856D.6176/400: Telegram

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

139. I have received British Government’s reply25 to representations based on Department’s 47, February 13, 2 p.m.,26 which is 14 pages in length but in view of approaching meeting full cabled summary seems desirable.

Paragraph 1 emphasizes that British Government “have always been aware of the natural concern which any stringency in the rubber market is regarded in the United States and they are at all times willing to give careful consideration to representations coming from United States rubber interests, all the more so since these interests are the best customers of the British rubber producers”.

Paragraphs 2, 3 and 4 refer to setting up of Rubber Committee and mention that it is only British delegates to Committee over whom British Government have some measure of control and that they alone cannot secure fixation of any particular rate of release.

Paragraphs 5 to 14 are devoted to refuting American Government’s contentions by analyzing and emphasizing part played by Consumers Panel. “If then it can be shown that the Committee throughout 1936 acted in close agreement with the advice of the Consumers Panel it would be difficult to maintain that they were no longer following the same policy as in the period to the end of 1935, or that their policy could have been considered by the Consumers Panel as other than moderate and reasonable.” In this connection it is pointed out that “up to the end of October 1936 the Committee and the Consumers Panel were in close agreement as regards all measures taken to that date”. The defense of what happened after that time is varied, mention being made of wrong estimate of consumption of the American Rubber Manufacturers Association; that “towards the end of November rising prices and the possibility—now seen by all concerned for the first time—that consumption would largely exceed the estimate”; “the fact that the Committee considered that more rubber could not be produced at such short notice than the amount corresponding to the rates of release actually fixed”. It concludes therefore “that thus at the end of December 1936 the position which had arisen had been foreseen neither by the Consumers Panel nor by the Committee” and that it was not until the meeting called on January 26, 1937 to reconsider [Page 895] situation that “for the first time a divergence appeared between the views of the Consumers Panel and of the Committee”. It is maintained that Committee was then right in refusing to follow advice of Consumers Panel for they “had good reason for believing that the rate of increase on which they decided is the highest which producers can work to at the present time.”

Paragraph 15 remarks that rubber is not factory product and terms as remarkable achievement increase of 31 per cent envisaged for 1937 over 1936. “The essential difficulty at present is that sudden and unforeseen increase in demand unforeseen by Consumers Panel or Committee coincided with special circumstances rendering rapid despatch of rubber more than usually difficult.” After enumerating certain of these difficulties including speculation in commodities it is stated “no control scheme which is unsupported by the possession of large stocks under the controlling authority can control such a situation fully over a short period; and it is common knowledge that speculative movements of this kind occur periodically whether a control scheme is in existence or not and often irrespective of the long term position.”

Paragraph 16 emphasizes that Committee’s costing figures “do not support your contentions that 7-l/2d is a fair price for the efficient producer and during 1936 a price substantially higher would be more in accordance with the facts. It should not be forgotten that the equitable price level is a varying level depending on the rates of release, the cost of labor and many other changing factors …27 it can hardly be said that the present price level which at the date of your letter had lasted barely 2 months, although it is admittedly higher than the fair and equitable level for the efficient producer as determined on the Committee’s costing basis, has so far placed an undue strain on the consumer.”

Paragraph 17 expressed British Government’s confidence that Committee is taking and, supported by advice of Consumers Panel will continue to take, all practical measures in its power to deal with present situation and they expect that in short time the supplies of rubber will equal and then exceed demand.

Paragraph 18 expressed opinion that there is no necessity for altering personnel of Committee or provisions for safeguarding consumers’ interests. At same time British Government offers to consider any proposals which the United States sees fit to forward for increasing flexibility of scheme or of securing at all times adequate supplies and if acceptable would recommend such schemes to consideration of other parties concerned. “His Majesty’s Government would for instance be prepared to suggest to them that a representative of your [Page 896] Government should be invited to join the Committee and to attend its meetings.”

Paragraph 19 as follows: “I trust therefore that the foregoing observations will meet the misgivings which prompted Your Excellency’s Government to address to His Majesty’s Government their note of the 15th February. In view of the policy of the United States Government with regard to cotton, wheat, copper, sugar, etc., I cannot believe that the principle of regulation is in itself objectionable to them. So long as such regulation is able to maintain prices at a reasonable level and to provide alike against abnormal scarcity and excessive production, I venture to assume that your Government will accept such action as being consonant with their own policy; and from the point of view of world trade generally I believe that they will agree that some regulation of the production and marketing of raw materials is on the whole advantageous. In view of these considerations and of the practical suggestions which I have been able to make in the foregoing paragraph of this note, I trust that your Government will be able to reassure themselves, and American rubber consumers in general, that the work of the International Committee has on the whole been beneficial, that it cannot be regarded as mainly responsible for the recent and possibly excessive rise in the price of the commodity, and that it is desirable that it should continue its activities in the future along the same general lines of policy as hitherto.”

Viles and Blandin called yesterday at Embassy and in course of conversation reported that Sir John Campbell had gotten in touch with them immediately upon their arrival in London and in course of talk referred again to desirability of rubber interests for their own good insuring that the United States Government keep its hands off the situation. He also mentioned that he hoped that they realized he was only the Chairman of the Committee, that decisions did not remain with him and it was increasingly difficult for him to carry Committee with him and that therefore he was not personally responsible for its decisions. Later he suggested to Viles that no useful purpose would be served in advising this Embassy of above. May I venture to point out that in regard to British note, (1) there is no reference to the representations made under the Department’s instructions particularly that of September last which contained a clear warning;28 (2) that it would be highly desirable to place a reply on record before forthcoming meeting particularly if it can be in measure related to discussions of raw materials; (3) the final sentence in paragraph 15 quoted above may mean that the British authorities are contemplating the setting up of buffer pool (see 1934 correspondence) which would be a [Page 897] useful defense reserve for them; (4) the statement that “the Consumers Panel bears at least equal measure of responsibility with the Committee” is extraordinary in view of arbitrary manner in which American Government’s 1934 suggestions on consumer representation were turned down. I gathered from Viles and Blandin that Campbell is doing all he can with a view to getting Consumers Panel to endorse action to be taken at forthcoming meeting. In view of this note Department may care to instruct me to discuss the pertinent parts regarding the attitude of the Consumers Panel with Viles and Blandin. It might be mentioned that the common gossip on London Stock Exchange is that the Malaya plantations at least cannot produce any more rubber for some time and that almost all the companies have falsified their production figures. Consequently there is much talk of rubber being at 1 shilling 6 pence in the ensuing months.

  1. Note No. W4455/97/50 of March 11; copy transmitted to the Department by the Ambassador in his despatch No. 2932, March 15, not printed.
  2. Not printed.
  3. Omission indicated in the original.
  4. Foreign Relations, 1936, vol. i, p. 504.