JAPAN'S economic and political expansion southward is bringing her ever closer to the Netherlands East Indies. These islands, with a native population of some sixty-five millions, form one of the richest of all colonial domains; yet it is held by a nation which is one of the weakest, militarily speaking, in Europe. There may be no truth in recent reports that Japan and Germany have divided these islands into prospective spheres of influence. But that such rumors can be given credence in responsible quarters is evidence that the extent of Japanese economic penetration there is of political importance.

In terms of world trade the productivity of the Dutch East Indian empire, including as it does the islands of Sumatra, Borneo, Java, Dutch Guinea, Madura and Celebes, is enormous. Here is produced 99 percent of the world's supply of quinine, 50 percent of its wrapped tobacco, 20 percent of its copra and tin, and 11 percent of its petroleum. It has also been estimated that at the present rate of demand these islands could supply practically the entire rubber market. In addition, they export one-eighth of the world's tea requirements, some 80,000 tons of coffee annually, and much palm oil and sisal. They are also the principal source of such gums as benjamin and dammar, and of citronella, patchouli, lemon grass, and cajeput oils. Finally, they provide a good part of the world's rattan and large quantities of cloves, cinnamon, pepper and other spices.

For the present, Japanese penetration in this tropical empire is economic rather than political. Although Dutch colonial rule is one of iron, this is not altogether apparent to the native population, which for the moment appears to have small liking for the Japanese. The Dutch therefore have little fear that any project of these to secure the ownership of the islands will receive native support. But there is sentiment in favor of the idea of an independent native empire; and possibly Japanese strategy contemplates encouraging it at some future time. For the time being, Japan's weapon of penetration is trade, and during recent years her exports to the islands have made such headway that the Netherlands Government has had to try to stem the tide by the imposition of quota restrictions as well as by other measures.

In their competition with the Dutch the Japanese possess the advantages of low production costs, very favorable freight rates, and proximity to the market. In addition, the fall of the yen since 1931 has helped Japan to maintain her trade superiority, as is evidenced by the fact that although the total quantity of Japanese exports to the Netherlands Indies increased from 301,000 tons in 1931 to 304,000 tons in 1932, their value decreased from 93 to 78 millions of gulden -- a drop of approximately 15 percent.

During the early years of world depression, when the total trade of the islands fell off some 69 percent, the Dutch were not averse to admitting the low-cost Japanese products into their markets. In that way the native population, whose condition had become particularly bad as a result of the falling off of the export trade, were less conscious of the drop in their wages. The official Dutch policy was doubtless based on the theory that Japanese trade was preferable to native discontent. Complaints from export industries at home and from Parliament were ignored -- a situation made possible by the fact that the island authorities are answerable only to the Queen.

As a result of this policy Japan's influence in the Netherlands Indies import trade increased considerably. During the period 1909-1913 Japan's share of it had been 1.25 percent; her share had increased to about 10 percent during the period 1914-1918; but from that time until 1929 there had been no great change. Thereafter, however, Japan's exports to the Netherlands Indies began to increase rapidly at the expense of the mother country, as reflected in the following table showing the shares of the two countries in the colony's total imports during the period 1928-1934:

1928 1929 1930 1931 1932 1933 1934
Netherlands 20.05 19.62 18.92 17.44 15.76 12.37 12.98
Japan 9.54 10.55 11.68 21.24 21.24 31.03 31.88

In value, Japan's exports to the Netherlands Indies increased from 73,414,177 yen in 1928 to 158,450,525 yen in 1934. If we take into consideration the fall in value of the yen in the interim, we can get an idea of the extent of the control Japan has come to exercise over the imports of the islands. By 1934, indeed, the islands had come to occupy fourth place among Japan's export markets.

By 1933 a part of the purchasing power of the Netherlands Indies had been restored, and the Colonial Government began to grow alarmed at the continued encroachments of Japanese trade. Under the general heading "Crisis Import Ordinance," it imposed restrictions on various commodities. Still further protection was given the manufacturers of the Netherlands in 1934 by restrictive measures against the importation of rice, beer, multi-colored cotton woven textiles, cast-iron frying pans, bleached cotton goods, and cement. In 1935 these restrictions were again extended to cover a wide range of new commodities including practically all types of textiles and many iron and steel products. In this year the commodities subject to restriction constituted about 40 percent of the total value of all imports. Complete figures as to the results of these restrictions are not as yet available in all cases, but it is interesting to note that in the case of cotton goods, imports from the Netherlands rose in value from 4,514,000 to 5,819,000 gulden during the years 1933-1934, while those from Japan fell from 47,719,000 to 36,625,000. Dutch statistics indicated a pronounced trend during 1935 in favor of the Netherlands as against Japan, especially in the case of bleached cotton goods.

The Japanese Government has attempted to secure a revision of the existing limitations imposed by the Netherlands Government and in the case of porcelains did arrange a suspension of import restrictions in August 1934. Trade negotiations between the two countries opened at Batavia on June 8, 1934, but they were adjourned at the end of the year without any general agreement having been reached. They have recently been resumed, and possibly some adjustment will be worked out, for Japan is also a heavy customer of the Netherlands Indies. She depends on them, for example, for half of her oil imports.

Regardless of Dutch import barriers and intermittent trade parleys, we shall probably see Japan continue to include the Netherlands Indies in the ever widening orbit of her expansionist activities. For the present, these activities are confined to the economic sphere. If in different conditions they assumed a political character, how could the Netherlands protect their possessions? On whom could they rely for assistance? They might hope that Great Britain would play the rôle of rescuer. That the British are aware of the danger threatening them in this quarter seems to be shown by the speed with which they have completed the great naval base at Singapore. They are concerned by many of Japan's activities and projects along the mainland of Asia and in the southern Pacific, by her economic invasion of India, the Malay States and Australia, by her rumored desire to purchase Macao from Portugal, and by the plan to construct a canal through Siamese territory that will permit her to enter the Indian Ocean without passing the fortifications at Singapore. The strategic importance of the Dutch insular possessions to Great Britain is plain. Today as never before the Dutch feel that they can look forward with assurance to British support in the event that their hold on the Indies comes directly into jeopardy.

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