811.24 Raw Materials/83b: Telegram
The Secretary of State to the Ambassador in the United Kingdom ( Kennedy )
267. This Government is in urgent need of adequate emergency reserve stocks of certain raw materials. Bills are under consideration in Congress which would authorize the purchase of such materials but it is now clear that it will be impossible to secure immediately adequate funds for direct purchase. It is probable that the maximum amount that can be expected this year will be $10,000,000, whereas more than $100,000,000 would be needed to secure even the minimum essential reserves.
This Government would undertake, however, to place itself in a position to make available any quantity of cotton and wheat desired by other governments for emergency reserve stocks, in exchange for stocks of strategic materials to be held in reserve here.
You are requested to discuss with the British Government the possibility of arranging at once for an exchange of cotton and wheat for strategic materials, particularly rubber and tin. The matter seems to the President and to me important enough to carry before the highest officials of the British Government if necessary.
It is suggested that you stress the following points:
- The feeling here of urgent need of stocks of rubber and tin as reserves for national emergencies, especially in view of the limited stocks of these commodities readily available to the market under the control of the existing intergovernmental regulatory agreements, in which the British have such a prominent part.
- The belief that large reserves of cotton and wheat would be of great value to the British Government in case of an emergency, not only assuring adequate supplies but also relieving emergency demands on shipping and the Navy which might be of critical importance. Reserve stocks of rubber and tin in this country also would lessen shipping requirements in time of emergency over long and hazardous trade routes.
- As to price, it is believed that the British Government could arrange through the international control committees to secure rubber and tin from producers at a figure below existing market prices, since this extra-market demand would be particularly welcome to them at this time of low production quotas, and this increase of production would lessen unit costs. In this way the actual money outlay by the [Page 235] British Government for stocks of cotton and wheat might be lessened and, without question, would be notably lower than costs of necessary supplies in time of emergency.
- Consummation of an agreement along these lines would be tangible evidence of the willingness of the British Government to manifest its interest in facilitating our task of preparation for emergencies, and also its disposition to help us deal with the problem created by existing wheat and cotton surpluses.
From the standpoint of this Government, one of the essential features of such an arrangement would be a commitment on the part of the British Government to hold the stocks acquired in reserve for war emergencies and to provide adequate safeguards against the movement of any of these supplies into commercial markets at any other time. This Government would be prepared to make such commitments with respect to the stocks which it desires to acquire.
The details of such an arrangement, covering quantities and specifications, prices, safeguards against interference with commercial markets, conditions of release and so forth, can be worked out later. It would be encouraging if the British Government would immediately accept the proposal in principle and express its willingness to proceed with the discussion of details.
This Government now holds, as collateral for loans to producers, over 11,000,000 bales of cotton and approximately 80,000,000 bushels of wheat. In the case of each commodity the total stocks in the United States are much in excess of a normal reserve stock. It is expected that this Government could acquire the necessary title to, and obtain legal authority to make available any desired quantity of these commodities to supply emergency reserve stocks abroad in exchange for supplies of strategic materials for emergency reserves here. It is believed that such legislation could be secured without difficulty; it would not be introduced, however, until treaties embodying arrangements for such exchanges may be submitted to the Senate. Drafting of the agreements in the form of treaties will avoid any question of Executive authority.
You will be interested in Consul George Tait’s despatch no. 242 from Manchester, March 29, 1939,23 regarding the pressure of textile interests upon the British Government to provide cotton reserve stocks of roughly a million bales. Consul Tait’s informant was under the impression that such purchases would be made.
Background material is being sent to you in the pouch due April 26. The following summary regarding United States requirements of strategic materials may be useful to you in the meantime.[Page 236]
The principal materials essential to American industry and national defense, which are available in insufficient quantities in the United States or nearby, are rubber, tin, manganese, chromite, and tungsten.
In the case of supplies from the United Kingdom and British colonies the principal possibilities would appear to be, first, rubber and tin and, secondarily, manganese and chromite. If rubber and tin are to be supplied in considerable quantities, it would be essential that arrangements be made through the international control committees for additional quotas to provide these supplies over and above supplies available to the commercial market. In view of this Government’s willingness to give adequate assurance that the stocks acquired would be withheld from commercial markets, it would expect that arrangements would be made to prevent the supply of these stocks from influencing prices to consumers or supplies otherwise available to the commercial markets.
It is considered possible that the Netherlands Government will be interested in similar exchanges and be prepared to propose similar arrangements with the international control committees for extra purchases of rubber and tin.24
It is probable that tin producers outside of British and Netherlands territories, who are also covered by the International Agreement,25 would wish to share in the additional extra-market quotas provided under the proposed arrangements. Should this problem arise, it will be dealt with as the discussions progress.
The Secretary of Agriculture has authorized Dr. A. G. Black, Director of Marketing and Regulatory Work, who is now in London for the meeting of the Preparatory Wheat Committee, to extend all possible assistance to you.