811.20 Defense (M)/3469
The Secretary of State to the Deputy Federal Loan Administrator (Clayton)
My Dear Mr. Clayton: I am advised by officers of the Department who are working on the subject with me that the range and details of our emergency buying program for Philippine export products are being worked out and made effective. I would like to convey to you my sense of the importance of the undertaking. The action of the Philippine authorities, in conjunction with this Government, in controlling their exports will prove a very substantial contribution to the execution of our foreign policy.59 It should serve at once to make available to us for purposes of defense production materials we urgently need, and at the same time curtail supplies in other directions. These purposes, I am certain, will justify the expenditure that the Federal Loan Agency may be called upon to make or the financial risk to which it may expose itself thereby.
I believe it important that the Government go as far as it conscientiously can by means of our purchase program to minimize the disturbance and loss occasioned to Philippine producing interests and [Page 889] workers. Under certain contingencies, the Philippines might become an even more important center of political and military interests than they are at the present time. Assurances that both the Philippine authorities and the people working in the Philippines will be convinced of our consideration for their interest will be certain to be helpful. I suggest and recommend that the Federal Loan Agency consider the whole purchase program in the light of these considerations.
I understand that some hesitation exists particularly in the matter of low grade iron ore. Without going into detail, I feel that if as a consequence of our general policy in these matters the mines concerned completely or substantially lose their customary markets, this Government would be well advised during this emergency period in providing at some reasonable minimum price the financial assistance whereby the mines can avoid shutdown or too drastic reduction. If this means the accumulation of ore in the Philippines that cannot be moved to the United States now, there is always the hope that at the end of the emergency it will find a market; or at the worst, that we should have to consider this as one of the minor losses under the defense program.
Even more important than iron ore and the other base metals, from the standpoint of the Philippine economy, are such industries as coconut products, sugar, lumber and tobacco, which provide a large proportion of the Philippine income from exports and on which a large proportion of the population is dependent. I understand that plans for the alleviation of the problems of the coconut industry are being studied. The other industries mentioned are not affected by export control but are in grave danger of losing their normal markets as a result of our policy in the allocation of shipping space. The sugar industry, on which nearly ten percent of the population depends, is in a particularly difficult situation since the International Sugar Agreement provides that Philippine sugar may be sold only in the United States. It is doubtful if a loan policy would be very effective in this instance, due to storage difficulties and the unlikelihood of an adequate market at the end of the emergency, but the gravity of the situation makes it imperative that a solution of the problem be sought.
In the case of lumber, it might be found desirable to make loans against accumulated stocks, since lumber would not deteriorate and should ultimately be in good demand. It is possible that our responsibility toward the tobacco industry might be fulfilled simply by assuring that shipping space is available for the established quota for cigar shipments to the United States, which should not be difficult. It is hoped that Dr. Grady will find it possible to give some consideration [Page 890] to the problems of these industries, particularly sugar, before leaving the Islands.
I thank you for your consideration of this matter.
Sincerely yours,
- In a memorandum of September 8, the Adviser on International Economic Affairs (Feis) stated that “our export control directive as applied to the Philippines already curtails or eliminates the Japanese market for many important Philippine products; to wit, chrome, manganese, copper, iron ore, copra, coconut oil, abaca.”↩