International Circumstances surrounding the Postwar Japanese Cotton Textile Industry1
by Kaoru Sugihara
1 Introduction
With the end of the war in 1945 both the British and Japanese cotton industries, which had dominated the
prewar market in cotton textiles, lost no time in beginning the task of rehabilitation. Most of the spinningand weaving factories had been converted to military production, but as governmental control was graduallyrelaxed, textile production started up again and the workers returned to the factories. Demand for textiles,
which had been suppressed during the War, re-emerged almost instantaneously, making both the domestic
and foreign markets very buoyant. In addition, securing the supply of raw cotton was relatively easy as theUnited States and other countries held vast surplus stocks. Under such conditions the cotton industries ofboth countries bought new machinery and equipment and embarked on a drastic reorganisation.
The outcome of this reorganisation in the two countries turned out to be very different, as had become
apparent by 1960. In Britain it was recognized that the industry had lost its competitive edge, and the Cotton
Industry Act of 1959, which encouraged a great reduction in the number of spindles, represented a decision
to reduce the size of the industry considerably.2 In Japan, meanwhile, the cotton industry recovered its
international competitiveness very rapidly after the war; by 1951 it had become once again the world's
largest exporter of cotton textiles, and continued to dominate the world market throughout the 1950s.
Thereafter its share fell as other Asian countries caught up, and it yielded its first place in volume of exports
to China in 1967. Also, with the rise of heavy and chemical industry in Japan the cotton industry gradually
lost its position as an industry at the cutting edge of technological innovation. However, there is no doubtthat its development as the principal export industry from 1946 to 1960 was an important factor in therevival and rapid growth of Japan's economy.
What then were the international conditions which made possible this recovery of the cotton industry of a
defeated Japan? In previous research the following three main factors have been noted. First, from aninternational relations viewpoint, it was the result, directly and indirectly, of America's consolidation of herhegemony in the world order against the background of the emergence of the Cold War. Despite opposition
from Britain, mainly stemming from consideration of Lancashire's interests, America aided the revival ofJapan's cotton piece goods exports to South and Southeast Asia by giving priority to a policy of containing
China and therefore not permitting trade between Japan and China, and in compensation linking Japan's
exports to America's aid to Asia, and promoting Japan's membership of the GATT. 3 The influence of theCold War is visible here in various ways. The cotton industry, with the favourable disposition of the
Occupation and the American government which were trying to revive Japan's economy without militarizing
it, enjoyed a generally advantageous international environment.

1 This is an English translation, with slight modification, of "Sengo Nihon Mengyo o meguru Kokusai

Kankyo", published in Kindai Nihon Kenkyu, Yamakawa Shuppansha, Tokyo, 1997.
2 R. Robson, The Cotton Industry in Britain, Macmillan, London, 1957. John Singleton, Lancashire on the
Scrapheap: The Cotton Industry 1945-1970, Oxford University Press, Oxford, 1991. But Singleton also
argues that insufficient investment in new equipment during the postwar boom contributed to
Lancashire's decline.
3 Takafusa Nakamura, "Nichibei Keizai Kyoryoku Kankei no Keisei (The Formation of U.S.-Japan
Economic Cooperation)", Nenpo Kindai Nihon Kenkyu 4: Taiheiyo Senso, Yamakawa Shuppansha, 1982,
pp.279-302. William Borden, The Pacific Alliance: The United States and Japanese Trade Recovery,
1947-1955, University of Wisconsin Press, Wisconsin, 1984. Michael Schaller, The American
Occupation of Japan: The Origins of the Cold War in Asia, Oxford University Press, Oxford, 1985.
Tatsuo Akaneya, Nihon no Gatto Kanyu Mondai (The Issue of Japan's Entry to the GATT), Tokyo
Daigaku Shuppankai, Tokyo, 1992.

1

A second factor, related to the first, and well known to students of the history of the cotton industry and of
trade,4 is that economically, America, with her need to export her raw cotton, and Japan with her cotton
industry, presented the prospect of a perfect partnership. Initially, America's aim was to dispose of hugesurplus stocks of raw cotton, but gradually it became evident that the cotton industries of America andWestern Europe were no longer competitive, and the cotton growers of America wanted an increase in thenumber of spindles in the Japanese cotton spinning industry. America continued to offer credit to Japan forthe purchase of its raw cotton. Thus, if we take Japan as an industrial country which was relatively
competitive in labour-intensive industries, and America not just as an industrial country which specialized incapital-intensive industries but also a country at the same time supplying primary products to Asia, we havehere the basis for developing an international division of labour. A similar phenomenon was seen to somedegree in the prewar period, but with the development of a network of marine transport and communicationsin the Pacific after the war, this became a powerful driving force behind the development of an Asia-Pacificinternational division of labour and one which included also Japan's relationship with Australia and otherresource-rich countries.
Third, however, there were circumstances which forbade a repetition of the prewar success story. One was
the independence and the emerging import -substitution industrialization of the Asian countries, which
severely restricted the scale of Asia's foreign cotton piece goods market.5 This was a situation which did
not exist before the war when most countries in Asia were either in a colonial or a quasi-colonial state. Also,
the market in the advanced countries of the West expanded after the war, but here strong moves began to bemade to limit the inflow of cheap Asian cotton piece goods by voluntary restrictions on the part of theexporting countries and quotas set by importing countries.6 1946-1960 was a period of rapid recovery in theworld's industrial production and trade. In the cotton industry too the volume of world's production andconsumption increased, but the factors above to a large extent balanced each other out, allowing trade toexperience no more than a gentle recovery.7
Why was it that despite this the Japanese cotton industry, and it alone, was able to open up one after anotherof the world's markets? This paper aims to deepen understanding of this point, by focusing on the fourthfactor that the Japanese cotton industry confronted, that is, the competition in the world market with other
Asian countries such as India, China and Hong Kong. In the 1946-60 period most of the countries of Asia
and Africa, which were primary product producing countries before the war, were in the initial stages ofimport-substitution, and frequently lacked the capacity to satisfy their own domestic demand for cotton piece
goods. Also there were some primary product producing countries, such as Australia and New Zealand,
where incomes were high, but which had no domestic cotton piece goods supply capacity. As rehabilitation
progressed after the war, exports of primary products to the advanced countries recovered, and when thepurchasing power of the supplying countries increased, Britain, the former leading supplier, was unable tosatisfy adequately even the demand within the Commonwealth. The opportunity thus created was seized bythree Asian countries - Japan, China, and India - and by Hong Kong, whose strength had grown out of the
manpower and know-how accumulated in China's cotton industry. Their efforts in these markets resulted invery vigorous inter-Asian competition.

4 Yasuo Tawa ed., Sengo Bosekishi (A History of the [Japanese] Cotton Spinning Industry in the Postwar
Period), Nihon Boseki Kyokai, Osaka, 1962. Ajia no Sen-i Sangyo (Textile Industries in Asia), Ajia
Keizai Kenkyusho, Tokyo, 1962. Hiroshi Nishikawa, "Boeki no Jittai to Tsusho Seisaku (Foreign Tradeand Trade Policy)", in Tsusho Sangyo Seisakushi, 4-1-3, Tsusho Sangyosho, Tokyo, 1990. Takeshi Abe,
"Keikogyo no Saiken (The Rehabilitation of Light Industries)", in Tsusho Sangyo Seisakushi, 3-1-2,
Tsusho Sangyosho, Tokyo, 1992. Shinkichi Nagaoka and Hiroshi Nishikawa eds, Nihon Keizai to
Higashi Ajia—Senji to Sengo no Keizaishi— (The Japanese Economy and East Asia: An Economic
History of the Wartime and Postwar Periods), Mineruva Shobo, Kyoto, 1995.
5 Sengo Bosekishi, pp.835-42.
6 Vinod K. Aggarwal, Liberal Protectionism: The International Politics of Organized Textile Trade,
University of California Press, Berkeley, 1985, Chapter 3.
7 The proportion of cotton cloth entered into foreign trade in world production was relatively small.
According to GATT, the share of exports in total world cotton cloth production in 1910-13 was 29 per
cent, but declined to 10 per cent in 1936-38. It recovered to 15 per cent in 1950, but declined again to 12
per cent in 1960. GATT, A Study on Cotton Textiles, Geneva, 1966, p.10. See also OEEC, The Future of
the European Cotton Industry, Paris, 1957, pp.16-17, for slightly different figures.

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What were the factors which determined the end result of inter-Asian competition? How did this competition
influence the pattern of industrialization of Japan, India and China? And what connection did it have withthe dissolution of the British Commonwealth market and the trend towards formation of a free trade systemwith America as its leader? This paper integrates the materials collected by the British Cotton Board 8, withdescriptive, analytical accounts in relevant periodicals from each country, to investigate these questions, anddis cusses the causes of the recovery and growth of Japan's cotton industry. It should be made clear that thescope of this paper is limited to information about trade volumes, market shares and prices, and investigating
the perception of the people involved or those in close contact with them. Also, it deals mainly with thecotton piece goods market, touching occasionally on the related markets for raw cotton, cotton yarn, rayon,
cotton processed goods etc as they relate to the cotton piece goods market.
2

Patterns of Inter-Asian Competition

It is in fact not so easy to grasp the scale and trends of the world market in cotton piece goods. Table 1 wascompiled by the Japan Cotton Spinners' Association based on statistics gathered by the Cotton Board. As canbe seen, the statistics of each country are shown in three completely different kinds of units - square yards,
yards and quintals (a unit of weight), and to simply add them up as in this table is clearly wrong. However
the Cotton Board's statistics, on which these are based, although not added to produce totals, do suggest sucha manner of reading, and since this kind of rough and ready conversion was carried out both in Britain andelsewhere, such calculations must have served a certain function in the perception of the world market at thetime. Also, it is thought that if one converts yards and quintals to square yards using available conversion
rates, the results of the calculations in the table turn out by good fortune to involve a maximum error of only
about 10 per cent.9 Therefore, taking the tables below as usable for the purpose of pursuing broad trends, let
us take a brief look at the structure of exports in the world cotton piece goods market country by country.
First, the absolute volume of the world market in exported cotton piece goods in 1946 was no more than athird of what it had been in 1937, but it had recovered more or less to the prewar level by 1960. Asia's share,
which in 1937 had been 41 per cent, had fallen to 14 per cent in 1946, but thereafter recovered rapidly andby 1960 had risen to 46 per cent. By contrast, the British share, which in 1937 had accounted for 27 per cent,
8 The Cotton Board had its headquarters in Manchester, and represented the interests of not only raw
cotton dealers but the whole British cotton industry, and was active in the collection of information andpolitical lobbying. For details, see Marguerite W. Dupree, "Struggling with Destiny: The Cotton Industry,
Overseas Trade Policy and the Cotton Board, 1940-1959", Business History, 32-4, October 1990,
pp.106-27, and M.W.Dupree ed., Lancashire and Whitehall: The Diary of Sir Raymond Streat,
1931-1957, 2 volumes, Manchester University Press, Manchester, 1987.
9 The statistics published by the Cotton Board did present figures in three different measurements in one
table, though in such tables these figures were not summed. The Cotton Board Trade Letter began toinclude a note, starting in the ninth issue of its "Statistical Supplement" section, November 1947, "1
quintal = 220.5 lb. On the basis of 4.5 sq. yds. per lb., 1,000 Quintals are equivalent to approx. 1 million
sq. yds.". (The "Statistical Supplement" became the "Quarterly Statistical Review", and after June 1952
became a separate publication titled Cotton Board Quarterly Statistical Review.) From the 65th issue(published in June 1952), however, an additional sentence "But in practice the average weight of many
cloths is heavier than this amount" was added. Further, from the 67th issue (published in winter 1962-63),"The Cotton Board cannot guarantee the accuracy or completeness of all the figures". There is no directreference to the conversion rate from yard to square yard in this publication. However, other official
statistics did assume "1 yard = 1 square yard", and converted the former into square yards. See Colonial
Office, Digest of Colonial Statistics.
Looking more broadly at the historiography, there is a reference to an estimate of "1 yard = 1.10272
square yard", based on the information from the Chinese trade statistics. see Albert Feuerwerker,"Handicraft and Manufactured Cotton Textiles in China, 1871-1910", Journal of Economic History,
30-2, June 1970, p.360. As for the weight to yard conversion, "1 pound = 5.5 yards" is mentioned in
Robson, The Cotton Industry in Britain, p.333. This is based on the British statistics. Using these rates,
the rate of 1 quintal = 1099.59 square yards could be obtained, which implies that in the Cotton Board
tables the amount of trade expressed in yards or quintals is underestimated by about 10 per cent.
I am grateful to Professors Douglas Farnie and Takeshi Abe for informing me of some of the abovereferences.

3

fell from 21 per cent in 1946 to 5 per cent in 1960. Changes in the shares of the other main countries/areas atthese three dates (1937, 1946 and 1960) were as follows: Western Continental Europe - 23 per cent -> 19
per cent -> 28 per cent, Eastern Europe and the Soviet Union - 4 per cent -> 0 per cent -> 10 per cent,America - 3 per cent -> 33 per cent -> 6 per cent. From the above it can be seen that the shares of Japanand other industrialising Asian countries and Eastern Europe and the Soviet Union increased their share
greatly while conversely the international competitiveness of America and Britain, which accounted for an
extremely large share immediately after the war, was reduced.
Looking at Asia's share in slightly more detail, it is important to see that Japan, which was the largest
exporter in the world with 37 per cent in 1937, recovered from 0 per cent in 1946 to 20 per cent by 1960, andwas once again the world's largest exporting country from 1951. However, equally worthy of notice is the
rapid rise in the total share of other Asian countries - 4 per cent-> 13 per cent -> 26 per cent. India wasinitially by far the most important of these, and China (from 1949 on, the People's Republic of China, buthereafter simply referred as China), despite a longish gap in the period immediately after the Communist
takeover, gradually grew in importance. In the second half of the 1950s Hong Kong, Taiwan, Pakis tan, andSouth Korea were added to the list of exporting countries. If one considers the bewildering changes ininternational relations at the time, conditions were such that Japan would have seemed at the time not tohave had the race all to herself.
Turning to the structure of the importing countries in Table 2, an interesting reversal of the historical trend
can be seen in the world market at this period: the centre of gravity of the world market in foreign-madecotton piece goods was showing a tendency to shift from Asia back to the West. Reflecting the progress ofimport-substitution in many Asian and African countries, imports of cotton piece goods began to stagnate or
fall. Among those where there was a conspicuous decline were Indonesia, Malaya (the Federated Malay
States, from 1948 the Malayan Federation - including Singapore throughout), the Philippines, and countries
of former French Indochina (North and South Vietnam, Laos, and Cambodia). There were nevertheless a
few countries such as Nigeria where the tendency was rather for imports to increase. Meanwhile in theadvanced countries, imports increased in Britain, Australia, America, West Germany etc, reflecting theincreased competitiveness of Asian cotton industry countries. In the 1950s America and Britain's imports
from Japan, India, Pakistan and Hong Kong started to become a political issue and were repeatedly restrictedby agreements. France, West Germany and other countries in continental Europe used quotas to severely
limit imports from Asia. 10 Had the advanced countries of the West not resorted to restrictions on imports,
there is little doubt that Asian exports to the West would have increased more.
Thus in the world market of this period there appeared a situation which could be called a new type ofinter-Asian competition. The cotton industry of the internationally competitive Asian countries such as Japan,
India, China and Hong Kong, caught between the hammer of the trend to import-substitution of thedeveloping countries and the anvil of protectionism in the advanced nations, transcended the traditional
regional boundaries between Asia and the West to engage in intense competition for share on a global scale.
Let us now outline the export patterns of the four main Asian exporting countries. Taking Japan first, Asia
and Africa accounted for 70-84 per cent of her exports at this period until 1954, after which the proportion
fell somewhat, but even so it fluctuated between 59 per cent and 68 per cent until 1960. Also, it should be
noted that cotton piece goods exported to Britain were almost all "re-exported" (the contemporary
expression - as they were processed in Britain before being exported again, they were not re -exports in theusual sense of the word) to West Africa and other British possessions, of which more later. According toTable 3, first looking at the trend of Asia and Africa, the principal markets, it can be seen that exports toevery country rose rapidly until 1951, after which, because there was repeated production control underadministrative guidance (kankoku sotan) in the 1950s, they achieved no more than a rather gentle expansion
overall, despite the two peaks in 1954 and 1957. The distinctive feature about this period is that Japan was
unable to ensure stable export volumes in almost all the countries, repeating a pattern in which a very briefboom was followed by a falling trend and then was compensated by expansion into new markets. That said,
if one includes re-exports via Hong Kong, Indonesia was comparatively steady, and the largest market
almost throughout. Next came South and Southeast Asian countries such as Thailand, Malaya, Burma, thePhilippines, former French Indochina, Pakistan and Ceylon, and from the second half of the 1950s African
markets such as the countries in former British West Africa increased in importance. Exports to Britain on

10 GATT, A Study on Cotton Textiles, p.82. Aggarwal, Liberal Protectionism, pp.73-74.

4the other hand were reduced by restriction agreements, and in America too, after a temporary sharp rise inshare, Japan agreed in 1955 to voluntary exports restrictions, and reduced her export volumes thereafter. As
a result, although Japan did increase her exports to Western markets, its growth was not as fast as the rate ofincrease of the share of Western markets in world trade. Rather it became the rule that in the Asian and
African markets there was an opening-up of individual markets wherever and whenever the politicalconditions permitted, with a powerful sales offensive on the basis of international competitiveness. The
majority of exports in the initial period after the war were unbleached cotton cloth, even though the share ofprocessed goods rose in the 1950s, and there was progress in product diversification and a shift to higher
quality products. There was no clear move towards a differentiation to the goods in demand in the market
of low-wage countries. This explains why Japanese goods were exposed to intense inter-Asiancompetition.11
While the low level of wages compared with the advanced countries can be pointed out as factors
underpinning Japan's competitiveness, compared with the Asian countries, which were her chief competitors,
it was important that Japan had new advanced machinery and equipment and good-quality labour. In theinitial period, however, in order to ensure effective allocation of raw cotton given the shortage of dollars,
and again in the 1950s in order to avoid violent inventory and price fluctuations and the resulting "dumping
e xports", the industry and the government united to regulate production, so that the rate of capacity
utilization of machinery was low. It is noted that the foreign currency allocation system for the purchase of
raw cotton worked as an effective policy tool. The system was put in place in 1950 when private imports
restarted, although it was not fully applied until 1953. Since the industrialists feared that their raw cotton
allocation would be cut if they did not respond when the government suggested short-time working, there
was considerable power in the government's "guidance". Also, not only was the allocation of raw cotton
proportioned to the machinery, but also, with the aim of encouraging exports, the system was partially linked
to export performance. At the same time, in order to avoid cut-throat competition and dumping, a system ofexport license was put in place and an export inspection system to check the quality of products was also
gradually introduced.12 This is a framework under which the "compartmentarised competition" took place,giving direct impetus to technological innovation. A conspicuous improvement in productivity resulting
from efforts to streamline, automate, make continuous and speed up the production process and to eliminate
defects,13 was mainly due to the self-generating competition of the industry, but the role of the government,
which encouraged export competitiveness in both prices and product quality, cannot be ignored. Thus the
prewar context of inter-Asian competition by adapting to the demands of Asian and African markets wasmaintained, and Japan continuously refined her ability to manufacture the product characterised by a greater
variety, a relatively high level of processing, and good quality.
Furthermore, in the second half of the 1950s, Japan's rayon piece goods succeeded in replacing cotton piece
goods in a number of markets (in the Cotton Board's statistics for rayon piece goods, these and a very small
quantity of synthetic fibre piece goods are lumped together as man-made fibre piece goods), and achieved amore rapid export expansion than any other country through the low price. In 1957 and 1958 the volume ofrayon piece goods exported temporarily surpassed that of cotton piece goods.
Next let us look at the export destinations of Indian cotton piece goods in Table 4. Before the war India
imported large quantities from Britain, Japan etc, but from 1941 exports exceeded imports, and after the wa rexports expanded very rapidly. In 1950 India became the world's largest exporting country. The export
destinations at this point were the Commonwealth market, such as Singapore (Malaya was separately
recorded), Burma, Aden, Ceylon, British East Africa, Sudan and Pakistan. However, the increase in exports
in that year, achieved despite a fall in production, was a temporary effect produced by the government's
imposition of domestic price ceilings, and thereafter the government gave priority to domestic consumption
and limited the export volume through the control of the issue of export licences.14

11 Sengo Boekishi, pp.307-15.
12 Ibid., pp.226-58. Shin Hasegawa, "Gaika Wariate Seido no Unyo to sono Sagyo Seisakuteki Igi (TheWorking of the Foreign Exchange Allocation System and its Significance as a Tool of Industrial
Policy)", in Tsusho Sangyo Seisakushi, 6 -2-2, Tsusho Sangyosho, Tokyo, 1990, pp.153-85.
13 Sengo Boekishi, pp.109-118.
14Cotton Board Trade Letter, Quarterly Statistical Review (hereafter QSR), No.20, December 1950, p.1.
Ibid., No.21, March 1951, p.2.

5

Post-independence India's cotton industry was successful overall in supplying mass clothing to the enormous
domestic market, using cheap raw cotton produced within the country. However, despite trying an export
promotion policy to obtain foreign exchange, India was not a strong competitor in product quality, and there
were also problems with foreign marketing and packaging.15 On the other hand, Indian textiles, taking
advantage of the framework of the Ottawa Agreement (so-called "preferential tariffs") originally set with aview to the interests of Lancashire, and the various Commonwealth countries' import restrictions on
Japanese goods, were able to be exported more freely than Japanese or Chinese and at low tariff rates.16
Ironically, preferential tariffs acted as an institutional arrangement to promote India's exports ofmanufactured goods rather than those of the former mother country. While Japanese cotton goods' access to
the British market was restricted, Indian ones had the privilege of totally tariff-free status, and despite quotas
by agreement in 1958-59, India continued to be the biggest exporter throughout the 1950s. Thus inter-Asiancompetition was played out, not in a single world market, but in two interconnected markets, the British
Commonwealth and the rest of the world. Then in the 1950s the barrier between the two markets was
gradually reduced by a de facto lowering of tariff rates and a relaxation of the import restrictions on
Japanese goods. In the second half of the 1950s the well-established Indian trading network had to facecompetition from Japan and China.
Let us now turn to the third country, China. The Cotton Board's statistics carry China's cotton piece goods
export volumes up to 1948 (but these volumes are far below the statistics of the importing countries), butfrom the time of Communist takeover they vanish. Table 5 gives figures obtained by extracting the figures
for China from each country's import statistics. Since Hong Kong's share is large, this method cannot give usa full picture of the export destinations, but there is no doubt that mo st went to the Asian and African
markets.17 In the second half of the 1950s Japan's greatest rival in these markets were China and Hong
Kong, especially, if measured purely in quantitative terms, China. Indonesia was the main battleground, but
Chinese goods also went to Malaya and other Southeast Asian countries, to Holland and Britain (though inthe case of Britain they were mostly re-exported after processing) and to Nigeria and Australia.
Until very shortly after the Communist takeover, China imported American cotton, and processed it into
cotton piece goods, which were then exported to Hong Kong, Malaya, etc. The state-run corporations, which
inherited Japanese-owned mills in relatively good condition, even planned to replace Japan in the Southeast
Asian market in order to avoid competition with private capital in the domestic market. Certainly the exports
in Table 5 for 1947-48 are not negligible.18 After the takeover of 1949, with the danger of a blockade of
Shanghai and the dire shortage of foreign exchange, plans were made for self-sufficiency in raw cotton, andalso from 1951 large spinning factories were set up one after another, mainly in the interior. However, thecost of domestic raw cotton production was comparatively high, and the old existing machines were utilized
to the maximum, so the production cost of cotton piece goods remained higher than the international level.
Thus competitiveness in the Southeast Asian market was not achieved. The sharp increase in the second halfof the 1950s was achieved by setting prices artificially 10 per cent below international prices. In 1960 thedomestic price of cotton goods was about double the export price, which implied that the profit fromdomestic sales were making up the losses on exports.19
Finally, let us touch on the development of Hong Kong's modern cotton industry (see Table 6). Hong Kong's
modern cotton industry (spinning mills and intergrated spinning and weaving mills) started out based onentrepreneurs who moved from Shanghai from 1946, and went through explosive growth from 1947 to 1951,

15 For example, see B.N.Ganguli, India's Economic Relations with the Far Eastern and Pacific Countries in

the Present Century, Orient Longmans, Bombay, 1956, p.84.
16 In 1948 members of the British Commonwealth enjoyed tariff rates about 12 per cent lower than othercountries on the import items specified (which accounted for about a half of total imports). Donald
MacDougall and Rosemary Hutt, "Imperial Preference: A Quantitative Analysis", Economic Journal, 64,
1954, p.257.
17Hong Kong Textile Annual (hereafter HTA), 1956, pp.5-6. Ibid., 1959-1960, pp.9, 12.
18 Mitsuru Hagiwara, "Sengo Chugoku no Boeki: Menkogyo (Foreign Trade of Postwar China: The Cotton
Industry)", in Nagaoka and Nishikawa eds, Nihon Keizai to Higashi Ajia, pp.415-17. HTA, 1961,
pp.17-19.
19 Hagiwara, "Sengo Chugoku no Boeki", pp.410-24.

6

but with the outbreak of the Korean War the American government prohibited the export of American cotton
to Hong Kong, fearing the possibility of exports of Hong Kong cotton piece goods to China. Dealt thissevere blow, the Hong Kong cotton industry barely maintained its production level by importing raw cotton
from Pakistan, Brazil and British East Africa and advancing into the market in Indonesia by allowing her tosettle in sterling, where Japanese goods were shunned because of a shortage of dollars. In the second half ofthe 1950s Hong Kong became able to use American cotton again as its main raw material, and by
introducing state-of-the-art machinery on a par with that used in Japan, and operating at a far higher rate ofcapacity utilization, managed to maintain its competitiveness. In addition, through joint ventures withJapanese companies such as Toyobo, spinning factories entering the fine count market also appeared.20
In Hong Kong there was no regulation of production by cooperation of the industry and government as inJapan, and business went through violent ups and downs. From a quality point of view, Hong Kong wascompeting in almost the same markets as Japan and China, but since it was able to enjoy preferential
treatment in the Commonwealth, it advanced into that market, where there was no competition from Japanand China, and, in spite of the competition with India and Pakistan, in 1958-59 it increased its share so fas tthat the British government had to demand "voluntary" restrictions. From the second half of the 1950s it also
advanced into the American market where a gap had appeared due to the voluntary restrictions of Japan.
Let us summarize. The three main cotton producers of the prewar period, Japan, China and India, despite thepolitical changes of the independence of the Asian countries and the establishment of the Cold War worldorder, re -emerged as the principal exporting countries in the postwar world market. However, in China's casethe prewar accumulation of manufacturing experience manifested in two separate regions, China proper andHong Kong. While India and Hong Kong, under the protection of preferential status, expanded their share in
the Commonwealth, which accounted for more than half the world market, Japan and China were relatively
late in their advance into there, and their share was larger in the South and Southeast Asian market,
especially Indonesia. However even in the British Commonwealth market the inter-Asian competition
gradually became more intense, and the structure of a new world market took shape. In the next section wewill pursue the process of these changes in more detail.

3 The Disintegration of the Commonwealth Market
Inter-Asian competition was not just a matter of filling gaps in the postwar world market: it emerged amid
the reorganization of the prewar world market through the retreat of Britain and the advance of Asian
countries. In this sense, the protagonists in this section are Britain and Japan. Both countries were similar insome respects. They imported raw cotton, and exported a very large proportion of their cotton piece goods tothe world market. Also, compared with countries like America, India or China which, while they had
enormous domestic production for home consumption, were engaged marginally in the world market, orwith the countries of continental Europe, where intra-regional trade totals were large but direct involvementin the world market was relatively small, both Britain and Japan had a disproportionately strong degree of
influence on the world market. Let us now consider the process of structural change, dividing it into threestages: (1) the period up to 1950, in which both countries' exports expanded very fast; (2) the period to 1955
in which Britain's exports fell and Japan's exports to the Commonwealth began to increase; and (3) the
period to 1960, which saw a sharp expansion in imports by Britain as the Commonwealth market slowly
disintegrated.
The first period
As can be seen from Table 7, Britain's exports of cotton piece goods rose very rapidly until 1949 reflecting
postwar demand. As can be inferred from Table 2 the share of the British Commonwealth in the world
market at this period was extremely large. However in Britain the production of cotton cloth could not keep
up with the production capacity of processing companies, so Japanese cotton piece goods were imported,
processed in Britain, and then exported to West Africa and other areas. In 1949 such cloth made up about 20
per cent of Britain's exports of cotton piece goods. There was a fear that the colonies might import cotton

20 HTA, 1956, p.3. Ibid., 1961, pp.24-34. Independent weavers formed separate associations, including one

for those who came from Shanghai and another for Cantonese. However, there were many who did notbelong to any association. As a result, the organisational capability of independent weavers was generally
weaker. Ibid., pp.44-45.

7

piece goods from the dollar area if "British goods" were not supplied by this means. It was expected that if
the price of its primary products rose, the purchasing power of a colony would rise, and its cotton piece
goods market would expand more than that of markets for other goods. Alec Cairncross, Economic Adviser
to the Board of Trade, had already pointed out in 1950 that the benefit to Britain of the preferential tariff
system would become questionable if Lancashire had insufficient capacity to take full advantage of suchtariffs.21
Nevertheless, a shortage of dollars made it difficult for Commonwealth countries to import cotton piece
goods from America, and this shortage was aggravated when Britain withdrew from the convertibility
provision between dollar and sterling in 1947. Japan began exporting to the sterling area in April 1948, andin the same year concluded payment and trade agreements with the area, as well as reaching separate trade
agreements with Burma and Pakistan in 1949, and set about making good use of them. The idea was that if
the trade with the whole sterling area was in balance, there would be no objection to receiving payment insterling.22 Japan was rapidly successful in shipping great quantities of exports to Britain in 1949 andPakistan in 1950-51.
However, the country which captured most of the postwar demand in the Commonwealth was not Japan but
India. In Australia for example, Britain had an overwhelming share of the market, but in 1949-51 India took
advantage of the devaluation of the pound to gain entry to what before the war had been a Japanesemarket.23 In Malaya, which in 1950 was second only to Indonesia in volume of cotton piece goods
imported, India held most of this market despite competition from Japan and China. Part of this was
re-e xported to Indonesia from Singapore.24 The increase in imports to Malaya was the result of an increasein purchasing power due to the recovery in price and export volume of tin and rubber, but the 30 per centdevaluation of sterling of 1949 was also an important factor, as it improved India's price competitiveness.
Traditionally, Malaya tended to export her primary produce to the dollar area and import consumer goods
from the sterling area, so that she acted as a focal point of Asia's mulitilateral trade settlement mechanism. It
is thought that the re-emergence of this pattern at this period helped to alleviate the dollar shortage of the
British Commonwealth.25
Finally, let us briefly touch on the world's largest importer of cotton piece goods, Indonesia. From before thewar Indonesia had a large population, and a purchasing power deriving from exports of primary products,
but was nevertheless relatively slow to develop a modern cotton industry, with the result that it was one of
the world's largest markets for foreign-made cotton piece goods. During the Japanese occupation and thepostwar period of civil war, there was stagnation not only because poor internal communications and otherfactors created an unfavourable market environment, but also because the import of raw cotton and yarn was
severely restricted. Latent domestic demand had therefore been building up. In 1948 quotas were imposed on
the quantity of processed cotton cloth and cotton garments, as a result of which the volume of cotton imports
did not reach prewar levels. On the other hand, imports of cotton yarn and unbleached cotton cloth increased
to surpass their prewar levels.26 Even so, the total quantity of cotton piece goods imported was very large,
as can be seen from Table 8. Japan concluded a trade agreement with Indonesia in late 1948, and set about
exporting with settlement in dollars. In 1949 funds for the Marshall Plan for reconstruction in Europe were

21 "Imported Cloth", Cotton Spinners' and Manufacturers' Association, Minute Books, 11th January 1952.

A.K.Cairncross, "International Trade, Trends and Prospects", Cotton Board Trade Letter, No.64,
November 1949, pp.5-6. QSR, No.18, April 1950, p.1.
22 QSR, No.14, March 1949, p.1. Gaimusho Tsusansho Kanri Boeki Kenkyukai, Sengo Nihon no
Boeki·Kinyu Kyotei (Trade and Financial Agreements of Postwar Japan), Jitsugyo no Nihonsha, Tokyo,
1949, pp.15-42. Pakistan Trade, 1-1, April 1950, pp.20-21.
23 Cotton Board Trade Letter, No.59, April 1949, p.7. QSR, No.23, September 1951, p.2.
24 QSR, No.22, June 1951, p.2. Ibid., No.23, September 1951, p.2.
25 Ganguli, India's Economic Relations, pp.80-85.
26 Ingrid Palmer, Textiles in Indonesia: Problems of Import Substitution, Praeger, New York, 1972,
pp.48-56.

8

used to import Japanese-made goods.27 It was perhaps not surprising that exports of Japanese goods wereconcentrated in the only large market not belonging to the British Commonwealth.
The second period
From 1949 onwards the Britis h cotton industry met competition first from India and then from Japan and
China, and was forced to retreat in almost every market. Britain's share declined in India and Pakistan, which
had been her principal prewar markets, and in 1949 was faced with Japanese and Chinese competition in
British East Africa and Malaya. 28 In British East Africa competition with India was fierce, and the lattercountry was able to seize the lead helped by the restrictions on Japanese goods.29 Britain's three largest
markets at this time were West Africa, South Africa and Australia, but in West Africa, whose purchasing
power depended on exports of primary products, she came up against Indian and Japanese competition,
suffering serious losses despite import restrictions on Japanese goods, while British exports to the other twomarkets stagnated, affected by import substitution in South Africa, and in Australia by a shortage of foreignexchange.30
The proportion of Japan's exports accounted for by the Commonwealth was high from the first, but it isimportant to note that this proportion had been maintained in the overall expansion of exports.31 The
devaluation of the pound in 1949 reduced Japan's competitiveness in the Commonwealth market in priceterms, but since most of the preferential tariffs were specific duties, rather than ad valorem, there was atendency for their real effect to be weakened by inflation. Also, in vie w of the pressure from GATT, Britain
could not raise tariffs or widen the scope of preferential tariffs.32 Japan voluntarily restricted exports to thesterling area in 1952 in response to import restrictions, which led to a relaxation of the restrictions across thearea the following year.33
At the same time, a certain market segmentation was becoming discernible. Great quantities of Indian cotton
piece goods were exported to Britain between 1951 and 1954. The Cotton Board pointed out that India's raw
cotton export restrictions and low wages enabled her to supply raw cotton at a price far below world prices,and that because of Japanese competition a great concentration of Indian goods were being exported to
Britain and the Commonwealth. The CIF price of Indian unbleached cotton cloth imported into Britain was
42s 6d per pound, which was not only cheaper than British cotton cloth but cheaper even than Britain's
typical 20-count cotton yarn (51s 8d per pound) and prompted the Board to issue a warning to the low-wagecountries conducting this sales offensive.34 In point of production cost, by about 1955 Hong Kong had
become Japan's closest competitor. However, in the local Hong Kong market and in Southeast Asia
competition from Japan and China was severe, and a considerable portion of exports went in the direction of
Britain, taking advantage of preferential tariffs.35
What progress was made in import substitution in developing countries? Here let us examine briefly twocases, Pakistan and Indonesia. Taking Pakistan first (see Table 9), at independence in 1947 there was hardly
any modern cotton industry, and the country was dependent initially on imports from India and then from27 Sengo Nihon no Boeki·Kinyu Kyotei, pp.49-60. "Indonesia and the European Recovery Program",Indonesia Information, 4-2, April-June 1950, pp.71-72.
28 Cotton Board Trade Letter, No.71, January 1951, p.4. QSR, No.15, July 1949, p.1.
29 QSR, No.21, March 1951, pp.1-2. Ibid., No.29, March 1953, p.2.
30 "Australia's Import Cuts", Textile Recorder, April 1952, p.75. "Export Development: Possibilities of theEast and West African Markets", Textile Recorder, April 1953, p.63. QSR, No.38, June 1955, p.1.
31 For example, 64 per cent of Japanese cotton textiles exports went to the sterling area in 1952. Abe,

Keikogyo no Saiken, p.592.
32 Singleton, Lancashire on the Scrapheap, p.119. MacDougall and Hutt, "Imperial Preference", pp.251-56.

Cotton Board Trade Letter, No.82, November 1952, pp.1-2.
33 QSR, No.26, June 1952, p.2. Ibid., No.29, March 1953, p.2. Ibid., No.32, December 1953, p.2.
34 Cotton Board, The Cotton Industry and the Consequence of Unlimited Imports, Manchester, 1956,

pp.10-12. The price of imported goods at that point was 43 shillings 3 pence for Chinese cloth, and 50
shillings 5 pence for Hong Kong cloth.
35 Ajia no Sen-i Sangyo, pp.280-82, 286-87. HTA, 1955, p.57. Ibid., 1956, p.15. Ibid., 1961, p.47.

9Japan, but a spinning industry using the country's own raw cotton suddenly sprang up, achieving a very rapid
growth in which the number of spindles more than quadrupled between 1948 and 1953. In 1952, in responseto the demand of spinning companies, the government raised the import duty on British cloth from 24 to 54
per cent, and on other countries' from 30 to 60 per cent, a typical example of infant industry protection. Thisand a shortage of foreign exchange combined to raise the domestic price temporarily, but production
expanded steadily thereafter and from about 1953 imports started to fall markedly. In 1957 exports exceeded
imports for the first time, and in 1960 Pakistan disappeared from the Cotton Board's list of principal
importing countries. This could be called a successful example of rapid import substitution.36 In addition,
Pakistan advanced actively into the international cotton yarn market from which the principal exporters of
textiles such as Japan had more or less disappeared. At the beginning of the 1950s Pakistan was importing
considerable amounts of cotton yarn from Hong Kong, but by 1955 she had transformed herself into anexporter and by 1956 was so successful as to threaten Hong Kong yarn in its home market.37
Indonesia's import substitution industrialization policy was initiated in earnest at about the time a cease-fire
was agreed between the Netherlands and the Indonesian government in December 1949. However, thelatter's policy had great limitations in a number of respects. At this period there was roaring inflation and thefalling exchange rate tended to be unable to keep up with the resulting price rises, and therefore the actual
price of imports declined and made foreign cloth competitive. The interests of merchants, especially those ofimport traders bent on achieving their own ends, probably also played a part. In addition, the setting of thetariff wall was arbitrary and lacked consistency. For example, the domestic cotton yarn production was as
yet insufficient to satisfy demand, but imports of cotton yarn were not allowed to increase even though theplant capacity utilization rate in the cotton piece goods industry was low. Meanwhile in the spinningindustry the rate of capacity utilization tended to fall because of difficulties in importing raw cotton. In these
conditions, import substitution took considerably longer in Indonesia than in Pakistan, and throughout theyears 1950-56 the quantity of cotton piece goods imports continued to exceed domestic production.38 In
1952-53 imports from Hong Kong increased but from around the time in 1954 when restrictions were
temporarily placed on imports due to a lack of foreign exchange, Japanese cloth became the main imports.39
To sum up, in this period there was considerable variation in the import substitution industrialization ofdeveloping countries. The intensity of inter-Asian competition in the world market also remained uneven.
The third period
The most conspicuous characteristics of the second half of the 1950s were the appearance of a new tide ofprotectionism in the advanced countries, which wanted to keep imports from Asian countries within limits,
and an intensification of inter-Asian competition in other markets. The protectionist trend of the West was
already evident in continental Western Europe, but it was Britain and America that, while avoiding as far as
possible any measures which would conflict with the framework of the GATT, established a pattern of
introducing quotas through agreements reached in bilateral negotiations with individual countries. These
agreements became the precursors to a series of international fibre agreements in the 1960s and later. 40 In
Britain from 1955-56 there was a campaign which attempted to restrict imports of Asian goods. Britain had
imposed restrictions on imports from Japan in 1952-53, and imposed quotas on China in 1957, but now
demanded quotas of Commonwealth countries such as India, Pakistan and Hong Kong. A reduction in tariffs
on British goods entering India was obtained, and in negotiations spanning 1958-59 agreement was reachedon import quotas for India, Pakistan and Hong Kong. Import restrictions were also an essential precondition

36 "Foreign Trade and Textile Industry", in Fifteen Years of Textile Industry in Pakistan, Commercial Pressof Pakistan, Karachi, 1965?, pp.163-75. Fakhruddin Valibhai, "Textile Industry in Pakistan,", HTA, 1956,
pp.29-31.
37 HTA, 1961, p.30.
38 Palmer, Textiles in Indonesia, pp.57-60, 116-18. Ingrid Palmer and Lance Castles, "Textiles", in Bruce
Glassburger ed., The Economy of Indonesia, Cornell University Press, Ithaca, 1971, pp.322-25, 331-33.
39 HTA, 1955, p.58. Ibid., 1961, p.43. Palmer, Textiles in Indonesia, p.201.
40 Aggarwal, Liberal Protectionism, Chapter 4. Aggarwal calls this trend liberal protectionism, and offers anarrative of the emergence of protectionism within the framework of the GATT from the international
relations perspective.

10

of the rationalization of the domestic cotton industry envisaged in the Cotton Industry Act of 1959.41
However, as the level of import quota was raised in negotiations, the influx of cotton cloth made in India,
Pakistan and Hong Kong continued and took approximately 10 per cent of the British market. In 1958
imports from India exceeded exports to that country, reversing the trend of the previous hundred and fifty
years.42 Meanwhile, in the American market there had already been demands from the cotton industry for
restrictions on imports of Japanese cotton cloth in the first half of the 1950s. Japan's voluntary restraint of1955 and the intergovernmentally agreed quotas of 1957 were the response to this. However, although as aresult Japan's share fell from 72 per cent in 1957 to 20 per cent in 1960, little was achieved since other Asian
countries made great inroads in the American market, with Hong Kong taking 18 per cent, India 11 per cent,and Pakistan 3 per cent, to mention only the most important countries.43 In this way inter-Asiancompetition spread across the markets in advanced Western countries.
Mirroring these trends in the advanced countries' markets, inter-Asian competition intensified in the othermain markets too. In Ceylon, Tanganyika, Kenya, Uganda and Nigeria, Japan stole India's share of themarket, and in Australia and New Zealand, Britain's share. While in the Sudan India was dominant, and in
Ghana Japan, in Malaya there was a three-cornered fight between Japan, India and China, with Japan thedominant contestant. In Thailand China came out ahead of Japan, Hong Kong and India, and in Hong Kong
outdid Japan in market share.44 Japan and India also penetrated the Canadian market where America had
been dominant. In addition, Japan and China began to take an interest in the Dutch market. Thus at the endof the 1950s the competition became truly global, and the British Commonwealth market ceased to havemuch real importance as a distinct unit in terms of tariffs or currency.
In Indonesia, as a result of the quantitative restrictions of 1954 and the tariff increases of 1955, the domestic
production of cotton piece goods overtook imports in 1956. Thereafter import substitution progressed so
rapidly that in 1960 domestic production was 2.6 times as great as imports.45 One thing that had an
influence in maintaining Japan's share in imports was the conclusion of an agreement that, as a part ofAmerican economic aid to Indonesia, Japan would import American raw cotton, make cotton cloth and thenexport it to Indonesia. In 1956 cotton yarn and cotton cloth, and in 1959 and 1960 (at Indonesia's request)
only cotton yarn, were imported from Japan under this agreement.46 The other chief competitor in theIndonesian market was China, which in 1954 and 1956 concluded payment and trade agreements withIndonesia. As a result of these and the Chinese government's Southeast Asian diplomatic offensive, importsof Chinese goods also expanded sharply.47 In this period, China and Japan were dominant in unbleachedand bleached cotton cloth respectively. That is not to say, however, that there was a definitive division indegree of processing or in product quality: the fact that the main source of imports of coloured cotton fabrics
shifted from Japan to China is evidence to the contrary.48 Rather, generally speaking, the goods of bothcountries of the same quality came into the market at similar prices by the same sales routes in Southeast
Asia. Hong Kong tended to be forced to retreat under the intense price competition from Japan and China.49
Lastly let us look at Hong Kong's role in this period and how it changed, starting with its development as abase for entrepot and processing in cotton textiles. In 1954 Hong Kong was producing about 200 million
square yards of cotton piece goods, of which 160 million were being exported. At the same time 110 million
square yards were imported from Japan, India, Britain and China, and 20 million were re-exported toIndonesia and Thailand (see Table 6). However, part of what was counted as Hong Kong-made export cotton

41 For details of the process of negotiation, see "U.K. Quota and U.S. Problems", HTA, 1961, pp.77-95, andAggarwal, Liberal Protectionism, pp.54-73.
42 QSR, No,53, March 1959, p.1.
43 See Ajia no Sen-i Sangyo, pp.267-42.
44 See Ajia no Sen-i Sangyo, pp.218-37.
45 Palmer and Castles, "Textiles", pp.324, 332.
46 Sengo Boekishi, pp.265-70. Japan also concluded similar agreements with Pakistan and Burma.
47 Shigeichi Matsumoto, Chugoku no Tai Ajia Keizai Seisaku: 1949-1972 (China's Economic Policy withother Asian Countries, 1949-1972), Ajia Keizai Kenkyusho, Tokyo, 1975, pp.249-50.
48 Statistical Pocket Book of Indonesia, passim.
49 HTA, 1957, p.17. Ibid., 1961, p.47.

11

piece goods was imported cotton piece goods which had been processed by dyers in Hong Kong, so thateven at this date the entrepot-cum-processing base character of the colony was fairly strong.50 In 1956-58
imports from Japan and China increased suddenly. The majority were re -exported, although an increase indemand from the dyeing and apparel sectors was also important. However, as soon as re-exports increased,
direct exports from Japan and China to the country of final consumption increased the following year. When
we come to 1959 re-exports suddenly dropped, and the great majority of exports from Japan and China
underwent secondary processing such as machine-sewing in Hong Kong before being exported elsewhere.
Hong Kong's apparel sector introduced Western and Japanese technology and capital from around 1953 andachieved rapid growth: by 1958 the value of exports of secondary processed cotton goods was already sogreat as to surpass that of cotton piece goods. The material used was mainly Japanese cotton piece goods,
and by entering the America market where there was a gap created by Japan's voluntary restrictions, theapparel industry orientation of Hong Kong's cotton industry made great strides. From 1959 on Hong Kong's
exports of cotton goods were about the same value as Japan's, and by advancing into Britain, West Germany
etc. Hong Kong, together with Japan, initiated Asia's shift towards higher quailty cotton goods exports.51
The strategic role fulfilled by Hong Kong did not stop there. In the above-mentioned negotiations with theadvanced countries too, Hong Kong had a position which was extremely important for other Asian countries.
First, in negotiations with Britain, Hong Kong took a stronger stance than India and Pakistan, and as a result
got an advantageous import quota for the three countries. In the negotiations with America, Hong Kongdisplayed a more uncompromising stance than Japan, which was in a weak position vis -a-vis America. 52
The colony of course took advantage of Britain 's international standing, but it is undeniable that whatstrengthened its position more than anything else was the fact that as a free port it was putting the principlesof the GATT into practice more fully than the advanced countries.
To summarize, the postwar world market was initially divided into two, the British Commonwealth market
and the non-Commonwealth free market. However in the Commonwealth market, with the retreat of the
British cotton industry, supply was unable to keep up with the increased demand stemming from the rise inpurchasing power due to the recovery in exports of primary products, while in Asian countries, particularly
in Southeast Asia, the development of import substitution reduced imports from Japan, China and HongKong. Thus in the 1950s, with the entry of both Japan and China into the Commonwealth market,
inter-Asian competition became global, and the Commonwealth market gradually became part of acompetitive world market. If the idea behind preferential tariffs was a division of labour with Britain as theindustrial country and the rest as primary producers, one could say that the revised cotton piece goods
world market changed it into one which assumed an international division of labour in which Asia
specialised in cotton and other labour-intensive industries, and other countries were suppliers of heavy andchemical industry goods and primary products.
4 The Impact of Asia's Industrialization
Finally, I would like to develop the points presented above into a more general argument. First, the revival ofinter-Asian competition did not necessarily mean a smooth industrialization of India and China, but it may
be considered that the strong competitive pressure from these two countries was a decisive international
factor which pushed the Japanese cotton industry towards an increase in productivity and diversification,
including a shift to man-made fibres. Indian cotton piece goods replaced British cloth in the Commonwealthmarket and initially competed with Japanese cloth. As inter-Asian competition in the Commonwealth market
intensified, gradually India specialized in those markets, notably Britain, where it was easy to gain entry, andmaintained her position as the world's second largest exporter throughout the 1950s. However, India
possessed a huge domestic market in which low-quality fabric was dominant and Indian industrial policy put
priority on supplying this market with cheap cotton piece goods, with the result that product diversificationand improvements in productivity were limited. China, except for a short period immediately after theCommunist takeover, was also a powerful competitor for Japan in the world cotton piece goods market. It
cannot be denied that post-revolution China, handicapped by relatively expensive Chinese raw cotton and a

50 HTA, 1956, pp.5-8. Ibid., 1961, p.44.
51 HTA, 1957, pp.8-11, 27-37. Ibid, 1958, p.10-15, 38-41. Ibid., 1959-1960, pp.4-5, 45-50. Ibid., 1961,

pp.57-67.
52 See references for footnote 41.

12lack of updated machinery and equipment, gradually lost her international competitiveness and competedwith Japan by artificially lowering prices. However, the fact that intense competition between Japan and
China developed in Asia and Africa under the Cold War regime should be borne in mind. To put it anotherway, although Japan did not have any country yet to follow her, as the theory of the flying geese pattern ofdevelopment hypothesises, at this period she was actually under strong competitive pressure from India andChina of the kind that the theory assumes.53 Japan's originally labour-intensive cotton industry survived incompetition with Asian and African countries in their relatively low-income markets by introducing wave
after wave of labour-saving machinery. This was a strategy frequently employed by Japanese industry infields where no rapid development of the market for higher quality products could be expected. And, it may
be considered that this strategy was later followed by Hong Kong, Taiwan, Korea etc and became the driving
force behind the later flying geese pattern of development.
Second, inter-Asian competition also had a great influence on Japanese industrial policy. Discussion ofindustrial policy has tended to focus on the "catching-up" aspect of leading sectors. However, the question ofwhether to protect, abandon or in some way restructure an industry once it has started to face competition
from developing countries is now becoming one of the most important points of debate in industrial policy.
The restructuring of the 1970s and 1980s has been praised and there is a school of thought that considers thisto be the aspect of Japanese industrial policy most worthy of imitation by other countries.54 But it deserves
pointing out that this policy was in fact being practised throughout the postwar period. That is to say, theJapanese cotton industry and government after the war did not adopt a defensive attitude towards inter-Asiancompetition, and very rapidly worked out that the solution was to raise productivity and to convert toman-made fibres. The view taken was that the industrialization of Asia was something inevitable, and thestrategy conceived to meet the challenge was to make the old key industries labour-saving andtechnology-intensive and carry out a thorough remodelling of the industrial structure through a shift tohigher-value added goods, an approach diametrically opposed to that of Western countries, which tended
towards protectionism. The realistic recognition that if they continued as they were, sooner or later thelabour-intensive industries would be faced with competition from lower-wage countries and lose the battle
was something that was already clear given the background of competition with India and China. Certainly
Japan was the country where the idea of upgrading the industrial structure was put into practice most
systematically, and this was a way of thinking which for a long time was hard for neoclassical economics toaccommodate. However, it was not an expression applying only to the special circumstance Japan was in.
It should be seen rather as a concept which tried to grasp a positive response any high-wage country should
consider when she faced a competition from low-wage countries within the framework of a free trade systemsuch as the GATT.
Thirdly, behind the revival of inter-Asian comp etition, there was the fact that many Asian countries
responded to the new free trade system championed by America by proceeding with industrialization. It was
not only Japan, India, China and Hong Kong that did this. Most of the countries of Southeast Asia obtained
foreign currency as a result of the recovery of exports of primary products to the West, and with this ascapital set out to promote import substitution industrialization. In the process, when supply failed to keep up
with demand there was an influx of cotton piece goods from the four main exporting countries, but as soon
as domestic supply capacity caught up, imports were reduced. In this sense, the inter-Asian competition
described in this paper was nothing but a surface adjustment process of demand and supply for Asia's
industrialization. Naturally, from the exporting countries' point of view, this could only mean shrinking
markets. Thus, with the progress of industrialization in the Asian countries, advanced cotton industries
gradually ventured out into the world market. The country which led the world market as a whole was ofcourse America, but trade between Asian countries and America remained small.55 If Asia was to increase
trade with the advanced countries, it had to capture the worldwide increase in demand accompanying therevival of Britain and other West European countries (a revival which was indirectly dependent on American

53 See Kaoru Sugihara, Ajia Kan Boeki no Keisei to Kozo (Patterns and Development of Intra-Asian Trade),

Mineruva Shobo, Kyoto, 1996, pp.5-6, 118.
54 Hugh Patrick, "Japanese High Technology Industrial Policy in Comparative Context", in Patrick ed.,Japan's High Technology Industries: Lessons and Limitations of Industrial Policy, University ofWashington Press, Seattle, 1986, p.30.
55 In 1958-60 Asia traded far more with the U.K. and Continental Europe than with the United States. See
IMF, Direction of Trade, passim.

13aid), and the recovery in purchasing power of the peripheral countries of Oceania etc. Hong Kong, as aentrepot and processing base, created a competitive market structure in Asia, and became the axis which
gradually linked it to the world market. The commercial and financial networks and transport andcommunication networks to support trade were established. The whole of this linkage gradually changed themanner of involvement of the Asian economy in the world market into a more active one. The mostimportant international factor which determined the pattern of export of Japanese cotton piece goods may beconsidered to have been this kind of structural change in the world market against the background of theindustrialization of Asia.

14

Table 1 Geographical Composition World Exports of Cotton Cloth, 1937-1960(base unit: million square yards)
1937

1946

1948

1951

1954

1957

1960

Japan
2,643
India (a)
221
China
50
Hong Kong-Taiwan (b)-Pakistan (a)-South Korea (b)-Asia Total (c)2948
Continental Western
Europe (b)1,613
Eastern Europe(incl Soviet Union) (c)308
U.S.A.
227
U.K.
1,921
World Total (c) 7,159

1
318
3----344

408
308
260
----1,016

1,092
776
3
----1,871

1,278
861
15
163
1
--2,336

1,468
881
299
196
20
10
-2,894

1,424
724
562
312
98
76
39
3,254

450

1,029

1,871

1,570

1,378

2,033

6
789
514
2,416

155
940
761
4,144

254
781
864
6,220

359
591
637
5,670

594
548
456
6,205

743
437
327
7,147

Source: Sengo Bosekishi, Appendix Table B-5.
Notes: Figures for Hong Kong do not include re-exports (these re-exports are however included in Asia andworld totals). Asia and world totals include countries other than those in this table. (a) indicates that figures
are recorded in million yards; (b) in thousand quintals. (c) were calculated simply as the sum of all figures indifferent units. For details, see the main text and footnote 9. Figures in this table have been compiled not only
from the Cotton Board, Quarterly Statistical Review, but from trade statistics of various countries and do notnecessarily agree with those in the tables below.

Table 2 Geographical Composition of World Imports of Cotton Cloth, 1937-1960(base unit: million square yards)
1937

1951

1954

1957

1960

U.K.
50
U.S.A.
147
West Germany (b)50Hong Kong
107
Indonesia (a)779Burma (a)170
Malaya142
Thailand (b)145Former French Indochina (b) 76
The Philippines (b)120South Africa (a)220
Nigeria
164
Australia
171
World Total (c)
6,405

377
48
31
97
587
91
345
100
129
307
306
121
326
6,080

267
74
78
106
506
128
134
178
126
223
252
172
304
5,368

416
127
154
281
505
163
169
144
148
223
234
149
275
5,884

728
464
287
321
295
170
168
151
80
50
222
211
355
6,594

Source: Sengo Bosekishi, Appendix Table B-7.
Note: See Table 1.

15

Table 3 Geographical Composition of Japanese Exports of Cotton Cloth, 1946-1960(in million square yards)
1946 1947 1948 1949 1950 1951
U.K.
U.S.A.
Australia
Hong Kong
Pakistann.a.
Indonesia
Burma
MalayaThe Philippines
Former French
Indochina
CeylonThailandBritish West Africa World Total
1

111
22
10
30
225
198
39
23
10

1952 1953 1954 1955 1956 1957 1958 1959

1960
57
87
146
112
80
57
70
27

64
7
12
3
n.a.
116
9
7
7

67
9
n.a.
229
1
22
4

172
3
10
12
49
91
48
11

84
2
48
49
254
234
7
55
5

64
6
10
57
180
126
10
35
4

33
33
22
48
304
41
36
21

66
49
58
54
85
283
68
53
25

51
140
71
61
32
108
43
80
23

36
123
48
138
139
47
86
60

6
25
6
399

1
12
19
448

15
17
14
48
83
49
51
32
36
744 1,087 1,082

17
41
41
752

1
22
72
21
26
35
55
83 109
97
79
29
61
58
42
914 1,278 1,139 1,262

51
82
86
151
96
52
80
104

39
97
107
111
46
10
63
71

44
97
120
124
42
52
57
45

81
52
52
53
48
73
39
43
91
96 118 10447
57
64 123
1,46 1,245 1,263 1,425

Source: Cotton Board, Quarterly Statistical Review, passim.
Notes: There are marginal differences between the above figures and original Japanese statistics for theperiod from 1947 to 1952. The table includes those countries or regions whose annual volume of exports
exceeded 50 million square yards during ths period. "-" refers to no exports or less than 0.5 million squareyards. The total includes exports to countries other than those listed.

Table 4 Geographical Composition of India's Exports of Cotton Cloth, 1946-1960(in million yards)
1946 1947 1948
Australia
U.K.
Singapore
Burma
Iran
CeylonPakistan
British East
AfricaBritish West
AfricaIndonesia
Sudan
World Total

1949 1950 1951

1952 1953 1954

1955 1956 1957 1958 1959 1960

32
16
24
n.a.

24
n.a.
12
28
n.a.

20
n.a.
6
28
142

34
2
37
15
31
37
38

45
47
205
133
88
64
50

38
89
171
28
61
40
4

9
6
88
70
62
43
56

31
20
50
78
78
44
1

45
112
34
38
69
47
26

42
86
29
11
48
42
6

41
92
34
17
41
46
3

50
151
28
40
42
29
2

47
102
22
5
37
31
-

49
167
29
38
38
25
-

49
199
23
22
31
24
-

33

31

32

63

56

23

52

53

73

64

66

71

53

65

49

20
n.a.
22
318

n.a.
16
236

n.a.
9
308

26
28
37
54
466 1,109

20
29
776

20
54
597

60
32
44
655

73
31
83
861

72
n.a.
65
749

68
45
87
747

76
51
97
881

58
13
55
622

27
10
152
850

32
9
64
724

Source: Cotton Board, Quarterly Statistical Review, passim.
Notes: See Table 3.

16

Table 5 Imports of Cotton Cloth from China, 1946-1960(base unit: million square yards)
1946 1947 1948
U.K.
U.K. (a)The Netherlands (b) Australia
Hong Kong
2
Malaya13
Pakistan (c)
n.a.
Iraq
n.a.
Nigeria
Sudan (b)Indonesia (c)GhanaWorld Total (d) 16
(3)

12
40
55
70
45
n.a.
20
n.a.
12
16
14
129 168(92) (260)1949 1950 1951
1
34
15
18
5
26
102
-

-20
9
9
5
43
-

1952 1953 1954

2
1
4
(3)

1
(1)

2
5
7
(2)

1955 1956 1957

1958 1959 1960

5
9
28
39
28
25
4
8
15
14
24
23
1
6
26
52
43
3
8
12
15
10
8
62 101 100
127 126 156
2
11
16
23
37
32
24
2
6
7
4
6
22
19
16
2
6
13
6
6
4
38 114 114
86
66 12053
81117
121 258 312
388 406 462(15) (115) (245) (299) (361) (556) (562)

Source: Cotton Board, Quarterly Statistical Review, passim.
Notes: This table includes those countries or regions whose anual volume of imports exceeded 10 million
square yards. Figures in brachets are from Sengo Bosekishi Appendix Table B-5. (a) refers to the portion
re-exported from the U.K. after processing. (b) indicates one thousand quintals; (c) million yards; (d) total of
figures in three different units.

Table 6 Hong Kong's Trade of Cotton Cloth, 1946-1960(million square yards)
1946(imports)
U.K.
1
Japan
China
2
Total
7
(exports)
U.K.
U.S.A.
Indonesia Total
22(re-exports)
Thailand n.a.
Indonesia n.a.
Total
n.a.

1947 1948 1949

1950 1951 1952

1953 1954 1955 1956 1957 1958

1959

1960

8
41
59

6
1
55
79

6
7
34
76

6
25
20
114

5
43
97

3
62
91

6
49
2
101

3
61
8
106

2
55
62
138

2
145
101
274

2
151
100
281

2
118
127
257

2
123
126
281

1
120
156
321

11
87

8
132

1
111

11
142

26
160

1
98
165

2
96
134

23
74
163

54
27
165

59
24
141

76
3
29
196

123
4
6
220

128
41
3
235

125
86
14
312

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

n.a.
n.a.
n.a.

12
22
47

1
9
20

9
29
59

52
102
182

18
105
148

28
100
147

7
21
46

5
72
92

Source: Cotton Board, Quarterly Statistical Review, passim.
Note: This table includes those countries whose annual volume of trade exceeded 50 million square yards,
except for imports from the U.K.

17

Table 7 Geographical Composition of U.K. Imports of Cotton Cloth, 1948-1960(million square yards)

Japan
China
Hong Kong
India
Spain
Pakistan
Total
(a)
Japan
China
Total (Exports)

1948 1949

1950 1951 1952 1953 1954 1955

1956 1957 1958

1959 1960

55
5
226

178
3
7
348

91
76
21
287

85
109
27
377

71
11
7
180

38
2
16
2
99

52
20
133
267

64
5
51
137
300

32
9
58
133
3
8
306

57
28
75
186
2
7
416

42
39
119
128
1
2
387

44
28
137
193
10
32
537

52
25
123
231
64
40
728

54
761

165
904

89
822

82
864

54
711

38
709

52
637

64
4
555

31
8
474

57
15
456

40
14
384

43
24
347

50
23
327

Source: Cotton Board, Quarterly Statistical Review, passim.
Notes: This table includes those countries whose annual volume of imports exceeded 40 million square yards,
except for Germany who imp orted 62 million yards in 1948 and 47 million square yards in 1949. Figures
after (a) represent the portion of imports from Japan and China to be re-exported from the U.K. after
processing.

Table 8 Geographical Composition of Indonesia's imports of Cotton Cloth, 1948-1960(in million yards)
1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959
U.S.A.
13
Singapore
3
Hong Kong
3
U.K.
7
Japan
243
India
1
Hungary
The Netherlands 38
China
9World Total
340

51
4
2
13
156
4
59
26
340

58
25
11
9
191
62
48
5
412

106
37
24
14
287
54
51
1
587

64
4
106
10
182
29
36
1
436

87
119
15
294
49
6
43
626

25
86
4
300
42
8
27
4
506

46
66
7
123
89
17
38
38
451

13
78
4
186
54
11
42
114
532

3
104
2
173
63
31
114
505

1
82
79
18
12
86
287

24
44
18
9
66
171

1960
2
57
57
9
2
6
120
295

Source: Cotton Board, Quarterly Statistical Review, passim.
Note: This table includes those countries whose annual volume of imports exceeded 15 million square yards.

18

Table 9 Geographical Composition of Pakistan's imports of Cotton Cloth, 1948-1960(in million yards)

India
China
U.K.
Italy 2Japan
Hong Kong
Total
Exports

1948 1949 1950

1951 1952 1953

156
20
29
6
7
2
240
-

26
1
40
1
262
392
-

53
18
69
9
106
2
286
-

74
9
66
4
200
2
409
-

51
34
138
242
-

1954 1955 1956 1957 1958 1959

4
3
8
16
-

10
1
28
41
-

5
5
19
30
-

5
33
45
17

Source: Cotton Board, Quarterly Statistical Review, passim.
Note: Imports from some countries or regions are not listed in the above table.

19

1
1
3
10

1
1
4

2
2
42

1960
76

Notes20