The Chargé in the United Kingdom (Johnson) to the Secretary of State
[Received December 20—12:30 p.m.]
4149. In conversation with Sir John Campbell67 yesterday afternoon the following account was obtained concerning proceedings at [Page 508] the International Tin Committee meeting on December 16, which is of interest both regarding the American-Bolivian tin agreement of November 468 and the under-exports from Malaya mentioned in the Embassy’s 4105, December 17, 6 p.m.69
The discussion related in the first place to the future of the control scheme itself but since only one voice (that of Wilcoxson)70 was raised in favor of termination, the international agreement will go on unless Campbell has guessed wrong as to the outcome of the Dutch-Bolivian dispute, the salient facts of which he outlined as follows: the feud between the Dutch and the Bolivians, and between Van den Broek,71 according to Campbell, goes back a full 10 years and has been due to the fact, incontrovertibly established by actual experience, that the Bolivians have never abided by the control scheme or even succeeded in establishing the machinery necessary to do so. “They have never been able to meet a high quota, and they have always been either unable or unwilling to meet a low one.” During lots [sic] low quota periods they have not reduced production but have kept on piling up stocks, which has cost a lot of money to other signatories of the control scheme, their unjustifiable accretions to stocks overhanging the market and delaying the day when all signatories can go on to higher production again.
Just now the stage is set, according to Campbell, in such a manner as to give the Dutch the chance they have long been waiting for. In this period of high production and high profits, the Dutch and Van den Broek in particular—who do not have any excess profits tax to pay—are feeling in a position strong enough to enable them to challenge the Bolivians to a poker game with the future of the agreement in the balance, without themselves caring over much whether the agreement lapses or not. The Bolivians on the other hand are not, says Campbell, in a particularly strong position, in spite of their recent coup resulting in the agreement of November 4. (Incidentally Campbell reported that this agreement brought heated discussion and strong criticism at the meeting, which will be reflected in the minutes in only rather watered form. While it was accepted by Van den Broek and the Committee as being not technically in violation of the control agreement it was regarded as a “concealed subsidy” to the Bolivians and not in conformity with the spirit of the control agreement.)[Page 509]
The Bolivians have the highest production costs, and the agreement of November 4 gives them a price guarantee for only a year.
The issue at the meeting arose out of the present Dutch desire to produce a great deal of tin. They are now producing at 130% or over, evidently feel that they could produce at 160%, and accordingly proposed such a quota figure. There was, not unnaturally, no support for such a figure from Malaya, the undertakings of which are subject to excess profits tax and consequently have no particular urge to deplete their stocks of ore unduly merely to turn the proceeds immediately over to the Government. This quota proposal not gaining support, general support was obtained except from Bolivia for an alternative proposal to alter the basic production [export] figures of which quotas are computed, in such a manner that the new 100% standard will equal the actual experience of production [exports] during the first 12 months at 130% under the present control agreement. Bolivian opposition arose not only because it has no interest in a quota basis higher than the present one, which it is never able to meet anyway, but because the proposal also involves another change in the international agreement which is aimed to prevent Bolivia having as free a hand in quota compliance or the reverse as it has exercised for the past 10 years. The new clause would enable any signatory to the control agreement to break it upon short notice in case of non-compliance by any other signatory; and Campbell feels sure that in their present state of mind the Dutch would break the agreement at the drop of a hat if the Bolivians refused to conform.
Under the existing control agreement a meeting to act upon such proposals must be held between January 1 and March 31 of next year if they are to take effect shortly after the completion of 12 months at 130%. In order to squeeze the Bolivians, Dutch tactics favor the latest possible date for this meeting and it was accordingly fixed for March 20, 1941. Campbell feels for the reasons suggested above that although the Bolivians will bluff until the last minute they will not dare let the control scheme lapse and that they will give in “even though it is at the 59½ second of the 60th minute of the 11th hour.”
Campbell indicated clearly his pessimism as to our chances of making a go of the new smelter, in view of the nature of the agreement of November 4; and he was also a little caustic about the fact that no one here saw a complete or authentic text of the agreement until a few days ago. Although the Embassy is not, of course, in a position to comment on the merits of this matter, Campbell’s comments are passed on for what they may be worth. He referred to the low grade ore contracted for by the Metals Reserve Company by a definitely uncomplimentary name, and quoted Van den Broek as saying at the meeting [Page 510] that there is no known technical process now in existence under which that ore can be smelted into tin on an economic basis. Campbell added, however, that he sees no reason why it cannot be turned into first-class tin although with high production costs; and he thought that we “paid [through] the nose” for what we got.
He also said in this connection that of the tin ore of similar quality brought to Liverpool from Holland earlier in the war to prevent the Germans getting it, “not a single ton” has been smelted. He also referred to the difficulty the Metals Reserve Company will be apt to encounter in getting supplies of higher percentage ore as a “sweetener” to be used with the Bolivian ore in the new smelter; and he said that “You will not get a ton of Dutch East Indies ore for that purpose, and probably not a ton of Malayan.” He went on to say that Malayan mine owners as well as Dutch would be apt to see very little reason for helping us to produce 18,000 tons of tin which will mean just that much less business for smelters in the Middle East and consequently for the mines.
The decision of the Committee to leave their money in the buffer stock pool has, Campbell said, nothing to do with a buffer stock for use as such. It would buy only around 12,000 tons, which is nothing in comparison with present and prospective American stocks. These stocks,—besides 75,000 tons to be obtained by the Metals Reserve Company-International Committee Agreement of last summer72 and the published stocks, he reckons at about 40,000 tons invisible in consumers’ hands, which figure may well rise to 60,000 tons. Thus the United States will soon have obtained its independence in connection with tin for some time to come. Campbell expressed his feeling that American fears of the international situation in the Far East have been much exaggerated and that, as in the case of what he refers to as “the panic buying” of the autumn of 1939, they will bring strange and in some instances undesirable results, not the least of which is the Bolivian agreement of November 4. The speech of Chairman Thomas of the Ayer Hitam Tin Dredging, Limited, on December 13, which contained comments on the above from the viewpoint of this important Malayan producer, is being forwarded by despatch.73
- Chairman, International Tin Regulation Committee.↩
- For correspondence concerning the contract of November 4, 1940, see Foreign Relations, 1940, vol. v , section under Bolivia entitled “Negotiation of a contract guaranteed by the Bolivian Government for the purchase of tin ore…”↩
- Not printed.↩
- W. J. Wilcoxson, member of the Malayan delegation on the International Tin Regulation Committee.↩
- John Van den Broek, member of the Netherlands East Indies delegation on the International Tin Regulation Committee.↩
- Foreign Relations, 1940, vol. ii, p. 297.↩
- Not printed.↩