Papers Relating to the Foreign Relations of the United States, Transmitted to Congress, With the Annual Message of the President, December 6, 1886

No. 353.
Mr. Bell to Mr. Bayard.

Legation of the United States,
The Hague, January 21, 1886. (Received February 3.)

No. 105.]

Sir: In my No. 88, of the 22d ultimo, I transmitted a copy of my note of the 2ist ultimo to the Netherlands foreign office, in which I had embodied the substance of your instructions of December 8 last, and at the same time I reported my conversation with the minister of foreign affairs at the time of the delivery of the note in relation to the pending project of this Government to increase the duty on petroleum imported into the colonies of the Netherlands.

I now have the honor to report that the minister of foreign affairs, in reply thereto, sent me a communication on the 18th inst., of which I inclose herewith a translation.

This communication fully confirms the information which I have from time to time been able to send you in relation to the view of this Government with regard to the pending measure.

In the future consideration of this question it seems to me important to note that the minister of foreign affairs has expressed his regret that the remonstrance should have been formulated while the ministerial project proposing the increase of the duty on petroleum was pending before the States General.

In my interview with his excellency I have been careful to keep clearly in view the fact that the remonstrance related to the supposed effects of a projected measure and not to the result or operation of existing laws.

It will be seen that the minister of foreign affairs questions the correctness of the figures mentioned (as the rate of duty) by the Department, and maintains that it should be stated at 1s. 2d. per case instead of 1s. 6d.

The rate actually proposed is 2 florins per hectoliter, which, according to my calculation, is equivalent to 80.8 cents for each 22 gallons.

In view, however, of the position of his Excellency the difference of calculation is of slight consequence.

He claims that the proposed measure is purely fiscal in its nature, and should not be regarded in the character of a blow at the commerce of the United States; that the Government of His Majesty have relieved certain industrial and agricultural interests of taxation, and in compensation therefor have been forced to levy a duty on other products to regain their losses.

As an evidence of the fiscal nature of the proposed project he cites the fact, before referred to by me, that the minister of the colonies is now consulting with the colonial authorities with a view to a change of the project from an import duty to an excise tax, and suggests that if such a course is adopted it will be a still further proof that the project is not intended as a prohibitive measure or a blow at the commerce of the United States.

If such a step is now taken it seems to me that it should, in all justice, be regarded as a positive guarantee of the earnest desire of this Government to so shape their fiscal legislation as to foster and encourage the petroleum trade.

He maintains that a duty of 2 florins per hectoliter will not diminish the importation of petroleum into the colonies, for two reasons:

(1) That the article is indispensable.

(2) That the population can without any inconvenience support the additional charge.

It has occurred to me that, in view of the fact that the remonstrances in question relate to the supposed effect of a projected measure, this position raises an issue which cannot be determined by argument, but only by the actual operation of the measure when it becomes a law.

His excellency maintains that the minister of the colonies (who has bad years of personal experience in the colonies) has, after consultation with well-advised authorities in the colonies, reached the conclusion that petroleum will stand the proposed tax without any diminution of the imports, otherwise the object of the Government would be defeated.

This position, it seems to me, is not to be controverted by argument.

It will also be noticed that he maintains that a prohibitive character should not be attributed to the project, and has in support of this view cited the provisions of the treaty concluded November 18, 1884, between the United States and Spain, which provided for the admission of petroleum info Cuba and Porto Rico at what he maintains was a higher rate of duty than 2 florins per hectoliter—that now proposed by the Netherlands.

The provisions of that treaty cannot, in my opinion, be successfully invoked in aid of his Excellency’s position for several reasons, among the most important of which I may mention—

(1) The treaty has not been ratified,

(2) The difference in freight and insurance, as well as the difference in the condition and circumstances of the inhabitants, may operate in such a manner as to make the duty prohibitive in the Netherlands colonies, whilst it remained oppressive only in Cuba and Porto Rico.

It will appear to you, I think, on reading it, that the distinct avowal of the minister of foreign affairs that the Netherlands colonies can and will pay this additional duty without inconvenience to themselves and without injury to our commerce, and that this point was carefully and thoroughly considered by the Government before formulating this project, precludes the further discussion of the conjectural effects of the measure, especially as his Excellency has already expressed his regret that the remonstrance should have been formulated at this stage.

It will be noticed that he has reserved exceptions to the accuracy of the statistical figures presented by the Department in regard to the commerce between the United States and the Dutch West Indies.

It will also be seen that he claims that the liberal treatment of American products in the Netherlands guarantees a moral right to expect similar treatment for the Netherland products in the United States, and after referring to the long-continued efforts of this Government to successfully invoke the aid of the provisions of existing treaties in behalf of their colonial products, cites the case of Sumatra tobacco to show that the legislation of the United States was shaped with the openly avowed purpose to strike that article, and expresses the hope that the good intentions of the United States may take a practical shape by defeating the purpose of the parties who are at present strongly agitating a further blow at Sumatra tobacco.

In relation to the Sumatra tobacco agitation I have to submit the following observations for your consideration.

The cultivation of tobacco on the island of Sumatra on an extensive scale may be said to date its origin from the organization of the Deli Company of Amsterdam, February 19, 1870, which had for its capital $200,000, and for its object the clearing and cultivation of land situate near Deli, on the eastern coast of Sumatra.

I have not been able to obtain the early returns of this company, but it is reasonable to suppose that the profits were large, for on the 9th June, 1877, another company, the Arendsburg, having a similar object and with a capital of $400,000, was organized at Rotterdam.

The figures at hand, which were obtained from reliable sources, show that the Deli Company has paid the following dividends, in addition to the accumulation of a reserve fund of double the capital, for the following years:

	Per cent.
1878–’79	37
1879–’80	33
1880–’81	37
1881–’82	65
1882–’83	101
1883–’84	77

The Arendsburg has declared the following dividends:

	Per cent.
1879–’80 (the second year of its organization)	22½
1880–’81	25
1881–’82	25
1882–’83	50
1883–’84	60

There are no data at hand to show the amount of the reserve fund accumulated by this company.

It will be noticed that his Excellency maintains that the United States, in the year 1883, have seen lit to insert in their tariff a special provision with the object openly avowed to trammel the importation of Sumatra tobacco.

The section referred to by his Excellency reads as follows:

Leaf tobacco of which 85 per cent, is of the requisite size and of the necessary fineness of texture to be suitable for wrappers, and of which more than one hundred leaves are required to weigh a pound, if not stemmed 75 cents per pound; if stemmed $1 per pound.

As his Excellency here remarks, the object of this measure was well understood.

In acknowledging the note of the minister I have limited myself to saying that I would forward a copy to the Department and await its further instructions before making a reply thereto.

I have, &c.,

ISAAC BELL, Jr.

[Inclosure in No. 105.—Translation.]

Mr. Van Karnbeek to Mr. Bell.

The Hague, January, 1886.

Mr. Minister: In the communication which you have seen fit to address me on the 21st of December of the preceding year, you have in the name of your Government protested against the measure proposed by the Government of the King to the States General to raise the import duty upon petroleum in the Netherlands colonies of the East Indies to 1s. 6d. per case.

In declaring that it is the policy of the Government of the United States to encourage on its side the increasing commerce between the two countries by a judicious legislation, as well as by all means in its power, in disclosing the desire of your Government to free commerce of restrictions and to develop the commercial relations between the two countries, you have expressed the belief that the projected measure will constitute in its effect a prohibition of the importation of petroleum in the Netherlands colonies, and that it will be a blow struck directly at the commercial interests of the United States which will create a prejudice against the nation which has directed the blow, and will lead to serious complications in the commercial relations between the two countries.

The Government of the King, Mr. Minister, has not failed to give to these grave observations all the consideration which is their due, but wholly regretting that they have been formulated with regard to a measure which it proposes to take, it has not clearly convinced itself that they are well founded.

First, permit me to remark that the import duty, such as has been submitted to the States General, will not amount to 1s. 6d. per case, according to your estimation, but to 1s, 2d., according to the calculations of the minister of the colonies.

But the projected measure has not and will not have the character of a blow directed against the commerce of the United States. It is purely of a fiscal nature and made part of a remodeling of taxation by which the Government has on one side relieved industry and the agricultural population of certain taxes, and on the other retrieved the loss which this relinquishment of the revenues caused the treasury to undergo, and to increase its financial resources.

With this object a revision of the tariff has been undertaken by the minister of the colonies, who has examined with the greatest care what are the articles which can support an increase of import duty and to what point this increase can go without having for a result a diminution of the importation; for it is evident that this result will tend to defeat the object itself which the Government has in view.

Now, the minister of the colonies, after having consulted the most competent authorities and commerce itself in the Indies, is convinced that a duty of two florins per hectoliter will not tend to diminish the importation of petroleum, which has become an indispensable article for the Indian population, who can without any inconvenience support this charge.

The projected measure has therefore nothing prohibitive, and should not in all justice give occasion for any sentiment of prejudice.

Moreover, I am the less disposed to think that your Government would wish to attribute to it the prohibitive character as in the treaty concluded the 18th November, 1884, with Spain; the United States have, if I am not mistaken, admitted an import duty of more than two florins per hectoliter upon petroleum imported directly from the United States to Cuba and Porto Rico.

Now, the Government of the United States have certainly not voluntarily admitted in this treaty a prohibitive duty upon one of the principal American products.

I can nevertheless inform you, Mr. Minister, that since the project of law for the remodeling of the colonial tariff was submitted to the States General it is a question to submit petroleum in the Netherlands colonies of the East Indies to an excise tax in place of an increase of the import duty.

The minister of the colonies has consulted in this respect with the government of the Indies since the month of November, and it is very possible that the increase of revenue for the treasury which it must draw from the consumption of petroleum will be after all in the form of an excise tax and not in the form of a duty on imports.

This will be a greater proof that it is certainly not the prohibition of petroleum imports that we seek.

The Government of the King has received with satisfaction the declarations contained in your aforesaid letter manifesting the desire of the Government of the United States to encourage and to develop the commerce between the two countries, and to free it of obstacles.

I espouse the cause with great pleasure. But I have not observed without surprise the tendency of your communication to place by comparison the commercial policy of the Netherlands under a light less favorable on account of those liberal ideas.

Now since long years the commercial policy of the Netherlands is distinguished among all as the most liberal. It is known that the duty on imports is extremely moderate. It is entirely free from all tendency of protection to the national industries. It admits commerce, navigation, and foreign products alike to nations without making any difference, without seeking to prohibit or to trammel foreign competition, and only directed with the single object to offer to international commerce the greatest facilities.

Permit me to observe, Mr. Minister, that, on the contrary, for a number of years, the tariff of the United States is based upon entirely different principles, and, from the statements of a great number of your own economists, it is protectionist to a high degree.

Permit me also to recall first that it was at the end of long negotiations, of long years of fruitless expectation to have recognized in practice the right which our commerce had by the treaties to be exempt in the United States from the surtax upon indirect importations of colonial products from beyond the Cape of Good Hope, and afterwards the United States, in the year 1883, have seen fit to insert in their tariff a special provision with the object openly avowed to trammel the importation of one of our principal articles of commerce—Sumatra tobacco.

And with the same object it is actually a question very strongly agitated in the United States to proceed more energetically still for an increase of the duty upon tobacco wrappers.

Certainly, Mr. Minister, if measures of international commercial policy can give rise to a sentiment of displeasure, it will be measures of this nature, and I cannot conceal from you that in effect—as you can, however, determine for yourself—they will cause in the Netherlands an excitement with which the Government of the King will have to deal in time, the more so as on our side the products of the commerce of the United States enjoy a perfectly liberal treatment, which in our eyes creates a moral right to reciprocity.

I have not desired to inquire to what point the facts which I have presented are in accord with the liberal declarations which you have seen proper to make in your communication in the name of your Government.

I prefer to accept the declaration as an indication of a change of commercial policy, and I am flattered with the hope that the first guarantee of this liberal tendency towards the Netherlands will be the defeat of the efforts which are being made actually to-day in the United States to hinder still from advantage the importation of our colonial tobacco.

After the considerations which I have had the honor to expose above, Mr. Minister, I believe that it is useless to enter into an examination of the statistical figures of commerce between the two countries contained in your communication.

I should nevertheless permit myself to make some reservation with regard to their exactitude.

For example, I do not well understand those which you have been good enough to give in relation to the commerce between the Netherlands colonies in the West Indies and the United States, which represent, according to you, a value of importations to the United States of $3,261,671, of which more than 91 per cent, were admitted free of duty, whilst a fifth only of the importations from Netherland Guiana have had to pay import duty to your customs.

For according to our statistics, in leaving the coast, the exportations from Curacao to the United States, which are not in any case very considerable, we halve only exported in 1884 from Surinam to the United States to a value of 1,150,660 florins, principally in cocoa, sugar, and gold. If I am not mistaken these products are all subject to an import duty from the tariff of the United States.

It seems to me, however, that it is not the place to investigate these differences, and I finish, Mr. Minister, by profiting of this occasion to renew, &c.,

V. KARNEBEEK.