811.24 Raw Materials/328a: Telegram

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

1036. With respect to the deliberations of the Rubber Regulation Committee, the Department was informed by The Hague a day or two ago that Netherlands officials were prepared to agree to a 10-percent increase in releases if the British were favorable. The Department is now informed that Dr. Hart and his colleagues have been greatly impressed by the British argument that an additional 90,000 tons will be available during the next year due to the withdrawal of the Central Powers from the market, and that rubber prices have not fluctuated greatly to date.

The Hague is being informed that commercial stocks in this country are badly depleted and that there is every reason to believe that all of the rubber that can be released will be taken up immediately by American manufacturers, including any excess arising from lower sales in Central Europe. You may wish to press this point in London also and to seek to avert any further buck-passing between London and The Hague.

Please also stress the point that rubber prices have remained relatively reasonable only because of the strenuous efforts of American manufacturers, who have almost completely remained out of the market. Viles and the manufacturers are convinced that prices will rise inordinately when the manufacturers return to the market for their current requirements, even though they make no attempt to build up stocks, unless in the meantime the International Committee authorizes the additional releases requested.

The concern over a prospective reduction in world consumption may be justified in the long run but it seems clear that for the present [Page 879] and for several months ahead there is bound to be an unusual demand for supplies, due not only to the desire to build up stocks but also to heavy advance orders for finished goods.