Foreign Relations of the United States Diplomatic Papers, 1941, The Far East, Volume IV

756D.94/187

Dr. Henry F. Grady to the Secretary of State ⁴⁴

September 15, 1941

12th Cable Report

For Secretary Hull:

I have discussed in an hour’s interview with the Governor General⁴⁵ and at great length with van Mook⁴⁶ on several occasions their views and policy with regard to economic measures against Japan. The views of both officials are identical. Thinking you would wish a summary of my conversations with these officials I give it herewith. This statement has been approved by the Governor General and by van Mook:—

With regard to exports to Japan the policy of the Netherlands Indies has twice undergone an important change.

Before the war the general complaint from our side was that the balance of trade with Japan tended to be more adverse every year. The exports, however, which we would specially like to see increased, happened to be those of non-strategic agricultural and forestry products like sugar, copra, coffee and timber.

After May 10th, 1940 the interest of Japan for our export products showed a sudden development in the direction of raw materials for industrial and military purposes like mineral oil, rubber, tin and various ores. After the conclusion of the tripartite pact in September 1940 the Japanese made additional demands for vegetable fats, fibres, tanning materials, etc., goods which were notoriously lacking in Germany.

The restrictive measures taken during that period by the N. E. I. government were based on three principles:

a. no export of goods needed for ourselves or for our allies;

b. no discrimination in favor of Japan and against other neutral countries;

c. no exports which would provide Japan with more than its normal requirements and thus enable it to furnish the enemy with those materials.

Although there was no embargo directed against Japan, the restrictions mentioned had to be strictly executed and therefore the quantities to be exported were generally calculated on a basis of the known consumption in Japan in former years; any recent increase of consumption could not, as a rule, be taken into consideration.

A complete embargo was not deemed advisable at that time; moreover it would not have been supported by a similar policy of the British Empire and the U. S. A.

When Japan moved south in Indo-China, this move was considered a direct threat against the N. E. I. Even if the U. S. A. and the British Empire had not promptly frozen the Japanese assets, we would have had to reconsider our position. As it was we immediately joined in this action, even though a clear system of co-operation had not yet been established.

The restriction of exports to Japan should be co-ordinated in such a way that

a. Japan will not be able to get from one country what is denied elsewhere;

b. the embargo effectively lowers the war potential of Japan.

The machinery for co-ordination is still rather rudimentary, especially as regards the contact and the exchange of information between the U. S. A. and the N. E. I. The alliance between the Netherlands and the British Empire, has, of course, gradually developed a closer co-operation. It would be advisable to develop a similar system of cooperation with regard to export controls both in Washington (with the Netherland legation) and in Batavia (with the U. S. A. consulate general).

The embargo itself should be specially directed towards the prevention of exports of goods, which can be used for military purposes. It should not be used as a method to starve or cripple the Japanese people, as this [is] not required to realize the aim of lowering the Japanese fighting strength and might enable the military party to propagate the inevitability of war amongst the Japanese people. As regards war material however, the embargo should be as complete as possible.

It must not be overlooked that Japan has many—though partly inadequate—sources of war materials within the Japanese Empire, Manchukuo, China, Indo China, Thailand and possibly South America. Half way measures from our side would not exert enough pressure, as Japan might then be able, partly through severe restrictions on civil use, to maintain and even increase its war potential, while entrenching itself at leisure in Indo China and possibly Thailand and waiting for a better opportunity to strike.

Of course a tight embargo on war materials may lead to war. Any less stringent system, however, will seem to strengthen the position of the military party, whereas the fear of a general war is probably strong enough at present to deter the Japanese government from extreme measures as long as there is no change for the worse in the allied situation in Europe.

Finally measures of an ambiguous or intricate character should be avoided, as the fear of unknown consequences easily leads the Japanese to react by force. A gradual tightening of the chain may have a similar effect; our experience teaches us that a clear and convincing action is most effective in the way of making the Japanese pause to consider.

In practice this policy should mean for the N. E. I.:

no exports of mineral oil, rubber, tin, iron and iron ore, bauxite, nickel ore, manganese, resins, tanning materials, palm oil, etc.;

small exports of fibres, copra, kapok, etc.;

normal exports of sugar, coffee, maize, timber, etc.

44. Dr. Grady was President Roosevelt’s personal representative on an economic survey of the Pacific area. Copy of this document was transmitted to the Department by the Consul General at Batavia (Foote) in his despatch No. 315, September 15; received September 27.
45. Jonkheer A. W. L. Tjarda van Starkenborgh Stachouwer.
46. H. J. van Mook, Director of the Economic Affairs Department, Netherlands East Indies.