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The following extract from the "Far Eastern Review," July or August 1916, the facts of which have been authenticated, clearly shows the way in which the Japanese State-aided and directed national shipping policy operates to the advantage of Japanese trade and to the grave detriment of that of all other competing countries in the
open market of China:—
"A new menace and an exceedingly serious hindrance to trade between China and foreign countries, especially concerning Great Britain and the United States, has recently developed and has created a situation in which the capture of China's entire export trade by Japan is imminent. It is imminent if it has not already come about.
"Knowledge of the situation first came to break upon the British and American merchants when, in response to recent cabled requests from London for prices, they submitted bids for the supply of certain Chinese commodities, which, instead of being accepted as in former times, were rejected with the comment Price too high. This happened not only in some of the smaller lines of business, but in two of the great export products of China, vegetable oils and oil seeds, on which the particular merchants tendering were convinced they could quote as low prices as anyone.
"Refusal of first offers led some of them to quote new prices without commission, quoting the exact cost, insurance, and freight on the goods in question. Again the reply came back that the prices were too high. Closer enquiry elicited the information that Japanese houses, or British houses in London acting as agents for Japanese, were making much lower quotations. How they could do this the British and American firms failed to understand, since in some cases they know that slightly higher prices had been paid by Japanese for Chinese exports than they themselves were willing to offer.
"Then came a bombshell in the publication by the Japanese of revised schedules of freight from Kobe to the United Kingdom. By these schedules it was shown that Japanese steamers were taking ground-nut cargo, for example, at 48s. a tou from Kobe to Hull, whereas the Home Conference rate as published by that body was 1908. Since the rate from Shanghai to Kobe is about $6 Mexican a ton, or, at the then rate of exchange, about 11s., it appears that Japanese shippers can purchase China products in Shanghai or other ports, ship them to Kobe, and tranship to the United Kingdom for about 608. a ton, plus the cost of transhipment. This gives the Japanese an immense advantage over shippers on British and other vessels charging the Homeward Conference rate of 190s. a ton.
"It is obvious that no firm compelled to pay the Conference rates can hope to compete in any product which the Japanese care to handle, and it also follows that the Japanese buyers of Chinese products are able to pay several Mexican dollars a picul more for China products, thus stifling all present com- petition in buying, although the ultimate effect of this monopoly probably will be not to raise prices, but to lower them, as the Japanese is a good business man and always pays as little as he can for any produce he desires,
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The question may be raised why the British and American shippers do not take the line of least resistance and avoid payment of the 1908. Conference rate by shipping through Kobe. This is impossible, since the Japanese have carefully closed this outlet to other nationalities, and their polite reply to merchauts seeking cargo space for such shipments is that they have no room on their ships to accommodate the same. Whether this statement is actually according to fact at the time the space is requested or not does not matter since, even with the Japanese shipping and all the ships running under the Conference rates, there is still a sufficient deficit of cargo space, and the Japanese need only go out into the market in China to buy any amount of products needed to fill their holds.
"Thus far only the question of British and American trade with Great Britain has been dealt with, but it would also appear that those doing business with the United States, especially with the West Coast, are in a similar predicament as regards Japanese competition. The rate from Kobe to the West Coast is $8 gold per ton, according to the last advertised rates of the Japanese subsidised lines, whose maximum charges are regulated by the Japanese Government. Add to this the freight of $11 Mexican from Shanghai to Kobe, or about $5.50 gold, and it becomes evident that Japanese shippers can land Chinese products in San Francisco or Seattle for the freight charge
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of $13.50 gold, plus the cost of transhipment in a Japanese port, which probably runs less than 50 cents gold a ton, making a total freight and handling charge of $14. The Pacific Conference rates are $24 gold a ton, which gives the Japanese an advantage of $10 a ton, so that no American shipper or any other than Japanese can hope to compete.
While the effect at present is evidently to restrict trade in China products to the Japanese, it must not be forgotten that when trade lines are once established in China they tend to persist, and Japan's monopoly of the field, to the exclusion of all other competitors, gives her an opportunity of securing a strangle hold on the China market, which may be difficult to shake off when normal conditions as regards shipping return.
"The noteworthy feature of this competition is that it is perfectly legitimate, and has come about through the fact that Japan has been handed the dominance of the Pacific by the enforced withdrawal of the Pacific Mail Lines and the general lack of Amercan ships in Pacific waters. In fact, so greatly have the Japanese been aided in their policy of peaceful penetration' by the present shipping conditions, that their entire diplomatic attitude towards China shows signs of change. Their subconscious argument probably is, 'What is the necessity of force or threat of the same as displayed in the famous twenty-one demands, when the shipping situation has put us in a position simply to let economic advantages do their work and secure us that dominant place in the trade of China which we have so long contended was ours by right of proximity.'
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"Be that as it may, other nations engaged in business in China are not viewing with complacency the advance of Japan's commercial place at their expense, especially now that efforts on their part to secure relief by lower rates on the China run have proved unavailing, and strong representations made to the British Government have failed to reduce the rates of the British-owned ships in the least. When it is considered that even the 48s. rate from Kobe to United Kingdom ports represents a considerable increase over conditions prior to the war and that Japanese subsidised lines are making money hand over fist, declaring unprecedented dividends, it would appear that this firm combination of Japanese merchants and shipowners is being enabled to build such a wall around the trade of China that even a sweeping slash in rates will fail to demolish it. Past experience has proved that the Japanese can ran their ships on lower freight rates than those of other nationalities, so that it may take sterner competition than ever has occurred in the past to make a breach in the new economic wall which Japan has constructed around China, a wall in which no diplomatic representations can force an 'open door' since it is all so simple and above-board, being based on conditions over which diplomacy has no control."
D. ACTIVE GOVERNMENT ENCOURAGEMENT OF FOREIGN TRADE, Japanese official policy with regard to foreign trade has many points in common with that of Germany. The Japanese Imperial Government realised at an early date that economic expansion and the creation of a large overseas trade, with its concomitant of economic penetration in the countries of the East, was the surest way to consolidate the political position as the leading Power in the Far East to which it aspired, and which it has attained in a remarkably short space of time.
Industry and foreign commerce have, therefore, been fostered and scientifically protected in every possible way. Shipping has been encouraged by means of large subsidies, the closing of the coasting trade to all but Japanese vessels, and the development of the shipbuilding resources of the country by placing Government orders for warships with private yards such as the Mitsu Bisbi Dockyard at Nagasaki and the Kawasaki Company at Kobe.
Finance has been stimulated by the Government support accorded to the Bank of Japan, the Yokohama Specie Bank, the Bank of Taiwan, and others; the two last- mentioned concerns have branches in almost all countries of the Far East and in India. I am informed by a British banker in Japan that State financial aid is afforded to the foreign trade of Japan to the extent of 2,000,0001. at 2 per cent. per annum, through the medium of the Yokohama Specie Bank, which does not refuse any Japanese applicant for accommodation, provided that his enterprise is reasonably sofind, and he bears a good character, apart altogether from what his financial standing may be. Judged by results, this policy would seem to have been justified,
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