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munity is a close trading partnership between the
United States of America and the enlarged Euro-
pean Common Market.

Unhappily, however, as we build we must also
defend. Only through increased trade can the
increased economic growth needed to provide for
the defense of the free world be assured. The



cost of our nuclear deterrent, the increased build-
up of conventional military forces now under way
in the NATO, and the continued military assist-
ance to other free-world nations would otherwise
become an increasing burden. We cannot, without
a large favorable balance of trade, maintain our
forces overseas. Without trade with us, nations
willing to do so caimot generate the resources re-
quired to buy arms and build up their defenses.
Trade is the lifeblood of our national security.

But no matter how strong are their defenses,
the Atlantic nations cannot survive as a "rich
man's club." Cooperation with other free-world
nations is also a \dtal element of our "grand de-
sign." Increased economic strength and imity in
the Atlantic community facilitates that coopera-
tion. It enables us to offer additional help to the
other free nations of the world and thus to
strengthen our ties with these nations.

Wlaen I speak of "other nations," I include such
important trading partners as Canada and Japan.
I include also the other nations of the British
Commonwealth. I include Latin America, with
which the United States has special and long-
standing ties through the OAS [Organization of
American States] and with which we are embarked
on a great Alliance for Progress.*

Finally, and very importantly, I include the
newly emerging and lesser developed nations of
Asia and Africa. Together the industrialized na-
tions of the free world can help them to achieve
the ultimate goal which they and we share — which
is to enable the less developed nations to i-etain
their independence and to achieve self-sustaining
economic growth through their own production
and trade, without the need for continued
assistance.

Developing a Real Community of Interests

Our ultimate political goal is strength and unity
in the free world — the creation of what the Presi-
dent has called a community of free-world nations.
In the long run unity among free nations caimot
be assured by force, by psychological strategy, or
even by diplomacy. Unity will ultimately depend
upon the development of a real community of
interests, involving all of the varied activities and
aspirations of man. Trade is the warp and woof
of such a community.



' For b.ickRroiind, see ibid., Jan. 2, 1961, p. 8, and Oct.
16, 1961, p. 655.

292



' For background, see ihid., Sept. 11, 1961, p. 459.

Department of State Bulletin



Trade is the one most universal common de-
nominator among the pursuits of man. Trade
provides strength through independence. The at-
traction to free-world nations of participation in
the trade of the free world, which aggregates $115
billion a year, dwarfs the opportunities offered by
the $4-billion trade between the free world and
the bloc.

The adoption of the new trade legislation can
have a tremendous psychological impact through-
out the world. It will demonstrate that the Ameri-
can people are prepared to practice the principles
of free competitive enterprise that we have
preached for so many years. It will demonstrate
that the empirical mixture of public and private
enterprise developed by Western societies is su-
perior to totalitarian systems.

It will also demonstrate the ancient fallacies of
Communist theory and strategy. The Communists
have always maintained that the conflicts among
the nations of the so-called capitalist world —
and the conflicts among special interests within
these nations — -will eventually bring Western civi-
lization to a state of disintegration and decadence.

The European Common Market, with its high
rate of economic growth, is already confounding
the Communist theories. We can join in confound-
ing Commimist theory still more. We can prove
conclusively that communism is neither desirable
nor inevitable. We can prove that it is not even
an economic system fathered by Marx and Lenin
but is rather a new form of feudalism dressed up
in the psychology of Pavlov and the technology
of the Western industrial revolution.

All that I have said adds up to one fact. The
enactment of the new trade legislation proposed
by President Kennedy will enable the Government
and people of the United States to take a power-
ful new initiative in domestic and international
affairs. For many years, under various adminis-
trations, the American people have worried about
specific and dangerous crises — in China, Korea,
Berlin, Hungary, Suez, Lebanon, Cuba, Laos, the
Congo, and Viet-Nam. For years they have de-
manded the United States "seize the initiative."

And this is, however, not always easy to do.
The peaceful householder is rarely able to take
the initiative against the burglar. But we now
have an opportunity. We can and must take ad-
vantage of it to seize the initiative. By doing so,
we can accomplish a combination of results that



will far overshadow the significance of particular
crises and will help us to reduce the number and
diminish the proportions of future crises.

I do not want to imply that the new trade legis-
lation will automatically solve the problems of
American domestic life nor all the problems of
our international relations. This is not a panacea.
It is merely a set of tools. But it is a set of tools
that we cannot afford to do without.

We have a world to gain- — not for ourselves
alone but for the cause of peace and freedom, for
the things that gave this nation birth and nurtured
it. Our ultimate goal, as stated by President Wil-
son when we entered the First World War, is a
universal concert of free peoples that shall en-
circle the globe and "make the world itself at last
free". As President Wilson also said on that oc-
casion, God helping us, we can do no other.



United States and Ghana Conclude
Educational Exchange Agreement

Press release 52 dated January 24

Ghana and the United States concluded on
January 24 an agreement for the establishment of
a program of educational exchange between the
two countries. The agreement was signed at
Accra by A. J. Duowana-Hammond, M.P., Min-
ister of Education, for Ghana and by Ambassador
Francis H. Russell for the United States.

The agreement authorizes the exchange of pro-
fessors, scholars, teachers, students, and trainees
of all kinds and in all fields. It also authorizes
the establishment of a binational commission to
plan and administer the program in Ghana. The
initial program will be a modest one, the United
States having made available the equivalent of
$100,000 in foreign currency.

Ghana will be the second country in sub-
Saharan Africa, after Ethiopia, to conclude an
educational exchange agreement with the United
States. Forty-three nations now have active
agreements for educational exchange with this
country.

The agreement was concluded under the re-
cently enacted Fulbright-Hays Act (P.L. 256-87) .
The new act broadens the scope of the original
exchange legislation and provides more liberal
terms for the participating country.



February 19, J 962



293



The Case for American Trade With Japan



by Philip n. Trezise

Deputy Assistant Secretary for Economic Ajfairs'^



The subject I intend to discuss with you tonight
is that of trade between the United States and
Japan more particularly and wliy such trade ex-
ists. This is a moderately controversial topic to
wliich I hope I can contribute some light, without
heat.

Probably the most common and the most widely
accepted justification for trading with Japan is
that otherwise Japan might take a neutralist or
leftist course or enter into a political accommoda-
tion with the Chinese Communists and the Soviet
Union.

I believe that this line of argument, although it
is necessarily oversimplified, is essentially correct.
There is undoubtedly a close causal cormection be-
tween the state of Japan's external trade and the
country's domestic political well-being. One can
see readily how a serious blow to trade could lead
through a chain of events to a political disaster
for the free world in northeast Asia. Since the
United States occupies so dominant a place in
Japan's total trade picture, our policies are par-
ticularly relevant here. We would be shortsiglited
indeed if we failed to give due account to this
factor in United States-Japanese relations.

At the same time, the "trade in order to keep
Japan on our side" argument is only a part of (ho
story. In some respects it is a troublesome one. In
thus focusing on political considerations we tend
to agree with the proposition that trade is a kind
of imavoidable evil. We seem to say that we pro-
vide access to our market, reluctantly, as one of
tlie prices for sustaining our political ])osition in
the world. Trade becomes another kind of foreign
economic aid, closely related to the tensions of the
cold war. If those tensions ever were relaxed.



' Address made before the Japan Society, Inc., at New
York, N.Y., on Jan. 25 (press release 51 dated Jan. 24).



presumably we would consider it reasonable and
desirable to reduce or abandon some parts of our
foreign commerce.

In fact tlie political case for trade, althougli it
is certainly not inaccurate or irrelevant, need not
stand alone. I think that it is demonstrable that
our trade with Japan would exist inde|5endently
of any political requirements. It would do so be-
cause it makes the United States more prosperous,
because it creates jobs and wealth, and because it
coincides with our interest in promoting our own
economic well-being. All of us benefit in one
fashion or another from international trade. This
applies just as much to trade with Japan as to
trade with any other of our commercial partners
abroad.

Story of Postwar Japan

In examining our trade with Japan it is useful
to consider what lias happened to the Japanese
economy in recent years and what the prospects
for the future may be. Expeiience tells us that
the volume of our foreign commerce varies
directly with the level of economic acliievement
of other nations. Ti-ade between the industrial-
ized and richer countries is far greater than trade
between rich and poor countries or among the
poorer countries themselves.

Japan, for the past decade, has been in the
process of growing richer at a more rapid pace,
probably, than any other country in the world.

It is seldom recalled nowadays that, when
World War II ended, Japan was as nearly pros-
trate as a modem industrial nation could be. Its
great cities were in ruins; its industries were
shattered; the Empire was lost. There was even
reason to believe that the very bonds that hold a
society together might have been weakened beyond



294



Oeparfmenf of Sfafe Bulletin



repair. The outlook, at the most optimistic, was
for a full generation of hardship, while the
Japanese people painfully rebuilt and reorganized
their shattered countiy.

Tliis bleak and despairing prospect lasted only
briefly. ^Vithhi 5 years after the surrender, it
had become clear that Japan could hope to earn
its own way in the world. In the 1950's this hope
was more than realized. During this decade the
Japanese people, without Empire or colonies, with
unusually scanty domestic natural resources, and
without extraordinary foreign aid, built a new
economy far more boimtiful than any Japan had
ever had m the past and one that was expanding
at a rate rarely if ever matched under similar
conditions anywhere.

Eecently the Goveriunent of Japan estimated
that gross national product for the fiscal year
ending April 1 will have grown 10 percent in real
terms over the previous year. The growth rate
last year, in turn, was more than 13 percent, and
in the year before that nearly 18 percent. These
rates of expansion, under conditions of compara-
tive price stability and coming after a full decade
in which average amiual growth rates were in the
area of 9 percent, can only be called phenomenal.

Some of the specific details of the Japanese ac-
complishment are equally remarkable. In 1950
the Japanese iron and steel industry, which, as
you know, is heavily dependent upon imports of
raw materials, produced 4.8 million tons of crude
steel. By 1960 this figure was 22.3 million tons.
In calendar year 1961 it passed 28 million tons
and Japan became the fourth greatest steel pro-
ducer in the world, with only the United States,
the Soviet Union, and the Federal Kepublic of
Gennany ahead of it.

Another Japanese industry almost completely
dependent upon imports for its raw materials is
the petroleum refining industry. At the begin-
ning of the last decade, Japan's refining capacity
was about 69,000 baiTels per day. By 1960
capacity was up more than 9 times to 640,000
barrels per day and imports of crude oil, inci-
dentally, were up more than 15 times over 1950.

Consumption of electric power increased by
150 percent during the 1950's. Textile produc-
tion, most of it for domestic use, grew by 280
percent. "\^niole new industries came into being,
as, for example, in petrochemicals and in elec-
tronics.



Japan was suddenly pi'ojected into the durable
consumer goods age. Television became a major
industry, and Japanese consumers bought more
television sets than any people outside of the
United States and the United Kingdom. Elec-
trical appliances — refrigerators, washing ma-
chines, even dishwashers — found an important
place in the consumption pattern. Ownership of
an automobile, while still uncommon enough, is
sufficiently general as to make it an open question
whether Japanese cities in their present form can
survive.

Capping everything else — and what is seldom
remarked upon — the Japanese farmer began pro-
ducing rice in quantities that now make Japan
mainly self-sufficient in this basic cereal grain.
This accomplishment, in a land of small farms and
in the face of a shrinking farm area, is possibly
the most stai'tling of all. It reflects, of course, the
possibilities inherent in the application of modern
technology to small-farm agriculture. The lesson
in it for Asia and Africa may well be a revolution-
ary one.

Looking back on the postwar period, the wisdom
of our occupation policies is more than ever ap-
parent. The occupation under General MacArthur
set the stage for Japanese rehabilitation and
growth. "VVliere it could have easily restrained or
pi'evented Japanese progress, it fostered and
furthered the possibilities for growth and develop-
ment.

But neither occupation policies nor postwar
American economic assistance provided the essen-
tial expansive force. The achievement was a Jap-
anese achievement. Its basic ingredients were, I
think, hard work, a pattern of frugality in the
Japanese community, a general receptivity to
change, and an extraordinarily adventuresome
business leadership.

Japan's Growth as Market for U.S. Goods

I find the story of postwar Japan a very exciting
one in itself. The recovery and growth of Japan
under democratic institutions bears out better than
anyone could have expected our belief that free-
dom and economic progress are compatible phe-
nomena.

However, my point now is that the ingredients
which have made for Japan's perfonnance are still
there. So far as one can see, the potential for
economic growth has not been exhausted. Unless



February 79, J 962



295



external factors come into play, the supposition
must be that the Japanese economy will continue
to expand at a rapid pace for some years to come.
This implies a big and a steadily expanding
market for somebody's exports.

If the past is any guide, we should have a prom-
inent, probably a dominant, place in that market.
We sell Japan about a third of all her imports,
and this proportion reflects advantages that we
should on the whole be able to maintain.

The dimensions of the Japanese market are not
always fully appreciated in the United States.
In calendar 1961 we sold to Japan about $1.7 bil-
lion worth of commodities. Japan was far and
away our largest customer, next to Canada. The
data are incomplete, but it seems that after Japan
our next largest foreign customer was the United
Kingdom, which purchased from us goods worth
about $1.2 billion.

"Within the $1.7-billion figure are some notable
individual items. For example, we seem to have
sold Japan upwards of $250 million worth of raw
cotton, about $100 million worth of soybeans, and
$65 million in wheat and other grains. Our coal
mines found a market for 5 million tons of coking
coal in the booming Japan steel industry. Our
exporters of iron and steel scrap sold to Japanese
mills more than $200 million worth of raw ma-
terial. Machinery exports to Japan ran in excess
of $150 million.

1961 was a boom year in Japan, one in which
our exports to Japan exceeded our imports from
Japan by some $700 million. This level of export
surplus was extraordinary, but we do customarily
run a favorable trade balance with Japan and the
longrun curve of our export trade has been con-
sistently upward. During the 1950's our expoils
to Japan grew from $416 million to $1.3 billion,
or almost 220 percent. For a comparison, our
sales to the most rapidly growing part of Western
Eui'ope — the countries now organized in the Com-
mon Market — rose from $1.6 billion to $3.4 billion
or about 110 percent.

Tlie outlook, then, is that Japan will grow as a
market for American goods. Tliis will be true
for raw materials, for agricultural products, and
for industrial producers' goods. It will be in-
creasingly the case, also, for a broad range of
consumer manufactures and luxury items. As
personal incomes rise in Japan and as restrictions
on imports are removed, opportunities for sales of
such items as cameras, toys, textiles, and leather



and plastic goods — I select these examples ad-
visedly — will increase. I would not wish to ex-
aggerate tlie immediate prospects or to understate
the advantages that Japanese producers will con-
tinue to enjoy in their own market, but I would
observe that there is already widespread concern
in Japan over the prospective influx of "cheap"
American consumer goods. The point, of course,
is that, even in categories where Japan has in a
broad sense a substantial comparative advantage,
individual American products will or can be
highly competitive.

At all events, any sensible concern for our ex-
port trade and for our balance of payments means
that we must attend to the Japanese market.
Only a policy intended to hurt ourselves would
justify measures that would serve to reduce our
trade or to diminish our access to the booming and
expanding economy of Japan.

Imports From Japan Stimulate U.S. Industry

Now, of course, if we could go along increasing
our sales of goods to Japan while the Japanese
refrained from trying to sell to us, we would have
what some people w^ould consider the best of all
possible situations. But as the world happens to
be constructed, Japan cannot hope to finance its
imports in anything like their present volume, to
say nothing of a higher future volume, unless it
has substantial dollar earnings from sales to the
United States.

This is not a matter of crude bilateralism. The
American market is so large a part of the world
market and Japanese production and trade pat-
terns are of such a character that Japan must con-
tinue to look on this country as its lai'gest single
customer. If, for any reason, Japan's ability to
sell in the United States were to be markedly
diminished, the adjustment process would involve
a sharp decline in domestic business activity in
Japan and, in sequence, a reduction of purcliases
from abroad, including purchases from the United
States.

In short, if we are to sell to Japan, we must also
buy from Japan. This is a fact of international
trade that seems sometimes to sit badly with us.
I wonder, however, if it is really as onerous as
is sometimes suggested. The proposition that im-
ports are a burden is true in tlie same sense that
tlie grocery bill is a burden. Still, despite the
pain of paying the grocery bill, we find it desir-



296



Department of Stale Bulletin



able to have the groceries. Tlie same thing can
be said of imports, including imports from Japan.
The American consumer, who is not the most vocal
element in our society, has registered his approval
of Japan's sales to us with his pocketbook vote,
and the volume of our purchases from Japan has
increased fairly steadily.

Furthermore, some imports from Japan have
had an evident stimulating effect on U.S. industry
and consequently upon the employment of Ameri-
can labor. Postwar Japan has been responsible
for a number of innovations which deserve more
attention than they have received in this country.
Let me cite a few cases.

In the optical field, for instance, Japanese man-
ufacturers have offered us a whole range of fine-
quality equipment, some of it reflecting highly
ingenious improvements on what had existed
before. Has it been a bad thing for our camera
addicts that the Japanese industry has offered
them cameras highly competitive with the better
European products and with those of our own in-
dustry ? One would judge that the customers do
not think so, for Japanese cameras have had
steadily increasing acceptance in this country.
Moreover, it seems obvious that the impact of Jap-
anese cameras has been to give impetus to sales
of photographic film and to domestic employment
in the film producing and in the film processing
industries. In a dynamic society nothing stands
still. Imports can displace domestic production
temporarily and locally, but they can also lead
through a chain of actions to the expansion of
domestic industry.

It would be an interesting bit of analysis to
examine in detail the effect on the American
housebuilding industry, or better still upon the
do-it-yourself industry, of commodities such as
hardwood plywood and ceramic tile from Japan.
The effect on housing costs, from the consumer's
point of view, has surely been favorable. The
result almost certainly has been to widen the mar-
ket and to increase employment in the building
trades and in a variety of other activities.

A most impressive case has been the small tran-
sistor radio. If I am correctly informed, this
product was in the first instance a Japanese inno-
vation, although it was based on technology devel-
oped in the United States and licensed to Japanese
companies. The astonishing rise in Japanese
sales of this item in the United States within
a brief period suggests very strongly that the



American market was created by the product.
This having happened, however, our own industry
responded by developing a competitive product.
During the first half of 1961 Japanese exports of
transistor radios were off by half a million units
as against the same period in 1960. During the
same period factoi-y shipments from U.S. firms
of directly competitive radios increased by more
than a million units. Here there seems to have
been an almost classic case of the kind of competi-
tive response that we associate with an enterprise
system and from which we have obtained a new,
widely sold product and new jobs as well.

One could nm through many more commodities
imported from Japan and argue that the Ameri-
can consumer, and often related American indus-
tries, have been the gainers for imports. We need
not think of our purchases from Japan as acts of
political necessity or even as the unavoidable
means of sustaining our exports. Imports are
part of a desirable process in which we get from a
highly productive and increasingly inventive in-
dustrial economy in Japan a great many useful
things which make our lives more comfortable and
our economy stronger.

It would be naive, of course, to think, because
we gain as a nation from trade, that there are no
specific problems in our commercial relations with
Japan. I believe that I encountered most of them
over a period of 4 years. I can assure you that
they are frequent and difficult.

Basically, I suppose, import competition, from
Japan or anywhere else, is looked upon as quanti-
tatively and qualitatively different from ordinary
competition. American producers are no different
in this respect than other producers, including
Japanese producers. Given this imiversal atti-
tude, we have to recognize that imports, partic-



Online LibraryUnited States. Dept. of State. Office of Public CoDepartment of State bulletin (Volume v. 46, Jan- Mar 1962) → online text (page 59 of 101)