FOREIGN RELATIONS, 19 3 4, VOLUME III



656d.9431/32
   Memrorandunv by Mr. Eugene H. Doonman of the Division of Far
                         Ea8tern Affairm

                                   [WASHINGTON,] October 3, 1934.
  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 Nether-
land 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 Nether-
land 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 de-
signed to protect only certain local industries, namely, the produc-
tion of beer and cement. In the latter part of 1933 a quota was estab-
lished 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 re-
strict 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 remem-
bered 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 Jap-
anese, and, therefore, committed wholeheartedly to the program of
promoting the sale of Japanese goods. Thirdly, the nationalistic ele-
ment among the natives began to show increasingly a disposition to
oppose official measures calculated to benefit Netherland manufac-
turers at the expense of Japanese manufacturers.



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