811.24 Raw Materials/123: Telegram

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

355. Your 657, May 10, 7 p.m.,37 and your 668, May 11, 7 p.m., and your telephone conversation with Welles. A deal involving only 500,000 bales would be disappointing but we would be prepared to agree on that amount if that is all that can be secured at the present time. The Department of Agriculture is quite willing to leave wheat out of the picture.

This Government will wish to secure stocks of both rubber and tin in return for cotton. We have no specific instructions as to the proportion to be represented by each except to say that the War and Navy Departments would want a considerable fraction in tin. In the case of a deal limited to 500,000 bales of cotton, we would prefer one-half in tin but if necessary will agree to one-third; we would be prepared to consider an even smaller proportion in tin, however, if the British will take 1,000,000 bales. You should use your own discretion in working out this phase of the deal, submitting your recommendations after discussion with the British authorities.

You can assure the Board of Trade, on the basis of our 330, May 4, 10 p.m., that we would have no intention of insisting upon using, for purposes of determining quantities, special prices which they may be able to arrange for their purchase of rubber and tin. To avoid [Page 247] all such difficulties we strongly favor the use of market prices and suggest averages for the first 4 months of this year as a fair basis. The British may arrange for special prices for the purchase of rubber and tin from producers without any protest from us.

It is most important that the British Government be committed to securing the rubber and tin to be furnished this Government from new production, quite outside of production and stocks now available to the commercial market, so that the market may not be influenced. We should guard fully against any possibility of drawing upon existing stocks of either rubber or tin, including stocks of rubber on the estates and tin at the mine-heads.

In the case of rubber it is important that we receive fresh supplies because of the problems of storage and rotation of stocks here. We suggest, therefore, a commitment that rubber made available at ports of shipment should not be more than 4 months old, counting from the time of tapping. Viles is prepared to advise as to the grades of rubber required.

As to the tin required, which should all be Grade A, we would suggest roughly the same division between Straits and Standard taken by the United States over any recent period of time, say the year 1938. If there would be any difficulties involved in this division, for instance in supplying such a high proportion of Straits, we would be prepared to consider adjustments.

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