856D.6176/113: Telegram

The Secretary of State to the Minister in the Netherlands ( Swenson )8

5. Department’s 2, January 13, 2 p.m. In regard to projected international agreement for restriction of rubber production, Department does not want to be faced with an accomplished fact towards which it would be relatively helpless, or have to assume a position barren opposition.

Unless you, as a result of further inquiries, are of opinion the plan still not likely to go through, you are instructed to discuss it with the Dutch Government.

Please begin by expressing the American interest in any such agreement because of importance of the United States as rubber consumer. Then the two following general considerations might be emphasized: (a) That this Government is not unaware of the great fluctuations in rubber production and of price that have occurred, nor does it dismiss possible advantages of stable conditions and of stable and equitable price, but on the other hand (b), action of producers carried on with aid and consent of Government for formation restriction agreement amounting virtually to monopoly agreement for the supply of a vital commodity such as rubber is an action of great moment. It is therefore important that any agreement reached should be carefully drawn in principle and guarded in operation so that it would not seem to be [Page 621] a threat to the economic and general welfare of the consuming countries. The history of the Stevenson plan9 is a warning as to the dangers.

In the light of the foregoing it is the opinion of this Government that any agreement should fulfill thoroughly the conditions of Section (d) of the general resolution adopted by the Monetary and Economic Conference in regard to international agreements for the regulation of production and marketing.

The procedure so far followed on rubber does not promise fulfillment these conditions. No information has been vouchsafed and representatives of consuming interests have been given so far no opportunities for discussion.

Furthermore, if our information is correct, the plan would provide for a pivotal price without prior consultation with consuming interests, and the operation of the agreement would be entirely in the hands of an international committee representative solely of producers groups. The allowable production and price might therefore be determined primarily with a view of securing a maximum profit by imposing on consumers all that the traffic might bear under monopoly conditions. A plan so devoid of safeguards naturally would be regarded with anxiety in this country.

It might also well work to the ultimate detriment of the producing regions themselves, as was the case of the Stevenson plan.

In the event discussions should lead to question of constructive suggestions as to what changes might improve the plan, you might put forward the following and see what response is secured:

(1)
That the consuming interests be given adequate representation on the international committee which operates the scheme.
(2)
That there be provision for full and periodic public reports regarding the operation of the plan.
(3)
That there should be set some maximum price at which consuming areas would be assured an adequate supply of rubber at all times.
(4)
In the event that wheat agreement10 should be cited to you as [Page 622] precedence for the rubber agreement, you might emphasize two vital differences (a) in wheat agreement consuming countries consulted at all stages and represented fully on controlling board; (b) wheat raised practically world over and therefore there is great and easy expansibility of production which would take care of any inordinate increase in prices.

Report fully to Department.

Hull
  1. The same, mutatis mutandis, on the same date, to the Chargé in Great Britain, referring to Department’s telegram No. 5, January 13, 1934, 2 p.m. (not printed), with the following inserted as the penultimate paragraph:

    “Since the Prime Minister was the Chairman of the Conference that formulated the rules applicable to such agreements, this matter should if necessary be brought to his attention.”

  2. For text of the Stevenson Plan, see Great Britain, Cmd. 1678 (1922): Report of a Committee Appointed by the Secretary of State for the Colonies to Investigate and Report upon the present Rubber Situation in British Colonies and Protectorates. A supplementary report containing recommendations for action is in Great Britain, Cmd. 1756 (1922): Supplementary Report of the Committee appointed by the Secretary of State for the Colonies, to Investigate and Report upon the present Rubber Situation in British Colonies and Protectorates.

    For correspondence relating to the plan, see Foreign Relations, 1925, vol. ii, pp. 245 ff.

  3. League of Nations, Conference of Wheat Exporting and Importing Countries Held in London at the Offices of the High Commissioner for Canada, from August 21st to 25th, 1933; Final Act Signed at London, August 25th, 1933, with Appendices and Minutes of Final Meeting (II. Economic and Financial, 1933 II. B. 4).