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separation of this area from Japanese domination and aggressive development, trade with this area, if the USSR does not itself deny or cause others to deny such trade to Japan, might be expected to be resumed eventually at levels approaching those of the prewar period. Since the surrender, Japanese trade with these areas, with the exception of US- fostered trade with South Korea, has been negligible. The prolongation of present political conditions in North China, North Korea, Manchuria, and Sakhalin, moreover, will continue to impede the resumption of such trade. Complete Soviet control or domination of these areas would give the Kremlin the capability of prohibiting trade between Northeast Asia and Japan altogether, should such action, from the Soviet point of view, appear advantageous. The various areas of Northeast Asia are themselves mutually supporting. For example, Manchuria, a food surplus area, also has large quantities of iron ore which in conjunction with North China's coal and North Korea's ferro-alloys could constitute the basis for an integrated heavy industry. These areas, together with the Far East- ern USSR, could provide the largest industrial potential of any area in the Far East. It is believed, therefore, that should political or strategic considerations so dictate, the USSR could, without serious effect on its own position in Northeast Asia, refuse to allow Japan economic access to those areas under Soviet control. The loss of access to the markets and raw materials of North China, Korea, Man- churia, and Sakhalin to Japan could be compensated for, in part, by trade with South- east Asia and the Philippine Islands. However, if all trade with Northeast Asia were to be cut off for an extended period, Japan would have to obtain from the United States and Canada many essential raw materials-e.g. lumber, wood pulp, and coking coal- that otherwise would have come from Asia. Japan would also have to compensate for the loss of this area as a food supplier by obtaining from Southern Asia and the United States considerably more food than would otherwise be necessary. Costs of such imports would be increased substantially by shipping over long hauls. More- over, the loss of Northeast Asiatic markets for Japanese exports would have to be offset by continued austere living standards and by expansion of exports either to distant Western markets, where Japan faces strong competition, or to Southern Asiatic markets, where, in addition to US and European competition, the development or expansion of indigenous industries may limit the market for Japanese goods still further. It can be concluded that a short-term loss of trade with North China, Manchuria, Korea, and Sakhalin would make the economic recovery of Japan difficult, but not im- possible. Long-term exclusion from trade with these areas would, however, distort Japan's natural pattern of trade so drastically that economic stability probably could be maintained in Japan only if the US were prepared to underwrite substantial trade def- icits on a continuing basis. Should such outside aid be withheld and Japan be denied the trade of Northeast Asia, the ensuing economic distress, with its attendant political instability, might force Japan to align itself with the USSR. Moreover, it is by no means impossible that Japan may tend to trade with this area, either in the normal course of exploiting the trade and commercial advantages arising from the proximity 5

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Page context
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    "ocrText": "separation of this area from Japanese domination and aggressive development, trade\nwith this area, if the USSR does not itself deny or cause others to deny such trade to\nJapan, might be expected to be resumed eventually at levels approaching those of the\nprewar period.\nSince the surrender, Japanese trade with these areas, with the exception of US-\nfostered trade with South Korea, has been negligible. The prolongation of present\npolitical conditions in North China, North Korea, Manchuria, and Sakhalin, moreover,\nwill continue to impede the resumption of such trade. Complete Soviet control or\ndomination of these areas would give the Kremlin the capability of prohibiting trade\nbetween Northeast Asia and Japan altogether, should such action, from the Soviet\npoint of view, appear advantageous.\nThe various areas of Northeast Asia are themselves mutually supporting. For\nexample, Manchuria, a food surplus area, also has large quantities of iron ore which\nin conjunction with North China's coal and North Korea's ferro-alloys could constitute\nthe basis for an integrated heavy industry. These areas, together with the Far East-\nern USSR, could provide the largest industrial potential of any area in the Far East.\nIt is believed, therefore, that should political or strategic considerations so dictate, the\nUSSR could, without serious effect on its own position in Northeast Asia, refuse to allow\nJapan economic access to those areas under Soviet control.\nThe loss of access to the markets and raw materials of North China, Korea, Man-\nchuria, and Sakhalin to Japan could be compensated for, in part, by trade with South-\neast Asia and the Philippine Islands. However, if all trade with Northeast Asia were\nto be cut off for an extended period, Japan would have to obtain from the United States\nand Canada many essential raw materials-e.g. lumber, wood pulp, and coking coal-\nthat otherwise would have come from Asia. Japan would also have to compensate\nfor the loss of this area as a food supplier by obtaining from Southern Asia and the\nUnited States considerably more food than would otherwise be necessary. Costs\nof such imports would be increased substantially by shipping over long hauls. More-\nover, the loss of Northeast Asiatic markets for Japanese exports would have to be offset\nby continued austere living standards and by expansion of exports either to distant\nWestern markets, where Japan faces strong competition, or to Southern Asiatic markets,\nwhere, in addition to US and European competition, the development or expansion of\nindigenous industries may limit the market for Japanese goods still further.\nIt can be concluded that a short-term loss of trade with North China, Manchuria,\nKorea, and Sakhalin would make the economic recovery of Japan difficult, but not im-\npossible. Long-term exclusion from trade with these areas would, however, distort\nJapan's natural pattern of trade so drastically that economic stability probably could be\nmaintained in Japan only if the US were prepared to underwrite substantial trade def-\nicits on a continuing basis. Should such outside aid be withheld and Japan be denied\nthe trade of Northeast Asia, the ensuing economic distress, with its attendant political\ninstability, might force Japan to align itself with the USSR. Moreover, it is by no\nmeans impossible that Japan may tend to trade with this area, either in the normal\ncourse of exploiting the trade and commercial advantages arising from the proximity\n5"
}