856D.6176/381a: Telegram

The Secretary of State to the Ambassador in the United Kingdom (Bingham)

16. There is some belief that the International Rubber Regulation Committee will, in its meeting January 26, agree upon further lessening of restriction during 1937. The Department is of the opinion that such action is essential both to prevent an unjustified and unwise speculative rise in the price of rubber, and also necessary to prevent the whole question of rubber restriction from engendering new criticisms and controversies. You are therefore instructed to again discuss the situation with all the interested British authorities.

The present aspect of the situation as viewed here is as follows:

That even taking into account the recent enlargements of future production, the prospect is for a further reduction in world stocks during 1937.
That there are many elements present which might make for a further decided rise in prices, largely at the expense of American consumers; this in turn would be likely to be followed in the long run by a violent decline in prices disturbing to the financial position of the American manufacturers.
That the recent small declines in the price of rubber have been due to the fact that the American manufacturers have stayed out of the market at the suggestion of the International Committee, a practice which they obviously cannot continue indefinitely, and to the automobile strikes in the United States.

This Government expresses the hope that the Committee will make the necessary increase in production schedules. Even if this increase in schedules cannot have their full effect immediately in increased production, the announcement of prospective allowed increases should stabilize the price situation. I greatly hope that the Committee will decide upon an increase in production schedules. Even if the announced increases in schedules cannot have their full effect immediately in increased production because of local conditions in some of the [Page 875] producing areas that have been created by the scheme, the announcement of the prospective increases should help to stabilize and safeguard the price situation. The Rubber Manufacturers Association in New York, after talking with Colonel Townsend2 in London on the telephone, informs us that Townsend expects that certain increases in the allowable quotas will be made. However these may not take care of the immediate price dangers. The market position is being dominated at the present time by speculative activities. Therefore in addition to extensive increases in future allowed production it would probably be advisable for the Committee, if it wishes to insure a reasonable price, to announce that it is the Committee’s intention to provide adequate supplies of rubber at a reasonable price, and that it would take any further measures, no matter how drastic, to bring about this result if speculative activities created an unreasonable price situation.

In presenting these suggestions to the British authorities, I think it would not be out of place to remind them that much political interest and agitation centers today upon the question of access to raw materials, and the ability of countries not possessing adequate supplies to secure them at reasonable prices and to share in world prosperity. This question seems to be assuming increasing importance in the judgment of the reasonableness of policies pursued by different governments. This Government is making and will continue to make a firm endeavor to quiet political difficulties by putting before the world a program of enlarged international trade and increased economic activity which will enable the peoples of all countries to thrive, and which will render unnecessary the use of forceful means for the sake of national welfare. I know from the many conversations that have taken place with the British Government that there is a general attitude of agreement on the part of that Government with the underlying idea expressed in this program. I therefore believe that the British Government will wish to take all steps to see that the operation of the rubber restriction program does not become a distinct contradiction to the promise and purpose embodied in the program and in the assurances extended by the British Government when the scheme was inaugurated.

Colonel Townsend at Savoy Hotel, London. This communication has been discussed with Rubber Manufacturers Association in New York, and through them with Townsend. Department suggests you discuss situation with him at once.

  1. A. F. Townsend, American rubber industry representative on Consumers Panel of the International Rubber Regulation Committee.