611.9417/62
The Chief of the Far Eastern Section, Division of Regional Information, Department of Commerce (Moser), to the Inter-Departmental Subcommittee on Japanese Competition
Memorandum
In response to the Chairman’s request for suggestions as to what our policy should be in meeting complaints against Japanese competition, I feel that this whole matter is at present in a fluid state, and that it might be best for us to undertake no formal policy, but deal with each case as it arises upon its individual merits. In my judgment, voluntary restrictions or agreements, mutual in one form or another, will ultimately settle the problem; but conditions are not yet ripe for adopting this plan as a policy.
In this connection, I desire to make a few general observations, with respect to present conditions in Japanese industry, that affect our own people:
In Japan, industrialists and exporters appear concerned over the restrictions that have been placed on their export trade in nearly every foreign market. The effects are now being felt and exports in the past few months have shown a very small percentage of advance compared with last year, whereas industrial production has increased beyond current demand, despite curtailment measures. Production costs have advanced and the prices received for manufactured goods are considered too low. Corporate earnings are declining.
In view of these developments, the Japanese appear ready to increase export prices themselves, as a measure of offsetting the antagonism possibly aroused throughout the world by their low-priced goods. Unconfirmed trade reports state that there has recently been organized in Osaka an American Export Cotton Cloth Council whose function will be to control the export of textiles to the United States, limiting the maximum quantity to 5,000,000 yards monthly. It is stated that there will be a corresponding organization in New York from which the Osaka Council will receive instructions as to the quantity of goods to be shipped each month. Export prices are to be fixed according to “just and fair market prices,” say reports appearing in the Japanese press.
If American manufacturers are not willing to await the outcome of Japan’s efforts to adjust prices and exports, we might advise manufacturers to file with the Tariff Commission complaints against the continued importation of specific commodities. Before any action is taken, however, the manufacturer should be advised of the ill effects of clamping on higher duties in view of the possibility of Japan taking retaliatory [Page 987] measures. The action taken against Canada is an example. Canada imposed a special currency dumping duty on imports of Japanese goods. This annoyed the Japanese considerably, especially as Canada enjoys a large favorable balance in its trade with Japan. Japan has decided to increase the duty on imports of lumber and wheat and is considering similar restrictions on imports of other products in which Canada is interested.
In view of the present situation in Japan, it is quite possible that by the time any investigation has been completed, economic laws will have operated to raise the price of Japanese exports and further restrict trade expansion. This advance in prices would tend to restrict the activity of importers in the United States who have been taking advantage of the extremely low price of Japanese products and placing unusually large orders for them. These buyers are said to have been largely responsible for the sudden increase in imports into the United States of textiles from Japan in the early months of this year. Now that their orders have been filled, it is noted that imports of textiles have fallen off. The Japanese export guilds possibly may have a hand in remedying this situation.