811.24 Raw Materials/308: Telegram
The Secretary of State to the Ambassador in the United Kingdom ( Kennedy )
811. Your 1424, September 4, 1 p.m.,50 and 1442, September 4, 11 p.m. Reporters here claim to have rumors that the British Government does not wish to proceed with the rubber–cotton agreement. We have expressed the opinion strongly that there can be no foundation for this report, and have pointed out that both Governments will now be even more anxious than before to build up stocks.
There is of course concern in the markets as to whether the stocks acquired will now be held as reserves. You can assure the Ministry of Supply that this Government has every intention of holding the stocks acquired in reserve. So far as we can see, the only situation which would counsel release of these stocks would be a cutting off or drastic reduction of current supplies of rubber from the East. It might be useful for us to have some indication from the British Government as to its intentions with respect to the stocks of cotton to be acquired under the agreement.
The Maritime Commission is of the opinion that sufficient United States shipping could be made available to carry the normal supplies of rubber and tin from the East to this country as well as all the rubber supplied under the agreement, provided these commodities are available in reasonable quantities at reasonable intervals, and subject always of course to the possibility that unforeseen situations may develop requiring prior allocation of available tonnage. Before definite commitments could be made for such movements, it would be essential to have information specifying amounts, ports of shipment, destinations, and loading dates. Word from Singapore indicates that a temporary shortage of bottoms is likely, despite precautionary British measures, but that American and Netherland vessels now plying between Singapore and the United States afford sufficient space for all normal tin and rubber shipments.
Regarding cases, this Government will accept no. 9 cases to the extent necessary, although it strongly prefers no. 10’s for storage and rotation purposes. Further communication from the British Government will be appreciated if it eventually appears necessary to ship in bales.
Also, this Government is prepared to accept some no. 1 rubber if it is considered unwise to limit purchases to no. 1–X at present. This Government requests, however, that the amount of no. 1 be limited to 20 percent of the total, the rest to be no. 1–X, for shipment during the [Page 264] first month or two, and that the situation be reexamined before further purchases of no. 1 are made. In this regard, you should secure confirmation of the understanding set forth in our no. 759, September 2, 1939,51 before agreeing to the modification requested. It will also be appreciated if the British will supply us with information from time to time as to actual or prospective market reactions.
United States consuls in the East will be instructed to issue a certificate accepting responsibility for war risk when they receive copies of bills of lading and weight notes. Inquiry is being made regarding the form used by the National City Bank in Singapore.
For your information, Singapore advised, on August 30,52 that rubber interests anticipate and favor continuing restriction during war conditions, with at least 10 percent increase of quota on outbreak of war. They expect no shortage of supplies for the United States unless English reserves necessitate requisition, which they consider improbable. They report that tin smelting interests expect abandonment of quota control during war but that traders anticipate the maintenance of restriction with an immediate 10 percent quota increase on outbreak of hostilities. All agree that mine head stocks equivalent to 10,000 tons will be permitted to move freely and will be adequate for several months.
Batavia advised, on August 31,53 of the general belief there that the international rubber agreement will be suspended if actual hostilities occur. Some rubber producers believe that quotas will be increased from 60 to 70 percent in the last quarter of this year and to 80 percent in the first quarter of 1940.