7 October 1940

EXPORT OF SCRAP IRON TO JAPAN

The question of the export to Japan of scrap iron was considered
by a Cabinet Sub-Committee in May. The Sub-Committee recommended,
on the information before it, that an embargo should not be
imposed on scrap export to Japan at that time. This recommendation
was adopted by Cabinet on 13th June. [1] It was felt, however,
that the question would require to be submitted for further review
in the event of existing circumstances altering materially.

2. The main economic reasons against an embargo were accepted in
May as:-

(i) The export of any commodity is of particular value at the
present time in order to build up oversea credits.

(ii) The export of scrap is not at present generally prejudicial
to Australian industrial interests. The scrap iron available is in
excess of current requirements.

(iii) The Japanese buy all three grades of scrap, for the lowest
of which there is no other market of any size.

(iv) The Australian demand for scrap is very limited.

Manufacturers use only a small proportion of scrap in relation to
pig-iron and crude steel.

(v) The United Kingdom is able to use a greater proportion of
scrap to virgin metal, but lack of shipping space prevents
extensive export.

3. As against these reasons there is:

(a) The strong recommendation of the Commonwealth Geological
Adviser [2] in favour of the conservation of scrap resources.

(b) The disadvantage which some Australian iron and steel
interests suffer by the forcing up of scrap prices by foreign
competition.

4. The economic reasons against an embargo, however, were held to
outweigh (a) and (b).

The export of scrap to Japan has shown an increase since May. The
figures are as follows-
May 2,759 tons
June 3,752 tons
July 3,566 tons
August 10,769 tons.

5. The principal political reason against an embargo at the time
of Cabinet's decision was held to be the undesirability of causing
further resentment in Japan following the decision to continue the
embargo on the export of iron ore. On the basis that the economic
aspect of the question is unchanged, it is for consideration
whether political circumstances which have arisen since then
outweigh this factor. It may be noted that-
(i) The tightening up of the restrictions on key exports to Japan
by the United States includes the cessation of exports of scrap
iron.

(ii) The United Kingdom Government appears to be opposed to the
continued export to Japan of surplus wool.

(iii) It is reported that the Egyptian Government is considering
the suspension of exports of raw cotton to Japan.

(iv) The Canadian Government, according to press reports, is
considering the cessation of exports of copper ore to Japan.

(v) The swing of Japanese opinion and policy towards the Axis
Powers is bringing about a rapid consolidation of British and
American interests in the Far East. Continued sanction by the
Commonwealth Government of the export of scrap iron to Japan might
well be held to be an action at variance with the present trend of
Anglo-American policy.

In other words, there are strong political reasons for Australia
acting along parallel lines with the United Kingdom and United
States Governments to ensure, in the present situation, that Japan
is denied commodities vital for war purposes. [3]