Memorandum of Conversation, by Mr. Boy Veatch of the Office of the Adviser on International Economic Affairs

Mr. Viles17 leaves on January 21 for the next meeting of the International Committee at The Hague early in February. He called on Dr. Feis18 in order to discuss problems of supply and price as affected by the control of the Committee.

In the opinion of the American industry rubber prices at around 8 pence per pound in London and 16 cents in New York give an entirely satisfactory return to rubber producers and should not be allowed by the International Committee to go higher. He feels that the International Committee has somewhat revised its price objectives downward during the recent recession but he fears that the pressure will be strong for a considerably higher range of prices when consumption improves. Preceding the last meeting of the Committee in November there was a strong press campaign in London criticizing the International Committee for not taking effective action to lift prices to the point where all producers could operate profitably even at the low quota levels imposed at the present time. This press campaign charged particularly that the International Committee was under “American influence” and was not giving sufficient attention to the interests of British producers and traders.

Mr. Viles described in some detail the difficulties he had encountered at the last meeting in persuading the Committee to increase the rate of release of rubber for the first quarter of 1939, in view of the possibility of a higher consumption rate for that period. He received strong support in this position from the Dutch, and more surprisingly, from Messrs. Hay,19 Figg20 and McFadyean.21 At that meeting Mr. Viles had asked for a 55 percent rate of release for the first quarter of 1939, as a matter of tactics rather than the 60 percent which the Board of Directors of the Rubber Manufacturers Association (of America) [Page 859] had authorized him to request. The Committee had agreed upon an increase of the rate from 45 to 50 percent. Mr. Viles does not believe that a 50 percent rate of release throughout 1939 will be sufficient and he intends to make every effort to secure an increase to at least 55 percent the second quarter and 60 percent for the third.

Mr. Viles left with Mr. Feis the attached estimate of consumption and stocks in 1939,22 computed on bases of a number of different rates of release. He feels that stocks are already too low since the American industry believes that world stocks of at least 500,000 tons should be maintained.

Mr. Feis expressed the opinion that, taking into consideration a number of factors operating in the world, prices of rubber should over a period of time follow a downward trend from present levels. Mr. Viles was inclined to agree with this, basing the opinion principally on the known costs of production of rubber, but he said that the industry would be very much opposed to any sudden price drops since sudden price changes in either direction are upsetting to the calculations which manufacturers must make covering a considerable number of months in advance.

Mr. Feis expressed the opinion that Mr. Viles’ efforts have been very effective in influencing the International Committee toward moderation. He saw no occasion for any particular activity on the part of this Government with respect to the Committee’s work at the present time, but he thought it might be useful to instruct the American representatives in London and The Hague to seize a suitable opportunity if it should arise to express to the British and Dutch Governments the opinion of this Government that stocks of rubber should not be further reduced, particularly in view of world conditions as they exist today. Mr. Viles felt that such action would in no way be embarrassing to him and he suggested that if members of the Embassy staff in London should wish to talk the matter over with officials of the British Foreign Office and Colonial Office, they might wish to bring him along so that the position of American consumers with respect to the various aspects of the work of the International Committee could be discussed.

Mr. Viles commended highly the work of Mr. Butterworth23 in London, stating that he has a very good knowledge of the rubber situation and is very effective in his discussions with British officials regarding this subject. …

  1. A. L. Viles, American representative on the Advisory Panel of the International Rubber Regulation Committee.
  2. Herbert Feis, Adviser on International Economic Affairs.
  3. J. G. Hay, member of Malayan delegation on the International Rubber Regulation Committee.
  4. C. H. Figg, member of Ceylon delegation on the International Rubber Regulation Committee.
  5. Sir Andrew McFadyean, delegate from the State of North Borneo on the International Rubber Regulation Committee.
  6. Not printed.
  7. William W. Butterworth, Jr., Second Secretary of the American Embassy in the United Kingdom.