811.20 Defense (M)/2128: Telegram

The Chargé in the United Kingdom (Johnson) to the Secretary of State

2183. The proposal contained in the Department’s 1684, May 16, was discussed informally on May 23 at a meeting at the Colonial Office. Clauson57 presided and had with him Figg,58 Campbell, Miller59 and Pawson; Hart was there for the Netherlands Government and also as a Committee member. Schoenfeld60 attended for Ambassador Biddle and Ferris61 for this Embassy. Clauson, in a general opening statement on behalf of the Colonial Office and the Committee, indicated that the British favored the Rubber Reserve Company’s plan for centralized buying, and were disposed to cooperate.62 Referring first to cooperation in the sphere of governmental action, he pointed out that the British Government already restricts the exportation of rubber to authorized destinations and that no further control measures appear to that Government to be necessary at present. He added however that upon request it would be prepared to restrict export licenses for the United States to the nominees of the Rubber Reserve Company. He felt that no further action by the Committee was necessary, since the Committee has already agreed in its three contracts with the company to release sufficient rubber for current consumption and industrial stocks, in addition to that called for by the contracts themselves; and added that the Committee will, as also therein stipulated, urge producers and dealers in Malaya and the United Kingdom to be ready sellers within the price range fixed thereby. He and others pointed out that under the rate of release [Page 504]already decided upon for the third quarter,63 which is tantamount to unrestricted production, sufficient rubber will be available for all our purposes. (The statistical position as estimated by the Committee’s secretariat is given in the Embassy’s 2184, May 29.)64 Hart associated himself, in so far as the Netherlands Government was concerned, with the general position outlined by Clauson, although he felt that in principle the single buyer system might not appeal to the Netherlands Government. It was however for the American Government to decide on the desirability of establishing a single buyer. If they so decided the Netherlands Indies Government would naturally give full cooperation. It was his personal view that no new machinery would be required to assure the availability of the rubber desired from the Netherlands East Indies by the proposed American Central Buying Agency and that if any action were necessary the situation could be met by the existing export control system or by exchange control. He was of the opinion however that once the single buyer had been established neither of these measures would be necessary to ensure the free flow of rubber to the Reserve Company. The Netherlands Government was in any case fully disposed to approach Batavia with a view to securing the necessary collaboration. The British and Netherlands representatives also made the following oral communication of their views on other aspects of this matter and asked that they be conveyed to the Rubber Reserve Company:

(1)
They feel that centralized control of American buying should greatly facilitate the acquisition of rubber by the Rubber Reserve Company within the price range specified in the three agreements between the company and the International Rubber Regulation Committee.
(2)
They concur in the company’s view that nothing in the proposed plan should abrogate the agreements between the Rubber Reserve Company and the International Rubber Regulation Committee, or outstanding private contracts. They plan to recognize such contracts in connection with any export or other control measures that may be used in facilitating the proposed centralized control of American buying.
(3)
They would prefer that any rubber acquired by the central buying agency for stocks, beyond the agreed figure for American commercial stocks, should be held by the Rubber Reserve Company under the terms of its agreements with the Committee and therefore subject to controlled liquidation. The Committee would however be prepared to modify agreements to the extent of making provision for some increase in American commercial stocks beyond [Page 505]150,000 tons, if increased American consumption makes this necessary. They will desire periodic reports as to the purpose to which rubber acquired by the central buying agency has been put, i. e. whether consumption or commercial or stragetic stocks.
(4)
They think that the agency would be wise to extend forward buying to cover the whole year 1941, and as a general practice for at least 6 months ahead. They point out that a large proportion of the estate rubber production has already been sold forward up to the end of September, for the most part to American buyers, and that, if this class of rubber is wanted, the agency will not be able to operate on a large scale unless willing to purchase for October–December delivery. They also point out that that portion of the Malayan production that comes from small holdings, roughly one-half, is probably so far not sold forward; but that here again forward purchase from dealers who handle this rubber is essential if they are to arrange for a free flow of it to the market in convenient quantities, since such rubber reaches the market through these channels.
(5)
They note with satisfaction that the centralized buying plan provides for the use of all existing market facilities in the purchase of United States requirements, as they attach particular importance to the preservation of the market mechanism, not only in the Netherlands East Indies, Malaya and Ceylon, but also in London.
(6)
They believe that the appointment of a buyer in London would be most advantageous and would greatly accelerate the acquisition within the price range of rubber held in the East by London dealers. Their own experience indicates the desirability of employing experienced men for the Eastern and London buying offices, and they suggest that in setting up the central purchasing agency the company should consult, among others interested, with the Rubber Trade Association in New York.
(7)
They question the necessity for the proposed clause regarding cancellation after 6 months’ notice. They inquire whether it is not the case that the provision of necessary quantities of rubber within the agreed price range will automatically continue until stocks provided for under the agreements are completed, at which time the agreements (including the price range provisions) will cease to operate. It will then be for the United States Government to decide whether they wish to continue to control American rubber buying, and if so whether they wish to conclude a further agreement with the Committee on the subject. The British Government inclines on basis of its own experience to advise both steps if war still continues. The proposed arrangement might, if such a course should meet with the Department’s approval, be consummated by an exchange of notes between the interested governments.

Johnson
  1. Capt. Gerard L. M. Clauson, Assistant Under Secretary of State, British Colonial Office; alternate member of the Malayan delegation on the International Rubber Regulation Committee.
  2. Sir Clifford H. Figg, member of the Ceylon delegation on the International Rubber Regulation Committee.
  3. H. Eric Miller, member of the Malayan delegation on the International Rubber Regulation Committee.
  4. Rudolf E. Schoenfeld, Counselor of Embassy near the Governments of Poland and Belgium and First Secretary near the Governments of Norway and the Netherlands.
  5. Walton C. Ferris, Second Secretary of Embassy in the United Kingdom.
  6. The single buying agency scheme came into operation on June 23, 1941.
  7. The Committee had announced on May 20, 1941, that the quota for the third quarter would be 100 percent.
  8. Not printed.