Japan and Australia

Press, Volume LXXII, Issue 21977, 29 December 1936, Page 6

Japan and Australia

The settlement of the trade dispute between Australia and Japan, announced in the cable news yesterday, can be welcomed for political as well as for economic reasons. As is the case with all trade disputes, both parties have been heavy losers. Last season Japan bought from Australia about £6,000,000 worth of wool; "since May of this year she has not bought a single bale in Australia, and although prices at the Australian sales have been satisfactory it seems that the boycott has had a depressing effect. Certainly Australian wool prices have not been as good as prices in South Africa and New Zealand. Moreover, as we have pointed out before, the boycott is of concern to all woolproducing countries because of the fillip it is giving to the consumption of wool substitutes in Japan. It is true, of course, that the dispute has been much more expensive to Japan than to Australia and that, had she wished, Australia could have held out indennitely against the Japanese demands. Normally, Japan fills more than 90 per cent, of her wool requirements in Australia and the diversion of this demand to South Africa, New Zealand, and the Argentine has been achieved only at the cost of a heavy increase in prices and freight charges. But the Government and the people of Australia have been justifiably concerned over the political consequences of the dispute. In Japan, partly because of the importance of exports in the national economy and partly because of the close connexion between the State and thf< great exporting houses, trade and foreign policy are closely linked. It is significant that, at the Tokyo end, the dispute has been handled, not by the Department of Commerce and Industry, but by the Foreign Office. In recent years the Australian Government has appreciated the need for maintaining friendly relations with Japan and has understood the importance of trade relations as a factor in political relations. The Australian goodwill mission to Japan in 1934 and the subsequent negotiations for a trade treaty seemed to indicate the beginning of a substantial expansion of trade between the two countries, but with dramatic suddenness, and for reasons which have not been adequately explained, the Australian Government, embarked on its unhappy trade diversion policy. The immediate reaction in Japan was an outburst of bitterness against Australia and the British Empire. The Japanese press, not without official encouragement, explained Australia's change of front as the result of pressure from Whitehall (which it certainly was not) and as part of the same policy which has been responsible for shutting Japanese goods out of the British colonial empire. In Australia these manifestations aroused a corresponding truculence and the Prime Minister took the unusual course of replying to the Japanese Government in a nation broadcast. Recent trade figures help to explain the disproportionate fuss which the new Australian tariff has aroused. For 1936 Japan will probably have an adverse trade balance of some 200,000,000 yen, compared with 19,000,000 yen for the previous year. Though the figure is not dangerously large, it is a further sign that the Japanese trade boom is beginning to wane. This is a prospect which sliould cause as much anxiety in Australia as in Japan, since industrial expansion is Japan's one alternative to territorial expansion. As far as can be judged, the terms

of the settlement which has now been reached are favourable to Australia. Trade between the two countries will henceforth be controlled on the basis of an exchange of 500,000 bales of Australian wool for about 85,000,000 yards of Japanese artificial silk and cotton piece goods; and according to recent reports in the Japanese press the Japanese Government has been holding out for the admission of at least 130,000,000 yards of piece goods a year. Nevertheless, there is now good reason to suppose that an unhappy chapter in the history of the trade relations between the two countries has been closed. It can only be hoped that its lesson will be understood in New Zealand, where the Government is now lightheartedly assuring British manufacturers that it is willing at a moment's notice to place an absolute embargo on all imports from Japan.