Memorandum by Mr. Eugene H. Dooman of the Division of Far Eastern Affairs

Until 1930 the trade between Japan and Netherland East India was fairly evenly balanced, but in 1931, when there was initiated the present Japanese plan of commercial expansion, Japan’s exports to Netherland East India were considerably increased without there being a corresponding increase in Japan’s purchases from the latter area. The balance of trade in 1931 was approximately Yen 20,000,000 in favor of Japan. The disparity was further increased in 1932 and again in 1933, the balance of trade in favor of Japan in the latter year being approximately Yen 100,000,000. To indicate the rate at which Japan’s exports to Netherland East India were increased, in 1931 its sales to Netherland East India were valued at about Yen 65,000,000, whereas in 1933 they were valued at Yen 160,000,000, a proportional increase of approximately 250%. On the other hand the exports of Netherland East India to Japan in 1931 were valued at about Yen 46,000,000, increasing in 1933 to only about Yen 56,000,000.

The first measure directed particularly against Japanese imports taken by Netherland East India was the laying down of quotas designed to protect only certain local industries, namely, the production of beer and cement. In the latter part of 1933 a quota was established upon imports of certain types of bleached cotton tissues, in supplying which Netherland manufacturers competed with Japanese manufacturers.

It was realized, however, by the Netherland Government that, owing to certain circumstances, it would be difficult and undesirable to restrict Japanese imports by the usual method of applying quotas, increasing duties, and so on. Netherland East India is primarily a “price market” and not a “quality market”, the average income of the natives placing a premium on low-priced commodities rather than on commodities of good quality. In this connection, it must be remembered that certain types of Japanese goods, notably cotton textiles, are not of inferior quality and are offered for sale at substantially lower prices than those quoted by European manufacturers. It was found, furthermore, that a large proportion, if not a majority, of the retailers of foreign merchandise in Netherland East India are Japanese, and, therefore, committed wholeheartedly to the program of promoting the sale of Japanese goods. Thirdly, the nationalistic element among the natives began to show increasingly a disposition to oppose official measures calculated to benefit Netherland manufacturers at the expense of Japanese manufacturers.

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The restrictive measures against Japanese imports applied by the Netherland East India Government resulted, in the summer of 1933, in Japanese representations being made at The Hague. After informal discussions between the Japanese and Netherland Governments over an extended period of time, the decision was finally taken by the two Governments that a conference to regulate the commercial relations between Japan and Netherland East India should be held at Batavia. Accordingly, representatives of the two interested Governments met at Batavia in June, 1934, and they are still in conference.

Due reportedly to the fact that an agreement was reached after the conference opened to keep secret its proceedings, the despatches that have been received from the field do not clearly reveal either the agenda or the results thus far achieved. The despatches indicate that the proceedings have been carried on with considerable show of acrimony on both sides, that neither side appears to be concessive in attitude, and that the imperious attitude of the Japanese delegates and of the Japanese press representatives accompanying the Japanese delegation has aroused considerable resentment among the Dutch, both official and commercial.

It is evident that the Japanese have been unable to offer the Dutch any satisfactory compensation for a Dutch undertaking to refrain from restricting imports of Japanese goods. The principal imports of Japan from Netherland East India are such raw materials and foodstuffs as rubber, petroleum, copra and sugar. It was suggested that Japan undertake to increase its purchases of sugar from the Dutch possessions, where the sugar industry has fallen into a dangerous condition. The Japanese have pointed out that Japan’s sugar requirements are filled by the output of sugar in its own colony of Taiwan, and that if Japan were to purchase more sugar from Netherland East India it could only dispose of it in China and other areas which are at the present time important markets for Dutch sugar. It is understood that the Japanese have put forward some proposal in the direction of securing larger supplies of petroleum from Netherland East India; however, no conclusive information is available in that regard.

Press despatches and official reports together convey the impression that the proceedings thus far of the conference at Batavia have been a series of controversies unrelieved by substantial progress toward an agreement. The latest controversy was occasioned by an order of the Netherland East India Government restricting imports from Japan of china and porcelain ware, on the ground that the Japanese were endeavoring to monopolize the market. The Japanese delegation protested against the order as being a violation of an agreement between the two delegations that the status quo existing at the time when the conference opened should not be altered by restrictive measures. The [Page 288] Dutch contended that Dutch and other foreign exporters to Netherland East India of porcelain and china ware doing business in Japan had been excluded from the quasi-official Japanese guild of manufacturers and exporters of those commodities. The guild replied by decreeing an embargo on exports to Netherland East India, the purpose of the embargo being apparently to arouse discontent among the nationalistic element in the Netherland East Indies against the Netherland authorities. The Dutch Government has made representations at Tokyo against the action of the guild, but it is reported that the Japanese Government has declined to entertain the protest on the ground that the responsibility for violating the agreement to maintain the status quo rests upon the Dutch.

The foregoing is a brief outline of the salient features of the conference, so far as they are known to the Division. They do not appear to warrant expectation that the conference will be productive of a fundamental adjustment of the commercial relations between the two countries. It should be borne in mind, however, that it is to the interest of neither country that the conference should end in a quarrel: Netherland East India is today Japan’s third most important market, while it would seem important for the Netherlands to avoid the political repercussions of a quarrel with Japan over commercial relations. The fact that the conference has already been in session for almost three months tends to give color to the assumption that neither side is anxious to assume responsibility for a break-up of the conference.2

  1. The Ambassador in Japan in his despatch No. 1089, December 10, 1984, reporting on the continuation of the conference at Batavia, stated: “On the whole, the prospects for the eventual conclusion of a trade agreement between Japan and the Netherland Indies appear to be more hopeful than they have been for several months past, if one can credit the reports published in the Japanese press.” (656d.9431/37)