BRITISH SHIPPING VERSUS JAPAN

Otago Daily Times, Issue 23811, 18 May 1939, Page 9

BRITISH SHIPPING VERSUS JAPAN

By H. V. Hodson, Editor of the Round Table. Shipping under the British flag is being steadily levered out of its established position in the Far Eastern trades. The decline, though slow, tends to be progressive, because as the shipping lines lose custom their finances weaken, they cannot replace their old ships with up-to-the minute tonnage, and so they fall back in commercial competition. A striking ample of the process is to be seen on the route between Australia and Japan. Before 1895 the British line had a monopoly, but then came along • a Japanese competitor, am after the war two more. In 1933 a conference of the four lines was formed, with the main purpose (as with shipping conferences all over the world) of preventing cut-throat competition. An agreement of 1938 provides that the lines shall pay into a pool 50 per cent, of their receipts from wool carried northward and 60 per cent, of those from their southward general traffic. Of this pool the British company’s share is only 22£ per cent., and it is near to being extinguished altogether^ An even more striking example is provided by the Bombay-Japan conference. The initial agreement of 1888 gave the British line 65 per cent, of the eastward traffic. After the world war, though the Italian and Austrian participants had been eliminated, the pressure of two Japanese lines had reduced the British allotment to 33 1-3 per cent. Since then still another Japanese line has had tc be admitted to the quota of permitted sailings, largely at the expense of the British P. and 0., and a fourth is now being sponsored by its colleagues on the condition that the P. and 0., not they, makes room for it. To some extent a decline of British shipping from the commanding position which it once held in Indian Ocean and Pacific waters was only to be expected, and even welcomed as healthy. The rise of Oriental nations, first Japan and then China and India, in industrial power and national consciousness, was bound to shake old monopolies and raise new problems. But where Japan is concerned the process has now gone further than simply a more equitable sharing of traffic between the old hand and the newcomer. On some shipping routes Japan herself is moving towards a position of even stronger monopoly than the British lines ever possessed in the heyday of their power. When such Japanese monopolies are eventually fastened down upon the primary producers, shippers and merchants whom the routes serve, they are likely to rue the day when they failed to give their support to Japan’s competitors. At present, because they do not themselves belong to large ship-owning countries, they tend to be indifferent whether they employ British, Japanese or other ships, even though most of them are citizens of the British Commonwealth.

The corrosive competition of Japan is enforced by three powerful factors, quite apart from the strictly financial elements of low standard of living, depreciated currency, shipbuilding subsidies, and possibly greater managerial efficiency. Those three further factors are the close organisation of Japanese industry, both “ vertical ” and “ horizontal the unorganised loyalty to each other of merchants, manufacturers and shipowners, and even of rival shipping lines; and the backing of a vigorous unitary Government with a mind of its own about the future of Japanese shipping. A very large part of Japan’s oversea trade is handled by three great vertical combines known as Zaibatsu. These huge family businesses have their tentacles everywhere. They own banks, mines, factories, shipyards, docks, shipping and many other ancillary concerns. They control practically all the large-scale enterprise of Japan. Naturally they carry their own products or their own raw materials in their own ships if they can. And they can make up on the roundabouts what they lose on the swings. That is to say, they can afford to overbid their competitors in buying produce for shipment, and undercut them in selling it at the other end of the route, because they themselves and not some third party obtain the advantage of the high shipping freight charge on the produce. This is said to be the oractice of the Japanese on the route between Singapore and North America.

In addition to these vertical combines there are also powerful horizontal organisations which have made themselves felt in shipping affairs. Of these the most important is the Rengokai, the cotton spniners’ association. It was largely through the concerted pressure of the members of the Rengokai that the first Japanese line, the N.Y.K., edged its way into the Bombay-Japan conference.

Apart from any organisation, moreover, independent Japanese firms bring their national patriotism to bear on their business dealings, and do not have to be told to “ ship Japanese.” The process is further aided by the practice of buying produce f.0.b., that is to say changing its ownership before it leaves the land of origin, a practice which enables the purchaser to specify his own shipping line. This has been of decisive advantage to Japanese shipping in the trades in Australian wool and Indian cotton.

But perhaps more important than anything else has been the firm backing that Japanese shipping has had from its Government, not so much in the form of subsidies as by strengthening its hand at the turning point of negotiations with other shipowners or Governments. This importance of this Governmental factor was clearly shown in a dispute over the participation of Japanese ships in the trade of the Netherlands Indies with other parts of the Far East. In sharp contrast with the results elsewhere, the firm action of the Indies Government, carrying out a definite shipping policy, defeated the Japanese attempt to “ muscle in ” on the traffic of Dutch shipping.

There are many reasons for the failure hitherto of British shipping in the Far East to receive similar support. The traditional relations between private enterprise and government under the British system have been against it. But the most important reason of all has been the lack of any single governmental authority for British shipping, which concenrs all the Governments of the British Commonwealth. This problem of shipping in the Far 'last is of direct importance to Canada, Australia, New Zealand, Malaya, and India, as well as the United Kingdom, because it is mainly in the trade between them and Japan that the problem arises; and it even concerns South Africa, since the

tide of Japanese encroachment _is lapping beyond India to East Africa and the Cape. All these members of the British Commonwealth are severally and jointly dependent for their very life upon British maritime power; yet there is no Government or instrument of Government capable of speaking for them all on this matter.

The Imperial Shipping Committee, itself but an advisory body, has recommended that they all consider urgently the desirability of setting up some joint authority to plan a British Commonwealth shipping policy and to see that it is carried out.

Serious obstacles have to be overcome before such a scheme could operate. The greatest obstacle is the ignorance or indifference of public opinion. The Australian or New Zealand woolgrower, for instance, content to sell his wool to the highest bidder, is surprised to have it suggested that he or his Dominion Government should be concerned whether it is transported overseas in British or Japanese ships; yet at the same time he may be enthusiastically supporting a rearmament plan which has its eye upon a much less certain menace from Japan than this commercial menace.

The problem in India is even more difficult, since there the cause of British shipping has to meet not merely with indifference, but very often with hostility. This attitude has not been entirely unjustified in the past. The virtual monopoly of Indian shipping formerly held by the P, and O. and its subsidiaries was a heavy dead-weight for Indian enterprise to shift. No such monopoly should be, or ever can be, re-established. But British shipping interests will have to realise that if they seek India’s partnership in defence against foreign commercial aggression it must be on equal terms. India should be able to look forward to carrying in her own bottoms a growing portion of her overseas The construction of a common defensive front for British shipping is not proposed in order to buttress up especially the P. and O. or the Canadian Pacific steamships or the Eastern and Australasian line or any other particular concern, but British Commonwealth shipping as a whole. And not only British Commonwealth shipping, but also other interests dependent on it, or which the most urgent and vital io the defence of a group of democratic nations whose arteries are the highways of the sea.