The Washington herald., 1919-03-14
HELPED JAPAN
CAPTURE TRADE
Holland Declares Money
Borrowed in America
Used for Factories.

In 1911 the Japanese government ap-
preached the American money market
with intent to secure a loan amounting
to many millions. Japan's credit was
SO goood that the government at the
time OF Japan's war with Russia was
able to iost a large loan in the United
States. The money thus obtained was
used by Japan to pay for purchases
made in the United states of ma
terial needed by her in the war. There
lore almost all the money thus
secured remained In this country.
Notwithstanding Japan's excellent
credit and the favorable financial ex-
perience with her at the time OF the
war with Russia she was compelled
10 pay a high rate OF interest upon
the loan which she did secure in this
country in 1911 One New York bank
lent her $4,000, 900, but exacted in
trest at the rate of 9 per cent. It
may be that other New York banks
also made loans at about this rate of
interest
Having secured the money. the
government Of Japan let the indus
trial leaders of that country know
that II they needed funds to carry on
would lend them reasonab Bile amounts,
All of the ten millions which were
borrowed in this country were lent to
the managers OF Japanese industries
who were charged only four and one
half per cent interest upon the loans.
The government, however, exacted
pledges that the loans would be uti-
hzed In developing upon a large scale
certain textile industries and one or
two others. These pledges were Civ
en- and there speedily began the
manufacture in Japan Of certain
kinds Of cotton cloth. particularly
oiue jeans. These cloths were manu-
tactured for The purpose of securing
a market for them In China. The
Chinese were tempted to buy these
goods because the quality was ex-
cellent and the price reasonable. IT,
timately large market was found
Tor these commodities in China
In that way the government in
directedly. at least, recouped Itself on
account OF the difference between the
interest 1t was obliged to pay to the
American banks, nine per cent and
the interest which IL charged the jap
anese, four and one-hslf per cent, for
the loans.
We Lost the Trade.
The capture by Japan Of a consider-
able part OF the Chinese market for
certain kinds OF cotton goods newt
ably involved to some extent the loss
OF so much Of that market as the
United States had before possessed
Some Of the banking authorities OF
this city estimate that our trade with
China fell on within the course of
two years, by approximately fifty
millions, due in great measure to tho
fact that Japan had taken away much
OF the American market for cotton
goods.
There therefore arose a situation
which has been referred to many
times recently in financial circles
when the question of loans by banks
and individuals to other nations has
been under discussion. For it is as
sumed that II il not improbable that
American money represented by loans
to other nations even IL the rate Of
interest is high. is 10 be employed in
creating or developing industries
which win be able in time to capture
markets heretofore held by American
manufacturers.
This is a point which none of those
who have in public discussed the
league of nations proposition has
mentioned. Possibly 1t did not occur
to any Of the Senators who have re-
Gently spoken in opposition to the plan
which Is now under consideration in
Paris. But it has occurred to men
who may be called upon hereafter to
make loans to other nations. There
seems to be some hint Of this feeling
contained in the recent statement said
to have been made by Frank A. Van
deriip. Mr.. Yandelip has been in Eu-
rope for some weeks for the purpose
Of seeing with his own eyes, and in
Vestigating by means OF personal
touch with authorities over there, the
conditions so that he might be able
to recommend the granting of loans to
private interests abroad or. on the
other hand. to dlsprove proposed ac-
ton Of that kind. He is quoted as
having said that he did not now feel
justified in recommending loans by
American bankers or individuals 10
private interests or private individ-
uals in Europe.
One OF the reasons for this opinion
is undoubtedly to be found in the fact
that until readjustment is completed
and peace permanently established. a
serious question respecting the Sc
cuTity behind loans of this kind will
be raised. Furthermore American
bankers may be asked to lend large
amounts OF money to manufacturers
and others in foreign lands. II this
be done then the chances are that
a considerable part of this money
will be employed exactly In the way
which Japan made use Of the mil
lions which she borrowed I'm the Unit
ed States in 1911. The money would
be used for the purpose of highly
developing industries, especially those
which will seek world trade, In other
words, American money lent to in
dustrisl leaders abroad may be used
in such manner as to enable those who
borrowed this money to manufacture
commodities which they could place
in other markets in competition with
American manufactures.
An Important Point.
There Is no question about the ac-
curacy OF the statement which was
recently made by a Chicago banker
after a visit to New York that he
found financial leaders in New York
not opposed to an association or even
a covenant whereby the peace OF the
world might be maintained, but they
are In doubt about the propositions as
il now stands before the Paris con-
ference. One of the reasons for this
doubt Is to be found in the appre-
hensfon that at some time the United
States might be seriously enbarrassed