811.24 Raw Materials/949: Telegram
The Ambassador in the United Kingdom (Kennedy) to the Secretary of State
[Received May 18—9:35 a.m.]
1263. Department’s 886, May 17,35 and Embassy’s 1248, May 17. At the meeting this forenoon besides officials of the Colonial Office, Campbell, Hay, Miller, and Rawson [Pawson?] were present and there was an evident desire on the part of all concerned to cooperate in the matter of making rubber available to the United States to the extent practicable and for the purposes and under the commitments defined. The following proposals evolved from the ensuing discussions: (1) that Sir John Hay be authorized by the Rubber Committee and designated by the British Government to proceed immediately to the United States to negotiate a detailed arrangement with the American Government or the corporation to be set up by it in conjunction with the American rubber industry; (2) that at the meeting [Page 271] of the Rubber Committee (and subject to the concurrence of the Dutch) an 80 percent quota to be announced for both the third and fourth quarters and licenses therefor to be issued for both quarters together.
The British representatives stated that it was their previous intention to authorize a 70 percent quota for the third quarter and 60 percent for the fourth and that consequently this would mean an addition to world stocks of 172,000 tons during the third and fourth quarters. Furthermore there are stocks available which could and would move on the issuance of such licenses.
Hay was particularly anxious that no announcement be made either by the Rubber Committee, the British or American Governments as to governmental American purchases or as to his mission. Both Hay and Miller emphasized that all heads of rubber companies had previously let their agents know that they anticipated a reduced demand during the second half of this year and if the news of this reversal of policy was broken too drastically there would be immediate competition for available labor estates “stealing tappers” for each other with the result that production itself would suffer. Hay and Miller claim that under existing labor conditions and without prior notice to effect arrangements they can produce little more than about 80 percent during the third quarter and 90 percent during the fourth quarter. They are quite prepared if the rubber is to be taken by us under suitable conditions to make every effort to increase this output. They feel that the announcement of quotas for the next 6 months will warn the industry of higher production and they are aware that reports of the discussions between the American rubber industry and the American Government will percolate through. It was of course understood that an 80 percent announcement by the Committee would be a tentative minimum pending the conclusion of Hay’s mission but it was not the sense of the meeting that this would be so announced in the communiqué of May 21.
Hay and Miller were also anxious to have the position of these reserve stocks defined and, while the Embassy did not go into details, for that would fall within the province of Hay’s negotiations at Washington, it used the authority contained in the Department’s 875 that we “would be prepared to take responsibility against the rubber overhanging the market” and drew the analogy to the arrangements made in connection with the cotton for rubber agreement.
The Colonial Office also referred to the shipping problem and pointed out that the “cash and carry principle” must apply and that the rubber producers would assume no responsibility for ensuring that the rubber was shipped to the United States, that that must be the responsibility of the American Government. In this connection Miller pointed out that even f. o. b. rubber did not ensure cash to the producer but that [Page 272] cash in go-down did. The Colonial Office expressed agreement with the view that violent price fluctuations either way ought to be avoided, that there was a good deal of discussion as to whether the issuance of 6 months’ licenses at once would not have a depressing effect on the price but the consensus of the British representatives at the meeting was in the end that the demand by American rubber manufacturers plus the rubber buyers’ agreement requirements, and some unspecified but presumably British Government demand, would ensure orderly marketing at 80 percent.
The Colonial Office states, in confidence, that discussions are now proceeding with the Dutch and given the changed Anglo-Dutch relations should succeed which would permit of the institution of a complete licensing system of the exports of rubber and that this mechanism should permit of a more controlled marketing of rubber in connection with any arrangements ultimately resulting with the United States.
It is important to have your comments on the above by Monday morning London time.36