File No. 825.6374/54a

The Acting Secretary of State to the Ambassador in Great Britain ( Page)


5831. Please communicate the following to Consul General Skinner, furnishing him with copies of previous cables and full information regarding the proposed Nitrate of Soda Executive Committee:

Referring to British proposal for formation of Nitrate of Soda Executive, composed of representatives of American, British, French, Italian and Russian Governments, which has already been agreed to by the other Governments, this Government desires that a preliminary meeting of this proposed Executive be held promptly and authorizes Consul General Skinner to attend as its representative informally to present the following views and obtain full statements of views of the other Governments.

The Government of the United States accepts in principle the British proposal and agrees that the entire supply of nitrate of soda needed by these five Governments for the year 1918 shall be purchased without competition, and that the amount purchased shall be pooled for their mutual benefit, but it desires to suggest some modifications as to the method of purchase and allotment, and its acceptance of the agreement is subject to the condition that it shall not be bound to any action which proves to be unacceptable to the Chilean Government.
It is reported that the Chilean Government is supporting a project, for which legislation is pending in the Chilean Congress, to force all nitrate producers into a combination designed to regulate production and price. It, therefore, seems advisable that some steps be taken to meet this situation.
It is suggested that it might be possible, without going into the open market, to arrange immediately through a British agency by private contracts with the British-owned or British-controlled producing companies for the purchase of their entire output for 1918 at a price to be subsequently adjusted on the basis of average profits to producers on the entire amount of nitrate purchased for 1918 delivery to the five Governments concerned, taking into account cost of production and delivery.
It is further suggested that the Executive Committee should, in its discretion, authorize at once the purchase in the open market of such nitrate as can be bought on reasonable terms for delivery in 1918. In this connection it is desired by the United States Government to preserve the existing buying agencies by utilizing their existing facilities in the proportions of their present business, but requiring them to operate under direction of the Executive, and, if necessary, all purchases to be pooled for account of the Executive.
It also seems advisable that arrangements be made to undertake negotiations as soon as possible in Chile for the purchase from the projected Chilean producers’ combination of the entire available output for the year 1918 on the best terms possible, to be approved by the Governments concerned.
It seems undesirable to carry on these negotiations through ordinary diplomatic channels on account of the contraband character of nitrate; therefore, it would be advisable to send a special representative to Chile for that purpose, and, if agreeable to the other interested Governments, the Government of the United States will undertake the responsibility of initiating and directing these negotiations on behalf of the five Governments concerned.
It is necessary to arrange ample supplies of fuel, bags and other materials that may be required to facilitate production and shipment, and the American and British Governments should supply these at an agreed standard price, any increase or decrease of the price above or below an agreed standard would be added to or subtracted from the contract prices of nitrate; similarly standards for all elements entering into the cost of production should be agreed upon and adjustments made for any variations therefrom.
It is understood that all purchases of nitrate shall be pooled for the mutual benefit of the five Governments concerned in the proportions which have been heretofore suggested.
The United States Government will supply the necessary shipping tonnage required for transporting its share from Chile to the United States, and also will supply and transport to Chile to the utmost extent possible the necessary amount of fuel oil required there for the highest possible production of nitrate during the year 1918, but the United States can not undertake to supply any shipping tonnage for transportation of nitrate across the Atlantic.
Subject to the above suggestions and modifications, the arrangement proposed by Great Britain, and already agreed to by France, Italy, and Russia, for the formation of a joint Nitrate of Soda Executive is acceptable with the exception of paragraph No. 13 of the plan, which has already been refused by the United States, and subject also to the reservation made by the United States as to the independent purchase by itself of 100,000 tons of nitrate for the Department of Agriculture.
The Government of the United States also desires expression of views of the other Governments as to whether formation of proposed nitrate combination should be opposed or encouraged.