811.24 Raw Materials/111: Telegram

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

343. Department’s No. 330, May 4, 10 p.m. We recognize fully that you must have discretion to arrange the best possible deal with the British Government. In an effort to be helpful to you, we have been considering a number of points which must be dealt with in an agreement and, in consultation with the Department of Agriculture and the Maritime Commission, we offer the following suggestions on these points:

1. The Quantities to be Exchanged. Certainly as regards cotton we would be in a position to provide as large quantity as the British authorities might desire. Confidentially for your own information, the Secretary of Agriculture would like to provide up to 2,000,000 bales. The total amount of wheat we would be willing to supply is a matter that would have to be discussed further. We will be glad to [Page 242] have as much rubber and tin as can be procured by providing cotton. (Within the next few days we will discuss with the War and Navy Departments their preferences as to the division between rubber and tin).

2. Terms of Exchange. The price formulas suggested in Department’s No. 330 of May 4, or whatever price formulas may finally be agreed upon, can advantageously be regarded merely as a basis for determining the ratio of exchange between the quantities of the commodities involved.

The questions of arrangements for making the commodities available and of provisions for transporting them can then be dealt with separately. On these subjects we proffer the following suggestions:

3. Ports of Shipment and Destination. The agreement will presumably have to deal with the question of ports of shipment and destination for each commodity. The ports of shipment which suggest themselves are (a) in the case of cotton, Gulf and South Atlantic ports; (b) in the case of rubber, mainly Singapore; (c) in the case of tin, Singapore and Liverpool. The agreement would have to provide arrangements for handling the details of this question and be flexible enough to be practical.

The form in which we at present visualize the undertaking is that in the case of each commodity the commitment of the supplying government in this field would be to make the specified quantities available at the designated ports of shipment in conformity with whatever time schedule may be agreed upon.

4. Time Schedule. The entire amount of cotton could be made available almost immediately, and the time schedule could be based, therefore, on the speed with which the British Government would wish to receive it in the United Kingdom, and the practical necessities of the shipping situation. In the case of both rubber and tin, it seems to us essential that additional export quotas be arranged by the international control committees covering the amounts to be supplied to this country and that sufficient time be allowed for this additional production to meet these export quotas; a time schedule which would call for quantities available for shipment more rapidly than they could be produced might affect supplies available to the commercial market and tend to increase prices.

5. Division of the Carrying Business Between the Merchant Marines of the Two Countries. There can be no doubt but that the shipping interests of each country will wish to secure maximum participation in the transportation of the commodities to be exchanged. From the point of view of the American Merchant Marine, a fair arrangement would appear to be a fifty-fifty sharing of the tonnage of each commodity to be transported, although on this point the agreement should [Page 243] be elastic and provide for the adjustment of this general formula in the light of specific situations which might arise. The agreement should provide for consultation between the United States Maritime Commission and the corresponding British agency to effect the shipping arrangements and make the necessary adjustments. American lines now operate regularly from the Straits and are prepared to carry rubber and tin at going freight rates and on a regular schedule. Likewise, American lines operate from the Gulf to British ports, and are prepared to carry cotton. The agreement should stipulate that transportation should be provided at reasonable rates, no higher than going rates on such cargoes, and on a schedule which would occasion no unreasonable delay. It is believed that the prompt delivery of these stocks, on the time schedule arranged, would be a matter of importance to both governments, and that therefore, should it prove to be impossible to secure adequate tonnage at reasonable rates under the two flags, consideration should then be given to the limited use of vessels of other flags.

6. Division of the Expenses of Transportation, Insurance, et cetera. As far as we can visualize the transaction now, these expenses would present a separable question, since they are likely to involve both governments in a separate outlay. It may prove in the course of your discussions that the question of agreeing upon a division of these expenses is best handled in connection with the determination of the price formula, or some wholly independent basis may be advisable. At this moment, therefore, the Department will not attempt to suggest any rigid basis of negotiation on this point. However, it appears highly advisable to keep in mind that Congress when considering the agreement is likely to have direct interest in this matter and that therefore the nearer we can come to seeing that the outlay of the American Government for shipping expenses goes to compensate American shipping, the more satisfactory the agreement will be from the point of view of Congress.