856D.6176/444: Telegram

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

304. Your despatch No. 3170 of July 1, 1937,44 transmitting the response of the Foreign Office to our memorandum regarding the operation of the rubber restriction scheme. You are instructed to present the following memorandum, making such changes in tone or language as may seem to you advisable:45

“My Government asks me to express its appreciation of the consideration given by the British Government to its communications in regard to the operation of the rubber restriction scheme. The latest reply of the Foreign Office which was given to the Ambassador on June 29 has been studied with care. The concern of the American Government in the matter is identical with that expressed in the note of the Foreign Office. It is this continued concern on the part of the American Government that leads to the continued and candid presentation of its views.

“The characteristics of the existing world rubber situation, despite the steps thus far taken for its improvement, remain a matter of anxiety to the American Government. Both world stocks and stocks in the United States have continued to decline up to the present time, and authorized production and exports for the remainder of 1937 afford no reasonable expectation that at the year-end the months’46 supply of rubber for the world will be greater than at its beginning, when prices were at a disturbingly high level. Greater stocks were proved necessary for orderliness at that time, and for reasonable security the industry in the United States needs Committee action in [Page 915] anticipation of consumption instead of action following price reactions. The industry in the United States, which buys so large a part of the total world production, is still faced squarely with the fact that it could acquire adequate stocks of crude rubber only at prices that involve great risk of loss to them in the event of future prices more nearly in conformity with the original formula of prices ‘reasonably remunerative to efficient producers’. The continued absence of adequate stocks, in the face of what is a monopolistic control, therefore means continuing fear lest that control operate to keep supplies unduly low.

“All these circumstances will explain the importance in American eyes of the decisions of the future meetings of the International Rubber Restriction Committee as regards the amount of rubber to be made available in the world market.

“My Government asks me also to comment upon Mr. Eden’s interpretation of the assurances given by the British Government to the American Government in its note of April 26, 1934, regarding the character and operation of the rubber restriction scheme. Its understanding of the communications of that period was to the effect that it could be well assured that the scheme could not operate unfairly to consuming interests because it so largely rested upon actions carried out under the authority and responsibility of the British and other Governments. In the light of this understanding it is somewhat disturbed by the statement in the memorandum of the Foreign Office that while the assurances extended ‘are at all times present to the minds of the British members of the Committee, they were not assurances that we would or could intervene in the work of an International Committee, in order to dictate what should be their policy’. I am requested to ask whether my Government is now to understand that there can be no effective and decisive governmental supervision over the decisions of the representatives of the International Committee, most of the membership of which are directly connected with the private rubber producing interests. As my Government understands the situation, the decisions of the Committee can only become effective by virtue of official governmental actions of the British and other governments, that control of production exercised through governmental agencies is the essential instrumentality of the whole restriction scheme.

“It is greatly to be hoped that the situation will be so developed that present anxieties are quieted. These anxieties are natural in the face of serious dependence for so vital a raw material upon the decision of a combination representing all the main sources of supply. It is a matter affecting the welfare of consumers, the occupations of tens of thousands of workers in the United States, and the public mind. It is unnecessary to dwell upon the constantly developing public interest in the whole question of raw material supplies. Ever since the Conference at London in 1933 the American Government has shown its disposition to cooperate in plans for the orderly international coordination of supply and demand of products entering world markets. Its participation in the Sugar Conference47 was the most recent indication of this disposition. At the same time it is [Page 916] becoming increasingly convinced that if such arrangements are not to give rise to new conflicts they must favor, to the greatest extent possible compatible with the reasonable interests of producing groups, those dependent upon the supplies.” (End of note.)

The British reply seems to the Department a disappointing one which pays insufficient attention to the risks involved in the present situation, particularly the Department’s concern with what would appear to be the evasion of responsibility in the memorandum of the Foreign Office, which seems greatly to lessen the assurances previously given. In presenting this note to the Foreign Office and in discussing the matter with that and other branches of the British Government, you are instructed to indicate these views.

Please repeat to The Hague.

The substance of this telegram may be discussed freely with Mr. Viles.

  1. Not printed; see footnote 42, p. 912.
  2. Transmitted to the British Foreign Office as the Embassy’s note No 2693, July 17, 1937.
  3. Among the verbal variations of the draft memorandum made in the Embassy’s note of July 17, “months’” was inadvertently changed to “available”; see memorandum of September 18, p. 918.
  4. See pp. 931 ff.