VOLUNTARY EXPORT RESTRICTION AS A FOREIGI‘N COMMERCIAL POLICY WITH SPECIAL REFERENCE TO .IAPAINESE COTTON TEXTILES Thesis for the Degree of Ph. D. MICHIGAN STATE UNIVERSITY KENNETH LeROY BAUGE - * 19.67 ' m LIBRARY IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII Mich“. 5m 3 1293 10447 This is to certify that the thesis entitled Voluntary Export Restrictions as a Foreign Commercial Policy with Special Reference to Japanese Cotton Textiles presented by KENNETH LEROY BAUGE has been accepted towards fulfillment of the requirements for Ph.D. degree in_E_C_Qan1_C.S' I \) Major professor Date June 9, 1967 0-169 . “A, xv. (_/J __L ABSTRACT VOLUNTARY EXPORT RESTRICTION AS A FOREIGN COMMERCIAL POLICY WITH SPECIAL REFERENCE TO JAPANESE COTTON TEXTILES by Kenneth LeRoy Bauge The purpose of this study has been to evaluate the use of voluntary export controls by a nation as an alter— native to possible restrictions imposed by a major im- porter. The case analyzed is that of Japanese export limitations on cotton textiles to the United States when it became evident in the late 1930's and again after World War II that tariff rates almost certainly would be sharply increased. The history of these export restrictions indicates that through diplomatic channels and through pressure brought by the textile trade association on the United States Tariff Commission that the Japanese cotton textile exporters had little choice. They could control exports Voluntarily or face the consequences of higher tariffs. Export restrictions were adopted in the belief that trade Would be limited less than by import controls. A test of the results of export controls has been made by calculating the elasticity of demand for cotton Velveteen in the United States market. By means of multiple linear regression and correlation analysis, a demand in!" “Uno‘ -m’y I A".- Vd V AC n u .5... Ad fl\u .‘ J Kenneth LeRoy Bauge elasticity factor was obtained. From this elasticity of demand, an estimate was made of cotton twill-back velveteen imports, assuming the tariff would have been increased as recommended by the Tariff Commission. On the basis of these calculations, it appears that the voluntary quota imposed by Japan in 1957 was more restrictive in three out of the five years of the agreement than had the United States imposed tariffs at rates proposed by the Tariff Commission. L2} 0 \ .IC I v VOLUNTARY EXPORT RESTRICTION AS A FOREIGN COMMERCIAL POLICY WITH SPECIAL REFERENCE TO JAPANESE COTTON TEXTILES By Kenneth LeRoy Bauge A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Department of Economics 1967 \ <“' ..) 7§4E977 Myst/27 @ Copyright by KENNETH LEROY BAUGE I968 nfi* CV ~\» \~. “9. o.u‘ ab Db ‘ « w Y O O E C. .u . .. _ r . To C .l P. e h .l S . TV .in . a h . at. A.» W; a. v 41 ) "V... W . ab r w l .q a v . A. C n... Nu a u.\v m e e .1 ac » . . . w . Q» a» as mg D. QC 1 .. V.» O D. .l 10 n& ma VT . t HL . v . T. O n S V .l S C 4 u nu .. . S “.1” wt. 9. a C an I. e S .4” w .. AD n . a: a; z I a» -7 At n ML a .n e n A; .3. AC m” .3 S .nlt. m 4|. S Tu h 0 .. . ..: Va n a . n . A: Fm. .Ou THU. 0 all. gt a . y n u a» .. «U A C n\ hi WED Phi. 0.0 S p. Ana h . -fid . .v fl.» s v A AU 1...! ‘1" ht “V «J w; «1 . ,. ab and h . w hflv . v WTII.‘ . s -. . 7; wk. aw amt» nu: r; n . IA nun. nth o. . n0. A: .T . m y .n . wml. .~ 4 I M x . -mlv I‘ll » w . u ~\v u u A v A v si- I ACKNOWLEDGMENTS I want to express appreciation to Dr. Harry G. Brainard for his interest, patience, supervision and suggestions during the development and writing of this thesis. Over the years he has been more than a super— visor. As a teacher and advisor, he has given me in— spiration and personal assistance at crucial times. Also I wish to express gratitude to Dr. John L. Hazard and Dr. Peter J. Lloyd for their careful reading of the manuscript, for their searching questions and constructive criticisms. Their suggestions have imporved the consistancy of this thesis. The courteous assistance given by Miss Catterine M. Wheaton in patiently reading the manuscript and suggesting improvements in style has aided in improving my writing. Finally, I owe a debt more than I know how to express in words to my wife, who not only typed the manuscript through many revisions and suggested style improvements, bUt who also showed unequalled patience and gave up much during the period I was engaged in research. The views expressed and any errors made are solely my responsibility. ACKNOWLEDGMENTS LIST OF TABLES LIST OF APPENDIC Chapter I. INTRODUCT Commer Staten Object Method 11. DEVELOPME INDUST The Pe Nature Charac Indust Indust Devalu Balanc I Summer I I ANALYSIS STATES HI. United United Unitec Mar United Mar Unite: of Summer TABLE OF CONTENTS ACKNOWLEDGMENTS . . . . . . . . . . LIST OF TABLES . . . . . . . . . . . LIST OF APPENDICES . . . . . . . . . . Chapter I. II. III. INTRODUCTION. . . Commercial Policy Statement of the Problem Objective Method of Analysis DEVELOPMENT OF THE JAPANESE COTTON TEXTILE INDUSTRY . . . The Period Prior to 1930 Natural Resources and Population Characteristics of Japanese Labor Industrial Rationalization Industrial Co-operation and Control Devaluation of the Yen Balance of Trade Summary ANALYSIS OF JAPAN'S EXPORTS TO THE UNITED STATES DURING THE l930'S. United States Imports United State's Imports from Japan United States Imports of Cotton Manufactures United States Imports of Cotton Manufactures from Japan United States Production and Imports of Cotton Manufactured Goods Summary iv Page iii xi AO Chapter IV. VOLUNTAR' Intro< Cottoz Cotto: Cottor Velve‘ Summa: V. ANALYSIS TRANS! Wartir Unitec Unitec Unitec Mar Unitec Mar Unitec Cot United United Ja; I ConclL I II. VOLUNTAR} Introd I React: 1956 \ I I Prelim I Five-3 I Conclt IH' VOLUNTAm QUOta 19E cotter 195 1961 g Short. Short. Wit LOHE-T L°n8~l Chapter IV. V. VII. VOLUNTARY AGREEMENTS OF THE 1930's Introduction Cotton Cloth Cotton Floor Coverings Cotton Hosiery Velveteens and Corduroy Summary ANALYSIS OF UNITED STATES- JAPANESE TRANSACTIONS 1940- 1962 . . Wartime Changes United States Imports During the Fifties United States Imports from Japan United States Imports of Cotton Manufactures United States Imports of Cotton Manufactures from Japan United States Production and Imports of Cotton Manufactured Goods United States' Exports to Japan United States Balance of Trade with Japan Conclusion VOLUNTARY CONTROLS OF THE 1950's. . Introduction Reaction to Increasing Imports I956 Voluntary Agreement Preliminaries to the 1957 Agreement Five-Year Voluntary Agreement Conclusion VOLUNTARY CONTROLS OF THE 1960's. Quota Request and Japanese Reaction, 1959- 1960 Cotton Textile Imports from Hong Kong, 1959—1960 1961 Quota Requests and the Seven—point Cotton Textile Plan Short-Term Multilateral Agreement Short—Term Bilateral Agreement with Japan Long-Term Multilateral Arrangement Long-Term Bilateral Agreement Page 50 92 120 145 Chapter Other Great Bi] ConclL VIII. ANALYSIS Alterr Volunt Cor United Wit IX. SUMMARY A APPENDICES. BIBLIOGRAPHY . Chapter Page Other Bilateral Agreements Great Britain's Experience with Bilateral Agreements Conclusion VIII. ANALYSIS OF VOLUNTARY AGREEMENTS . . . . 173 Alternatives to Voluntary Agreements Voluntary Agreements Versus Commodity Agreements United States Paradox Position Within GATT IX. SUMMARY AND CONCLUSION . . . . . . . 198 APPENDICES. . . . . . . . . . . . . . 205 BIBLIOGRAPHY . . . . . . . . . . . . . 271 vi Table 11-9. 11-10. 11-11. II~12. III-1. TH.2. Cost 2 Tex Compar Jap DOllar Foreig Foreig Sta SOUrCe Compar Nat Imp Compar Imp Man Imp Table II-l. II—2. II—3. II-A. II-5. II-6. II—7. II-8. II-go II—lO. II-ll. II—12. III-l. III-2. LIST OF TABLES Japanese Imports and Exports . . Japanese Cotton Spindles . . . . Japanese Exports of Cotton Yarn and Cotton Fabrics. . . . . . Population of Japan . . . . . . . Changes in Working Hours and Annual Per Worker Production in Japan, 1922-1932 9 o I o o o b o 0 Number of Mill Workers and Average Daily Wages in Japan, 1929— 1932 . Cost and Wage Comparisons in the Textile Industry of Japan . . . . Comparison of Cotton Textile Exports of Japan and Great Britain . . Dollar-Yen Exchange Rate in New York Foreign Trade of Japan . . Foreign Trade of Japan with the United States and with Rest of the World Source of Japanese Raw Cotton Imports . Comparison of the United States Gross National Product, Total Imports, and Imports from Japan, 1925-1939 . . Comparison of the United States Total Imports, Total Imports of Cotton Manufactures, and Cotton Manufactures Imported from Japan . . . . vii Page ll 12 15 23 2A 25 27 3O 32 33 37 A2 AA Table In. III-9. IV.10. IVhll. In” Compar Imp Mar Man Compar Cot Cot Cot Compar Tot Compar fro Agr Relati due Eng Compap por Imp Cov Compar Tot COMpar Hos Compap Tot Compar and COmpar Tot Compar and Compar Nat and Table III-3. III-A. IV-l I IV—2. IV-3. IV-A. IV-5. IV-6. IV—7. IV—8. IV-9. IV-lO. IV-ll. Comparison of the United States Total Imports from Japan, Total Cotton Manufactures Imported, Total Cotton Manufactures Imported from Japan Comparison of Value of the United States Cotton Manufactures Produced, Total Cotton Manufactures Imported, and Cotton Manufactures Imported from Japan . . . . . . . . Comparison of Total Imports and Imports from Japan of Cotton Cloth 1926— 19A0. Comparison of Domestic Production and Total Imports of Cotton Cloth . . . Comparison of the Cotton Cloth Imports from Japan and the Voluntary Quota Agreements . . . Relative Importance of Domestic Pro- duction and Total Imports of Cotton Rugs, 1929- 1933 Comparison of United States Total Im- ports of Cotton Floor Coverings and Imports from Japan of Cotton Floor Coverings. . . . . . . . Comparison of Domestic Production and Total Imports of Hosiery 1929-1939 Comparison of Total Hosiery Imports with Hosiery Imports from Japan Comparison of Domestic Production and Total Imports of Velveteens. . . Comparison of Velveteen Total Imports and Imports from Japan l93A-l9AO Comparison of Domestic Production and Total Imports of Corduroy 1935-1939 Comparison of Corduroy Total Imports and Imports from Japan l93A-19A0 Comparison of United States Gross National Product, Total Imports, and Imports from Japan viii Page A6 A8 6A! 65 67 71 72’ 78 79 8A 85 87 88 97 H V-3. V-A. V-8. V-9. V~10. VI-l. V1.2. Ira Table V-2 o V—lO. V-ll t V—l2. VI-l I VI—2. Page Comparison of the United States Total Imports, Total Imports of Cotton Manufactures, and Cotton Manu~ factures Imported from Japan . . . 100 Comparison of the United States Total Imports from Japan, Total Cotton Manufactures Imported, Total Cotton Manufactures Imported from Japan. . 102 Comparison of Value of the United States Cotton Manufactures Produced, Total Cotton Manufactures Imported, and Cotton Manufactures Imported from Japan . . . . . . . . . 10A United States Production and Imports of Cotton Cloth . . . . . . . . 105 United States Production and Imports of Velveteens.. . . . . . . . . 106 United States Production and Imports of Ginghams . . . . . . . . . 107 United States Production and Imports of Sheets and Pillow Cases. . . . . 108 United States Production and Imports of Blouses . . . . . . . . . . 109 Comparison of Total Exports to Japan, Total Exports of Unmanufactured Cotton, and Exports of Unmanu- factured Cotton to Japan . . . . 112 United States Balance of Trade with Japan. . . . . . . . . . . 115 United States Balance of Trade of Unmanufactured Cotton and Manu- factured Cotton Goods with Japan. . 116 United States Imports of Cotton Manufactures . . . . . . . . lAO Comparison of United States Imports from Japan and Voluntary Quota . . 1A3 ix Table VIII-l. VIII-2. VIII—3. IX—l I Observed and Predicted Quantity Im- ported of Cotton Twill—back Velveteens from Japan . . . . . Actual Imports of Japanese Cotton Twill-back Velveteens Adjusted for Changes in Income 1957—1961 . . . Comparison of Predicted Imports of Japanese Cotton Twill-back Velveteens Under the Assumed Tariff Increases and the Actual Imports Adjusted for Changes in Real Per Capita Disposable Income 1957-1961. United States Imports of Cotton Manu- factures . . . . . . . . Page 180 187 188 203 Appendix Appendix A. B. LIST OF APPENDICES Memorandum of Understanding . . . . . Agreement . . . . . . . . . . . Text of the 1957 Agreement General Agreement on Tariffs and Trade Text of Short-Term Arrangement General Agreement on Tariffs and Trade United States—Hong Kong Cotton Textile Agreement . . . . . . Table I.-—Independent and Dependent Variables Used in the Multiple Linear Regression and Correlation Analysis xi Page 206 215 229 236 2AA 26A 268 A foreign acountry which rent plus capit mercial policy between countri there are new m Amen transac There are IONS and “NI IN mes 0f 80 0N . III IIIIII I CHAPTER I INTRODUCTION Commercial Policy A foreign commercial policy is any public policy of a country which directly regulates or influences its cur- rent plus capital international accounts. The use of com- mercial policy to control the flow of goods and services between countries is not new to the twentieth century, but there are new methods of commercial policy used to control foreign transactions that are unique in this century. There are various means of influencing the flow of goods and services from one country to another. Commercial policies usually regulate foreign trade through control of the price of goods and services, or through quantity re— strictions. These regulations may be directed at various Stages in the production of goods and services. Price and quantity regulations can be directed toward the producer. These restrictions can be applied only to goods that cross international boundaries. Also, price and quantity regu- lations can be directed toward the consumer in an effort to control consumption. In practice, there are two means of regulating foreign commerce: price and/or quantity; and these regulatio: people: domest: domestic consume Price inte discourage the J Discouraging car can be done thrr restrictions, wl also be used as flow of goods at < This thesi as a commercial InIrhereby the to Another cow AIIOII‘I and One I IIIIII Naults 11 these regulations can be directed toward four groups of people: domestic producers, and/or foreign producers, domestic consumer, and/or foreign consumers. Price interferences are used to encourage and to discourage the flow of goods and services between countries. Discouraging can be done through tariffs and encouraging can be done through the payment of subsidies. Quantity restrictions, which will significantly affect prices, can also be used as a means of increasing or decreasing the flow of goods and services across national boundaries. Statement of the Problem This thesis examines the voluntary export restriction as a commercial policy. Such agreements are an understand— ing whereby the exporting country will restrict its exports to another country. When two countries have the same in— ‘dustry and one has a definite cost and price advantage, which results in a large flow of goods from one to the other, what alternatives are available to overcome the displacement of import competing production? Also, what can the low—cost country do to delay protective restrictions by the other? Because of the cost and price differences, two problems are created. Industrial expansion in the export- ing country will be the direct result of an increase in demand for exports, which will increase the demand for resources, and, if none are available, result in an upward pressure cause excessive sources in the too rapid. If long run econom were used to pr Prior to and is a large share of which States cotton t Tard Japanese 11 low profits and also in the 195. ma1 amount of to the United s M Ether; upward pressure on costs and prices. This expansion could cause excessive unemployment of human and non-human re- sources in the importing country if the rate of change is too rapid. If this is a permanent change, there is the long run economic task of reallocation of resources which were used to produce goods that are now imported. Prior to and after the Second World War, Japan was and is a large exporter of cotton textile goods, a large share of which have been to the United States. The United States cotton textile industry has frequently pointed to- ward Japanese imports as the cause for their problem of low profits and excessive unemployment. In the 1930's and also in the 1950's Japan voluntarily placed quotas on the total amount of certain types of cotton textiles exported ito the United States. Two general types of voluntary quotas may be estab- lished by an exporting country. One type is unilateral in form but results from diplomatic negotiations and other pressures at the governmental level. The other type is also unilaterally imposed by the exporting country, but is a result of an evaluation of the market situation in the importing country involving no negotiation with the im- porting country with respect to the amount or duration of the quota. These types result from a specific international a; bilateral or mu: The volum compared to the policies of a to Imposed unilatei voluntary quota country or is b: has, at the mini voluntary agree: to be more tempt All quotas anal 1AA, while a 1 have such a limf Ieriodicany re. and 811°" the net I no is that the discrimination I international agreement which will be in the form of a bilateral or multilateral agreement.1 The voluntary quota has distinguishing features when compared to the usual form of the more typical commercial policies of a tariff or quota. Commercial policies are imposed unilaterally by the importing country while the voluntary quota is imposed unilaterally by the exporting country or is bilaterally negotiated. The exporting country has, at the minimum, some influence over the terms of the voluntary agreement. Also, the voluntary quota is intended to be more temporary than the quota or tariff. The volun- tary quotas analyzed in this study have a specified time limit, while a typical tariff or quota usually does not have such a limitation. Therefore, the voluntary quota is periodically re—examined, and its promoters must Justify and show the need for its continuation. The final differ- nce is that the bilateral voluntary agreement permits iscrimination against one country. An importing country s able to use the bilateral voluntary quota to control mports from one country or more, while allowing market onditions to control imports from other countries. lNoel Hemmendinger, Non-Tariff Trade Barriers of the nited States (Washington, D. 0.: United States-Japan rade Council, Inc., 1954), p- 6' This thesi voluntary MESA?j :ioneo‘ two E91191 proposed that ti the thirties, ff :atic negotiatic cotton textile i thesis will test export restricti of diplomatic pl action which no. possibly more re examination will striction as a :- M a large flow States. ObJective This thesis examines the Japanese cotton textile voluntary restrictions with reference to the above—men- tioned two general types of voluntary quotas. It is proposed that the cotton textile voluntary agreements of the thirties, fifties and sixties resulted from diplo- matic negotiations and pressures from the United States cotton textile industry and government. Therefore, this thesis will test the hypothesis that Japanese voluntary export restrictions on cotton textiles are imposed because of diplomatic pressures and threats of unilateral American action which would be more permanent, less flexibile and possibly more restrictive than voluntary quotas. An examination will be made of the voluntary export re- striction as a means of solving the international problem of a large flow of cotton goods from Japan to the United States. It is proposed that the voluntary export re- striction is a means used to postpone more severe and permanent restrictions for Japanese exports of cotton textiles to the United States. Method of Analysis For organizational purposes the thesis is divided into nine chapters. Chapter I deals with the statement of the problem, the objective, and the method of analysis. Chapter II brings together the events that placed Japan in the position to rapidly expand her exports of cotton textile imports 1930's. In Cha thesis, an evol tary agreements Chapter V discu buildup of Japa the analysis ch sumnary and C01". :extile imports into the United States is shown during the 1930's. In Chapters IV, VI and VII, the main body of the :hesis, an evolution is made of the cotton textile volun— :ary agreements during the 1930's, 1950' and 1960's. Zhapter V discusses the wartime changes and the post—war ouildup of Japanese—United States trade. Chapter VIII is :he analysis chapter, while the ninth chapter contains the summary and conclusions. DEVEZ oapan n85 ing the past 01“: example of this chapter brings phenomenal expa The fiqut res established with machinery styles of livin no the country lice these mate CHAPTER II DEVELOPMENT OF THE JAPANESE COTTON TEXTILE INDUSTRY Japan has emerged rapidly into the modern world dur- ing the past one hundred years. This rapid emergence has attracted much attention due to her remarkable development in all areas of human endeavor——economic, political, social, and scientific. The cotton textile industry of Japan is an example of this rapid and balanced development. This chapter brings out the natural economic causes for this phenomenal expansion. The Period Prior to 1930 The first modern steam powered cotton spinning mill was established in Japan in about 1866, and was equipped with machinery imported from England. At this time western styles of living were rapidly being introduced into Japan, and the country was lacking in capital equipment to pro— duce these material goods. Demand for foreign made goods rew rapidly, which sooon resulted in a rather large and 1 onsistent unfavorable balance of trade. Table II-l shows 1U. 8., Tariff Commission, The Foreign Trade of a an (Washington, D. C.: U. S. Government Printing Office, 922 , p. 2. 5333’)! L\~\g‘x\x\.‘\‘ ‘.~s\~.«s‘«\.x \‘~.N.N.;kv~ .\\\ \.H.~IV \r; \Ir\ ‘Tzs \.L \T.\ \—\ \25 ‘C \yk \‘J I.‘ ... ._ .... c . ~ .._ k.‘ .. .. . . . .‘\~\. x : uux~ ..,...a.. .. .,. ..~.. .......‘.\...‘«‘ssgs«~«a.x ......,. .__ . .. ... .a..«..\ ,.c..c.\«.\..‘.,.~.-,~y.«\.\,\.«V...:‘~.«M.\U..~..\.\u}\\1/\VJNN.\TVJ a..........i......s...~.~«‘«‘~\.‘.xdt«.gs.\«s.ssesxs~‘\ri 8 a TABLE 11—1 JAPANESE IMPORTS AND EXPORTS (VALUES IN THOUSANDS OF YEN) Total Total Excess of Excess of Year Imports Exports Imports Exports 1 68 10,693 15,55A ___ A,861 1 69 20,78A 12,909 7,875 -—- l 70 33,7A2 1A,5A3 19,199 ——— 1 71 21,917 17,968 3,9A9 --- 1 72 26,175 17,026 9,1u9 __— 1 73 28,107 21,636 6,A71 -—— 1 7A 23,A62 19,317 A,1u5 ___ 1 75 29,976 18,611 11,365 1 76 23,965 27,711 —-- 3 7A6 l 77 27,A2l 23,3A8 ”.073 —-— 1 78 32,875 25,988 6,887 ——- l 79 32,953 28,176 ".777 ——- l 80 36,627 28,395 8,232 __— 1 81 31,191 31,059 132 —-— 1 82 29,nu7 37,721 ——— 8,27u 1 83 28,AA5 36,268 ___ 7,823 1 8“ 29,673 33,871 —-— A,198 l 85 29,357 37.1A7 ——— 7,790 l 86 32,168 A8,877 ___ 16,709 1 87 AA 30A 52,AO8 —_— ,10A 1 88 65,A55 65,706 ___ 251 1 89 66,104 70,060 3,955 1 90 81,729 56,603 25,126 __— l 91 62,927 79,528 -—- 16,601 1 92 71,326 91,103 ——— 19,777 1 93 88,257 89,713 ~-— 1 A56 1 9A 117,A82 113,2A6 A,236 _ _ l 95 129,261 136,112 ——— 6,851 1 96 171,67u 117,8A3 53,831 _-_ 1 97 219,301 163,135 56,166 ___ 1 98 277,502 165,75A 111,7u8 ___ 1299 220,A02 21A,930 5,u72 ___ 1900 287,262 20A,A30 82,832 ___ 1901 255,817 252,3u9 3,A68 ___ 1902 271,731 258,303 13,A28 -__ 1903 317,136 289,502 27,63u ___ 190A 371,361 319,261 52,100 ___ 1905 A88,538 321,53A 167, 00A _ 1906 A18,78A A23,755 ___ n 971 1907 A94,u67 A32,A13 62,05u ___ 1908 A36,257 378,2A6 58,011 1909 39A,199 A13,112 ___ 18 913 1910 A6A,23A A58,A29 5,805 —— — 1911 513,806 uu7,u3u 66,372 ___ 1912 618,992 526 982 92,010 ___ 1913 729,A32 632,u60 96,972 ___ 1911 595,736 591,101 r 635 1916 756,A28 1,127,A68 -—— 371,0ho 1917 1,035,811 1,603,005 —-— 567,19u 1918 1,668,1AA 1,962,101 293,957 1919 2,173,A60 2,098,873 7A,587 —-- 1920 2,336,175 1,9na,395 387,780 ___ 1921 1,61A,15A 1,252,837 361,317 ___ 1922 1,890,308 1,637,A51 252,856 ___ 1923 1,982,230 1,Au7,750 53A,u79 ___ 1924 2,u53,uo2 1,807,03A 6A6,367 ___ 1925 2,572,657 2,305,589 267,068 __- 1926 2,377,u8u 2,00A,727 332,756 ——— 1927 2,179,153 1,992,317 186,836 ___ 1928 2,196,31A 1,971,955 22A.359 —-— 1929 2,216,2A0 2,1u8,618 7, 21 ___ 1930 1,5A6,070 1,A69,852 76,218 -_- a1868 to 1920 obtained from: U S. Tariff Commission, The Forei n Trade of Japan (Washington, D. C.: U. S. Government Printing Office, 19225, pp. 1, 2. 1921 to 1930 obtained from: The Foreign Affairs Association of Japan, The Japan Yearbook 193A (Tokyo: The Kenkyusha Press), Japan's unfavor from 1896 to 19 Prior to governmental ad constitutional political stabi and encouraged the development influence upon abling exports 1890's.2 The Japan 0f the unfavora' first encourage, “‘13th by bui. These served to make any of its 3°Vernment also private individv encourage the 11 sent "01110 loan whWiShed to h It tOOk a] Spifldles t0 r6a< 2 9% ~, Kei J 20 Japan's unfavorable balance of trade during the 1870's, from 1896 to 1915, and during the 1920's. Prior to 1890 Japan had successfully reorganized her governmental administrative system into a well-established constitutional government. This provided an atmosphere of political stability and monetary incentives which enabled and encouraged the people to devote more of their time to the development of the economic sector. This also had its influence upon the country's international trade by en— abling exports to continue to increase rapidly after the 1890's.2 The Japanese government took corrective action because 3f the unfavorable.ba1ance of trade during the 1870's. It, ?irst encouraged the development of the cotton spinning .ndustry by building two model spinning mills in 1878. Phese served to stimulate private industry. Japan did not mks any of its textile machinery at this time, so the pvernment also imported spinning machinery and sold it to rivate individuals on favorable credit terms. To further ncourage the importing of textile machinery, the govern- ent would loan money on favorable terms to private firms ho wished to import their own cotton textile machinery.3 It took about thirty—five years for the number of pindles to reach one million and about another thirty—five .21010. 3Keizo Seki, The Cotton Industry of Japan (Tokyo: ipan Society for the Promotion of Science, 1956), p. 15. years for it tc 11-2). This 1’6 cause of a stat scientific syst Japan beg textiles in the experiencing a temporary over; provided a sols Japanese cottor. Peting in the v duty was elimir tocompete in t yup increased and cotton fabr 11281211111011 5 World War ievelopment in ,as the maj 01‘ C as now decrees cumentrating h 1 camp the Oppor Of Asia and par ION than dOUbl l 1010 \‘3; 10- years for it to reach_twe1ve million (see column 2, Table II-2). This rapid industrial development was possible be- cause of a stable and relatively developed social and scientific system. Japan began looking to foreign markets for its cotton textiles in the early 1890's. At this time Japan was experiencing a domestic recession, which brought about a temporary overproduction of cotton yarn. Foreign markets provided a solution to this problem (Table II—3), but Japanese cotton yarn exports were having difficulty com- peting in the world market because of an export duty. The duty was eliminated in 1899, enabling Japanese cotton yarn to compete in the world market.Ll The exports of cotton yarn increased from approximately 0 to 83.5 million pounds, and cotton fabric exports increased from 6.8 million to 112.8 million square yards during the 1890's. World War I was another period of extensive and rapid development in the cotton textile industry of Japan. England was the major cotton textile exporter during this time, but was now decreasing her textile production and exports, and concentrating her resources on war production. This gave Japan the opportunity to expand her textile exports to all of Asia and part of Africa. Her exports of cotton fabrics more than doubled, from 403.4 million square yards in 1915 “1616., pp. 18—19. 11 TABLE II—2 JAPANESE COTTON SPINDLES Year Spindlesa Percent Increaseb (l) (2) (3) 1867 3,624 —-- 1870 5,624 55.2 1875 8,344 48.4 1880 12,792 53-3 1885 79,264 519.6 1890 358,184 351.9 1895‘ 677,108 89.0 1900 1,361,122 101.0 1905 1,378,846 1.3 1910 2,004,968 45.4 1915 2,772,982 38.3 1920 3,689,640 33.1 1925 5,026,848 36.2 1930 6,942,706 38.1 1935 9,739,300 40.3 1938 12,550,156 28. \O aObtained from: Keizo Seki, The Cotton Industry of an (Tokyo: Japan Society for the Promotion of Science, a p. 311 bPercent increase over preceding period. J1 Year L__ii 12 TABLE 11-3a JAPENESE EXPORTS OF COTTON YARN AND COTTON FABRICS Year Yarn Fabrics (in 1,000 lbs.) (in 1,000 sq. yds.) (l) (2) (3) 1885 —-— 8,987 1890 12.4 6,835 1895 4,710.5 45,867 1900 83,492.9 112,839 1905 106,953.5 147,375 1910 139,054.0 239,889 1915 230,356 8 403,430 1920 121,970.o 862,888 1925 124,321 1 1,297,542 1930 23,846.4 1,571,825 1935 38,633.2 2,725,109 aObtained from: Keizo Seki, The Cotton Industry f Japan (Tokyo: Japan Society for the Promotion of cience, 1956), pp. 304-307. to862.8 milli panded world m. World War I.5 The war « domestically 133 time, most all firmnEngland, 1 unable to mate] ports. The wa: which led to g: and textile ma< demands on and machinery indu: successful in : Product, s0 whe available, Japa dmmstically p: After 401 13. to 862.8 million square yards in 1920. This greatly ex— panded world market was a major benefit Japan derived from World War 1.5 The war also provided a great need and demand for domestically produced textile machineryt Prior to this time, most all textile machinery and parts were imported from England, because domestic machinery producers were unable to match the superior quality of the English im- ports. The war interrupted all English exports to Japan, which led to greater co-operation between the cotton textile and textile machinery industries of Japan. This put great demands on and stimulated the development of the textile machinery industry. Japan’s textile machinery industry was successful in substantially increasing the quality of their product, so when the war was over and machinery imports available, Japan's cotton manufacturers preferred the domestically produced machinery.6 After World War I Japan continued her drive to increase cotton exports. She strengthened her position in the markets gained in Asia during the war, and also expanded them to a world—wide basis. This was accomplished even though there was a severe depression in the early 1920's in Japan that caused large price fluctuations and financial uncertainty. To protect itself from the depression, the cotton textile 6 51bid., p. 22. Ibid., pp. 23—24. industry incre aided in reduci the depression in a relatively as other econo early 1930's..7 Before 18 cotton goods wa emphasis began exports of cott ginning of Worl 0? Jam, and at exporting gray in I, Japan's 1 Boods, and afte. Japan gained in; toods . 8 Japan's 11 resources revea of the dOmestic M18 the thir mate1v doubled The rate of inc 14 industry increased its intra-industry co-operation which aided in reducing industrial instability. As a result of the depression in the early 1920's, Japan's economy was in a relatively better economic position and not inflated as other economies prior to the world depression of-the early 1930's.7 Before 1895 most of the monetary value of exports of cotton goods was in cotton yarn, and after this date the emphasis began shifting from yarn to fabrics; in.1905 the exports of cotton fabrics exceeded imports. At the be— ginning of World War I exports of fabrics exceeded those of yarn, and at the same time the emphasis shifted from exporting gray goods to finished-goods. Prior to World War I, Japan's exports were primarily in semi-finished goods, and after the war, the cotton textile industry of Japan gained importance as a world supplier of finished goods.8 Natural Resources and Population Japan's unique combination of population and natural resources reveals why her government encouraged expansion of the domestic cotton textile industry for foreign markets uring the thirties. The population of Japan had approxi- ately doubled within sixty years as shown in Table II-4. he rate of increase showed signs of becoming more rapid fter World War I. This increase in the rate of 71bid., pp. 25-27. 81bid., pp. 28—30. Year 1872 1875 1880 1885 1890 1895 1900 1905 1910 1915 1920 1925 1930 . aObtained “°°“°mic and F1 15 TABLE 11—4a ‘POPULATION OF JAPAN (IN THOUSANDS) Year Total Index Number 1872 34,806 100.0 1875 35,316 101.5 1880 36,649 105.3 1885 38,313 110.1 1890 39,902 114.6 1895 41,557 119.4 1900 43,847 126.0 1905 46,620 133.9 1910 49,184 141.3 1915 52,752 151.6 1920 55,473 159.4 1925 59,058 169.7 1930 64,448 185.2 aObtained from: Harold G. Moulton, Japan, An onomic- and Financial Appraisal (Washington, D. C. Brookings Institution, 1931), p 3 facilities.9 In 1928 per square mil Germany, and 4 When tillable lotion density countries. Be< of Japan is til 9.774 people pe Dares with 860 Because of this tillable land, supply,10 Japan pos lations became Erowth during as iron ore an P011 9Albel‘t \01 (cambri 10Harold 19mm (was 31 , pp. 22_ 16 celeration of population was attributed to a continued gh birth rate combined with declining death rates be— use of improved sanitary conditions and medical cilities.9 In 1928 Japan had a population density of 437 peOple r square mile. This compares to 330 per square mile for rmany, and 41 per square mile for the United States. en tillable land is compared to population, Japan's popu— tion density increases relatively more than other untries. Because less than 16 percent of the land area Japan is tillable, she then has a population density of 774 people per square mile of tillable land. This com- res with 860 for Germany and 229 for the United States. cause of this high pOpulation density per square mile of llable land, Japan must import much of her annual food only-10 Japan possesses a wide variety of mineral resources, ; did not have sufficient quantities of any to meet her vidly growing domestic demand. These resource limi— ions became a very important factor in limiting Japan's wth during the twenties. Key industrial minerals such iron ore and crude oil were inadequate for the nation's 9Albert E. Hindmarsh, The Basis of Japanese Foreign £1 (Cambridge: Harvard University Press, 1936), p. 36. loHarold G. Moulton, Japan, An Economic and Financial aisal (Washington, D. C.: The Brookings Institution, 3 pp. 22-27. A industrial de ported over 85 percent of the Japan ma to 1930, and t increasing pop with limited n becoming a pro Many wes in population 4 the nineteenth were circumsteu sion. These 01 Population from Sources that we industrial exp: eStablished 1‘01 f0? productive Facine the pro t“”114‘0‘4’6.‘ her for, and dapen imminz her l7 industrial demands of the twenties. In 1928 Japan im- ported over 85 percent of her crude oil consumed and 92 percent of the total iron ore consumed.ll Japan.made remarkable economic expansion from 1870 to 1930, and this expansion has enabled her to support an increasing population at a rising level of living. But with limited natural resources, Japan's population was becoming a problem of crucial importance.12 Many western countries experienced concurrent growth in population and industrialization after the middle of the nineteenth century. In most all of these cases there ere circumstances that differed from the Japanese expan— sion. These other countries who experienced an increase in population from 1870 to 1930 were endowed with natural re- sources that were relatively adequate to permit wide spread industrial expansion. Also, these other countries had established foreign transactions which offered some outlet or productive enterprise of their excess populations. acing the problem of an expanding population and a desire 0 improve her level of living, Japan was forced to look or, and depend on international trade as the means for 13 nproving her welfare. 11 12 Ibid., pp. 55—66. Ibid., pp. 396-397. l3Hindmarsh, o . cit., pp. 36—47- _E__i__ It is s teristics of rapid economi ture, the wri buted much to possessed som economic deve tage of the J his habits. A ing able to pr 0n the other h actually capah able person by 1930's. an ave attended eight automatic loom ”me than six 18 Characteristics of Japanese Labor It is significant to understand some of the charac- teristics of the Japanese labor force when evaluating the rapid economic growth of Japan. In reviewing the litera- ture, the writers agreed that the Japanese laborer contri- buted much to the industrial development of Japan and possessed some very desirable characteristics for rapid economic development. It is the nature and cultural heri— tage of the Japanese worker to be diligent and thrifty in his habits. A worker is praised by his colleagues for be— ing able to produce quality work at a relatively rapid pace. On the other hand, a worker who does less work than he is actually capable of doing is looked down on as an undesir— able person by his colleagues. For example, during the 1930's, an average Japanese worker in the cotton mills attended eight semi—automatic looms and thirty to forty automatic looms. The English worker has refused to attend more than six looms, and the Japanese morals would immedi- ately brand them as lazy and undesirable people.1l1 The Japanese worker is, and enjoys, being competitive. He tends to have the same goals as management-—producing higher quality goods in a shorter time.15 l“Isoshi Asahi, The Secret of Japanese Trade Expan— sion (Tokyo: The International Association of Japan, 1934), Pp. 49-50. 151618., pp. 50+52. M—J/rw — The Japa ations in impr studious and a the plant. Hi his specific .1 social science courage this s he sees it aid. The Japa.‘ of manual dext4 during the age Dlaining the 1‘: world War 1.17 Japan's 1 1930 accounts : textile indust: traditionally Performed by w developed, it 19 The Japanese workers also demonstrate great aspir- ations in improving themselves. They have a habit of being studious and are dedicated to improving themselves within the plant. His desires for learning are not limited to his specific job, but are also in other areas of science, social science, and humanities. Employers tend to en— courage this studious trait of the Japanese worker because he sees it aiding the development of Japanese industry.16 The Japanese worker is well-known for his high degrees of manual dexterity. This trait may have lesser importance during the age of mass production, but it does aid in ex- plaining the rapid industrial growth of Japan prior to World War 1.17 Japan's rapidly expanding population between 1870 and 1930 accounts for her abundant labor force. In the cotton textile industry during this time, over 80 percent of all mill workers had come from rural areas and were mostly girls less than twenty—one years of age. Historically and traditionally the cotton handicraft industries have been performed by women on the farms. When the cotton industry developed, it naturally relied upon the rural female popu- lation as a major source of its labor supply.18 Due to this source of labor supply, labor and management of the cotton industry co-operated to develop the dormitory l6Ibid., pp. 52—514. l7Ibid., p. 55. l8Seki, op. cit., p. 53. — system. Since from distant I ing quarters a of the cotton quarters for a tory system, is reduced the 11 Since these 31 were suffering wages above th The depr coupled with t left the indus teneral econom industry of Ja: rent to Organi fore1811 trade in1930, a Rat the Department ystem. Since many of these minor aged female workers came om distant rural areas, it was necessary to provide liv— g quarters and special care for them. This led the firms the cotton textile industry to build and provide living arters for a large share of its labor force. The dormi— pry system, which was provided by the cotton textile firm, tduced the living cost of the labor force to a minimum.19 lnce these girls came from low—income rural areas that ere suffering form a surplus of labor, their demands for ages above the company services provided were minimal.20 Industrial Rationalization The depressed economic conditions of the twenties, )upled with the general world depression of the early 1930's, »ft the industries of Japan in a weakened position. These neral economic conditions also crippled the cotton textile dustry of Japan. The Japanese government promoted a move— nt to organize domestic industry and the domestic and reign trade on a more sound and profitable basis. Thus 1930, a Rationalization Bureau was established within e Department of Commerce and Industry; the purpose was l9Ib1d., pp. 53—54, 20It is interesting to note that the labor supply for a Japanese cotton textile industry corresponds with the vis thesis of development, where an unlimited supply of )or is available, in this case from agriculture, at a )sistence wage and employment in the industrial sector the economy increases as capital formation occurs. N. Agarwala and S. P. Singh (eds.), The Economics of lerdevelopment (London: Oxford University Press, 1958), E EH9 — to advise and intended to or general effici The ecor was also chang financially we by liquidatior movement tende structure of t The cour proved the eff movement inclu in the mills, to determine t ing programs 0 ratio loom rap 21. to advise and give central direction to measures that were intended to coordinate industrial activity and promote general efficiency.21 The economic structure of the Japanese industries was also changing because the conditions were such that the financially weaker companies were being eliminated either by liquidation or merging with stronger companies. This movement tended to strengthen and stabilize the economic structure of the country.22' The countrywide rationalization movement greatly im— proved the efficiency in the cotton textile industry. This movement included: scientific methods of management applied in the mills, time and motion studies made of mill workers to determine the most efficient procedures, special train- ing programs organized and given to workers, Toyoda auto- matic loom rapidly being installed in the mills to replace the less efficient semi—automatic loom, mills were being air conditioned which increased the efficiency of the looms and the workers.23 The automatic loom enabled greater labor efficiency which resulted in one man operating up to 21U. S., Senate, Cabinet Committee on Cotton Textile Industry, A Report on the Conditions and Problems of the Cotton Textile Industry, Report No. 126, 7Uth Cong., lst 5888-, 1935, p. 130. 22U. S., Department of Commerce, Expansion of Tapan's Foreign Trade and Industry, Trade Information Bulletin No. 8§E (Washington, D. C.: U. S. Government ?rinting Office, 1937), p. 15. 23Seki, op. cit., pp. 29—30. 7 — twenty looms. limited one me In addit the mills, eff conditions. ‘I was improved b inefficient du organized whic chasing progra The rati industry had 1 working hours the annual per creased in bot Table II-6 cle; Production tha‘ henwher of Thelabor cost “W“ by 52 PPOsram. Table II 22 twenty looms. In Great Britain, trade union regulations limited one man to the operation of six looms.214 In addition to these technical improvements within the mills, efforts were also made to improve some external conditions. The managerial efficiency of the textile firms was improved by the merging of small companies that were inefficient due to their size. Trade associations were organized which resulted in the organization of Joint pur— chasing programs.25 The rationalization program within the cotton textile industry had impressive results. Table II—5 shows that the working hours per day were reduced, and at the same time the annual per worker production was substantially in— creased in both the textile and spinning industries. Table II-6 clearly reveals the rapid decline in costs of production that was accomplished by substantially reducing the number of man—hours required to operate 10,000 spindles. The labor cost required to operate each 10,000 spindles was reduced by 52 percent as a result of this rationalization program. Table II-7 shows that the real wage per worker in- :reased during this intensified rationalization program. me daily wage to operate 10,000 spindles was greatly 2u"The Textile Trade War: Japan‘s Challenge to witain Calls for World Analysis," American Exporter, uly, 1934, pp. 16—17. 258ek1, op. cit., p. 30. NmmHINNmH azan, 193 , p. 28 aObtain Trade Ex ansi Japan, 1934 , b . Calcu1 he Foreign A 25 TABLE II—7 COST AND WAGE COMPARISONS IN THE TEXTILE INDUSTRY OF JAPAN (INDEX NUMBERS) Dailya Dailya Retailb Real Wage Wage Price Wage Year (per 10,000 (per Worker) Index (per Worker) Spindles) (l) (2) (3) (4) (5) 1929 100 100 100 100 1932 48 81 75 108 aObtained from: lrade Ex ansion (Tokyo: ’apan, 1934), pp. 28,29. bCalculated from: Isoshi Ashi, The Secret of Japanese The International Association of The Japan Yearbook 1934 (Tokyo. 67. he Foreign Affairs Association of Japan), p. 3 reduced (see period the da: column 3, Tab was declining fore, the real dustry increa: This rat industry of Je to compete in share of the t the dominant i veals how the Japan's relati During this ge creased the m teXtiles while 3, Table 11-8) Great Britain‘ Japan's export L: 5 and 6, TE incTease in J5 decline in re] Br itain (see C Rationa] J PA “4 mater: al; ~ e ' a ’ nd ( I 26 reduced (see column 2, Table II—7). During the same time )eriod the daily wage per worker was also declining (see :olumn 3, Table II—7). The general price level in Japan 'as declining at a more rapid rate than the wages; there— 'ore, the real wage per worker in the cotton textile in— ustry increased by 8 percent (see column 5, Table II—7). This rationalization program in the cotton textile ndustry of Japan substantially improved both her ability 0 compete in the world textile market and her relative hare of the world market. Prior to 1930 Great Britain was he dominant textile exporter of the world. Table II-8 re- eals how the rationalization movement was able to improve apan's relative position in the world textile market. iring this general world economic contraction, Japan in— ?eased the number of spindles in production of cotton extiles while Great Britain's declined (see columns 2 and . Table II—8). The world exports of cotton textiles, and ‘eat Britain's exports of cotton textiles, declined, while Lpan's exports of cotton textiles increased (see columns 5 and 6, Table II—8), and this resulted in a substantial crease in Japan's relative share of world exports, and a cline in relative share of the world market for Great itain (see columns 7 and 8, Table II-8). Rationalization in the cotton textile industry of pan served (1) to reduce production costs; (2) to lower w material purchasing and finished good marketing ex- mses; and (3) to concentrate the control of production C .Ho unwohom nmuhomKMIUwhOZ mflhmw .HO 9035.32 aHO .HMQESZ ZHHpooncs m was : mcESHoo oucH m QESHoo mcHOH>HU >9 OopMHSOHmoo . . «.Illl me a pHpHn .2: .o .AsmmH ..poq .com pep mcHM .m .m "COOQOHV mnpmsvsH oHproB OHhoz one .oOHumo pooped HmQOHumcnochm m m: 3: HO.: om.m mo.m O.Hm om.s mmmH 7 2 m HO om .m0.0 sm.m ms.H m.mm mm.o mNmH Amv AOO Asv HOV Amv sz a mepm Amv AHV mnmspo CHMthm , . GHmpHmm H O Amuse» Um HH< pmmnw smash mo mQOHHHan wanna smash pmoaw smash Amothcsoo oHQHocHnQv Amvnmz .Um moHproB mo mCOHHHHQV AmQOHHHHEV snow omphomxm OHsoz Coppoo mo nvopsomxm omoHocHQm mo pcoopom nmpnogxm OHnoz mcnmm mo Monasz Mo nonesz ZHdaHmm Bidly than exports, and this resulted in an increase in a country's unfavorable balance of trade. Japan's balance of trade did not change substantially m 1929 through 1934; however, there was a substantial nge of the Japanese balance of trade with the United tes and with the rest of the world. During the thirties anese balance of trade with the United States, and her ance with the rest of the world, was reversed (see Table 11). Prior to 1932 Japanese exports to the United States eded her imports, and she was experiencing a favorable nce of trade with the United States. During this same Japan was experiencing an unfavorable balance of e with the rest of the world. From 1932 to 1934 Japan I nflmh .HO mCOfiHHdEu MCOHHHHEV mCOHHHHEv MEOHHHfiEV mufionfiH ho mmooxm Hduofi mohOQEH nuhomxm endow zow .m .D ”.O .Q .COpwanmmzv smash mo conga cmHomom map CH mpCmEQOHo>mQ pcooom .QOmeHEEoO mMHhmB .w .2 “Eopm oochpnom 32 HHH mme.e mmm.m NAH.N emmH em was.m sHo.H HOO.H mmmH Hm Hem.m Hme.H OHe.H mmmH mm mmm.m pmm.H aeH.H HmmH es OHo.m oem.H one.H ommH so mom.e OHN.N meH.m mmmH emm wOH.e omH.N msm.H mmmH AOH HNH.e msH.m mmm.H smmH mmm mme.e ssm.m meo.m emmH New mew.e msm.m oom.m mmmH pee oem.e mme.m FOO.H emmH Amv Aev Amv ANO AHO Ago» mo Ago» mo finch ho Hook mo mCOHHHHEV mcoHHHHEV mCOHHHHEV mooHHHHev mphOQEH mo mmooxm Hmpoe monomEH mpnogxm snow zoc .m .D .m .o .AmmmH .ooficoo mefioeflnm ".O .Q «Cowmanwmzv mmfismm Osooom .mOH .oz psoaom .Gmmmh mo momma cmesom 0:» CH mucmEQOHo>oQ pcooom .QOHmmHEEoo MMHsma .w .D “Eon“ UoCHmnnom em OH mmm + eHm.H mas.H osm I one mam emmH mm pm me + omm.H mem.H mmH I HNO mm: mmmH mm mm a: + Hmm mom mo I OHm me: mmmH mm hm msH w 3mm mms mm + mam mm: HmmH mm em mmH w mOH.H now me + me: mom ommH am we 2mm w mom.H mmm.H com + eme eHm mmmH HOV HOV Asv HOV Amv Aev Amv Amv AHO smash ,commm va mpLOQEH .cmmmh smash AIV mpthEH smash smash ousH Eonm A+v mphoaxm och Eosm A+v mpsoqu cpsH Eomm mpsogsH manomxm mo mmooxm manomeH monomxm mo mmmoxm muLQQEH mpnoqu snow m D ocp anz OHhoz no .m .D .oeooe Heooa mo psmoaom omom noae_ooene oeo none moose Azmw so mZOquHz zHO QHMOS Mme mo Emmm mBHS Q24 mmB2. cit., p. 21. l-{ Table S". coming from in the late t2 tively less 3. became more i: The cha: beexplained l was the most : Japan. The p: late twenties artificial su‘: in Japaz event was the the type 0f C( COURtPies othf trend of Japax her GXpOrats g T». Ml)‘ Anotl stantial expa: Because Japan and the UHite< the JapaneSe 1 Share of J apa: \See COlumn 9 35 0o. eit U' S' \‘3 pp. 36 5. F0 line, 19631.16“ 36 Table-II—l2 shows the increasing trend of raw cotton coming from the United States during the early thirties. In the late thirties, United States cotton became rela- tively less significant while China and other countries became more important as a source of supply. The changing trend of the Japanese foreign trade can be explained by three events. During the 1920's, raw silk was the most important item the United States imported from Japan. The price of raw silk declined substantially in the late twenties and early thirties due to the development of artificial substitutes. Therefore, the substantial fall in the price of raw silk accounted for a large part of the de- cline in Japanese exports to the United States. Another event was the expansion of Japanese exports, which were the type of commodities that found better markets in :ountries other than the United States. This changing :rend of Japanese exports resulted in a reduced share of ier exports going to the United States (see column 7, Table II—ll). Another event influencing the trend was the sub- stantial expansion of the cotton textile industry of Japan. kcause Japan must import over 99 percent of her raw cotton, md the United States was a major supplier of raw cotton for ihe Japanese textile industry, this resulted in an increased hare of Japanese imports coming from the United States see column 9, Table II-ll).35’36 35U. S. Tariff Commission, Recent Developments . . ., p. cit., pp. 7—l2. 36Foreign Agricultural Service, Cotton Division, une, 1 6 , SOU Year Uni 1903 1909 1905 1906 1907 1908 1909 1910 1911 1912 1913 1919 l915 1916 1917 1918 1919 1920 1921 1922 1923 19211 1925 1927 37‘ TABLE II—l2a SOURCE OF JAPANESE RAW COTTON IMPORTS (IN PERCENT) Year United States India China Othersb (l) (2) (3) (A) (5) 1903 13 56 25 6 190A 10 38 A3 9 1905 27 5O 16 7 1906 19 5O 23 8 1907 21 52 21 6 1908 2A A5 20 11 1909 18 58 15 9 1910 9 63 23 5 1911 18 58 18 6 1912 31 52 ll 6 1913 26 6O 9 5 191A 22 66 7 5 1915 22 67 8 3 1916 26 61 8 5 1917 2A 63 9 A 1918 36 A2 18 A 1919 39 A5 12 A 1920 Al 53 3 3 1921 A0 50 6 A 1922 33 57 7 3 1923 29 58 9 A 192A 29 56 12 3 1925 35 56 6 3 1926 39 50 7 A 1927 50 39 8 3 1928 A0 A7 11 2 1929 A2 A8 7 3 1930 A1 A9 7 3 1931 A8 A3 6 3 1932 71 22 A 3 1933 60 32 5 3 193A A8 A3 2 7 1935 A7 A2 A 7 1936 39 AA 3 1A 1937 30 51 3 16 1938 35 33 15 17 1939 29 3A 11 26 19AO 0 3O 10 6O aObtained from: Keizo Seki, The Cotton Industry of Ban (Tokyo: Japan Society for the Promotion of Science, 367, p. 328 b100 percent minus the summation of United States, lie, and China. Japan's growth in the and the first exports grew yen in 19009 comparison, t from $2.14 bil During population gr“ improve their extremely lim ‘nad to earn hi the form of f. economically. The 008' Soods were 10‘ BAese reasons r .et‘ nods, new . lab 01‘, more e 38 Summary Japan's industrial activity experienced enormous growth in the last thirty years of the nineteenth century and the first thirty—five years of this century. Japanese exports grew from approximately zero in 1870, to 20A million yen in 1900, and then to two billion yen in 1935. As-a comparison, the foreign trade of the United States grew from $2.A billion in 1900 to A.3 billion in 1935.37 During this time Japan-was experiencing a rapid population growth and her people had a strong desire to improve their level of living. This desire, combined with extremely limited raw materials, resulted in a country that had to earn her foreign exchange by exporting her labor in the form of finished goods for her to survive and grow economically. The cost of producing Japanese cotton manufactured goods were lowered for numerous reasons in the early thirties. Dhese reasons included imporved management and production nethods, new and better equipment, more effective use of Labor, more extensive centralized control over foreign >UYing and selling operations, and a lower exchange value ?or the yen. These changes, the above—discussed desire of ihe people, and the country's limited natural resources :ombine to explain Japan's situation in the 1930's: she . 37R. A. May, "Trade Relations with Japan," The Far astern Review, XXXII, No. 12 (December, 1936), p. 516. M held a positi able her to r. cotton textili 39‘ held a position which naturally and logically would en- able her to rapidly increase all exports, especially cotton,textiles. ANALYSIS ( Internet {3' ( t e decade of 3- he early thil incomes and ir Countries to a CHAPTER‘III ANALYSIS OF JAPAN'S EXPORTS TO THE UNITED STATES DURING THE 1930's International trade was in a state of flux during he decade of the thirties. The world—wide depression of he early thirties resulted in a sharp decline in national ncomes and international transactions, which led many ountries to an increasing protectionist policy to aid nternal industrial recovery. Countries were devaluating heir currencies which resulted in changing the inter— ational price structure. There was also rapid techno— ogical development occurring in many countries of the rld. In 1930 the United States passed the Smoot-Hawley riff Act which substantially increased tariffs. Japan preciated the international value of the yen in 1931, ich lowered the international price of Japanese goods. 80, rapid and substantial rationalization was experi- ced by all Japanese industries in the twenties and irties and by the cotton textile industry during the rst half of the thirties. These events of the early irties had conterbalancing results that set the stage r the Japanese-United States trade problems of the middle AO and late thiI' important €00 trols of the in quantities The tot steady during the thirties. duct was arou: over $2 billi: Ill-l. During direction as I imports decli: part of the C11 pared to sligl .olumn 5, Tab: The 61011 39999 $900 In; in Column A o; w:_ y.“ K 7" “__‘K , , ,, Al and late thirties. This chapter will concentrate on the important economic events that led to the voluntary con— trols of the thirties. Due to the lack of comparable data in quantities, this analysis will be in dollar values. United States Imports The total dollar value of United States imports was steady during the late twenties and fluctuated more during the thirties. During the late twenties Gross National Pro— duct was around $100 billion and total imports slightly over $A billion as indicated in columns 2 and 3 of Table III—l. During the thirties total imports moved in the same direction as N. N. P., with the exception of 1933. Total imports declined relatively more than G. N. P. in the early part of the depression and stayed around 3 percent as com— pared to slightly over A percent of the late twenties (see column 5, Table III—l). United State's Imports from Japan The dollar value of total imports from Japan was around $A00 million during the late twenties as indicated in column A of Table III—1. It dropped to less than $200 million in the early thirties and tended to decrease dur— ing the decade. The percentage of total imports that came from Japan was from 9 to 10 percent prior to 1932 (see column y of Table III-l). 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Summary The percentage of G. N. P. that was imported and the lercentage of total imports from Japan declined during the -hirties. Total cotton manufactures imported as a per— ent of total imports was relatively constant at the 2 .638 .w .e 338:ch doueoo sounds -v. 5 ho pflwohmm .HO uflmohwm z¢mmz new oosoEEoo cmflosom .eoomefiemezv mesmem cause: one so oesoEEoo mo psoEpstom .m .D .anm oocfimpoo .Aoooa .omoa .eoanno weaeeasm eeeeeee>oo .m .o "cosmeaemezo monSpommdcmz mo mommoo noosoEEoo so psoEpsoQoQ .m .D ”Eons cocampoom .oo. :.m o o: ooH.H omofi ,sm.H m.o sH sm Hom.fl smoa os. o.o o H: Hmo.H mmoa om. m.m m mm moo mmofi em. o.: N H: omo Hmofi oh. m.o m oo oom.H omoa loo Amo Ago Amo Amo AHV AN CESHOO a : cesaoov Am cszaoo comma smash Eons a m QESHOOV Scam HMpOB AmLmHHoQ copnomEH copMOQEH so mQOflHHHSV mposoosm mposuoam Amsmaaom so mQOfiHHsz emposcomm soow UoLSQomgssmz Uohdpomsscmz pvoppoaeH UoLSpomsscmz cooeoo .m .o sooeoo .m .p amazoeoeoeez eoeeoo eoepoo .m .p mo pcoomom mo pcoosom z mo zomHm1. 46, Part 1, p. 701. hopeless to priced Japa same time 1 231% W I! buceq ms, pobsreae £0 QOWGEL‘IC IUC QUIPGQ 338“ I" we Tan, yeaozsem tic, combflyng M 1 Mom . 53 From 1933 to 1935, the textile industry was also complying with the provision of the National Industrial Recovery Act to improve wages and working conditions with— in the industry. But increasing Japanese exports to the United States led to a feeling of frustration in the domestic industry. The domestic industry thought it was hopeless to try to compete with the substantially lower priced Japanese goods in the domestic market, while at the same time it increased its costs of production through complying with N. I. R. A. Because of the N. I. R. A., the industry believed it was the government's responsibility to protect them from foreign competition. This fear of Japanese imports in the United States was openly expressed in the press, and trade associations made formal appeals to state and national congressmen for legislative action to correct the problem. One appeal for legislative action was: The Textile Fabrics Association, at its annual meet— ing yesterday, adopted a resolution to appeal to President Roosevelt and Congress to take immediate action to fully protect American Industry and Labor from forgign competition in the market of cotton fabrics. Another appeal was With cotton cloth imports from Japan last year more than six and a half times larger than in the pre— vious year, the Association of Cotton—textile Mer- chants of New York yesterday sent out a bulletin 6New York Times, January 18, 1935, p. 38. Metcalf of R serious cott proposed Rho bpoboeeq Bio esspone 00:3 we uoqe Ia Hones o; Heb ”steep; 0% B confineaameIJ V 8433‘: ”Seq, {to In: 5A to its members, reciting the facts and stressing the need for prompt governmental action.7 A state legislature also appealed to its national ressmen for protection. On January 25, l935, Senator alf of Rhode Island, announced in the United States e of Representatives, that a resolution was pending in Rhode Island House of Representatives pertaining to the ous cotton textile difficulties in New England. The osed Rhode Island House resolution reads as follows: Whereas the unsatisfactory conditions in the textile industry are a cause of great distress in Rhode Island, and the lack of work imposes a heavy burden upon the relief agencies in the state; and Whereas Federal legislation is needed to cor— rect the condition in the textile industry and to ameliorate suffering: Therefore be it Resolved, that the general assembly respect— fully requests the Senators and Representatives of Rhode Island in the Congress of the United States to take such steps as will remedy the conditions now existent in the State; and be it further Resolved, that copies of this resolution be transmitted by the Secretary of State to the Sena— tors and Representatives of Rhode Island in the Congress of the United States.8 On March 14, 1935, Congresswomen Rogers of Massa- etts, presented to the House data she collected from Department of Labor and the Department of Commerce that ed the seriousness of Japanese textile competition in United States. Later that same day Congressman Citron onnecticut emphasized the potential danger of Japanese rts and questioned whether tariffs would provide 7New York Times, February 2M, 1935, p. 19. 8U. S. Congressional Record, 74th Cong., lst Sess., , LXXIX, Part 1, p. 963 sufficient 26mm Lego TUSQS batsmen,I I: exeLemem 1 £116 htoal“$8 home 01. c s QHLLICTSUQ 55 sient protection. He stated, "While the total im— of textiles in 1934 were about the same as 1933, rogressively increasing share from Japan and the mely low prices of Japanese products have become a tial menace to the industry."9 These events led to the submission of the following we resolution on March 15, 1935, by Senator Metcalf lode Island: Resolved, that the United States Tariff Commis— sion is directed, under the authority conferred by Section 336 of the Tariff Act of 1930, and for the purposes of that section, to investigate the differ— ences in the costs of production of the following domestic article and of any like or similar foreign articles: cotton manufactures, included in para— graphs 903 and 90A of such act.10 resolution received Senate confirmation on March 29 of same year, but this action did not pacify the textile try and they continued to remind Congress of their em. On March l6, 1935, Senator Walsh of Massachusetts, 'ved a telegram from representatives of the New Eng— cotton cloth industry, calling his attention to the increase of cotton cloth imports from Japan in the two months of 1935, and suggesting that he discuss asing tariffs with the President.11 On March 18, 1935, in an interview with a New York reporter, Senator George of Georgia stated, 10 9Ibid., Part A, p. 3670. Ibid., Part A, p. 4680. llIbid., p. 3793. 3W L98? 1632 1qu The 9113 LG] 991. 11181) 001) Cm 9M3 ‘18:, DJ h 56 In the first two months of this year imports of Japanese cotton goods reached the total of more than twenty—four million square yards, or more than three times the total for the year 1934. The only way to control such imports was declared to be the establish- ment of a quota for Japan; in other words, a re- stricted or limited embargo. Any plan involving relief through the raising of tariff walls would be entirely ineffective. 2 The above actions during the first three months of indicate the attitude of textile industry leaders and fear of the potential expansion of Japanese exports .e United States. The State Department‘s attitude to— this problem was stated as follows: "The policy of itate Department is to increase and develop foreign 2 without causing any drastic distrubance to estab- ed domestic industry. The program for increasing foreign a envisages an increase of both exports and imports."13 The State Department was placed in a most difficult ion: in international relations they had a policy tive to increase and develop foreign trade, and in tic relations their actions were not allowed to inter— drastically with the domestic industry. Since the mic depression of the early thirties weakened the tie textile industry, any small increase in Japanese ts to the United States was viewed as further im- ng the already serious conditions of the domestic try. 12New York Times, March 19, 1935, p. 39. 13Ibid., April 18, 1935, p. 5. The cotton cl go the th This was because 0 sion's in boopoppi o soaps 0; p ZIOUI 2 mp pecsnae 01 one rose ( Eo cps pm 00980” (:1. Julie 57 The Tariff Commission began its investigation of ton cloth in April, 1935, however, its report did not the the President until one year later, April, 1936. 's was delayed at the request of the State Department, ause of a possible voluntary agreement.lu The Commis- n’s investigation indicated the disparity between the ts of production in Japan and the United States, would bably cause the President to increase tariffs on cotton th when the report was officially placed before him. a State Department was negotiating with Japan in the :ter part of 1935 and the early part of 1936 to obtain roluntary export agreement acceptable to the cotton :tile industries of both countries. When Japanese exports of cotton cloth to the United .tes increased during March and April, 1936, the State artment increased its pressure on Japan. On April 27, 6, when the Japanese Ambassador called on the Secretary State, the Secretary made the following statement: "If Japanese Government should not cooperate with us in ing to stabilize the trade situation, it might well se a commotion which would prove disastrous.”15 During same discussion, 1“U. S. Tariff Commission, Twentieth . . ., p. 35. 15U. S. Department of State, Foreign Relations . . . , Vol. H, p. 878 The J corre State Japan withs to so ultin line. itthis par fin Japanes restrict th States or t over which that creas is, c effec that cottc Japan hOpe ment men's EeSte hOpe Since Way I to ti Later I" state Depax details of 58 The-Japanese Ambassador . . . asked whether he could correctly report to his government that the United States Government is asking for a reduction in Japanese exports to the United States in order to withstand political pressures so as to gain strength to successfully promote its trade program to secure ultimate reduction of trade barriers all along.the line. The secretary replied in the affirmative.1 ot this particular time the Secretary of State was giving :he Japanese Ambassabor an alternative either to voluntarily 'estrict their exports of cotton textiles to the United itates or to face more severe and permanent restriction >ver which the Japanese have no control. During this same meeting the Assistant Secretary of Btate, Sayre, read a lengthy memorandum to the Japanese imbassador of which the last paragraph is pertinent to the >resent discussion: There is, of course, another alternative, and that is promulgating the very moderate tariff in— creases recommended by the Tariff Commission. It is, of course, impossible to predict exactly the effects of tariff changes, but it is our expectation that a moderate increase in the duties on Japanese cotton textiles will tend to maintain imports from Japan at about last year's level. We consequently hope that it may be possible for the Japanese Govern— ment to see its way clear to entering into a gentle- men's agreement along the lines that have been sug— gested, but if this is found impracticable we sincerely hope that the Japanese Government will appreciate our sincere and friendly endeavor to collaborate in every- way possible with the Japanese Government with a view to the friendly adjustment of the problem.l7 Later discussions between the Japanese Ambassador and tate Department officials turned toward working out the etails of a voluntary agreement, whereby Japan would limit 17ibid., p. 881. 59 her exports of cotton textiles to the United States. Under pressure from the domestic textile industry the Tariff Commission allowed its cotton cloth report to go to the President in April of 1936. The State Department then recommended that the President postpone acting on the report because of the progress made toward a potential voluntary agreement, but when these negotiations failed on May 21, 1936, the President proclaimed an increase of about #2 percent in the import duties on cotton cloth as recommended by the Tariff Commission.18 The base for the Tariff Commission's recommendation was a change in the competition from abroad. Prior to 1931 the United Kingdom had supplied about 3/4 of the total cotton cloth imported into the United States each year. From 1931 to 1934 Switzerland ranked first in square yards imported to the United States. These European imports were mostly of good quality cloth, and were of a price and quality that did not compete directly with domestic production in the United States. Lower quality imports from Japan began in- creasing in 1934 and increased rapidly in 1935 and 1936. The lower priced Japanese imports were more directly competitive with domestic production. Competition from l8Seijiro Yoshizawa, Introductory Address, a report to the Twenty-third National Foreign Trade Convention, Chicago, November 18—20, 1936, prepared by the National Foreign Trade Council, Inc. (New York: The Council, 1937), Pp- 315-316. 60 Japanese imports was due not so much to total quantity, as it was to unusually low prices and concentration in-a limited number of fabrics.19 Cotton Cloth Agreement From around the middle of 1934, Japanese cotton cloth searched for new outlets in the United States, as a result of import restrictions placed on Japanese cloth by India and other Asian countries which were former markets for Japanese cotton goods. As Japan was turning to the United States as an enlarged outlet for its cotton textile products, the United States domestic industry was under- going significant internal changes. While the Tariff Commission's investigation was under way in 1935, Japanese exporters and manufacturers of cotton textiles set up in Japan a coordinating group to negotiate voluntary control agreement with the United States Manufacturers. Though both countries had agreed to the general terms of the Voluntary agreement, negotiations failed in May, 1936, when they could not agree on handling shipments through a third country.20 After the increase in tariffs in May of 1936, Japan— ese cotton cloth imports continued to increase, reflecting 19U. 3. Tariff Commission, Twentieth Annual . . ., op. cit., p. 35. 20Letter from Dr. C. T. Murayama, Managing Director, Japan Cotton Spinners Association, Tokyo, Japan, November, 1963. ___!mwrzgfiae . .3, 61 :reased business activity and an upward movement in cotton stile prices in the United States. These higher tariffs i not offer the protection desired by the domestic pro— :ers, and they demanded more urgently some form of quantity strictions with Japan. In August of 1936, Dr. C. T. Murchison, then President Cotton Textile Institute of the United States, suggested iifferent angle to negotiation: the private direct nego— itions between the textile industry of the two countries.21 arivate committee was formed to represent the American :ton Textile Industry in discussing a voluntary agreement :h the Japanese industry. This committee contacted the >anese textile industry through the State Department and a Japanese Ambassador to the United States. These two iustrial groups agreed to meet in Japan in January of 1937. 2y also agreed to keep this a private meeting between the iustry leaders of the two countries, and the governments Japan and the United States were to have no further part the negotiations. In January, 1937, through negotiation a number of conferences, the Japanese cotton industry eed to a quota limitation on cotton textile shipments the United States for the years 1937 and 1938.22 A memorandum of understanding between the American ton Textile Mission and the representatives of the 2lSeijiro Yoshizawa, op. cit., p. 316. 22Letter from Dr. C. T. Murayama. 62 nese Cotton Textile Industry was agreed to during their erences in January, 1937.23 The purposes of this con— nce between the American and Japanese cotton repre— atives, as indicated by Dr. C. T. Murchison, were: to discuss frankly the problem of the rapidly increas— shipment of Japanese cotton textiles to the United es; and (2) to negotiate a private arrangement to con- shipments of Japanese cotton piece goods to the United as. This memorandum was to be based on the mutual rests and confidence of the two industries.2u The memorandum of understanding stated that the agree— was to begin on January 1, 1937, and would terminate ecember 31, 1938. For the year 1937 the basic quota L55 million square yards, and for 1938 the basic quota LOO million square yards. The memorandum also stated ‘ly how to measure the imports and how to handle trans— ients of goods from third countries to the United States. .so established a Joint committee consisting of repre— .tives from each country's cotton textile industry. 'unction of the joint committee would be to deal with ver administrative difficulties might arise in con- on with existing quota arrangements, and also to act negotiating committee in establishing subsequent 23Memorandum of Understanding printed in full in iix A. 2L1"The American-Japanese Cotton Textile Under— Lng,” Current Information, Vol. 3, No. 3 (March 937), p. 2. 63 crangements between the two industries relative to quantity imitations or other means of control.25 On December 19, 1938, the joint committee of the two 1dustries renewed the provisions of the memorandum of iderstanding for two years beginning January 1, 1939.26 maximum quota agreement was for 100 million square yards ‘ imports from Japan to the United States for each year.27 Import and production figures of cotton cloth reveal :e problem that was developing during the middle thirties Ir the domestic industry. Total imports of cotton cloth re rapidly increasing from 1934 through 1937. Cotton oth imports from Japan were increasing at a much faster te than total imports as revealed in column 7 of Table —1. Japanese quantity imports of cotton cloth were 2.7 rcent of total imports in 1933 and this increased to .3 percent in 1937. These two factors, (1) rapid in— ease in quantity imports from Japan, and (2) rapid in— ease in the share of total imports coming from Japan, 7e the major causes for the domestic cloth industry's icern for its future. Table IV—2 reveals that when total imports were in— easing, domestic production was also increasing but not 25Ibid., p. 21. 26Printed in Appendix A. 27Letter from Sual Baran, Director, Far Eastern ision, Bureau of International Commerce, United States artment of Commerce, Washington 25, D. 0., April 1, 3. A. a .3 6A .Aosmfi lemma .oonnno meanness neosceo>ou .m .b ".o .m .eoomeflenszv nopnem confine the no QOHDmmfl>mz psm oohoEEoo cmflopom .oonoEEoo mo meEphmooQ .m .3 ”Scan confidence N.H: s.om mmm.m mwo.mo mHH.© :zm.:m ozmfi w.:m H.ms sHo.m mmw.am som.m :mm.HHH mmma m.mm m.sm m®n.n omm.mm mom.w mwm.wm mmmfi s.mm m.ms ma:.m om:.woa www.mH omm.s:a smmn s.mm m.sm mm:.m emo.ss mmm.oH mmfi.:HH mmmfi m.:m m.sm mms.fi ms:.©m omo.s :so.m© mmmfl :.m m.sfi mom swm.s mms.m :mm.a: smmfl N.H s.m ms mHH.H omm.n m:m.n: mmmfl m.H s.m em was m:m.: mm:.mm mmma m.H m.m moa one amo.s mms.:m Hmmfi m.H m.m one mHo.H om:.m sfim.mm ommfi m.H o.w me sHN.H Hom.mH me.Hm mmmfl ©.H w.m wmm oas.H Nam.mfl mmm.flo mmmfl s.H o.m owm mmw.a mmm.mn moo.mo smmfi o.m s.m mmm snm.m wmm.ma omn.om nmmfi Asa Ana Amv sz Amv . Amv AHV Am CESHOO AN QESHOO a m QESHOOV a : QESHOOV manHom .mpw .wm mamaaom .mpw .Um mnmfiaoo .mpm .wm snow swoon Eonm AmpcawsonBv noncomsonev Hence mo QCmome Spawn HmpOB ormalommfl meOAO 203300 E a. 65 .Ammma lemma .ooneno meanness wcfipeoeseo>om .m .D ”.o .o .eOpmenennzv nonsnm oopfiep one no Goapmwfl>mz use monoEEoo flwflmnom .oohoEEoo no pcoEprQoQ .m .D ”Eonm UmcHMonn .Aszma nooflmno mcfipsfinm pcoecno>ow .m .D H.o .Q .QOpwcflnmmzv um .02 phooom nmcwsom mnpmsch CH mmwcmno an: .onao coupoo nQOHmmflEEoo nmflgme .m .bm m.H :.H m NHH coo msm.m mmma w.H s.H :H sea one ass.m smma m.H o.H s so mwm omm.m mmma N.H ©.o o H: mam omm.s mmmfl m.H m.o s mm mm: mma.n Hmma m.a w.o ma He saw osm.s mmmfi Asv Ami Amv Aav Amv Amv AHV Am QESHOO Am QESHoo o m QESHOOV a : GESHOOV mnwaaoa .mpw .Um mamaaoo .mpw .wm msoHHoo .no» .om snow noneoeeH eonnosoonm Aneoefifinzv Ansonfififizv OHQmoEOQ no pcmonom QmpLOQEH mQOHposponm OfipmmEom mBOAO ZOBBOO mo mBmomSH q I-" 66 as rapidly. Total imports reached a high of 1.7 percent of domestic production in 1937; 72 percent of the total imports were from Japan, which would make Japanese imports about 1.2 percent of domestic production. This is a rela— tively small and insignificant share of domestic consumption. Much greater fear developed in domestic producer's minds when they viewed the dynamic rate of change of cotton cloth imports from Japan. In comparing the quota agreements of 1937 through 19AO to actual imports from Japan (see Table IV—3), the important fact is that the imports from Japan never came close to the allowable quota. During the four year period imports averaged 6A percent of the quota; two independent but significant events helped to explain this difference between actual imports and the quota. From May, 1936, when the State Department failed in its attempt to obtain a voluntary agreement, until January, 1937, when the private voluntary agreement was made, Japanese exports of cotton cloth to the United States were increasing at a very rapid rate. During the same time the domestic industry was mak— ing some progress in stabilizing itself after the depression, but the biggest destablizing component, as viewed by domestic roducers, was the low—priced Japanese imports. It was the oal of the Textile Mission to Japan in January, 1937 to btain a definite yearly ceiling on total Japanese imports f cotton textiles. This would give the domestic industry he protection it felt was needed and because of its nod—v" 67 TABLE IV—3 COMPARISON OF THE COTTON CLOTH IMPORTS FROM JAPAN AND THE VOLUNTARY QUOTA AGREEMENTS (MILLIONS OF SQUARE YARDS) Percent of Year Quota Importsa Quota Used (Column 3 + Column 2) (l) (2) (3) (A) 1937 155 106 68 1938 100 3A 3A 1939 100 82 82 1940 100 68 68 aObtained from: U. S. Department of Commerce, foreign Commerce and Navigation of the United States (Washington, D. C.: U. S. Government Printing Office, 1937—19A0). 68 strong desire to obtain a quota, it was willing to have. the quantity relatively high to make it appealing to the Japanese. The other factor that tends to explain why Japanese exports fell so far below their quota took place on the other side of the Pacific. During the early thirties Japan developed and expanded its textile industry and ex— ports of textiles to obtain foreign exchange. In July, 1937, Japan declared war with China and immediately began converting to a wartime economy. The predominant position of the textile industry was reduced by the expansion of other industries, particularly various heavy industries such as metals, chemicals, and machinery.28 And production of cotton textiles for export was being de—emphasized to aid in war mobilization. Cotton Floor Coverings Another need for a voluntary agreement began when the President requested the Tariff Commission to investigate the cotton floor covering industry on December 15, 1933. The Cotton Rug Manufacturers Association, representing twenty—one companies located chiefly in New York, Pennsy- lvania, and Georgia, filed a complaint on November 3, 1933, with the National Recovery Administration. This complaint 28J R. Stewart, Japan' 5 Textile pIndustry (New York: Institute of Pacific Relation, 19A9), 1. 69 was against importation of cotton rugs under conditions that made it difficult for domestic producers to maintain the codes and agreement under the National Industrial Recovery Act. The N. R. A. investigated this complaint, found it to be valid, and recommended to the President that an investigation be made of the cotton rug industry. On December 15, 1933, the President officially requested the Tariff Commission to investigate the Cotton Rug In- dustry under Section 3e of the N. I. R. A. This section gave the President power to order an immediate investigation by the United States Tariff Commission when an article was being imported in substantial quantities or in an increas— ing ratio to domestic production of a competitive article. This condition must have also seriously endangered the maintenance of any code under the N. I. R. A.29 The Code of Fair Competition set up specific standards for improving labor conditions in the cotton textile in- iustry. These standards were: (1) setting a minimum wage Der week at a rate substantially above the market wage rate of many employees; (2) setting maximum hours of work )er week which were considerably less than the hours many Employees were working; and (3) abolishing child labor :minors under 16) in the textile mill.30 The 29National Industrial Recovery Act, in U. S. Statutes ot Large, Vol. H8, Part 1, pp. 196—197. ‘ 30U. S. Tariff Commission, Code of Fair Competition Or the Cotton Textile Industry, Code No. 1 (Washington, M C.: Government Printing Office, 193A), p. 6. ldustry—wide implementation of these standards increased gmestic.costs of production of cotton goods. Imports of btton rugs were increasing relative to domestic pro- 'ction in 1933 (see Table IV-A), which caused apprehen— on among the domestic producers. Also when square yard tal imports were broken down by country of origin, Japan pplied from 75 to 99 percent of the total during the rirties (see Table IV—5). This was the basis for their omplaint to the N. R. A., which they hoped would result o increased protection for the domestic industry in the Arm of tariff and/or quotas on imported goods. During its investigation the Tariff Commission found at: (l) the mills producing cotton rugs were operating der the code of fair competition for the cotton textile dustry; (2) cotton rugs, both domestic and imported, in— uded a wide range of types and grades of rugs and had a de range of value per square yard; (3) imports of cotton gs during the early thirties were greatly exceeding mestic production, and proportion of imports to total nestic production was increasing steadily; (4) costs of oduction of all classes of domestic rugs increased sub— antially during the later part of 1933, under the code fair competition for the cotton textile industry; ) the greatest majority of imported cotton rugs were of Ferior quality when compared to domestic rugs, but the )orts were selling at a price so much lower than the oestic rugs that they were increasingly dominating the 71- TABLE IV-H RELATIVE IMPORTANCE OF DOMESTIC PRODUCTION AND TOTAL IMPORTS OF COTTON RUGS, 1929-1933a Consumption Supplied By Productionb Imports (Percent of Total) (Percent of Total) (2) (3) 39.3 60.7 31.2 68.8 2 22.3 77.7 3 19.0 81.0 aObtained from: U. S. Tariff Commission, Cotton Rugs, rt No. 95, second series (Washington, D. C.: U. S. rnment Printing Office, 1935), p. IA. bData are not available on total domestic production. e percentages were derived from data obtained by the ff Commission from cotton mill producers. These figures ot include production in homes or institutions. .Aosmn ozmma .oOflmmo mumpcfinm pcmscnc>ow .m .D ".0 .Q «sopmcficmmzv mcpwpm popes: on» no somemwfl>wz use mohoEEoo cmfiohom awonoEEoo no psoEpanoQ .m .3 ”Song Umzfiwunoo .mzflozqfi .ea .Ammmfi .oonmeo meanness pucecnm>ow .m .D “.0 .Q .QOchflnmmzv mofinom pcooom .moa .oz pnoqcm .cmmmh no mange cmfionom can CH qucEmoao>cm pqoocm aCowmmHEEoo mmHnt .m .2 ”Song confidence s.m: N.Hs Ham mmm.m mmm.H smm.m noamn m.mm ©.ms mmw smm.: omn.n smm.m ommma m.Hm m.mm cam mmm.m mmm mmm.m hmmma :.mm s.mm mo:.fi soo.m mmm.H msm.m gamma H.mm :.mm NH:.H nmm.m om:.H :sm.m comma m.mm o.mm mmH.H mam.m mmH.H Ham.m ommmfl H.mm s.:m msm.a mmm.m ssm.n mmm.oa gamma m.:m H.mm omo.a mmo.m :HH.H mmn.m nmmma 2. m.ms m.wm mam mms.m ass sno.s nmmmfi 7. H.ms m.mm mam Hms.m omH.H mmm.m nHmmH Asv Ana Amv sz Amv Ami AHV Am QESHOO AN QESHOO mhmHHOQ .mUN .Uw wthHOQ .mUM. .Um o m GESHOQV o : QESHOOV mswaaom .mpw .dm Ampmmmmwsev AmUMMMwMQBV snow magma Song monogaH Hopoe mo pzoonom mwsflmo>oo hooam coupoo mUZHmm>Oo mooqm ZOEBOO mo zOo mooflm ZOBBOO 73 domestic market; and (6) some restriction of imports of the principal class of cotton rugs was necessary to enable the domestic industry to operate under the prescribed code of the N. R. A.31 The Tariff Commission sent its report on cotton rugs to the President on March 26, 193A. It concluded that im- ports of cotton rugs were substantial, and that they repre— sented a major part and an increasing proportion of domestic consumption. The report also concluded that this situation seriously endangered the operations of the domestic in— dustry under the N. I. R. A. The Commission recommended to the President that he increase the tariff rates on cotton chenille rugs, hit—and—miss rag rugs, and other floor coverings, and that annual importhuotas be assigned to each of the three types of rugs.32 Cotton Rug Agreement A After the Tariff Commission's investigation and re— port, the President ordered an increase of about 20 percent ad valorem in import duties on cotton rugs which equalized the difference in the cost of production of domestic and foreign made goods. At the same time, a one year agreement was reached between the governments of the two countries, whereby Japan was to take the necessary steps to insure that imports of Japanese cotton rugs into the United States 31U. 3. Tariff Commission, Cotton Rugs, p. 2. 32Ibid., p. 1. 7A >uld be limited on and after June 1, 193“ as follows: .) chinille rugs—-650,000 square yards per year; (2) hit— 1d-miss rag rugs-—3,250,000 square yards per year; (3) :her rugs, mostly cotton——A,070,000 square yards per ear.33' This was an agreement made through the State apartment, whereby the Japanese government agreed to an :port quota on cotton rugs. The Japanese government had 1e cooperation and understanding of its cotton rug manu— .cturers and exporters who agreed to restrict themselves ) the quota. During 1935 the cotton rug industry and market were oowing favorable trends.3u Because the cotton rug agree— ont gave the domestic industry the protection it felt it oeded, the State Department was interested in renewing it. oe Japanese, when pressed, were willing to enter into .other agreement when it would assure them that the United ates domestic industry would not ask for more severe and ‘rmanent restrictions from the United States government. t to these conditions, the State Department succeeded in taining a one year revised extension of the cotton rug reement beginning on June 1, 1935. The new quantities re: (1) chenille rugs——700,000 square yards per year; ) hit—and—miss rag rugs——3,350,000 square yards per year; ) other rugs, mostly cotton——A,O70,000 square yards per 331bid., p. 56. 34U. S. Department of State, 1935, Vol. 3, p. 1012. 75‘ year.35 The United States was willing to grant small in— creases in the quota due to improved conditions of the domestic industry. The Japanese Embassy presented a typed statement on April 14, 1936, requesting a one year extension of the existing cotton rug agreement. The request stated that Japanese exporters had been urging the government to ask for an increase in the quota for the coming year, because they had received a considerable quantity of orders which they were not able to fill within the limits of the agree- ment. The Japanese would have liked to obtain an increase in quotas for its exporters, but the Japanese stated with no explanation that they did not want to open this dis- cussion for bargaining; therefore, they clearly stated they would be willing to accept the present figures for a one year extension beginning June 1, 1936.36 The United States ccepted the above proposed agreement after the State De— artment discussed it with representatives of the United tates textile manufacturers and importers.37 Cotton Hosiery Circumstances leading to a cotton hosiery agreement egan on October 15, 1936, when the United States Tariff 351bid., p. 1040. 36U. S. Department of State, 1936, Vol. 4, p. 877. 371bid., p. 894. ___... 76 Commission officially began to investigate the cost of pro— duction of seamless cotton hosiery under Section 336 of the Tariff Act of 1930. This investigation was requested by the National Association of Hosiery Manufacturers, who ex- pressed alarm over the increasing imports from Japan.38 The Japanese Embassy in Washington notified the Japanese Manufacturers Association of Hosiery for Export and the Japanese Hosiery Exporters Association in July of 1936, when the American Hosiery Manufacturers filed a pro- test notice with the Tariff Commission. The protest was based on the increasing imports of cotton hosiery and parti— cularly imports from Japan. The Japanese Manufacturers Association of Hosiery for Export and the Hosiery Exporters Association arranged a conference to discuss restricting their exports to the United States. At this conference they :also discussed increasing their export price of hosiery by (imposing a fee. The conference participants exercised their full influence to prevent any interim increase of exports based on the anticipation of any possible future increase of import duty in the United States. On September 22, 1936, the Japanese government granted the Exporters Association the right to collect an export tax of a maximum of twenty sen per dozen pair. The Exporters Association began immediately collecting a five sen per dozen export tax 38U. S. Tariff Commission, Twenty-first Annual Re- EOPt (Washington, D. C.: U. S. Government Printing Office, 1937), p. 33. 77 which tended to raise the export price and restrict speculative orders.39 This five sen per dozen export tax was about five percent of the average hosiery export price. After 1933 Japan was the principal hosiery exporter to the United States. Prior to 1933, Germany supplied from 85 to 90 percent of the cotton hosiery imported into the United States. The remainder came principally from the United Kingdom, France, and Italy. Hosiery imported from Germany consisted mainly of higher quality men's full— fashioned half-hose, while hosiery coming from Japan were mainly men's seamless half—hose and anklets, and children's socks of lower quality.)40 The Tariff Commission's investigation specifically related to seamless cotton hosiery. More than 95 percent 41 of total imports of hosiery was of the seamless variety. This was also true for imports coming from Japan; there— fore, the percentage figures for seamless cotton hosiery are almost identical to those presented in Tables IV-6 and IV—7. Cotton Hosiery Agreement On April 16, 1936, a three year hosiery quota agree- ent was arranged between the National Association of Hosiery 39U. S. Tariff Commission, Hearings on the Investi- ation of Differences in Costs of Production of Hose and alf—Hose, January 26, 1937, pp. 174-175. noU. S. Tariff Commission, Twenty—first Annual Report, Cit.. pp. 33—34. 4 1U. S. Department of Commerce, Foreign Commerce and 8.Vi ation of the United States (Washington, D. C.: U. S. Overnment Printing Office, 1934-1940). 78 .Ammmaommma .oonnmo menoennm peoecnosoo .m .p “.o .m GOHpMMH>mz new oohoEEoo mwflmgom noohoEEoo no pcoapnmooo .m .D .eopmensnozv nonnpm popes: one no ”Scam pocflmpnon .Ammmfiummma .oonnno meanness peoeeeo>oo .m .p H.o .o .soo Imcflnwmzv monopommscmz no mdmcoo AoomeEoo mo meEpnmooQ .w .D "509% UoCproom mmm mzo.a H o s o www.mo: Nam.mma m m.o m.H mms mmn.a ssm.mfim mmm.mma smmw H.o o.o an: mms sm:.onm om:.mnn mmmn m.o m.o mmm mam mmn.mmm oqs.mon mmmH m.o m.o :mmMH coo mmm.mHm som.nm Hmmfi m.o m.o sow m mam mmm.oom HmH.HHH mmma Asv gov Amv Aav Amv ANV AHV Am casfioo Am QESHOO m m QESHOQV o : CESHOQV mgwaaom .Lm .NOQ mpoHHoo .gm .NOQ mnmafioa .nm .Nom snow UoppoaeH composoopm Awesomzonev Amusemsoaev OHpmoEom mo pcoopom ampLOQEH wCOHposoomm OHumoEoo nnn4lnun4 Hcd403E n) O , a .nozmfiommma .oOflmmo mafipcfinm psoEQho>ow .m .D ”.0 .Q «Cowmcflnmmzv mopmpm nonficb on» no coapmwfl>mz pom oonoEEoo mMWohom .moLoEEoo no pcmEpnoQoQ .m .b "Eogm oocfimpnom m.m: :.mm :ma mm: mmm mmm.H mama :.om m.wo com mmm mmm m:o.a mmmfi o.mm o.mm Hmm mom Hmm cos mmmfi m.mm m.mm oom mH:.H mms mmm.a smma m.ms H.mm New s:fl.m mmm :om.m omma s.:m m.sm mmm man an: mms mmmH m.mm o.aw moa Hmm mm: as: :mma H.m :.mm mm smfi mmm mam mmmH m.m m.HH Hm mm mmm Hmm mmmfi m.H m.m mm mm :mm.H com Hmma N.H m.m ma am mmm.H mam omma m.o m.H m ma oom.m mam mmmH m.o m.o m m mmm.m ems mmma mu m.o m.o m m mms.a mmm smmfl H.o 2.0 m m mam.n mm: mmma Asa gov Amv “av Ami ANV AHV Am cadaoo Am QESHOQ o m CESHOQV m : QESHOOV manHOQ .nm .Nom mamaaoo .nm .Noa mnwaaom .Lm .NoQ comma Eonm show gamma ans“... Hmpoa mo pcoogom uzo . . .. . monoponnseo: no noncoo .oonoesoo no remapnnaoo mm mm a smnw omewmmwwennnozv O .mm .Q «Ammma .ooanno msapsann psossno>ow . . .. . . . m D . o . .co m IEoo nnflnoE mopmpm UopHCD can no pnomom Hmscc< pmnflnlzpccSB QUEonw MMMMMwWOQOHmmHE Q .Ammmflommma .oonnno weaponsm nsoeenoeom .m .2 ".o .o .eoomen an mmnmnoooooooooooooooo MW sowpmmfl>mz can conmEEoo cwflonom .oonoEEoo no onEpanoo .WQ.DSV“EownpwoWMwwmw ogp no . o m.mm Hmm.H onom.m mmmH m.n: me.H nmms.m mmma flaw Amv ANV AHV Am QESHoo m m cesfioo Amvnmw amendm Amonmw ohmsmw popsomeH soaposponm no mocmmsonev no mpswmsoaev snow Qflpmmsom no unconom ompnomEH nonposoonn capmceOQ mzmmem>qm> mo mBmomZH Qow .m .D ".0 .Q «so won on :éliiio sompmmfl>oz Ugo monoesoo ammonon qoonoEEoo no onEpnogom .mn.bzvuwwwwpwommmew on» no .m m.sm :.mm mom omm m mum m . s.mm m.mm mam snm.fi mmm amm.m mmmw H.Hm o.sm 3mm Hsm mmH mmm mmmfi m.mm m.mm moo mom.m Hmw nmm.m nmmn m.sm q.mm gas men.m mes sna.m nmmn oumm mumm mom smn.a mmm mam.fi mmmn 3 mm a so on em as omn :mmn Amv va Amv sz Amv Am sasaoo Am sasaoo Amy AHV o m QESHOOV o : QESHOOV manHoQ .mpm .dm mnoaflom .mow .Um mnwaflom .mpw .Um noon comma Bonn AmocomSOQBV Amocomsogev Houoe no pcoonom sogmb Hopoa ozmfllnmma mzqm> m0 ZOmHmow .m .D ”.0 .Q .COpmcH . mmma .Qmm mm m soapowfl>oz Ugo oonoEEoo cwflonom .oonoEEoo no pCoEpnoQoQ .m .DSVquwanowwwwmw can no . n .Ammmfilmmma Aoomnno mCHpcfinm quECho>ow .m .D u. . «C monopownscmz no momcoo .oonoEEoo no onEpnogoQ .m .b "Eonw omsaommwzficmozv . o All; m.o nmm omn.mm mmmH m.m 3mm sHm.om smmn oil: ma men.Hm mmmH Ara Amv Amv AHV Am casaoo o m cesaoov Amonow onodvm Ampnow onozom oopnoaeH coaposoonm no mUQMmsosBV no mocwmsonev noon ofipmosom no pcoonom nmpnogeH MQOflpozoonm oapmoEom mmmfilmmmfi NOMDQmOo mo mBmomSH Qow m D . o D . . . ”Eon pocampno nocwmummmwmz ommannoEEoo QMHwnon noonoEEoo no pcoEpnmmoQ m D n m ozma m.ms :.mm om mmm mm mmm mmmH m.Hm m.mm m: mmm Hm mza mmma m.mm n.0m OH mm mm mm nmmfi m.mm H.mm own msm mza : : mmma m.:m :.wm sw ow: mm mm mmma mm. 3. w- m: N. a. as E so 5 a: 5 5 3 Am QEsHoo Am Cezaoo . o m CESHOOV m : QESHOOV mnoHHom .mow .Um mnoaaom .mow Gm MHMHHOQ .MUN .UW oIllllllillllollllllllllp cmomh Eonn Amocom5039V Amocomsogev Hence no usoonom comma Hopon fidmw Osmalzmmfi mzoo .m .D “.o .o .eopmcaemezv mmpmpm emcaee mnp mo moHpmflpmum HdofihOpmHm .oonoEEoo go onEpthmQ .m .D "Eopm UoCHmpoom m.m em. o.m mmm.a mam.ma m.:mm mama m.s .Hm. m.m oso.a mas.:a m.wam Hmma s.a mm. m.m amH.H :mm.:a o.mom omma s.m am. m.m mHo.H som.mfi s.mw: mmma m.m ma. m.m saw www.ma m.::: wmma m.: :H. m.m mom mam.ma m.o:: emmfi m.: ma. o.m mam maw.ma m.ma: mmaa s.m OH. m.m ma: :wm.aa m.emm mmma a.m mo. m.m mam mam.oa H.mmm :mma :.m so. o.m 0mm mam.oa :.mmm mmma H.m No. H.m smm sHs.oa o.sem mmmfi w.H mo. m.m oom sem.oa o.mmm Hmma o.m mo. H.m sea mmw.w m.:wm omma Asa Amv Amv “av Amv Amv AHV pamohom pcmohom unmoamm mamafiom no wLmHHom mo mhmHHOQ mo Am essaoo Am essaoo Am essfioo mcoaaaaz mcoaaflaz meoaaaflm ¢,: QESHOQV a : QESHOOV m m QESHOOV magma anm coach Eopm comma muLOQEH copaOQEH .m .z .m psoam mpaooeH m.m .z .w Lacy amuOB .m .z .6 go pqmosmm mpLOQEH m Hmpoe mo unmoamm mo pcmopmm m mm mphOQEH z¢m¢h 20mm mBmOmSH Qz< «mBmOmSH.Q flqnf. 98 increased slowly during the early 1950's, while the late fifties showed a more steady increase, as indicated in column 2 of Table V—l. Total imports were around $10 billion during the first half of the fifties and then in— creased to the $14 billion level in the late fifties. G. N. P. was around $300 billion in the early fifties and increased to $503 billion in 1960. Although G. N. P. and imports fluctuated during the fifties, imports as a per— cent of G. N. P. remained relatively stable, as indicated in column 5 of Table V—l. Total imports varied from 2.8 to 3.3 percent of G. N. P. during this time. United States Imports from Japan The dollar value of Japanese imports showed an in- creasing trend during the 1950's. Imports from Japan were around $200 million in the period and increased to $1.1 billion in 1960, as shown in column 4 of Table V—l. This was a substantial increase, but was still an insignificant share of G. N. P., as indicated in column 6. Japanese im— ports were .06 percent in 1950 and increased to about .25 percent in 1960: a four—fold increase. The dollar value of Japanese exports to the United States was increasing relative to total imports during the 1950's. According to column 7 of Table V-l, Japanese goods ecame more important relative to total imports during this ime. Japanese imports were around 2 percent of total mports in the early fifties and increased to about 8 99 percent in 1960. The yen value of the above figures would have the same relative comparison, as the dollar-yen ex- change rate has remained stable since 1949.6 United States Imports of Cotton Manufactures The total dollar value of cotton manufactures im— ported into the United States increased from $69 million in 1951 to $252 million in 1960 (see column 3, Table V-2). When comparing cotton manufactures imported to total im— ports, we find the figure varying from a low of .6 percent in 1951 to a high of 1.7 percent in 1960 (see column 5, Table V—2). Imported cotton manufactures increased in relative importance to total imports during this time but never exceeded the 2 percent level. United States Imports of Cotton Manufactures from Japan Cotton manufactures imported from Japan into the United States were around $12 million in the early fifties (column 4, Table V—2). It increased rapidly in the mid— 1950's to a high of $84 million in 1956, from which it de— clined to $73 million in 1960. Japan's cotton manufactures imported into the United tates during the fifties were a relatively small and in- ignificant part of total imports (column 6, Table V—2). 6Warren S. Hunsberger, Japan and the United States n World Trade (New York: Harper and Row, 1964), p. 23. .mmmalamma .omaem .oz whoomm .coapQESmcoo com shapednoaoz mo mphommw mmpmpm Ucuacb «monsoo a0 sawmsm .m .b ”Scam pmcampnon I .mmm .mma .aa .Amoacmo weapcacm nemeecm>oe .m .D ".o .o .copmeaemszv mmpmnm empaeo can mo moapmapmum Hmoahoumflm nmecamEEoo no pcoEpamme .w .3 ”anm UmCamppom m. a.a ooa mmm msm.wa mama m. a.a om :om maa.aa amma m. a.a ma mmm amm.aa coma m. m.a as mom mom.ma mmma m. m.a an maa mms.ma mmma m. a.a mm oma mem.ma amma a. m.a am ama mam.ma omma m. a.a om mma amm.aa mmma m. a. mm mm mam.oa :mma m. a. ma ma mam.oa mmma a. m. ma mm mae.oa mmma a. m. ma mm emm.oa amma m. l amv Amv Aav Amv Amv Aav Am QESHoo Am QESHoo m : QESHOOV m cesaoov qmmmh ampoe cmamh 809% anm Amamaaom mmadpomhscmz mohsuommscmz no CODDOO £090.00 mGOHHHHSV cammw spa page spa page AmcMaaoo mo mcoaaaazv empsoasa mpaoafiH Hanoa mpLOQEH Hmpoe oompnogeH amuoe no pcooamm go ucoohmm megapommscmz coupoo z dqp 101 They comprised .1 percent during the early fifties, exe panded to .7 percent in 1956, and declined to .5 percent in 1960. These figures show an increasing trend during the early and middle fifties and a slight decrease in the late fifties; however, the absolute percentage level is relatively insignificant. When a comparison is made between total imports from Japan and cotton manufactures imported from Japan, there was a definite increasing trend in the early fifties and a declining trend in the later half of the decade (see column 5, Table V—3). There was a substantial change in cotton manufactures imported from Japan relative to total imports. Cotton manufactures were around 6 percent of total imports from Japan in the early fifties, increased to :15 percent in 1956, and declined to 7 percent in the late fifties. Column 6 reveals that cotton manufactures from Japan increased substantially relative to total cotton manu— factures imported. Less than 20 percent of the total cotton manufactures imported into the United States was from Japan in the early fifties. This relative share increased rapidly, especially in 1955, to a peak of 54,5 percent in 1956, and then declined to around 30 percent in 1960. During the mid-1950's United States' purchases of cotton manufactures from Japan substantially increased relative to purchases from other countries. .mamanaama .omaem .oz spouse .eoaa semeoo com omHUQMQohoS we mphOQEH moQMpm pouacb .mdwcoo mo smoadm .m .2 "50pm comamunow a.am a.a ooa mam mam.a mama a.am a.a on :om aao.a aama o.mm a.a mm mam sma.a oama a.am a.a as mom aao.a mama a.a: a.aa as maa :ma aama a.a: a.aa aa ama moa aama I a.aa a.aa am aaa mam aama I a.a: a.aa oa mma aaa aama 7 m.om m.a mm aa amm aama a.am m.s ma mm oam mama w m.om a.a ma ma amm mama i a.aa a.a ma ma oom aama ,Aav Aav Ana Amv Amv Aav Am cadaoo Am QESHOQ m : cedaoov ¢ : casaoov Gamma ampoe Annmaaoa mo mthpommscmE EOhm ncoaaaazv gamma Scam soppoo mcmamh Eopm amow amphanH ma< pmsa mpLOQEH monopommscmz cmamh ana Amamaaom mommcoaaaazv Hauoa coppoo ampoa mpaoaeH Hapoa mpopho EH mo pcmohom mo nccoamm mopsuomwzcmz coupoo zoa .m .e ".o .m .cOpaeaemmza,maemam anaemacam cospoo .maosaocm aaaz maaaxme .meSpomMSsz ho mzmcmo mama .oohmEEoo mo psofippmaoo .m .D "Eopm Umchpnom ma am ooa mmm mmm mama m am om :om an» aama oa mm mm mmm mmm oama oa mm as mom mmm mama oa mm am mza awa wmma Aaa Ga :3 Ama Ama Aaa Am_qesaoo Am Cezaoo + : casaoov m m cesaoov Gamma advoe Gamma Soap anm Amamaaom UmpLOQEH pmppoafiH mo mcoaaaazv mposaoam whoopoam Ampmaaoo mo mcoaaaazv mucospopm ammw ooLSpommdcm: pmhdpommscmz nompaomsH monopommszmz Coppoo .m .D ,Qoppoo .m .D mmsSpomwscmz goupoo coupoo .m .3 ,mo pccopmm mo pcoosom z mo zomHm< p02 uxhow SoZV momaa ”50hm pecadpnom ma .<.z maa.m aae.a .a.z aama ma .<.z sao.m oom.a .<.z oama aa .<.z amo.m asa.: .<.z mama sa .<.z sms.m saa.a .<.z aama as .<.z maa.m aam.a .<.z sama ma .<.z ama.a amm.a a.a.z aama ms mom ams.a ooa.a aam.a aama aa maa a:a.m saa.a mmm.a aama Aaa Aaa Asa Ama Amv Aaa Am cadaoo Am QESHOO ¢,: casaoov I m casaoov a.mpm .mm Apcwohomv Apcooacmv Unmmsosav .mpw .mm a.mpm .Um mpmomsH ampoa composnoam magma Eosm Ucmmsonev cosmzosev Lmow ho mhmcm mo ucoohmm mpLOQEH mphomfiH coauQSUOLm m.cmmmb mm mpLOQEH .mmm .a agama fl30m cam hmaamm “apow 3ozv cache vamos :a mopmpm ompacb any pom Gamma “powaonmcdm .m Cmanmz "Eopa vocampnom aw om mm s: azm aama ma mm mm aa aam aama aw sa am m: aam mama 7. am om s: cm mam mama N am am m: a: mmm sama mm mm ss mm saw aama mm :a mm mm oam aama sa m a a maa aama aav Aaa Aav Ama Ama aaa Am sesaoo Am essaoo a : Cezaoov m m cesaoov a.mpw .mm Anamohmmv Answoaomv soaaaazv a.mvw .mw a.muw .Um mphOQEa aMpoB coaposvoam mmamm Scam coaaaazv coaaaazv Mao» a0 madam mo pqmohmm mphOQEa mpaOQEa soapozooam m.chMb mm mpLOQEa .manmaam>< pozn .wmm .Q .Azama n30m 6cm ccamwm mayo» zmzv mange caaoz Ca mopmpm ampacb who 6cm Gamma .pmwscpmcsm .m spasm: "Sosa vocampnom 108 sa .<.z aom.a moa.a a.a.z aama am m.m osm.a aaa.a ooo.mam oama aa a.m ama.a omm.a ooo.mam mama am m.m amm.a aaa.s :am.mam aama sm m.m oaa.a amo.a ooo.mmm sama a.mm m.m oom.a mmm.: ooo.mmm aama In- a.a In: ams.aa ooo.aam aama In: a.a nun smm.a mas.aam aama Aav Aaa Ana “ma Amv Aaa Am cesaoo Am GESaoo a : Cezaoov + m Cezaoov Apcmohmma Auzooaomv Amvcmmsocev Amwcmmzocav Amczmmzoflev Lama mpLOQEa amuoe coapospoam swamm Scam mphOQEa coaposuomm a0 mhmsm a0 peooacm muLOQEa a.mmgmh mm mmeQEa IIIIIIIIIIIII‘ .mmm .a .Azama .som Una amasmm "anew 3mzv camne capo: ca mcpmpm Umpacb can cam gamma .acmamomcsm .m spasm: "anm UmQaMpnom 44444 aa aa mom.a aam.m oom.aa aama a: om asa.a asm.a oomnaa oama 0, aa mm sma.m ama.a ooa.aa mama m ma am aaa.m saa.a ooa.ma aama I»- In: aaa.a In- ooa ma sama In- In- oao.m In- ooa.oa aama :1- ll. oaa.m In- aao.oa aama In- In: mma in- maa.a aama so as a Am cesaoo Am GESaoo sz Amv Amv A v a : casaoov a m Cezaoov chomom Amcomoo Amcomoo Apccoammv Anemoammv beamsogav acmmsogev ocmmsonev mpLOQEa ampoe soaposcoam cmamh ana mpLOQEa coapozuoam aama mo madam go psmopmm muQOQEa m.cmamm mm mpLOQEa lflflDDDJn _nD DHEDL—ga. 372a 334......)333CH QflifidibfibHD||| nuring the middle and late 1950's. Column 2 of Table V-5 eveals production of cotton cloth was from ten to eleven pillion square yards. Total imports tended to increase. hrough the fifties, while imports from Japan increased to a high of 143 million square yards in 1956 and then leclined for the rest of the period. Imports were never fireater than 2.5 percent of production during the fifties see column 5, Table V-5), while Japan's share of total :loth imports tended to decline in the late fifties (see lolumn 6, Table V—5). Now turning to velveteens, production was over four Lillion square yards in the middle fifties. Total imports ncreased to over eight million square yards in 1955 and 956, and then declined to less than five million square ards from 1957 to 1961 (see column 3, Table V—6). Imports rom Japan reached a high of around 6.8 million square ards in 1955 and 1956, and then declined to around three illion square yards from 1957 to 1961, as indicated in olumn 4 of Table V—6. Japan's share of total imports pached a high of 83 percent in 1956 and declined to less Jan 60 percent in 1961 (see column 6, Table V—6). Examining ginghams, imports reached a high of 38 rcent of domestic production in 1956 and declined to ound 20 percent from 1957 to 1961 (see column 5, Table 7), while column 6 shows from 62 to 94 percent of ngham imports originated in Japan. Sheet and pillow se imports were less than 6 percent of domestic 111 production in the late fifties and early sixties, as indi— cated in column 5 of Table V—8. Column 6 reveals that over 84 percent of the sheet and pillow case imports came from Japan. The limited data on cotton blouses shows that from 16 to 30 percent of domestic production was imported, as indicated in column 5 of Table V—9, while from 44 to 58 ‘percent of the imports were of Japanese origin. Cotton textile imports from Japan were highest in 1955 and 1956 and then tended to decline in the late fifties, while total imports continued to increase. Im— ports of cotton cloth and sheets and pillow cases were never greater than 6 percent of domestic production, while the limited data on velveteens show imports very high rela— tive to production. In all instances of the specific types of cotton goods, Japan's share of United States' total im- ports was 75 percent and greater in the middle fifties, and the share declined in the late fifties and early sixties. United States' Empprts to Japan United States' exports to Japan were increasing during the fifties, as indicated in column 2 of Table V-lO. They were around the $600 million level in the early fifties and increased to $1.7 billion in 1961. United States' total exports of unmanufactured cotton7 varied from $452 7Unmanufactured cotton is various types of raw cotton grouped together. — ~~—n""' 112 .mamauaama .omaaa .oz anommm .mmaacmeocmz cwaonom paw oapmoEom go mpgommw wmpmpm umpacb .mSmcoo go smogsm .m .D ”Eogg pccawpnom a.am a.a aaa sma aoa.a mama a.am a.ma mmm aaa ams.a aama a.mm a.aa sam mam amm.a oama 0.0m 0.0a mm mm: amm mama m.ma m.:a waa ama mmm mama a.am s.sa sam mao.a smm.a sama s.am m.mm aaa mms sam aama a.am a.aa ama ssa maa aama m.mm a.am asa was ssa aama m.mm a.sa aaa ama aaa mama a.om a.am asa asa oma mama m.aa s.om maa aaa.a mma aama aaa aaa :1 AC ama aaa Am cEsaoo Am cesaoo Amgwaaom AmQMaaoQ amgmaaoa a : cesaoov a : Cezaoov go coaaaazv go coaaaazv go Coaaaazv Conuoo cmgmm UmpduodgscmEcb acmmmh on mQOppoo aama op ow wasp ma pmgp coupoo chzpomgscmEQb acmmmm on mpgoaxm Coupoo gamma 0p aogzpomgscmecb go mpgomxm mpgoaxm megapomgscmECD mpgoaxm .m .D go pqoogmg augoe ampoe go pcmomcg go pcmommg z .fl 113 million to $1.1 billion with no particular trend revealed (see column 3, Table V—lO). Column 4 shows unmanufactured cotton exported to Japan varied from $93 million to $221 million during this time and revealed no particular trend. Unmanufactured cotton exports made up 30 percent of United States' exports to Japan in 1951 and declined to 8 percent in 1962 (see column 5, Table V—lO). Exports of unmanu- factured cotton to Japan were of less relative importance in the late fifties and early sixties than in the early and middle fifties. Of the unmanufactured cotton exported, 15 to 25 percent was exported to Japan, with a high of 25 percent in 1955 and 1956 (see column 6, Table V—lO). The State Department was faced with a conflict of interests within the domestic industries of the United iStates. This conflict came into existence when the United 1States exported increased amounts of unmanufactured cotton to Japan, and Japan increased her exports of cotton manu— factured goods to the United States. Because of Japan's exports of cotton manufactures to the United States, she consumed more raw cotton, which was desirable from the point of view of the domestic cotton farmers. The domestic textile manufactures viewed this action differently, as this increase interferred with their domestic market. The State Department had to work with this dilemma during the thirties and again in the fifties and early sixties. 114 United States Balance of Trade with Japan The United States had a surplus in her balance of trade with Japan during the fifties and early sixties, with the exception of 1959. United States' imports from Japan were less than 50 percent of her exports to Japan during the early fifties, as indicated in column 5 of Table V—ll. In the late fifties and early sixties, United States' im- ports from Japan increased relatively more than did her exports to Japan, but the absolute surplus level was not reduced, because both United States' exports and imports to Japan were increasing in absolute terms. When the balance of trade between the United States and Japan is viewed in terms of raw cotton and cotton manu— factured goods, the United States has a surplus in its ‘balance of trade every year (see column 4, Table V—l2). United States' imports were increasing relative to exports, as cotton imports were less than 20 percent of cotton ex- ports in the early fifties and greater than 30 perdent in the late fifties and early sixties (see column 5, Table V—12). Cotton manufactures imported into the United States from Japan did have a substantial increase in dollar volume uring the fifties and early sixties, as indicated in olumn 3 of Table V—l2; however, they never exceeded the ollar value of raw cotton exported to Japan. 115 .mamauaama .omaam .oz pcommm .coap sameoo cog cmawcmgopmz go mpammEa mopmpm Uopacb .mSmcoo go swmasm .m .D "Eopg vocampoon .mamalaama .omzam .oz phonom .omausmcogoz cmaogog ,Ucm oauwmsoo go mahogxm mopmpm Umuacb .mdmcco go smoazm .m .D ”ang vocampoom a.am aa mam.a ao:.a mama m.ma aaa aso.a ams.a aama a.aa ama sma.a amm.a oama m.moa sau aao.a amm mama m.am aaa asa mmm mama a.m: ama moa smm.a sama a.aa mmm aaa saa aama m.aa amm aaa mma aama m.m: ao: asm ssa :ama a.am aaa aam aaa mama a.am mmm smm oma mama s.mm mmm oom mma aama aaa aaa ama ama aaa Am Cezaoo Am Sasaoo Amgmaaom AmaMaaom a m cesaoov I m ssoaoov go mooaaaasv go mcoaaaasv mpgomxm go Annmaaoa ocmmmh Eogg «magma on gmow pcooacg a ma go mcoaaaazv mngQEa .m .D mpMOme .m .D mQLOQEa .m .D mdaagsm .m .D z manna ”song pecaneoon mm s: em as mom aama 0 am :a mm ms mam oama .M mm a: am ss mom mama aa sa a: as maa aama a a m: aa ama sama a a aa aa :aa aama aaa Aaa aaa Amv ama aaa AN QESHOO Am QESHOD a a essaooa Ansoaaaasv a m easaoov Aneoaaaazv aneog onnnaaoo aneog amenaaoo ammmwwmmzwo nets go gcooaog go gcoogog madame mcox meow comma mmmDBoasz<2 ZOBBOO m0 mBmomEH wmeaam QMBHZD aIH> mam manna ”song noeaneoOe .s-> oaoma ”song ooeaeeeo .omm .m .Azama .aom one spasm: vagoz ca mopdpm copacb map vow cmamm .gowgopmcsm .m Conga: n "xgog 3ozv muons ”Eogg cocampnom aaa s.m a.m am am a: aama ama a.m aim am mm o: oama oma a.m a.m om am on mama maa a.m a.m aaa s: am aama mma m.m a.m mma m: am sama ama m.a a.a In: ss In: aama “so aaa aaa aaa ama ama Aav E o taa cewwowv Amanda Amanda .Am mmwawo Anthem Anagmg . ameSG ohmsmm go ogmdmm go 4 oposw 0V ogmsmm go ogmzmm go go one mooaaaazv mcoaaaazv go ohm acoaaaazv whoaaaazv mpLOQEa omgLOQEa NMQQSG mpgoQEa mpgoasa emposa gmow gcoogog gcoogog o coopo>am> Emanaw mz< z mam< ll X = Annual National Income of the United States. Xu = Annual Personal Income of the United States. X = Annual Disposable Income of the United States. X6 = Real National Income--National Income in current dollars (X ) deflated by the Bureau of Labor Statistics Consumer Price Index (1957-1959 = 100). X7 = Real Personal Income-—Personal Income in current dollars (X4) deflated by the Bureau of Labor Statistics Consumer Price Index (1957-1959 = 100). X8 = Real Disposable Income—-Disposable Income in current dollars (X5) deflated by the Bureau of Labor Statistics Consumer Price Index (1957-1959 = 100). 176 >4 I 9 - Real Per Capita Disposable Income-—Rea1 Dis- posable Income (X8) divided by Population (X2). X10 = An index of the relative price of imports to domestically produced cotton products—-An index of the average annual price per square yard of cotton twill—back velveteens imported from Japan (X ), divided by the domestic Wholesale Price Index of Cotton Products (1957—1959 = 100). Xll = An index of the relative price of imports to domestically produced textiles and apparel—-An index of average annual price per square yard of cotton twill—back velveteens imported from Japan (X ), divided by the domestic Wholesale Price)Index of Textiles and Apparel (1957-1959 = 100 . Xl2 = An index of the relative price of imports to the domestic Wholesale Price Index--An index of average annual price per square yard of cotton twill-back velveteens imported from Japan (X1), divided by the domestic Wholesale Price Index (1957-1959 = 100)- X13 = An index of the relative price of domestically produced cotton products to domestically produced man—made fibers-—Wholesale Price Index of Cotton Products divided by the Wholesale Price Index of Man—Made Fibers (1957-1959 = 100). X1“ = An index of relative price of domestically pro- duced cotton products to domestically produced textiles and apparel--Wholesale Price Index of Cotton Products divided by the Wholesale Price Index of Textiles and Apparel (1957-1959 = 100). Factors Used in the Analysis The analysis is based on the years 1951-1963. These years Were selected because of the reasonably normal post- war economic conditions in the cotton textile industry of the world, and also because of the availability and continuity of data for this period. 177 Because of the high intercorrelation between some of the independent variables, the first part of the analysis was to select the best predictor variable from the groups that demonstrated high intercorrelation. Preliminary- analysis showed that there was-high intercorrelation be- tween the following sets of independent variables: X3, X4, X5: X6, X7, X8: X10, X11, X12: and X13, X14' Out of the money income group (X3, XA’ X5), disposable income (X5) had the highest simple correlation coefficient. Of the real income group (X6, X7, X8), real disposable income was the best predictor. Variables X10, X11, X12 compare the price of imports to the price of domestic products. Variable X10, which com— pares the price of imports to the price of domestically pro- duced cotton products, was the best predictor of imports. Variables X and X14 compare the price of domestically pro- 13 duced cotton products to domestically produced textiles. Variable X13, which compares the price of domestically pro— duced cotton products to domestically produced man-made fibers, was the best predictor of velveteen imports. Preliminary analysis also revealed a high correlation between population (X2) and real disposable income (X8). These two variables were combined into real per capita disposable income (X9), which eliminated the intercorre- lation problem and this generated variable had a higher simple correlation coefficient with imports than the vari- ables it was derived from. 178 In summary, preliminary analysis has reduced the independent variables to the following: X = Average annual price per square yard received 1 by Japanese exporters for cotton twill—back velveteens. >4 ll Real Per Capita Disposable Income. X = An index of the price per square yard of cotton twill-back velveteens imported from Japan divided by the domestic Wholesale Price Index of Cotton Products. X = An index of the price of domestically produced cotton products divided by an index of the price of domestically produced man—made textile fibers. The independent variables have been narrowed down to the above mentioned four, with the last two requiring further explanation. During the research it became apparent that the demand for cotton textile imports may depend on two substitution effects. There was a high degree of technical substitutability between Japanese cotton velveteen cloth and domestically produced cotton velveteen cloth. Also, the domestic textile manufacturers had the productive facilities to substitute man-made fibers for cotton fibers. Price data were used to measure these two substitution ef- fects. Variable X measures this relation between im- 10 ported cotton velveteens and domestically produced velve- teens. Variable X measures the relation between domesti— 13 cally produced cotton products and domestically produced man-made fibers. Results of Statistical Analysis The data used in this multiple linear regression and correlation analysis is shown in Appendix G. Since an IBM 1130 computer was used to solve for the regression and correlation coefficients, all possible combinations of X9, X10, X13 were tested with Y and X1. The set of statistically significant independent variables were price (X1) and real per capita disposable income (X9). Following is the statistical equation along with the correlation coefficients: Y = “593,596 ' 1,697,400Xl + 1:320X9 R = .69 rY9 = .48 I'Yl =.-,53 1"1 9 = .07 Both regression coefficients and the correlation coefficient (R) are statistically significant at the 5 percent level. Also, the signs of the two regression coefficients are the same as economic theory would predict. Table VIII-l shows the observed imports and the predicted imports from the statistical equation. With a correlation coefficient (R) of .69, these two independent variables explain about 48 percent of the total variations of the cotton twill—back velveteen im- ports from Japan. As stated previously, the above equation is statistically significant; however, the 180 TABLE VIII—l OBSERVED AND PREDICTED QUANTITY IMPORTED OF COTTON TWILL—BACK VELVETEENS FROM JAPAN Observed Importsa Predicted Importsb Year Square Yards Square Yards (1) (2) (3) 1951 387,348 118,155.8 1952 439,613 438,577.4 1953 220,914 418,879.0 1954 52,633 484,992.4 1955 1,280,526 729,255.4 1956 1,104,486 679,579.6 1957 996,189 825,073.0 1958 770,492 628,272.4 1959 563,272 713,890.2 1960 274,626 672,277.4 1961 597,374 526,735.4 1962 866,009 748,094.2 1963 873,303 832,567.0 aColumn 2, Appendix G. bObtained from regression equation Y 1,697,4ooxl + 1,320x9. = -593,596 - 181 numerical value of the correlation coefficient does indi- cate that it is low in predictability. We can be reason- ably confident that each predictor variable in the equation does in fact influence the dependent variable. Nor is the correlation coefficient inflated by predictor vari- ables that are not significant at the 5 percent level. This equation will be used in the subsequent analysis but the results must be interpreted with great caution because the model explains less than one—half the annual variation in the imports of twill—back velveteens from Japan. The formula for point elasticity of demand (E) used here is 8% is the slope of the demand curve and is the regression coefficient (bl) correSponding to X1. From the regression equation 8 _ 7 3.1% — —.1697 x 10 The next step is to choose a point on the demand curve at which we shall measure the elasticity. For future analysis, we will need to know the point elasticity of de— mand at the average price received by Japanese exporters for 1956 and 1957. The average price for 1956 and 1957 is $.532 and the corresponding quantity demanded, which is obtained from the regression equation is 751,412 square yards.” Therefore, p _ .632' _ y —6 a — m- .8410 X 10 and E = (0.1697 x 107) (.8410 x 10‘6) = —1.427 The derived price elasticity of demand could be biased because of the quotas.. This bias results since the elasticity is derived from the regression equation, and the regression equation is derived from import data of annual quantities that is influenced by the voluntary restriction after 1956. It is not clear as to how or which way the elasticity will be influenced because-of the quota, but when quantity controls are present, they could affect the elasticity. Comparing Alternatives During the negotiations of the 1957 five—year volun— tary agreement, the Tariff Commission recommended an increase in the ad valorem tariff on cotton twill-back velveteens from the existing average of 26 percent to 56 percent.5 The question that will be answered in this section is, would this threatened tariff increase have been more or less re— strictive than the voluntary agreement? “Price figure obtained from Appendix G. 5 Chapter V1, p. 132. 183 In making the above comparison, it will first be necessary to establish the percent increase in the price of imports if the higher tariff would have.been adopted. Incorporating the price elasticity obtained in the prey vious section, a numerical.quantity of Japanese velveteen imports can be obtained that would have been demanded in 1957 under the increased tariff. This quantity imported under the assumed increased tariff will be compared with the actual imports from 1957 under the voluntary agree— ments to determine which was more restrictive. To obtain the numerical quantity demanded under the assumed tariff increase, another assumption is made. The following analysis will assume that the supply of Japanese cotton velveteens to the United States is perfectly elastic because of the behavior of Japanese cotton exports to this country. Chapter V reveals how rapidly Japanese cotton textile exports have increased to the United States. Column 3 of Table V—12 shows how quickly total cotton im— ports could increase. They-increased almost four times from 1954 to 1956. Tables V-5, 6, 7, 8 and 9 reveal how rapidly specific types of cotton textile imports were in— creased in the United States. Column 3 of Table V—6 re- veals the fluctuations of Japanese cotton velveteen im— ports into this country. These velveteen imports more than doubled from 1954 to 1955. Because of these large changes in quantity of Japanese imports within a, 184 relatively short time, it is evident that the elasticity of supply of Japanese cotton velveteens in the United States is high. I shall assume this elasticity of supply to be perfectly elastic. Hence, an increase in the United States tariff will result in an increase in the import price by the full amount of the increase in the tariff. Japanese exporters received an average price of $.632 per square yard for cotton twill-back velveteens exported to the United States in 1956—57.6 The price the American importer had to pay was $.632 plus 26 percent average duty ($.164), which totals $.796 per square yard. Assuming a perfect elasticity of supply in Japan and the adoption of the higher tariff of 56 percent, the price the American importer would have had to pay would have been $.986 per square yard ($.632 + $.354). This $.l90 increase. ($.986 — $.796) in price due to the assumed increase in tariff represents a 23.9 percent increase in price. From the previous section the price elasticity of demand at the average price of 1956—57 was estimated to be —1.427. This means that a 1 percent increase in price would decrease quantity demanded by 1.427 percent. There- fore, a 23.9 percent increase in price would tend to de- crease quantity demanded 34.1 percent (23.9 x 1.427). The 6Column 3, Appendix G. It states in the General Explanation of any Report No. FT110, that the dollar value shown on the import statistics is defined as the market value in the exporting country for goods subject to an ad valorem rate of duty. 185 quantity imported in 1956 was 1,104,486 square yards.7 Thirty-four and one tenth percent of these 1956 imports is 376,630 square yards, so assuming the increased tariff would have been adopted and a perfect elasticity of supply in Japan, the estimated quantity that would have been imported in 1957 and succeeding years would have-been 727,856 square yards (1,104,486 — 376,630). The quantity that was imported from Japan in 1957 was 996.189 square yards.8 These 1957 imports arose from a change in income as well as price. Real per capita dis— posable.income (X9) increased $.92 in 1957 over 1956, therefore, 1,214 square yards (.92 x 1,320) can be accounted for due to an increase in income.9 Adjusting imports for income changes, the quantity of imports demanded was 994,975 square yards (996,189 - 1,214). This 994,975 square yards of adjusted imports for 1957 can be compared directly with the 727,856 square yards which were the estimated imports under the assumed tariff increase and perfect elasticity of supply in Japan. Therefore, given the assumptions and the statistical outcome shown above, the results indicate that for this year, the voluntary export restriction was less restrictive than the alternative tariff increase. 7Column 2, Appendix G. 81b1d. 91320 originates from the regression equation stated in the previous section, and represents the change in quantity imported (Y) per unit change in disposable in— come (X9 ). 186 Tables VIII-2 and 3 includes the calculations and analysis for all five years of the 1957 voluntary agree— ment. Table VIII—2 derives the imports for the years of the agreement, adjusted for changes in real per capita disposable income, and these can be compared to the pre- dicted-imports under the assumed tariff increase. Table VIII-3 reveals which tends to be more restrictive+-the assumed tariff increase or the voluntary quota in each of the five years. The actual imports under the voluntary quota are lower than the estimated quantity that would have been imported under the assumed tariff increase in three out of the five years of the agreement. The potential tariff appeared to be more restrictive during the first two years of the five-year voluntary agreement. The three suc— ceeding years show that the voluntary quota tended to be much more restrictive than the potential tariff increase. Conclusion This section has made a post—war comparison between a specific voluntary agreement and its alternative. The voluntary agreement tended to be more restrictive in three of the five years than its alternative. It was hypothesized in Chapter I that unilateral American action would be more restrictive than the volun- tary quotas. Based on the analysis above, this hypothesis must be rejected. 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