882.6176 F 51/27

The General Receiver of Customs of Liberia ( De la Rue ) to the Chief of the Division of Western European Affairs ( Castle )

My Dear Mr. Castle: I sent you two cables because I thought you would be interested to know how the Firestone Company Agreements [Page 407] have been received here and also they would indicate to you the turn affairs were taking.17

2.
The majority of the Cabinet who are here were all of the opinion that it would be a more proper procedure and would not be likely to give offense to Great Britain and France or start anti loan propaganda as they fear the present Agreements may do if the loan agreement provisions were made a part of a separate agreement. They are perfectly willing to have the two Agreements so worded as to make them in effect part and parcel of each other but nevertheless as these Agreements have all been completed and signed, you will understand it was doubly difficult for the officials here to accept although had they been able to discuss and possibly change some of the wording without changing the principles it would have been easier for them.
3.
At any rate, as I cabled you, these principles have now been accepted and the Agreements themselves are receiving scrupulous care and consideration although no definite action can be expected until the President’s views are ascertained.
4.
For your confidential information, I am forwarding you a copy of my opinion as Financial Adviser, so that you will see the attitude I have taken in the whole matter.

Very sincerely and respectfully yours,

S. De la Rue
[Enclosure]

The Financial Adviser of Liberia ( De la Rue ) to the President of Liberia ( King )

Excellency: I have the honor to herewith submit for your Excellency’s consideration, at the request of the Secretary of State of Liberia, an opinion on the Firestone Agreements mentioned above.

1.
In order that my attitude may be clear, I should like to explain that my present intention is to discuss the matter as a question of principle rather than from the view point of minutely examining the detail. In my opinion, the question of the detail is insignificant in a subject of the magnitude and far reaching effect that a Concessionary Agreement of this class must be to all of the officials, citizens and inhabitants of this country. Should it come to be ascertained that the Executive Government of the Republic finds itself in accord with the principles embodied in the Agreement, then the detail becomes important only as a matter of phraseology or expression.
2.
As I am impressed with the offer that has been formally made by the delivery of three completely executed Agreements, I see the question before the Executive Government of Liberia as divided into three great principles:—
(a)
The acceptance of American economic influence,
(b)
The acceptance of the idea of offering inducement to foreign capital for the development of Liberia.
(c)
The determination of the country to renew its acceptance of American superiority of interest over the interest of other foreign countries.
3.
The first principle (a) The Acceptance of American Economic Influence, is the foundation stone of the other two. To a student of economics and equally to a student of diplomacy and affairs, modern civilization appears divided into certain great economic fields, each with certain characteristic peculiarities. Ancient civilization never comprehended an economic field separated from the sovereignty or dominion of the dominant nation in each field, but today the world has progressed to the use of trade agreements, special exemptions and financial systems which render it perfectly possible for groups of peoples moving in certain economic fields to preserve their own sovereignty and government and yet from the point of view of commerce, to be as indissoluble as if they were citizens of the same country or men of the same blood and race.
4.
The economic field of Germany, before the war, was an example of this. German commercial dominion was recognized among many nations. It was when the German military caste sought to return to the principles of the ancient world and unite commercial supremacy to sovereignty, that Germany saw the careful commercial up-building of many years swept into ruin. Today, Germany deprived of her colonies and deprived of her former sources of raw material, compelled to buy in the world’s market and to borrow her very capital from her late antagonists, presents an uncertain future. Germany may become modern, democratic and a safe neighbor. Germany may revert to her war ideals and become a military autocracy again endangering those people with whom she deals. The desire for colonial possessions in Africa is evident and her increasing power will render her diplomacy more and more determined in its efforts to this end. I am convinced that at this time, seeing the future no more clearly than we do, entering into the post war German economic field would be unsafe for a country whose strength is yet undeveloped.
5.
France has presented to the world an unwavering economic policy of colonial possession, and then and only then, development. Broadly speaking, one may examine the map of the world and find [Page 409] relatively little French capital invested in any country other than a country which by some system of government is in fact a French Colony or Protectorate. France suffered as a country more during the late war than any of her allies excluding Belgium. Today, we see her with depreciated currency struggling to obtain some share of the promised compensation for her damages with but little available capital for the development of her very large share of the world. To enter definitely into the French economic field would not appear to offer hope of that capital investment which the resources of this country require if they are to be brought into service for its citizens.
6.
The British Empire is the next great economic force in the world and English capital has developed country after country and territory after territory with little or no regard of the question of the sovereign power so long as an honorable and stable government was maintained in the place where English capital was to be used. Even the United States sought English capital and the great transcontinental railroad lines of America were largely built from English sources. The British Empire, therefore, appears from this point of view, a safe and desirable field in which the Republic of Liberia might seek to obtain the necessary capital for its development.
7.
On the other hand, the Republic of Liberia is a plantation country. It may have mineral sources of great value but they have never been accurately located. There is not a mine in actual operation from the many concessions that have been given, and if one examines the Export Statistics of the country, one finds that the people of the country have turned to the export of palmoil, palm kernels, fibre, coffee and rubber. It is a law of economics that is well recognized, that people of any country, community or environment, will tend to produce always that thing which their environment most profitably and easily produces. The proof, therefore, today of Liberian resources has been definitely given on the subject of plantation production and it is yet to be obtained on minerals or manufactured goods.
8.
In my opinion, therefore, Liberia should seek and must seek an alliance with capital in an economic field whose effort is toward the development of plantation products of a character which experience has shown can be easily and profitably produced in Liberia.
9.
If one examines the world’s statistics, the British Empire already produces more than 80% of the plantation rubber produced in the world. We find British industries seeking to sell rubber rather than to buy. The same in effect holds good for all plantation products, the British Empire being the best balanced as well as the most self-contained existing economic field. Capital alliance with the British Empire field must therefore be sought in competition with British industry, if it is to be obtained at all.
10.
The next great world economic field is that of the United States of America which includes many nations not under American dominion. An examination of the world’s products bought and interchanged by this field shows that the consumption by industry is greater than its production of raw products. We find 70% of the British Empire rubber production bought by this field; we find other tropical products equally sought. Logically, therefore, the Liberian Republic should expect to obtain a better consideration in an alliance with the American economic field than with those groups which I have compared above.
11.
In discussing the question of the principle of world economic fields, I have approached the subject from a detached point of view taking no notice of the local sentiment or desires of the citizens of the Republic. It would be perhaps unfair to refrain from recalling the historical association between the United States and Liberia and the very natural tendency of the citizens of this Republic to look with favor on an economic alliance with a group whose colony they consider themselves to have been, this association being mutually appreciated as the political history of Liberia so frequently records.
12.
The second principle (b) The Acceptance of the Idea of Offering Inducement to Foreign Capital for the Development of Liberia has been already accepted as the expressed policy of the present Administration. The interior has been partially opened to foreign trade, the draft Agreements exchanged with the Firestone Tire & Rubber Company in June 1924, the Anglo African Exploration Company Ltd., Mining Agreement, the Mining Laws of 1923/24, the Highway Act of 1924/25, and other laws, regulations and privileges demonstrate the attitude of this Government on this point beyond question or need of discussion. The Firestone Agreement No. 2, however, as now modified, brings into question two principles inasmuch as the inducement suggested as being necessary to permit this Company to develop rubber plantations producing in competition with the Far East covers in Article 4, Sub-Section “K” the agreement on the part of this country to accept a loan for certain public works, educational, agricultural and other developments.
13.
The principle of inducing private capital to come here to develop the natural resources of the country may appear to be somewhat different from the idea of obtaining a foreign loan. Actually this is not so as the loan and the public works resulting, offer in themselves a part of the inducement desired. The question of a loan, its desirability and necessity as distinguished from ordinary inducements to foreign capital, I will cover in my next paragraphs.
14.
The third principle (c) The Determination of the Country to Renew Its Acceptance of American Superiority of Interest Over the [Page 411] Interest of Other Foreign Countries. This question may appear to be very closely allied with the question of entry into the American economic field and yet in a strict sense it is only recently that this has been so considered. The people of Liberia originally sought aid from America in order to establish themselves on this coast and repel the native tribesmen, and that aid was forthcoming through the American Colonization Society. Later, there was a decided attempt to unite this country with the United States of America either as a territory or in the form of a protectorate. These attempts to make closer the association between the two countries were never based on the desire for the development of the country’s resources. They were purely and simply attempts to secure protection of a stronger power on the part of a weaker power who felt that it needed that protection in order to develop its strength; that it needed protection in order to be able to turn its ideas to any other things than war and self-defence. In 1917, this idea was again expressed by the Liberian Republic in the original 1917 loan, or in the “American Program” as it was called.17a
15.
In 1921, there was a different feeling shown in the relations between the United States of America and Liberia because the relationship contemplated under the 1921 loan agreement incorporated the idea of economic development although the idea of protection was never lost sight of. The loan was defeated in the Senate of the United States and the Liberian Government followed your Excellency’s idea of not seeking a foreign loan until this country had shown its ability to succeed or had at least demonstrated its ability to develop to such an extent that the Executive Government could exactly determine the degree of necessity of a foreign loan.
16.
In 1923, upon my return from Europe, your Excellency had decided that in spite of the very manifest and successful efforts of the people of this country, it was apparent that a certain protection on one hand and assistance on the other were necessary if the people were to be satisfied and not discouraged by the slowness of their effort and the lack of sympathy manifested in certain foreign quarters. I refer particularly to your Excellency’s communication addressed to the Honorable Fred Morris Dearing, American Minister to the Republic of Portugal.18
17.
When I returned from leave in 1924, I was able to lay before your Excellency a very clear statement of the necessity of a fixation of American interest in this country if public works and other development was [were] to be undertaken through the assistance of a foreign loan obtained in the United States. From the numerous [Page 412] interviews I had had both in Europe and the United States, I ascertained that the present resources of this country were not sufficient to offer very much security to bankers and it seemed to be inevitable that a loan obtained through private bankers must be at a high premium and must to a great extent carry itself from its own capital for the first several years before the resources of the country could be expected to be developed.
18.
If your Excellency will recall, I pointed out that the investment of the very large amount of capital offered by the Firestone Tire & Rubber Company for plantation development would at once put a different phase in this situation. The amounts that the Firestone Tire & Rubber Company offered to pay the Government form but a small percentage of the benefit to the Government. I mean that the employment of some thousands of laborers, the increased use of the roads, the increased calls of ships to handle the export, the increased demand for skilled labor, and the putting into circulation of many hundreds of thousands of dollars annually, mean a swelling of the income of the Government in every direction not only from the ability of the citizens to pay taxes but from their increased consumption of necessities and luxuries. A condition of economic prosperity to thousands of individuals in this country obviously puts a different face on the aspect of a foreign loan so far as the ability to meet its obligations is concerned.
19.
The Firestone Tire & Rubber Company came to Liberia seeking three things as the foundation on which it could determine whether it could do business in this country profitably and successfully. The first question to be considered was, could the Republic produce rubber, that is, was its rainfall, its climate and its soil suited to rubber production.
20.
The second question to be considered was, granted that the first was satisfactory, was the Government animated by a desire to have such a development and if so, would it express that attitude concretely in the form of satisfactory terms which would permit production on a competitive basis with the Far East and Brazil.
21.
The third question was security. In other words, if the rain and the climate and the soil, after experimentation was decided to be suitable for rubber production, and if the country was prepared to grant terms which permit competitive production, then came the third and last question which determines whether or not this Company will carry on its affairs in Liberia. That question was and is, is the territorial sovereignty of Liberia secured. Or, putting the question in another way, can this Company assure itself of the continuation of the Government of Liberia as a stable, autonomous Government.
22.
Incidentally and closely associated with all of these questions is the question of whether or not the Liberian Government is prepared [Page 413] to undertake construction necessary for public improvements, to develop its Sanitary Department on modern lines, to train agriculturists, and in other words, to progressively develop as other countries have developed and to meet and pay those expenses and obligations which could not be considered to be any part of the proper and ordinary cost of the production of rubber to be paid by the Company itself.
23.
The statements contained in the foregoing paragraphs may appear to digress somewhat from the subject under discussion. Nevertheless, it is not so, because the study which the Firestone Tire & Rubber Company has made of Liberian conditions has brought that Company, as evidenced by its new draft agreements, into very much the same state of mind as led your Excellency to re-open the conversations with the United States Government on the subject of Liberian development in the letter to the Honorable Fred Morris Dearing above referred to, and in a conference had with the writer in November 1924 the details of which were communicated to the American Government.
24.
We must presume from the fact that after having had experts examine the conditions in Liberia, the Firestone Company has submitted completed and signed proposals, that the question as to rainfall, climate and soil has been answered satisfactorily; that as an analysis of the new agreements shows relatively little change from the terms of the original draft Agreements tentatively offered last June, that the question as to the willingness of the Government and Legislators is considered to be entirely satisfactory and even were this not so, the action of the last Legislature definitely proves the willingness and desire of the people of this Republic to offer what appears to be fair terms to the investment of foreign capital. I am perfectly aware that certain comparatively new paragraphs have been inserted in these Agreements and some changes made in the financial conditions, but after all these are not modifications of principles and are matters for discussion after the larger questions at issue have been definitely decided.
25.
There then remains the third question, that of security. Security comprehends not only the autonomy of this nation, but more, it means that the progress and administration of national affairs shall continue in an orderly fashion. Very obviously no large capital investment from foreign sources can be expected unless prospective investors can be fully satisfied on these points. I remember, when I was in Washington, the Firestone Company sent some representatives to interview one of the higher officers there and asked the question, what protection could the Company expect if it invested its capital in Liberia. For an answer, the Company was referred to the existing treaties: that of Commerce and Amity, containing the [Page 414] most favored nation clause represented the only conditions under which the United States Government could exercise any interference or protection in this country. Questions have been asked as to public works development and as to the ability of this country to build roads, bridges and maintain a duly qualified Physician and medical force for Sanitary purposes, and to these questions, and to others of like character, the replies have not been satisfactory because the country has not been financially able to do these things from its current revenues nor is there any prospect of it being able to do these things for the next several years to come unless a loan is sought. To an analysis of the existing conditions, therefore, only one answer could be made, namely, that from some source if these things were to be done, a loan must be secured.
26.
The conditions of the granting of loans to small countries throughout the world are matters of public record and the reference works of the big financial institutions render them easy of access for any one seeking information thereon. Looking at these terms and at the fact that almost inevitably they provide for foreign advisers, foreign officials, or control and administrative officers appointed by foreign banks and Governments, it appears to be only logical and to be expected that conditions and terms for Liberia, where conditions and circumstances are analogous to these other countries, would be similar. It was inevitable that the question should be asked by the Firestone Company, would this new element which it foresaw must become a factor in Liberian affairs be a force which would fit into the economic field in which it was conceived Liberia would be entering. What nation would furnish it and for what reasons. What conditions would be imposed. Would they interfere with the plantation business in this country.
27.
Looking at the history of Liberia’s relations with the United States, the most important point would be the 1921 Loan Agreement. This Agreement had been considered satisfactory to Liberia. It had been signed by its highest officials and it had become a law by virtue of the approval of the Liberian Legislature of 1921/22. This Loan Agreement saddled the country with no charges for floatation. It aimed at development, it provided impartial officials and what was more important, possibly, was the fact that by virtue of the Memorandum entered into at Versailles in July 1919 by Representatives of Great Britain, France, the United States and Liberia, it recognized on the part of Great Britain and France the close association between Liberia and the United States of America; the right of Liberia to call on the United States as its next friend and the right of the United States to answer that call. As a diplomatic foundation, it was perfect.
28.
As I see the situation, the only thing that could be done which would at once place both the Republic of Liberia and the Firestone Tire & Rubber Company’s investment in the position of security desired was to attempt to revive the conditions that existed at the time the 1921 Loan Agreement was in contemplation, and to do this, the consent of the American State Department had to be sought. Would the Secretary of State of the United States again assume the obligations to be assumed by the American State Department under the loan plan of 1921? That the answer to this, by the American Secretary of State was favourable, cannot be doubted from the fact that the Firestone Company is content to offer signed Agreements. Further, I have been informed by Mr. Hines that his Company is in possession of a letter from the American Secretary of State on this subject,19 although I have not seen the letter. Since that consent of Mr. Hughes has been secured, Mr. Hughes has resigned. Mr. Hughes’ successor will of course feel himself as morally and ethically bound by Mr. Hughes consent, but whether he will consider himself so obligated should new modifications render it necessary to re-submit these Agreements to the State Department remains to be seen. The first is a question which may be regarded as settled, the second is a situation calling for an expression from the new Secretary as to his own determined policy which may or may not be the same as that of Mr. Hughes. It is a new factor in the situation and one that must be considered.
29.
Discussing the subject of the incorporation of the loan basis of 1921 in the present Agreements, from the view-point of principle, I find the idea excellent and the advantage to Liberia is an advantage which is greater than Liberia has ever sought in her previous negotiations, although obviously, it is the advantage which it was hoped the public works and progress planned under the 1921 loan might in its last result bring to the citizens of this country. To express myself clearly, I mean, that the Firestone Company’s plan incorporates in one single Agreement, commercial prosperity to the merchants, the employment of thousands of citizens, revenues to the country both direct and indirect, and lastly, a foreign loan for immediate public works, education and various other things which this country ardently desires.
30.
Knowing your Excellency’s thought on many of these subjects, from your Excellency’s conversations and confidence, and referring particularly to the conversation had with your Excellency and the Secretary of State on the subject of foreign loans, as a result of which I wrote Washington in November 1924,20 I realise that there were [Page 416] faults in the American Loan in itself which needed correction and I realise perfectly well that there have been some changes, in fact great changes, in Liberia in the last several years. I believe, however, that a study of the situation will bring your Excellency to the same conclusion at which I have arrived, that is, that inasmuch as the amount of money specifically mentioned in the Firestone Agreement, viz:—two to five million dollars, is a reduction of the original 1921 loan plan, it must mean a corresponding reduction in the number of foreign employees and in certain other of the disbursement and expenditure clauses when the time comes to enter into a completed Loan Agreement.
31.
Further, and this is important too, the Firestone Agreement is open notice to foreign nations of the renewed interest of the “United States of America in Liberian affairs under the July [June] 1919 Memorandum.21
32.
I have stated in my opinion that I will confine myself to the principles involved. This I have done. I have several suggestions on certain aspects and phases of this situation which I would be glad to discuss if your Excellency cares to go further into the matter, but to my mind, I do not find the Firestone proposals unreasonable nor unnecessary nor do I find them to be so far from the Administration’s desires and ideals as to be incompatible with the plans for the progress of this country as laid down by your Excellency’s Administration. The principles embodied in the No. 2 Agreement, I consider as meriting approval. I have not considered the other two Agreements as these are relatively unimportant except as a part of the No. 2 Agreement.
33.
I therefore recommend to your Excellency the acceptance of the plans incorporated in the Firestone Company’s scheme as set out in the several Agreements under discussion.

I have [etc.]

S. De la Rue
  1. Evidently refers to telegrams of February 23 and 25 from the clerk in charge of the Legation at Monrovia, supra.
  2. See Foreign Relations, 1917, pp. 877 ff.
  3. Assistant Secretary of State at the time of President King’s visit to America in connection with the proposed loan of 1921.
  4. Ante, p. 403.
  5. Not printed.
  6. Foreign Relations, 1919, vol. ii, p. 486.