With reference to telegram 921 from Mr. Bruce  conveying the proposal of the Netherlands Government for the exchange of diplomatic representatives between Holland and Australia, I desire to offer the following comments.
Subsequent to the invasion of Holland and the collapse of France, the position of the Netherlands East Indies vis-a-vis Australia has assumed greater significance. As our nearest neighbour we are closely concerned with the political, economic, and military developments in the East Indies. Questions of common defence, munition supplies and air communications all raise problems the solution of which would be facilitated by an exchange of Ministers.
While a Dutch Minister would be welcomed in Australia, it is doubtful if Australia would derive any real benefit from the exchange unless the Australian Minister accredited to the Queen of the Netherlands in London was actually located at Batavia. To this there might be some objections, as a Minister would have precedence over all other foreign consular representatives in the East Indies. The Dutch would probably be faced with an immediate request for the appointment of a Japanese Minister, which in present circumstances would prove an embarrassment to them.
There is also the fact that consequent on the establishment of the Netherlands Government in London, many of the wider powers granted to the Governor-General of the Netherlands East Indies in anticipation of the occupation of the Netherlands have been withdrawn. Thus, most questions of moment and policy which would ordinarily be raised by a Minister would still have to be referred by the colonial administration to London. These objections would, however, be obviated if the press report to the effect that the Queen of the Netherlands and the Dutch Government might shortly transfer to Batavia, proved to be correct.
It might also be observed that in view of the personal discussions which have taken place between yourself and Dr. Pao , the Chinese Government may be under the impression that China will be the next country selected for an exchange of Ministers.
In the circumstances, I suggest a telegram along the following lines be sent to Mr. Bruce:-
'Your 921 of 16th October. Exchange of Netherlands and Australian Ministers.
In principle, we would welcome a Dutch Minister in Australia, but in view of unprecedented circumstances in which Dutch Government is placed, the location of an Australian Minister in London would have little practical value or benefit to Australia.
We are now intimately concerned with the political, economic and military developments in the Netherlands East Indies, and closer contacts will become inevitable. Therefore, if it were possible for an Australian Minister to be accredited to the Dutch Government in London but actually stationed in Batavia, we would view the proposal favourably.
Such an unprecedented arrangement might, however, not appeal to the Netherlands Government in view of various difficulties which we can appreciate.
If the Queen and Government were to proceed to Batavia, as reported recently in the press as being under contemplation, these difficulties would be obviated.
Would be glad if you would convey to Minister for Foreign Affairs  our appreciation and close interest in his proposal, obtain informally his views on the suggestion we have advanced, and in meantime keep the question open.'