July 1 marked the 80th anniversary of Australia’s iron ore embargo against Japan. The official reason was resource conservation, but the ban was really driven by a fear of Japan – which had been buying up assets like iron ore and scrap metal – gaining a stronghold in Australia that threatened our sovereignty and security.
Despite the passing of 80 years, Australia is having the same discussions we had back in 1938, only this time about China.
China’s growing commercial influence in Australia and other Asia-Pacific countries has sparked concerns about its political ambitions. Responding to these concerns with economic sanctions is likely only to pander to US desires to curb Chinese influence, placing Australia’s economic future and regional security at risk.
What can we do differently this time around?
The Australia of the 1930s faced a region in flux. There were territorial disputes, the waning power of Britain – Australia’s primary ally and protector – and the growing military and commercial weight of regional power Japan, whose intentions remained unclear. Sound familiar?
In early 1937, fears emerged of a world steel shortage. While iron ore restrictions were being introduced elsewhere, the Australian government maintained that it was not a lack of resources that had created a shortage but an inadequate output.
It came as quite a surprise then, in May 1938, when the Australian government announced an embargo on iron ore exports, effective July 1 1938. The government cited a (then) recent and very brief report, compiled by the Commonwealth government geological adviser, which concluded iron ore deposits were much smaller than had been estimated and perhaps would not meet domestic needs.
The embargo included existing agreements with foreign investors, such as the Japanese lease at the Yampi Sound mines in Western Australia, where preparations for the first iron ore extraction were well under way.
The government stressed that the embargo was not due to anti-Japanese sentiment. Nevertheless, this was the conclusion the Japanese government drew as it tried and failed to secure access to the Yampi Sound project.
The size of Australia’s current iron ore exports calls into question the logic of this report and the export ban it led to.
A foreign foothold in Australian territory
Throughout the 1930s, Japan pursued a policy of southward expansion, both territorial and economic in nature. At the centre of this policy was the need for resources to cater for Japan’s rapidly growing population. This involved the “economic penetration” of Far Eastern nations, investing Japanese capital to secure essential goods.
Australia, still recovering from the Great Depression, welcomed these investments.From the Collection of the National Archives of Australia, A601, 402/17/30.
Japan’s visions for territorial expansions became clear in July 1937. Japan – as Australia had long feared – proved itself an aggressor when its army invaded China, signalling the start of the Second Sino-Japanese War.
However, Japanese economic investments were being viewed with increasing caution.
Australia’s trade commissioner in Tokyo, Eric E. Longfield Lloyd, reported that Japan’s territorial expansion into China had been aided by a seemingly innocent system of economic penetration throughout the 1920s and ’30s. He feared that allowing the Yampi Sound project to continue, operated as it was by Japanese staff, would result in a “foreign foothold” in Australian territory.
- ^ official reason (www.nma.gov.au)
- ^ economic sanctions Japan faced (www.nytimes.com)
- ^ tit-for-tat US and Chinese trade restrictions (theconversation.com)
- ^ 2017 Foreign Policy White Paper (www.fpwhitepaper.gov.au)
- ^ Australian government maintained (trove.nla.gov.au)
- ^ brief report (trove.nla.gov.au)
- ^ Australia is hedging its bets on China with the latest Foreign Policy White Paper (theconversation.com)
- ^ Japanese lease at the Yampi Sound (trove.nla.gov.au)
- ^ policy of southward expansion (www.bbc.co.uk)
- ^ as Australia had long feared (www.awm.gov.au)
- ^ cooperation and conciliation (electionspeeches.moadoph.gov.au)
- ^ limiting of property investments (www.smh.com.au)
- ^ banning of foreign political donations (www.reuters.com)
- ^ Belt and Road Initiative (www.smh.com.au)
- ^ debt-book diplomacy (theconversation.com)
- ^ outbid the Chinese telecom giant Huawei (www.abc.net.au)
- ^ territorial disputes (theconversation.com)
- ^ recently argued (www.lowyinstitute.org)
Authors: Honae Cuffe, PhD Candidate, History, University of Newcastle