Textile Compromise

The rebirth of the Japanese textile industry is one of the success stories of the postwar years. With little U.S. help, the rebuilt and modernized industry produces 37% of Japan's vitally needed exports and employs 24% of its factory workers. But success has brought loud complaints from U.S. textilemen that Japanese exports, by concentrating on vulnerable U.S. markets, are threatening the whole U.S. industry. Last week, after months of negotiations, Japan agreed reluctantly to put a five-year ceiling on its exports to the U.S. The terms (subject to yearly review): Japan will ship no more than 235 million sq. yds. of cotton textiles, or 2% of annual U.S. production.

While the dollar value of the cut was comparatively small, the political effect was large. Said Japanese Government Economist Morio Yukawa: "I do not think that Japan stands alone in feeling apprehension over the growing intensity of import restrictions in the U.S. It is our sincere desire that the American people take full cognizance of the fact that their every action, however slight or unpremeditated, casts an influence on all the free nations out of all proportion to their original intent."

15 1/2 an Hour. Beside the overall quota, the agreement invoked a complicated system of subquotas aimed at keeping Japan from taking over such minor areas of the U.S. industry as velveteen (only three U.S. companies) and gingham (14 companies). These were precisely the kinds of markets in which Japan, thanks to wages as low as 15 1/2 an hour, had been most successful. In 1955, when U.S. velveteen producers sold only 4,200,000 yds., Japan shipped 6,900,000 yds. Another example was the famous Japanese "dollar" blouse, which so glutted the U.S. that it soon sold for 63 1/2, flooded Japanese stores as well at 50 1/2. Responding to U.S. protests in 1956, Japan switched to exporting dresses. But dress sales rose from half a million at year's beginning to nearly 2,000,000 at year's end, slicing into the markets of the edgy U.S. garment industry. Japan tried "voluntary" export curbs to solve the problem. But many Japanese exporters bypassed them by shipping to Hong Kong and "exporting" from there.

Voluntary Curbs. Some Southern states, irked by Government sales of cotton to Japan at 25% discount, pushed for restrictive state laws to check Japanese imports. The Tariff Commission urged presidential approval of a 100% hike in velveteen tariffs, the highest in 27 years; it began studying higher tariffs on Japanese gingham imports, now 48% of U.S. production.

To avoid tariff increases that would be a blow to free trade, U.S. and Japanese commerce officials tried to work out a compromise. U.S. manufacturers wanted to limit imports to 225 million yds. overall in 1957. Japan held out for its 1955 level of 270 million yds.--half in yardage fabric, half in readymade goods. When U.S. textilemen suggested more Japanese concentration on yardage cotton goods (dominated by more efficient U.S. producers), Japanese Cotton Spinner Spokesman Yasuo Tawa said tartly: "They are giving us broad fishing areas where there are no fish, and shutting us out of narrow seas which are full of fish."

Buy Pakistan. The Japanese also pointedly noted that Japan is the leading buyer of U.S. cotton, may buy 1,200,000 bales in 1957. They suggested that such purchases might well be transferred to Pakistan. Though the threat was largely bluff since Japan depends on middling, 1 1/16-in. staple cotton, grown mainly in the U.S., it underscored increasing Japanese resentment at being knuckle-rapped for their industrial enterprise.

In the end, the Japanese pretty much agreed on U.S. terms, predicted gloomily that the sub-quota system would enable them to sell only 80% of their total quota. Their surplus output would have to be sold somewhere else, probably Red China.

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