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A forgotten consequence of the Korean war

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November 2017


A forgotten consequence of the Korean war

In 1952, the Swiss government took the controversial decision to restrict watch exports to Hong Kong. Watchmakers were obliged to respect quotas that cut the number of watches they were authorised to export each month by an average of 50%, compared with the previous year, to what was at that time still a British colony. What were the reasons for this restriction?

A

s a British colony, Hong Kong was part of the sterling area, and in 1952, the pound sterling was experiencing some turbulence.

“In the first half of 1950, before the outbreak of the conflict in Korea, there was a real approach to economic balance throughout the world,” we can read in the 22nd Annual Report of the Bank for International Settlements, which met in Basel on 9 June 1952.

Cover of The Eastern Jeweller and Watchmaker no. 5, published by Europa Star in 1952
Cover of The Eastern Jeweller and Watchmaker no. 5, published by Europa Star in 1952
Cover of The Eastern Jeweller and Watchmaker no. 6, published by Europa Star in 1952
Cover of The Eastern Jeweller and Watchmaker no. 6, published by Europa Star in 1952

Countries were beginning to pick themselves up after the second world war, and in Europe the Marshall Plan was in full swing. But in mid-1950 the Korean War broke out, with an effect like a lightning bolt from clear skies. As a result, numerous countries decided to rearm, creating fierce competition for raw materials. “Since prices of manufactured articles did not rise at the same pace as those of raw materials,” continues the report, “the terms of trade deteriorated for industrialised countries in general.” In the sterling area, the delivery of import licences was subjected to strict controls from February 1951. “In an effort to avoid unnecessary inflation as a result of its position as creditor,” wrote Europa Star in its The Eastern Jeweller and Watchmaker edition of late 1952, “Switzerland has introduced obligatory quotas for many manufactured products, including watches. Deliveries to Hong Kong importers have therefore been limited according to the exchange reserves of each exporting firm.”

One major Hong Kong importer objected vociferously: “It is difficult to understand why the Swiss government would not demand cash payment from the country concerned, rather than resorting to negative actions by reinforcing export restrictions!” He reminds us that, even then, “Hong Kong is the main repository in the Far East and the second biggest outlet for Swiss industrial output, after the USA.” Clearly, his diatribe convinced our reporters, who noted that “this reaction is understandable, and we hope that more favourable measures will quickly be taken by Switzerland in order to be able to respond effectively to the very high demand for watches of all kinds.”

A forgotten consequence of the Korean war

Between 1948 and 1952, Swiss watch exports grew from 20 million to around 35 million watches. This growth was cut short, and exports dropped back to 30 million in 1954, before taking off once again, climbing to 40 million in 1956, the date of the Suez crisis. Exports plateaued and then declined up to 1960, which marked the start of a new growth period, reaching its zenith in the record-breaking year of 1974, at 85 million units. This peak was followed by a severe depression that bottomed out at 50 million watches in 1979. The “quartz crisis” had struck, and a whole new story was about to begin.