811.24 Raw Materials/120: Telegram

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

349. The price basis for the rubber–tin, cotton–wheat deal must be a fair one, otherwise all the good results hoped for from this agreement will be jeopardized. I certainly hope that the British authorities will not try to burden us, in determining the terms of exchange, with tie extremely high prices that the tin control in particular has created during the past few months by its excessively severe limitation of production. The same is true only to a lesser degree in the case of rubber. In marked contrast is the fact that the prices of cotton and wheat during the same period have been abnormally low and quite below the costs of production. General recognition of the fact that prevailing prices for cotton and wheat have been unjustifiably low is indicated by the universal expectation, in consuming countries as well as elsewhere, that the fair price ranges to be sought in connection with international control agreements affecting cotton and wheat, if they can be established, would be substantially higher than recently prevailing prices.

Disappointment will result if the quantities exchanged are not substantially greater than those that would result from the exchange of only 500,000 bales of cotton and corresponding amounts of rubber and tin. If and as the British Government substantially enlarges its ideas on the acquisition of cotton, consideration may be given to adjustments in the basis of exchange.

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Many completely reliable indications have come to the Department that various private interests, particularly rubber traders in London, are busily at work criticizing the contemplated exchange and also conjuring up false fears as to its effect upon ordinary trade in the commodities concerned. They are actually busily contacting the press in this country. Whether their moving motive is the thought that they might lose a certain amount of commission business, or whether their interest is in speculative price movements I will not attempt to judge. However, if you find it useful, you may mention to the British Government the unpleasant impression produced by the evidences of their activity.