The British Acting Secretary of State for Foreign Affairs (Halifax) to the American Ambassador in the United Kingdom (Bingham)48
Your Excellency: I have the honour to acknowledge the receipt of Your Excellency’s note of the 17th July,49 on the subject of the Rubber Regulation Scheme, and to inform you that His Majesty’s Government in the United Kingdom have taken note of its contents, and that they are gratified to learn that the concern of the United States Government in this matter is identical with their own desire that no controversy arising out of this question shall at any time trouble the good relations happily existing between our two countries.
- In the course of your note you ask whether the United States Government are to understand that there can be no effective and decisive Governmental supervision over the decisions of the International Rubber Regulation Committee. It is possible, I think, for you to reassure your Government on this point.
- The Committee contains members of great administrative ability and wide general experience, as well as some of the most prominent experts on the producing side of the industry, who are thoroughly familiar with the rubber market. It has the benefit of the direct advice of a very authoritative consumers’ panel, and it has also at its disposal the fullest statistical material. It is therefore in a better [Page 917] position than any other body to reach reasonable and balanced decisions. Those decisions are, moreover, immediately binding upon the Governments of the rubber-producing countries. At the same time, the various delegations on the Committee are appointed by those Governments; the senior Government member of each delegation holds the vote of that delegation; and the Governments must therefore jointly accept full responsibility for the Committee’s decisions. Further, as His Majesty’s Government in the United Kingdom have signed the International Rubber Regulation Agreement on behalf of the British rubber producing territories (other than India and Burma), they therefore accept ultimately the share of the responsibility which rests with those British territories.
- Your Excellency will however appreciate that the Committee is an international body; and that even if His Majesty’s Government in the United Kingdom were to desire to dictate the policy of the Committee, irrespective of the views of the other signatories to the International Agreement—which, of course, they are very far from doing—they have not the power under the terms of that Agreement to make such dictation effective.
- At the same time, His Majesty’s Government have no reason to suppose that the other signatories of the International Agreement would not unhesitatingly endorse the views expressed in the last sentence of your note: namely, that if arrangements for the orderly international co-ordination of supply and demand of products entering world markets are not to give rise to new conflicts, they must favour those dependent upon the supplies, to the greatest possible extent compatible with the reasonable interests of producing groups. His Majesty’s Government for their part entirely agree that this should be a cardinal principle in the Committee’s policy.
- I observe that in the second paragraph of Your Excellency’s note you express the opinion that the available supply of rubber for the world at the end of 1937 will not be greater than at the beginning, when prices were at a disturbingly high level. I think that there must here be some miscalculation. The world stocks of rubber outside regulated areas at the end of 1936 were about 458,000 tons, and the London price was then 101/2d per lb. By the end of June these stocks had fallen to about 403,000 tons, but the price, (it is true after rising to a considerably higher level for a brief period) had also declined to about 9%d, and it has since fallen to below 9d. If the Committee’s anticipations are fulfilled these stocks will rise steadily from now onwards, and by the end of the year will have reached a figure in the region of 485,000 tons. Even if consumption is greater than is at present anticipated, it is unlikely that this figure will be much below 470,000 tons. It is clear therefore, that, according to the best information [Page 918] available, stocks at the end of 1937 will probably be nearly 30,000 tons in excess of those available at the beginning of the year. A more important consideration in estimating the market prospects is a comparison between the present stock position and that at the end of the present year. If, in fact, a reduction of stocks by 55,000 tons in the first half of the year was accompanied by a fall of about 10% in the price, it is difficult to believe that an increase in stocks of about 82,000 tons or at the least of some 60,000 tons in the second half of the year can be accompanied by any substantial rise in price.
- I do not wish to elaborate these statistical arguments; but in as much as the anxiety of Your Excellency’s Government appears from the terms of your Note to arise, at any rate in part, from a study of the market position, I feel bound to correct what appears to me to be the erroneous deduction which they have drawn from that study.
- I propose if you see no objection to circulate copies of this correspondence consisting or [of] your Notes of the 1st May and of the 17th July and my replies of the 29th June and of this present date to the Governments of the countries signatory to the Main Agreement and also to the Secretary of the Regulation Committee for the information of the Members of the Committee (excluding the manufacturers’ panel) in order that they may be formally notified of the concern which the United States Government feel in this matter, and of the large degree in which that concern is shared by His Majesty’s Government in the United Kingdom.
- In conclusion, I wish to assure Your Excellency once again of the great satisfaction with which His Majesty’s Government have welcomed the co-operation of the United States Government in the attempts made, since the Economic Conference of 1933, to co-ordinate supply and demand. As you have pointed out, this co-operation has been recently—and most effectively—shown in your Government’s participation in the International Sugar Agreement.
I have [etc.]