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living advances greatly. It is small in Great Britain even to-day, and our highest class makers are largely dependent on foreign trade.
265. We are of the opinion that Japanese competition in world markets will certainly increase, and that our wool textile industry should be forewarned and take steps to ensure that the experience of Great Britain versus Japan, in the cotton trade, is not repeated. Japan has, in addition to her very much lower production costs, the benefit of cheaper freight for much of her raw materials. This gives her a definite advantage in many types of products. Her manufacturers and merchants are keen and astute, her workers are frugal and industrious, her Government and financial institutions definitely foster and assist export trade in every way open to them. She has, so far as the Eastern markets are concerned, advantages in the cost and time of delivery of goods, by reason of shorter distances from the markets. This point is important; it enables buyers in the Far East to place their orders later and reduces their risk both as to price and exchange fluctuations. It also enables the Japanese maker to undertake orders for repeats, which the delivery time required from Europe makes it difficult for the Far Eastern buyer to place with European makers. This has already led to a system of placing orders with British makers for small sample quantities only to a design or colour, instead of the old bulk trade. Repeats are placed with Japanese makers instead of with the original British maker.
266. In our view, it is imperative that British industry should be organised to meet this competition, and confine it to the narrowest possible limits when it comes. It will inevitably arrive. Recom- mendations which we make on this subject will be found in the China section of this Chapter.
MISCELLANEOUS INDUSTRIES.
267. The outstanding facts revealed by our study of a number of other important industries in Japan is the increasing efficiency of those industries and their ability to compete with the products of similar industries established in Great Britain. Japanese industries have a very definite advantage over their British com- petitors in wage costs, and, with few exceptions, are equal in efficiency. Many Japanese products have successfully established themselves in Far Eastern markets, and in the British Dominions. Certain Japanese products (paper, porcelain, cotton hosiery, and underwear, hats, etc.) have a market in Great Britain. The important point for Great Britain is that of recent years the ten- dency of Japan's exports of finished goods is to increase both in volume and in variety of markets to which they are consigned.
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REASONS FOR THE DECLINE OF BRITISH TRADE WITH JAPAN.
268. Throughout the period of Japanese industrialisation the Japanese Government has, in effect, been a partner in Japanese commerce and industry. Government encouragement is given to industry by means of the tariff, State regulations which call for the employment of Japanese manufactures in public enterprises, and by other means.
269. Japanese industry has a definite advantage over British industry by reason of the low wages paid to Japanese workers, and the longer hours often worked in Japanese factories. Great Britain is, therefore, handicapped in the sale of her goods in Japan by a disparity in price arising from higher production costs, her distance from the Japanese market, as well as by a tariff directed These against those goods in the production of which she excels. are the factors which handicap Great Britain in addition to Japan's ability to supply her own markets. There is, however, the further competition from other industrial countries, mainly Germany and the United States. The imports into Japan from both these countries now exceed those from Great Britain. Germany's suc- cess is mainly due to price, whilst that of the United States is due to a combination of attractive and suitable goods, quality and price which assist in the sale of such goods, and first class contacts with the market. The intelligent aggressiveness, on the one hand, of the United States, mainly in providing the market with so large a number of modern mechanical conveniences at moderate prices, and on the other of Germany's thorough and persistent cultivation of the market with goods at low prices, is the cause of our decline. 270. Distribution of imported goods in Japan is no longer mainly With carried out by old established British merchant firms. Japan's industrial rise, there have been created a limited number of large Japanese business houses which control vast amounts of capital, direct much of Japan's industry, and distribute a large proportion of both domestic and imported goods. These firms are far stronger to-day than any resident foreign merchant firm- indeed, they may be said largely to dominate the industrial life and distributive organisation of Japan. They are also closely allied with shipping, and their branches are to be found in most of the trading centres of the world. We cannot avoid the conclu- sion that Japan henceforward will offer but little attraction for British or other foreign merchant houses unless it be for the limited quantity of goods of a special nature which Japan herself does not produce.
271. The representation of British manufacturers in Japan is not satisfactory, and it is essential that the British manufacturer should himself provide the stimulus for the sale of goods in that
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