Japan v. U. S.

All summer long, most U. S. businessmen had foreign troubles. By Oct. 1 they began to hope the heat was off England, began to permit themselves the luxury of domestic worries. But last week their attention was jerked back to a foreign crisis--this one across the Pacific. Businessmen in scores of trades from toys to machine tools wondered how badly their businesses would be hurt. By the time the shock of the headlines had passed, most of them were thinking that they would not be hurt badly.

Perennial No. 1 sore point in Japanese-U. S. relations is the scrap-iron trade. But this time the scrap issue was dead. Burying it were a flock of Japanese, Greek and miscellaneous tramp steamers feverishly filling up with their last loads of U. S. scrap before the embargo took effect Oct. 16. At Jacksonville (Fla.). not ordinarily a big scrap port, two Greek tramps loaded about $102,000 of scrap while the town went wild, the city fathers passed an ordinance against such trade.

As scrap moved out of the U. S.-Asiatic limelight, many a more innocent-looking export and import commodity moved into it more & more: cotton, textiles, rubber, tin, lumber and pulp, drugs, toys, machinery, pepper, hides, wool, silk. Businessmen in these lines had reason to ponder the course of Washington-Tokyo diplomacy. For if the U. S. went to war with Japan, an enormous two-way trade across the Pacific would be cut off.

Exports. Japan buys $200 to $300,000,000 worth of U. S. goods a year, is by far our best customer in the Far East. To the U. S., the biggest and most acutely needed part in this trade is cotton, some 20% of the whole. Japan's cotton purchases have risen since she went to war in 1937, Europe's have fallen. Hence Japan's importance to the U. S. cotton belt has increased.

At the prospect of losing another big foreign market, cotton men were naturally upset last week. But they had two compensating reflections: 1) U. S. cotton's No. 1 internationalist, quiet, aristocratic, canny William Lockhart Clayton of the cotton-broking firm of Anderson. Clayton & Co., has come out of recent anti-New Deal retirement to work for Nelson Rockefeller, coordinator of Commercial and Cultural Regulations with Latin America, the National Defense Council's agent for nudging U. S. commerce toward a hemisphere basis. Cottonmen were relieved that if defense must monkey with their crop, it would be done Will Clayton's way. 2) If U. S. exports of raw cotton to Japan were cut off, presumably so would be Japan's exports of cotton goods to Latin America, which were a substantial 113,152,000 square yards ($7,771,000) last year. Cottonmen could figure that a good part of the raw cotton now exported to Japan might still be exported in the form of textiles to Japan's former markets.

Other non-munitions exporters to Japan are lumber and pulp men on the Pacific coast. Their Japanese pulp market, especially rayon pulp, normally accounts for a healthy margin of their business. But lumber and pulp men were not losing much sleep last week. Already oversold, they figured on remaining oversold as long as Scandinavian exports are cut off. Also unruffled were coppermen. Their exports to Japan last year were $27,567,000, 15% of output; but the copper market is even tighter than the lumber market, doling out new supplies to defense-favored customers only. Another key Japanese supplier is the machine-tool industry, which has made sales of about $20,000,000 a year to Japan ever since German industry became too preoccupied with its own rearmament to supply such exports. But machine-tool men would not mourn the loss of their Japanese arms-making customers. They are already in danger of defense priorities, would doubtless be relieved if Japanese work (already paid for in the main) could be passed up in favor of overdue defense work at home.

Other U. S. manufacturers, still farther away from the Merchants-of-Death class, viewed the U. S.-Japan squabble with almost no trepidation. Pottery and glass makers, who six months ago would have settled for shutting the door on Japan's "dumping" ($3,533,000 last year) in the U. S., last week wondered about Japan's $658,000 market in the rest of this hemisphere, wondered if they might have to expand to supply it. Last week U. S. clothing manufacturers, fearful that the good-neighbor policy might divert rayon, woolen & cotton textiles to Latin America, began to clamor for speedier delivery from the overworked mills.

Imports. U. S. importers from Japan were less complacent about last week's crisis. Most fearful were silk and hosiery mills. Their $100,000,000-a-year purchases from Japan survived the silk-stocking boycott of 1938 without a qualm. But the possibility of war was something else. For three weeks the mills have been laying in all the silk they could get. Last week they pushed the price (for future delivery) up 22-c- to $2.82 1/2 a lb. U. S. Silk Importer Paolino Gerli called it "hysteria." He also forecast that by the end of November. U.S. silk stocks (now about two months' supply) would have doubled. But knitters and weavers, reflecting that a war with Japan would last longer than four months. noted that Du Pont was speeding its nylon plant expansion and intensified the buying rush. Some importers had to turn orders down.

Threatened rather than controlled by Japan, The Netherlands East Indies would, if cut off, leave the U. S. with less than a year's supply of rubber and not much more tin. Rubber futures jittered upwards to 20.4-c- a lb. in U. S. markets last week; black pepper to 3.86-c- a lb. Wool futures also rose to $1.175 a lb., implicating Australia. Unquoted on any organized market, but nonetheless crucial to U. S. defense, was quinine, of which the U. S. has none too much on hand. Practically all cinchona bark (from which quinine is made) comes from The Netherlands East Indies.

The jitters among importers last week served one useful purpose: to make the U. S. more conscious of stockpiles, largely neglected until this year. Meanwhile, there was a possibility that, via the Philippines, Japan might circumvent the U. S. embargo on scrap. The U. S. exerts no direct control over Philippine trade, has not included the islands in its embargo. Last year the Philippines produced over 1,000,000 tons of iron ore, sent practically all of it to Japan.

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