Thread: The foreign trade of the most important countries in 1936

The foreign trade of the most important countries in 1936. All values in million Reichsmark (RM)

Code:

Nation                Import       Export          Export(+) / Import(-) Surplus
Great Britain:        9737,4       5442,4          - 4295,0
USA:                  5917,5       6002,5          + 85,0
Germany:              4217,9       4768,2          + 550,3
France:               3862,0       2349,9          - 1512,1
Japan:                2580,3       2540,0          - 40,3
Canada:               1548,2       2325,9          + 777,7
Belgium.Lux:          1773,7       1658,2          - 115,5
Netherlands:          1629,1       1195,8          - 433,3
.
Soviet Union:         666,9        670,2           + 3,3

Originally Posted by Bleipriester

The numbers I posted here are economic ones, they have nothing to do with the war.

Yes and no. Japan was engaged in military hostilities in China since the invasion of Manchuria in September, 1931. Japan was very dependent on the U.S. for trucks and this posed a serious national security issue as the possibility of U.S. trade sanctions against Japan were discussed. Through the 1930s, Japan's oil consumption was dependent at 90% on imports, 80% of it coming from the United States. Furthermore, the vast majority of this oil import was oriented towards the Navy and the military. Japan couldn't produce its own oil but it could develop a truck industry if the Americans were forced out of Japan:

Originally Posted by machinehead61

Ironically, a natural disaster gave the first impetus to Japan's auto business, but domestic producers were unfortunately not in a position to take advantage. Tokyo's great earthquake of September 1, 1923 crippled the city's railway and tramcar system. One thousand buses were shipped from Ford in the United States. The passenger vehicle opportunity had arrived in Japan, but only the American producers could respond. Domestic manufacturers were very small-scale, primitive in production technology, and severely under capitalized. Automobile production in 1923 is estimated at less than two hundred units.

Within two years, both Ford and General Motors established wholly-owned onshore assembly operations. Japan Ford corporation was formed in Yokohama in late 1924. Japan General Motors, headquartered in Osaka, followed in 1925. By 1929, the two companies combined produced nearly 30,000 automobiles. Parts and sub-assemblies were imported from the United States for domestic assembly. Each organized a finance company and introduced the installment purchase in Japan. Within five years of their coming, Ford and General Motors controlled 85% of the Japanese market with onshore production.

Throughout this same period, Japanese domestic production remained dormant. The Japanese government, despite its wartime subsidy of military vehicles, had not demonstrated serious interest in a domestic industry. Japanese manufacturers remained inferior in scale, technology, and capital. Their combined annual production never exceeded 500 units before 1930. Quite apart from Japan's early competitive disadvantage, automobile production was considered by both government and major industry to be speculative and of lower priority than steel, coal, and other heavy industry. The powerful and diversified zaibatsu of Mitsubishi, Mitsui, and Sumitomo separately considered and rejected entry into the automobile business. Each worked constructively with the Japanese government and undertook major investments in other areas where mutual interest was strong. Autos, then, residually fell to the strictly private, small-capital sector.

Initial Efforts at Development

A change of attitude, at least by government, began to emerge around 1930. In that year, the Ministry of Commerce and Industry - the predecessor of the Ministry of International Trade and Industry (MITI) - instructed its Domestic Industries Promotion Committee to study the future of the automobile industry and the implications of domination by foreign capital. In the following year, a formal automobile industry committee was established. During the next five years, the Ministry's view of a domestic auto industry shifted from one of moderate desirability to strong necessity. Strategies for protection and development were formulated, and by 1936 major legislation aimed at forcing Ford and General Motors out of Japan was prepared.

Three major stimuli toward this new position are suggested by the events of this period. The first and obvious influence is Japan's growing territorial ambition in Asia. Domestic production of all vehicles in 1932 was still under one thousand units, hardly enough to support the military expansion. Production rose by a multiple of thirty-five over the next six years, a feat directly related to military needs. However, the preoccupation of the Ministry of Commerce and industry was not wholly military.

It was apparent that onshore foreign capital, if permitted unlimited production levels, would continue to dominate the domestic market and hence preclude the development of Japanese producers. The domestic manufacturer faced an uncompetitive scale of operation, an inadequate assembly technology, an absence of onshore parts supply, and an inability to finance automobile purchasers at competitive terms. the high failure rate of small domestic producers and the continued unwillingness of the zaibatsu to compete, even at later invitation of the government, convinced planners that protection from foreign capital was the prerequisite of a domestic industry.

This fundamental conclusion was never later seriously questioned in Japanese government or industry. While there was serious postwar debate within government over the necessity of a domestic automobile industry, the first requirement of development - protection from foreign capital - was uniformly confirmed. Similarly, the recent year's dialog within the Japanese economic policy community over capital liberalization of the industry was a debate over the domestic producers' stage of completed development, not a requisitioning of the necessity of protection for development.

A third stimulus to the government's reconsideration of autos was the foreign exchange problem. The international monetary crises and trade dislocations of the late 1920's and early 1930's dramatized Japan's precarious import position. Lack of a domestic automobile industry meant importing either finished vehicles or knock-down parts for assembly by onshore foreign capital. Both require foreign exchange.

The problem was not merely one of foreign exchange shortage, however, but rather the perverse cyclicality which import dependence forced on the Japanese economy. Japan has a high dependence on imported basic material, and until the past few years experienced a chronic deficit on current account in her balance of international payments. Throughout Japan's industrial history, this circumstance has meant a built-in macroeconomic instability: as income cyclically rose and combined basic material and manufactured imports rose in proportion, the resulting foreign exchange deficit required a deflationary countercyclical monetary policy. Japan's modern economic history fully documents this pattern. The implication for domestic industrial policy was that import-substitute manufacturing industries must be developed. A domestic automobile assembly and parts industry substantially reduces the net imports per automobile. This reduction is compounded by the secondary domestic production effects of autos on the steel, machinery, and tire industries. These implications were not lost on Japan's economic strategists, particularly as military production requirements rose.

The impact of this new government position on domestic automobile production was felt in the middle and late 1930's. It was felt most keenly by Ford and General Motors. In 1936, the government enacted the Automobile Manufacturing Enterprise Law, which literally and comprehensively aimed at closing down foreign producers onshore. Its provisions were of two varieties - advantages to domestic producers and disadvantages to foreign producers. Among the former, it exempted government-licensed manufacturers from income tax for five years, rebated import customs on machinery and materials for five years, and relaxed the legal requirements of recapitalization. These were consistent with earlier measures of the Ministry which lowered the automobile commodity tax and renewed the direct production subsidies of twenty years earlier.

The law's restrictions on foreign producers were severe. Annual production ceilings were imposed. Tariff rates on imported parts were raised. in 1937, a provisional law eliminated the import of strategic commodities. Japan Ford and Japan General Motors were soon closed down.

Japan: The Government-Business Relationship
A Guide For The American Businessman
Eugene J. Kaplan
Director, Far East Division
Bureau of International Commerce
February 1972
pp. 104-106

You can read as much as you want but eventually Japan changed its industrial/trade policy to avoid the chronic trade deficits that it experienced before WW II.

Steve