CANBERRA, 27 November 1947 1.

In the course of the last few months Notes have been exchanged
which constitute a basis for the liquidation of the military
supplies (except arms and ammunition) belonging to the Netherlands
East Indies Government. [2]

2. Financial consequences of the projected sale of arms and
ammunition of the Royal Netherlands Indies Army to the Australian
Government will have to be considered by competent authorities on
both sides. The relative negotiations, it is assumed, are not
likely to affect the political relations between Australia and the
Netherlands.

3. With the impending evacuation of the military loading personnel
the consequences of the joint war operations will have come to an
end. The Royal Netherlands Navy and the 19th Squadron left
Australia several months ago, hence only very limited liquidation
commissions will remain for some time principally to attend to
routine financial matters still outstanding.

4. In view of the fact that various matters which have caused
friction in the past have been eliminated, it is felt that the way
has been cleared to make a renewed effort to restore the relations
between Australia and the Netherlands to their prewar status.

5. The factor which has unfavourably influenced relations and
which gave rise to a multitude of interrelated problems, often
difficult of solution, has been the boycott of Netherlands Indies
shipping. All efforts directed towards the better understanding
which the Netherlands and Australia desire appear doomed to
failure if the primary cause of the present unsatisfactory state
of affairs is not resolutely attacked. No effective solution can
be achieved in treating each irritating symptom incidentally even
with mutual goodwill. It is necessary to remove the root of what
after more than two years is developing into a chronic disease,
which, if it remains unchecked, might conceivably lead to a
deterioration of the position. The remedy which is clearly
indicated is the lifting of the boycott in the immediate future.

6. In urging this course the following points are submitted:

(a) Public opinion in the Netherlands and Netherlands East Indies
is perturbed by the antagonistic attitude of certain Trade Unions
in Australia as manifested by the boycott. After the military
police action of July 1947 and extension of the boycott public
opinion inclined further to the view that Australia was not an
unbiased nor unprejudiced observer of events.

When it is considered that public opinion in Australia, largely
expressed by a conservative press (in the Netherlands a notable
proportion is definitely 'Left') at the outset has been somewhat
confused, both as to the issue involved and the actual situation,
it is not surprising that misconceptions arise in many quarters
identifying the attitude of certain Unions with the policy of the
Australian Government. It is however a source of satisfaction that
the real facts of the situation are gradually penetrating ever
widening circles as is borne out by a fairer presentation of
events by the Australian press.

In this connection it may be recalled that the Australian public
has its attention focussed almost entirely on the conflict between
the Netherlands Government and the Republican authorities in
Djocjakarta. It should be borne in mind however that considerable
parts of the Netherlands East Indies, the Republic[s] of East
Indonesia and Borneo, are already functioning as autonomous states
in full and loyal cooperation with the Netherlands Government with
a view to taking their place in the Federated States of Indonesia.

Apart from this development nationalistic movements in other parts
of the Netherlands East Indies are manifest, which seek on the one
hand autonomy and self government and on the other definitely
reject the exclusive domination by the Republic of Indonesia.

(b) The interest of Australia that an orderly state of affairs
should exist in the territory of a near neighbour is appreciated
because a state of anarchy and chaos has inevitable repercussions
on the political and economic life of the South Pacific. The
desire of Australia to contribute towards a restoration of normal
conditions is being thwarted by the sanctions imposed by the
Unions.

(c) Admittedly the Unions in question mean to extend to the
Republic of Indonesia their help and support in what is termed the
struggle for freedom and independence. This principle however has
been conceded and adhered to by the Netherlands Government and
would have been effected had the Republican Government been
willing and able to cooperate with the Netherlands Government to
execute the basic agreement of Cheribon. The boycott in reality
only amounts to moral support of a cause the principle of which is
no longer in dispute.

The situation really requires measures to reconstruct Indonesian
economy with emphasis on the restoration of normal living
conditions for the Indonesians. On examination of the civil
supplies stored in Australia, it is apparent that precisely many
of the goods required by the native population are those being
held up. This is obvious from the joint appeal of May 1947 to the
Australian Government from the Governments of the Netherlands East
Indies and the Republic. [3]

(d) It needs no comment that the continuation of the boycott
places a heavy financial burden on the Netherlands at a time when
the foreign exchange position is extremely difficult. The storage,
maintenance, administration etc. of the supplies involve
expenditure of large amounts plus the upkeep of a relatively large
civil personnel. The supplies were in the main purchased and paid
for in 1945, hence the loss of interest and the risk of
deterioration of the goods is very considerable.

(e) The Netherlands and Netherlands Indies Governments view with
dismay a situation which bears the seeds of constant menace to
good relations and impedes the flow of normal trade-considerations
of genuine interest to both the Australian and the Netherlands
Governments. In view of the mutual interests involved attention
should be given to reports from the Netherlands East Indies
showing that increasing quantities of products (i.e. oil, rubber,
copra, tea, kapok, sisal, tin, quinine etc.) are becoming
available for export. On practical grounds the lifting of the
boycott would secure for Australia a share of these products, and
at the same time, reopen the Netherlands East Indies market for
foodstuffs and the many manufactured products which constituted a
considerable proportion of the Australian export trade.

The time factor should not be neglected as trade which has been,
and is, increasingly diverted to other channels will be difficult
to re-establish if the shipping ban is to be continued.

(f) The present moment for action should be considered opportune
because as stated above possible causes of friction and
misunderstanding are being removed. Both Governments desire the
restoration of relations of traditional friendship. Australia's
membership on the Commission of Good Offices constitutes a
position of neutrality, acknowledged by Australia but which does
not appear compatible with the protracted boycott.

No gesture of goodwill could be more telling nor have greater
effect than if the Australian Government were to use their
influence for the termination of the shipping ban.