811.20 Defense (M)/6234a: Telegram

The Acting Secretary of State to the Ambassador in China (Gauss)

295. Department’s 258 of April 4.

1.
Further discussions with representatives of the British Ministry of Supply here have given us the following information concerning silk. Much of this information is, no doubt, known to you, but we repeat it nevertheless.
2.
The British Silk Control’s agent, Jardine Matheson, have been negotiating for the purchase of stocks consisting of (a) 2,000 bales of 13/15 or 20/22 denier silk, of which 1,000 bales are at Kunming, 500 bales are at Kyeiyang, and 500 bales at Chungking; and (b) for the whole of the 1942 crop of same grades, which it is estimated would amount to 5,000 additional bales.
3.
It appears likely that the 200 bales in stock and the 5,000 bales to be available during the year to which you referred in your 250 [251] of March 2 [20] are the same stocks and production for which the British are negotiating. This is the first point to be cleared up.
4.
If such is the case, this Government does not wish to interfere with the British Silk Control’s arrangement for purchase. Especially is this true since we are informed that the British Silk Control has a group of experts in Chungking who have been carrying on these negotiations.
5.
However, the question of the transportation method referred to in paragraph 1 of the Department’s 258 must be considered in this connection. All silk is subject to the order of the Combined Raw Materials Board sitting in Washington which allocates silk as between the British Empire and the United States in accordance with their respective war needs. It accordingly makes little difference who buys the silk. However it is understood that the decision has been made that only goods owned by the United States Government will be covered by the method referred to in paragraph 1 of the Department’s 258.
6.
With respect to the whole question of transportation referred to in the Department’s 258 insofar as it affects all strategic materials to be brought out of China, the question of cost must be considered and the Department requests that you telegraph whether the transportation of the materials from China to the point where the service referred to in the first paragraph of the Department’s 258 of April 4 will end would be without charge. The desirable solution would be to have the Chinese producers carry the cost of transportation up to the point of delivery to the place of departure of the services referred to above and to have payment made by the Reconstruction Finance Corporation, f. o. b. that point. If this can be arranged, the existing contracts between the Reconstruction Finance Corporation and the National Resources Commission and other agencies of the Chinese Government will be modified accordingly. Please telegraph fully on this point.
7.
In connection with the foregoing, it will also be necessary to know what point will be the termination of the service referred to in paragraph 1 of the Department’s 258 of April 4. In this connection, the Reconstruction Finance Corporation is sending to India immediately a special representative to concern himself with the question of [Page 647] transportation in India which necessarily involves his considering the question of the connection between the services referred to above and rail and sea transport in India.
Welles