Economic War?

When Secretary of State Cordell Hull last week abrogated the 28-year-old U.S.-Japan treaty of commerce and navigation, he put the skids under trade with the U.S.'s third-best customer.* To Japan last year went 7.7% ($239,639,000) U.S. exports; from Japan came 6.5% ($126,828,000) of U.S. imports. Small as this was in the U.S. total it represented 16.6% of Japan's foreign exports, made the U.S. her No. 1 customer. By toting up this million-dollar-a-day business, Japan could see that the U.S.:

>Took 80.4% of her raw silk exports ($83,651,000 worth last year).

>Supplied her with 70.4% of her scrap iron and steel, 60.5% of her oil and gasoline, 41.6% of her pig iron, 92.9% of her copper, 48.5% of her machinery and engines, 91.2% of her autos, trucks and parts (latest available figures).

>Offered her a market into which she dumped $18,108,000 worth of odds and ends in the first five 1939 months: crabmeat, tea, pyrethrum flowers (for insecticides), chinaware, electric light bulbs, zippers, toys, etc.

>Gave her a lush shipping traffic (bulk of the trade between the two countries is carried in Japanese bottoms).

By the same procedure, the U.S. (enjoying a two-for-one export balance in trade with Japan) could figure that Japan:

>Supplied most of her raw silk (which accounted for 65.9% of her total imports from Japan last year).

>Was her No. 1 buyer of cotton ($52,644,000 worth last year).

>Took half ($22,035,000) of her scrap iron sold last year and, in the first five 1939 months, $45,710,000 worth of oil and gasoline, copper and machinery, autos, trucks and parts.

The implied threat in Secretary Hull's treaty abrogation is an embargo on shipment of war materials to Japan when six months notice is up and possibly penalty duties on Japanese goods. Cutting off U.S. scrap would put a serious crimp in Japan's manufacture of guns and other weapons. With very little scrap iron available outside of the U.S., Japan would have to buy expensive iron and steel or iron ore. For her other U.S.-supplied war materials (oil and gasoline, pig iron, copper, machinery and engines, autos, trucks and parts) Japan could go elsewhere, but not to advantage. To be unable to buy parts for her U.S.-made trucks, etc. might be embarrassing to Japan, especially if Canada (which has U.S. motor subsidiaries) should also clamp down. To U.S. manufacturers such an embargo might mean a loss of around $175,000,000 a year in sales.

A penalty tariff on Japan's exports to the U.S. would hit the silk trade. Japan produces 75% of the world's raw silk, the U.S. consumes almost all of it, and neither can find an adequate market or source of supply elsewhere. U.S. women would suffer by paying more for silk stockings (half the world's silk sheathes their legs) and Japan would be threatened with permanent loss of part of her silk market to nylon, rayon and other synthetic U.S. yarns.

In other commodities Japan might lose her U.S. market more or less completely but, except as Japan's domestic consumption of cotton fell off, U.S. cotton producers might not suffer: if Brazil, for example, sells cotton to Japan instead of Britain, the U.S. should be able to sell to Britain instead of Japan.

Missing from these trade figures, moreover, is an item vital to warring Japan. In the last two years she has sold the U.S. $415,209,648 worth of gold, $4,202,856 worth of silver. She is now reported to have only about $140,000,000 of gold on hand. Last week Secretary of the Treasury Henry Morgenthau Jr. said he was taking a "fresh look" at gold and silver purchases from Japan.

*Best customer, United Kingdom; next, Canada.

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