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Consider Japan

Chapter XV

South Seas Shuffle

Japan’s postwar plans for the organisation of an expanding and mutually rewarding partnership in economics, trade and development with south-east Asia have somehow never managed to get off the ground. Suspicions of Japan and Japanese motives died hard in the dark memories of the “mutual co-prosperity sphere” of the war years. Nor were the earliest Japanese diplomatic salesmen after the war as prudent or as tactful as they could have been. In 1959 a former prime Minister, Mr Shigeru Yoshida, Japan’s wise old man, reported bluntly after a tour of south-east Asia: “It is useless just now to think of economic cooperation with these people of the South Seas (Japan’s name for south-east Asia), because the idea only raises their suspicions, makes them mistrust our intentions and withhold sympathy from our aims.”

But sentiment has changed sharply since then. Japan’s exports to south-cast Asia are now approximately 30 per cent of the national aggregate, or roughly equivalent to its volume of exports to the United States. Japan’s leaders fear that the United States may be virtually saturated as a market, and they realise that the south-east Asian markets will need a higher standard of living and increased cash or credit to be able to buy more from Japan. Japan’s own continuing prosperity at home is now indeed largely dependent upon prosperity elsewhere. Nor have Tokyo’s trade planners forgotten the sudden hot burst of competitive exports from China into south-east Asia in 1958.

At the conference of the Economic Commission for Asia and the Far East in Tokyo in March, 1962, Asian delegates, their old fears apparently forgotten, were politely critical of the scope and degree of Japanese aid and investment, but recalled hopefully that the prime minister, Mr Ikeda, after his own tour of the region four months earlier, had promised to promote economic cooperation with south-east Asia “even if we have to borrow money from foreign countries to do so.” There is also pressure from Washington: Japan’s ambassador there has no doubt transmitted State Department hints that Japan’s proportion of foreign aid and investment could, with advantage, be increased to one per cent of the gross national product. The present proportion is just over half of one per cent. (In 1956 it was 0.2 per cent. The total amount of foreign aid extended by Japan between 1956 and 1960 was $1,000 million, on Japan’s measurement.)

Drastic proposals to change the pattern of triangular trade now existing between the United States, Japan and south-east Asia have just been advanced by Japan’s influential Institute of Asian Economic Affairs. The institute’s experts, under the direction of Professor Kiyoshi Kojima, complain of contradictions, weaknesses and harmful competition between Japanese and American trade trends with south-cast Asia. These they argue, will have to be corrected in concert before the development of the south-east Asian states can be properly planned and expanded. The south-east Asian problem, indeed, is presented primarily as one of long-range agreement and co-ordination between Washington and Tokyo, and secondarily of investment and aid by both governments.

Briefly, Professor Kojima contends that the flow of south-east Asia’s exports in primary products to the United States should be large, and of American exports in primary products to Asia small. Actually, the volumes are reversed. Secondly, the professor says, the proportion of American manufactured exports to south-east Asia should be raised as the proportion of primary products drops. Thirdly, while Japan’s imports of primary products from south-east Asia are of course high, they should be higher – at the expense of a reduction in the excessive imports of American primary products. Fourthly, Japan should reduce its existing volume of exports of “labour-intensive” light industry goods, in order to increase its exports of “capital-intensive” heavy machines and equipment.

It is pointed out that, to the extent to which Japan imports primary products from the United States – because of superiority in quality and quicker and safer delivery – instead of from south-east Asia, Japan’s trade liberalisation policy automatically and increasingly stimulates this undesirable trend. Abolition of the protection which America now gives to its agriculture and textiles is strongly recommended. The United States should shift its industrial structure still further to heavy and chemical industries as well as the service industries; or so the report says. There is ample room for adjustment in the competition between Japan and south-east Asia in textile exports if Japan places greater emphasis on sending out mainly higher quality textiles. Japan should be ready to see a run-down in its exports of lower quality textiles and even begin to accept such textile imports from south-east Asia.

The United States and Japan, it is further argued, must coordinate aid and trade policies to increase the production of food, and especially rice, in south-east Asia. Because of poor methods and inadequate use of fertiliser, the south-east Asian countries produce too little food. This low productivity is responsible for the higher south-east Asian prices for primary products, which the United States is able to undercut to the continuing disadvantage: of Asian balances of payment. Japan, by scientific methods and proper use of fertiliser, produces four tons or more of rice to the hectare; in Korea and Formosa, the average yield is three tons; in other areas of south-east Asia, it is often one ton or less. Chemical fertiliser must be made available and large-scale irrigation work under-taken to double the production of rice in south-east Asia in the next 20 years – an increase which will just meet the estimated rise in population and rice demand in that time.

Finally, Professor Kojima recommends an agreement between Japan and the United States on capital co-,~1,1,, operation and amicable division of the categories of heavy and chemical industry products on which both should concentrate for the south-east Asian market. Some of these classes of capital goods, he insists, could be manufactured at lower cost in Japan if mass production were possible. “It is clear from our analysis,” he submits, “that there remains an ample market for the exports of capital-intensive products from the United States and Japan to a self-prospering south-east Asia, with expanding industry and rising living standards, provided that the United States and Japan improve their pattern of triangular trade and invest aid and capital in the right directions.”

In an imperfect world, the political and international difficulties confronting the recommendations of the Kojima report are only too obvious. But the report coincides with Mr Ikeda’s pledges of increased help) with a steadily rising scale of aid by Japan to the South Seas area (which, by Japanese calculation, includes 14 states: Formosa, Hong Kong, South Korea, Burma, Ceylon, India, Pakistan, Malaya, South Vietnam, Laos, Cambodia, Indonesia, the Philippines and Siam).

There is certainly an encouraging mood of ripening reasonableness in both government and industry in Tokyo. Perhaps, too, the prospects of long-range planning between Japan and the United States are not as remote as in other days. After all, Washington today is prepared to welcome Japanese investment in factories in areas of the United States, like Kansas, North Carolina, New Jersey and the west coast, to the advantage of both countries.

Japanese aid for south-east Asia takes the shape of loans, technical investment and advice, and more or less generous variations on the prickly theme of Japanese war reparations. Loans, it is true, have not been munificent; for example, only $80 million went to India’s third five-year plan and $30 million to Pakistan’s second plan. Interest on the Indian loan was 5½ per cent, which can be hardly described as generous. However, close friends of Mr Ikeda say that the prime minister was shaken by his first personal observations of poverty in India; maybe there will be more liberal offerings.

Technical aid has been on a more ambitious scale, and action has been taken to reform and expand this form of co-operation. An Association for Overseas Technical Cooperation, with a capital Of 200 million yen, will pool the efforts of the Asia Association, the Latin American Centre, the International Engineering and Technical Association and the Lower Mekong, Research Committee. In the past eight years, 35,000 trainees have come to Japan for technical studies, and Japan has sent 600 experts abroad. The latest budget appropriations for technical co-operation with the Colombo plan region total 2,233 million yen, including grants to Cambodia and Laos, and loans and credits to India, Indonesia, Pakistan, the Philippines, Siam and South Vietnam. In the year ended March, 1961, Japanese firms invested £15 million in south-east Asia.

Reparation payments are another method of providing economic stimulus in which Tokyo has done some skilful backing and filling. Burma’s exports to Japan are worth only 25 per cent of its imports from Japan, and her leaders now complain that Burma has suffered because of an early agreement to accept $200 million worth of goods in settlement of reparations, while other countries, which were tougher, have since hammered out better terms. There was some fine print in this agreement which provided for later renegotiations, but the Japanese are now being unyielding – and, in any event, no longer require rice imports from Burma because of improved agricultural methods and a growing taste for western bread and butter. So far Japan has paid £41 million reparations to Burma (of an agreed £72 million), £41 million to the Philippines (of an agreed £198 million to be paid over 20 years), £15 million to India (of £80 million over twelve years), and one million pounds to South Vietnam (of £14 million over five years). A complicated settlement with Siam over Japan’s manipulation of the local currency during the occupation of Siam is being completed.

Finally, rationalisation of trade and aid should be simplified by the stirrings of regional integration in south-east Asia. The projected Federation of Malaysia and the alignment of Siam, Malaya and the Philippines in the Association of South-East Asian States (ASA) are helpful contributions to the reshaped pattern of triangular trade advocated by Japan’s Institute of Asian Economic Affairs.

Japan has rejected all tentative proposals for a Pacific common market, contending with some plausibility that there is far too much diversity in the markets, wage structures and technological capacities of the various countries. But ASA is a welcome exercise in south-east Asian self-reliance; it represents a potential economic-social grouping of 65 million people and could help to stabilise world prices for south-cast Asia’s rubber, tin, copra and other basic exports. The nervous neutralism of Burma and the expedient neutralism of Indonesia limit the horizons of ASA, a grouping which, even if non-military, is anti-communist. The delicate balance which must be preserved in all plans affecting south-east Asia was properly stressed by the Burmese government: “When emphasis is placed on the positive aspects of common economic interest rather than the negative aspects of anti-communism, the idea of an association of south-east Asian states can become a reality.”

Some symbolist has since expressed the prospects for ASA by altering its original title ASAS, which is Malayan for “foundation.” The new title ASA means simply “hope” in the native languages of the three founding partners. Perhaps this is the right mood, also, for a cautious sniffing of the prospects for freer trade winds in the South Seas.