THE rapid expansion of Japan's export trade cannot be dismissed as a temporary phenomenon. It is a part of a major development in the Orient that seems destined to disturb to an even greater degree than at present the economic equilibrium of the leading industrial and commercial nations. It is based upon the more effective utilization of cheap labor, Japan's principal resource for industrialization. It involves a conflict of widely contrasting standards of living. It may foreshadow important shifts in the direction of international trade.
I. ORIENTAL COMPETITION AND THE INDUSTRIAL REVOLUTION
To understand its full implications, Japanese competition must be viewed in its historical setting in the long commercial intercourse of East and West. The present is not the first occasion when Oriental goods produced by cheap labor have entered world markets with disturbing results. An examination of the economic literature of the seventeenth and eighteenth centuries reveals that Oriental competition was one of the more powerful economic forces of that period. There is abundant evidence that it was an important contributing factor in stimulating the invention of the various labor-saving devices that constituted the Industrial Revolution.
In earlier times Oriental living standards and the cost of labor were of little importance in the trade between Asia and Europe, since the principal articles which the West obtained from the East were exotic products such as spices, silks and tea, few of which competed with European products. But early in the seventeenth century the British East India Company -- and later the trading companies of other European countries -- began to bring manufactured goods from the Orient. Among these commodities were cotton yarn and cotton piece goods, particularly calicoes and muslins, from India; and silk cloth, screens, beds, cabinets, lacquerware and fans from India and China. By the closing decades of the seventeenth century the volume of this trade had increased to such proportions that it was being attacked as the principal cause for the distress then prevailing among the industrial
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