‘Trouble Must Follow’: Australia's Ban on Iron Ore Exports to Japan in 1938

Abstract

Despite the attention that has been given to the role of economic sanctions in Japan's decision to launch the Pacific war, Australia's decision to ban iron ore exports to Japan has been given little attention, even though this was one of the earliest economic sanctions imposed onimperial Japan in the 1930s. To a degree this neglect can be traced to a preoccupation with the actions and objectives of the great powers and a failure to consider the opportunities available to small nations to take significant initiatives. The following article traces the origins of the iron ore embargo back to 1934 when Essington Lewis, the Managing Director of the Broken Hill Proprietary Company Ltd (BHP), Australia's iron and steel monopoly, visited Japan and subsequently advocated the development of an Australian armaments industry to counter probable Japanese aggression in the Pacific. In Japan Lewis crossed paths with J. G. Latham, the Minister for External Affairs, who was leading the Australian government's Eastern Mission. Latham returned to Australia with conclusions that differed fundamentally from those of Lewis, who came up with a plan to take advantage of Japan's dependence on imports of iron ore and other iron products to finance investment in Australian armaments manufacturing. In explaining this outcome the article discusses interactions between a number of conflicts: between Latham and Lewis; between the British Treasury and the Foreign Office; and between the Japanese army and navy. In London the Treasury wanted to focus on the European theatre, while also holding down military spending in order to achieve balanced budgets. The Treasury believed that the way to best defend British commercial interests in Asia was to appease Japan. On the other hand, the Foreign Office was committed to the protection of British interests in the Far East by a more forceful diplomacy, although it was only willing to counten-ance behavior short of military action. Consistent with Latham's recommendations to his government, the emerging consensus in London was that while a settlement in China would help to safeguard British interests there, as long as the Japanese were bound up in their war in China they were less likely to attack British colonies in Southeast Asia and the Pacific. In 1936 this orientation was challenged by a shift in the balance of power in Tokyo away from the army and in favor of the navy. Although priority continued to be placed on winning the war in China and guarding against an attack from the Soviet Union, now the navy's plan for southward expansion was given more careful consideration and credibility.