811.24 Raw Materials/373: Telegram

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

1339. Your 2099, October 19, midnight. There is no disposition here to urge that the British rubber buyer press the market and cause a general price rise. On the other hand, this Government must view with concern the long delay in making the agreement rubber available. The situation may become serious here, especially from a political angle, as more and more cotton is delivered while practically no rubber is moving.

There seems to be no question but that the difficulty is caused by inadequate supplies of rubber. This Department has the strongest assurances from the rubber manufacturers that all of the rubber they are securing is going into current consumption, with no increase of commercial stocks. The Department has checked with the American Consulates at Singapore and Batavia and learns that rubber is being produced at the full 75 percent rate and that there would be no appreciable labor difficulties in connection with further immediate quota increases. The evidence seems conclusive that releases at 75 percent are required to meet current consumption and that therefore at least an additional 10 percent is required to supply the agreement rubber on a basis of deliveries within a 6-months period.

Please prepare and present to the British Government a strong statement of this Government’s point of view, referring to the British Government’s commitment under article 5 of the agreement. The responsibility seems to rest with the British Government to secure action by the International Committee which will release sufficient rubber for the present quarter and for the first quarter of next year to supply the full amount of agreement rubber plus adequate amounts to meet commercial consumption requirements. It is the view of this Government that a quota of 85 percent for the present quarter, retroactive, and for the first quarter of next year will be required. There is also a very strong demand for increased commercial stocks [Page 886] in this country so that there should be no danger of excess rubber on the market even at a rate of release above 85 percent.

You may use in any way you see fit the information that reports are circulating in the market here that the British will supply the Russian Government with rubber bought for delivery to this Government. In any event, there is bound to be criticism of the British Government, and incidentally of this Government, if rubber is delivered to the Soviet Union without adequate arrangements being made for the prompt delivery to this Government of the amounts of rubber provided in the agreement.

For your information the Commodity Credit Corporation and other agencies of the Government are already embarrassed by inquiries from members of Congress and others as to the quantities of cotton and of rubber already shipped. When it becomes generally known that only cotton is moving in quantity, this Government may be subject to such embarrassing charges as the claim that it has in fact extended credit to the British Government through the cotton-rubber agreement.

For your further information American consumers are concerned as usual at this time of year with the possibility of price reductions which would require them to write off book losses on their existing stocks when they take inventory. They are anxious therefore that a commitment should be secured from the British Government or the British rubber buyer that any additional supplies of rubber released during the present quarter will be purchased promptly for delivery to this Government.

Mr. Viles will inform Campbell tomorrow that the preliminary estimate of October consumption is 53,000 tons.