The Chargé in the United Kingdom (Atherton) to the Economic Adviser (Feis)
My Dear Herbert: The Embassy telegram No. 28, of January 26, 4 p.m., gives you the result of the last meeting of the International Rubber Committee.
Subsequently, I lunched with the members of the Committee and the points of view I gained in my conversations there, as well as in a conversation I had with the Netherlands Minister last evening, are the immediate background against which I am writing this note.[Page 882]
In the course of the luncheon I was told that the producing members of the Committee very much resented the attempts of the American Government to influence their decisions, and that while our representations had reduced Sir John Campbell16 “to a state of jitters”, they had no weight with the other English members of the Committee. Mr. Hay took the line that the average price of rubber over the last two years was very favorable to American consumers and we had no reason to complain. A friend of his joined in saying that any attempts to propagandize the Committee must have the opposite effect upon their deliberations than was desired. Sir Andrew McFadyean was of the opinion that any greater release than was given on Tuesday would have produced a scare and merely increase speculative buying. In the course of his remarks to me, we touched on the question of a buffer pool, which he stated was an impossible project since producers would not be willing to finance it and in his opinion, furthermore, was an unsound method.
The Netherlands Minister was also at this Rubber Committee lunch. He told me then that he knew very little of the subject, but was to have a talk with Van Gelderen, the Dutch representative. I saw the Netherlands Minister again last evening and he told me Van Gelderen had confirmed to him that the members of the International Committee, particularly the British producers, were very much annoyed by the representations of the American Government; that Sir John Campbell had been asked to explain by the Colonial Office his more or less arbitrary actions in September, but that, even though he was Chairman of the Committee and acting under orders from the Colonial Office, he was unable to make headway against the Committee. Van Gelderen told another member of the Dutch Legation that the attitude of the British members of the Committee was “opposed to permitting consumer interests to run their business”.
My general impression, after these conversations, is that that the British producers’ idea of a fair price has now grown to 10d; that while the producing elements are allowed by the Governments—the British primarily—to have control of the restriction scheme, there is no possibility of adequate consideration of the consumers’ interest. It is for this reason that, in the Embassy’s telegram No. 28 of January 26, 4 p.m., the suggestion was put forward as to discussing this matter with Mr. Runciman before he left Washington “in view of the commitments made to us by the British Embassy in their 1934 correspondence”.[Page 883]
In a recent conversation with a Government official he said that the representations made by this Embassy under Government instructions just before the meetings of the International Rubber Committee had had no time to be digested by his Government and discussed with the Committee. I think this is true. Incidentally, the Department’s last instruction was only received the day before the last meeting.
As you may know already, both Mr. Hay and Mr. Miller, the outstanding British producing members of the Committee, have in the annual address to their companies’ shareholders pointed out the necessity for renewal of the restriction scheme, and I believe exchanges of views among the producers are taking place.
In my opinion, our next move should be a formal note to the British Government specifically detailing the commitments they have made to us in their 1934 correspondence and asking that they be implemented both according to the letter and spirit in which they were made. The only way we can get any effective action is by the British Government stepping in, and now is as good a time as any, for it is very likely that the price of rubber will rise, perhaps abruptly, between now and the next scheduled rubber meeting about the middle of March.
For your convenience, I am enclosing a summary of the assurances given to us by the British Government in 1934, the sum total of which are fairly formidable; particularly pertinent, I think, are those to be found in the note of April 26, 1934,17 which reiterates that “the object of the scheme is, that once excessive stocks have been gradually reduced, producers should be able to sell as much rubber as the world will take at a reasonably remunerative price. … Producers working to a higher percentage of their potential output can produce at a lower cost; and it seems probable that part at least of the increased profits thereby obtained would be passed on to the consumer in the form of a lower market price.” What has, however, happened is that, although the quota output has been gradually enlarged, the price has continued to rise decidedly.
While it is, of course, true that most commodity prices have risen, six months ago the British Government and most of the rubber people were thinking in terms of rubber at 7 to 8d. Now that the price has been successfully pushed up to 10d., 7d seems unremunerative, whereas, in point of fact, it affords a handsome profit to any decently-run rubber estate. In any case, the British Government did not gear in their 1934 correspondence their view of the price of rubber in any way to other commodity prices, they viewed the requirements of the industry in an absolute, not a relative sense.