firms, it is not likely that it would be lost after the close of the present European war. Inasmuch as German cotton goods have never been an important factor in the trade, the German firms would not turn to Germany, and the bitter feelings engendered by the war will probably make theni reluctant to handle English goods in the near future.
"A number of English firms, with branches or correspondents in New York, are doing some business in American cotton goods. With only a fow exceptions, however, they are extremely conservative, and, since they are allied by business and personal relations to the home country, they are not particularly anxious to handle American goods, except those lines which do not compete with Manchester goods. The tendency to favour British goods has been intensified by the war. One English importer went so far as to state that he would not buy American goods even if they were offered at prices 5 per cent. lower than similar goods that he could purchase in England."
It is possible that a commercial rapprochement between Germany and Japan may take place after the war. Japanese views with regard to the economic policy outlined at the Paris Conference are well known, and it is conceivable that if the supply of British goods should be artificially cut off, German firms would turn to Japan, firstly with a view to securing a textile trade, and secondly with the object of seriously damaging British interests. I am informed that the German prisoners in Japan, many of whom are assistants in German firms in China, are making the best possible use of their time in studying both Chinese and Japanese, and in cultivating friendly relations with their captors.
(c) Such legislation would tend (certainly at the outset) to restrict the shipments of British textiles to China and to confine our trade. At the same time it would provide such effectual protection for British merchants in China that they would lack the direct incentive and stimulus of healthy com- petition, and it is extremely doubtful whether, under such circumstances, they would be prepared to take adequate steps to widen the basis of their distribution.
The remedy would appear to be in energetic action on the part of the exporters in the United Kingdom and their British clients in China on the following lines:—
(1) The extension of the existing connections in every possible way with a view to a wider field of distribution. To this end, British merchants in China should abandon their pre-war attitude of confining themselves to one shipper only; they should be more ready to take up business in fancy goods and novelties; and should not refrain from handling new lines of trade because at first they appear to involve considerable trouble and detail work, and are not as simple to work as the large staple articles.
The fact that the bulk trade in staple goods has been in British hands in the past has undoubtedly caused British merchants to view with disfavour the small orders in novelties involving numerous designs and assortments, and much trouble for a small turnover. They failed to see that with the raising of the standard of living in China, these goods would tend in time to become staple articles themselves. This attitude largely accounts for the fact that the distribution of miscellaneous fancy textiles was so largely in German hands.
(2) Home exporters should give every possible assistance to the British houses in their laudable attempts to expand their trade. This can be done in many ways, such as by the help and advice of resident representatives in Shanghai, by liberal financial facilities and careful sampling, by regular consignments of goods on joint account in order to establish new qualities and chops, and by most meticulous attention to the execution of orders and the needs of the market.
(3) In view of the fact that there are not, at present, sufficient British firms of the requisite standing and enjoying the necessary facilities to deal with a greatly increased volume of business, new British firms should be established with the encouragement and assistance of the banks. would suggest that British textile merchants in Manchester. and Bradford
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