811.20 Defense (M)/13473a: Telegram

The Secretary of State to the Chargé in China (Atcheson)

752. For Fowler from Rosenthal. Department’s No. 683, May 27, 10 p.m. crossed your No. 779 of May 25, 4 p.m. but answered it in part. Board is of the opinion that the figures given you on competitive prices wolfram from other producing areas are what you need to support your views regarding advance in transportation charges which the Chinese request in order to increase wolfram deliveries. Board is pleased that there is reason to believe that it may be feasible to renegotiate all inland transport deals previously made on various commodities. We intend hereafter to give you entire responsibility for all inland transport negotiations.

Commodities which we wish moved on a priority basis are wolfram, tin for India and Russia, mercury for Russia, bristles, silk for Great Britain, and tung oil. Green tea is to be shipped as filler cargo only both for trucks and planes.

Wolfram—Our view is that an increase of mine production will be difficult but that we should make every effort within the next few months to move 7,000 tons referred to in the Embassy’s No. 670 of May 8, 11 a.m.12 Since question of increasing production wolfram is not of primary importance at this juncture, we intend to await advices from Morris13 in this regard.
Tin—As tin originates near airports, inland transport problem does not materially concern this material. However, we understand that considerable amounts black tea are going overland by truck to Russia and we wonder whether part of such truck capacity could not with advantage be devoted to direct shipments tin to Russia. Please comment.
Bristles—It is obvious that the high rate for transport bristles has made unfortunate precedent and it is hoped you can renegotiate to reduce this cost. However, it is of first importance to move bristles purchased to the airfields and we have already asked you if it is possible to fly bristles from the Luchow airports.
British Silk—We are not acquainted with financing this item, but believe you should consider it jointly with the other articles mentioned.
Tung oil—Rate of $1340 per ton for inland transport wholly nullifies any chance of business at present; for it is not possible to consider tung oil at more than $600 per ton delivered in India. Although important this commodity is not in the same class as materials listed above.
Antimony—It appears likely that India’s future requirements can be found in that country. No air priority has yet been arranged. See Department’s No. 670, May 26, 7 p.m.14
Mercury—No special question arises as the quantity is only 80,000 pounds per month.
Green Tea—Consensus of opinion is as follows: Although still desirable to ship substantial amounts to North Africa, importance of these shipments to the general program has decreased in view of recent developments in North Africa. Therefore we wish green tea treated as filler cargo only although we do not wish to prohibit its movement.

It seems to us desirable that the question of placing inland transport costs upon a reverse Lend-Lease basis, together with the question of the abnormal exchange situation, might be raised at an appropriate time with the Chinese Government. However, no such action should be taken without instructions from Washington. For your information the Department on May 15th handed to Dr. T. V. Soong15 a draft of a re verse Lend-Lease Agreement.16 We will explore the desirability of suggesting to the Chinese Government, if this agreement is entered into, the placing thereunder of inland transport costs of foregoing and other commodities that may be purchased from time to time. Should, however, the Chinese on their own part bring up with you the matter of reverse Lend-Lease, please report any suggestions made.

It is obvious from observations made in the foregoing paragraphs that, unless prices of the various materials originating in China and delivered at Indian ports can be considerably reduced, the Board will find it in its interests to promote production of these materials in other countries where prices are considerably lower. From our standpoint we are offering very high prices in U. S. dollars for all materials [Page 655] procured from China and we also sustain heavy cost of air freight out of China. Financial arrangements between the various Chinese Government Departments do not of course concern us, but we believe that the Minister of Finance17 should be in a position to make such financial arrangements within China as to effect maximum flow materials required by war industry here. American supplies now arriving in China from the United States are delivered free of charge both as to sea and air transport, which fact is representative of our approach to such matters. Corresponding action on the part of China in the matter of inland transport charges would accordingly be quite justified. However, it would be preferable to reserve this argument for possible use in support of a reverse Lend-Lease arrangement as above described.

We feel that the Chinese Government will take broad view of this situation and that it should be possible for you at this time to increase flow of wolfram while at the same time you negotiate lower trucking rates on bristles and possibly on green tea. You might find it possible to obtain Army cooperation to increase flow of wolfram perhaps through charter by them of trucks and other facilities.

We consider that in connection with movement wolfram, time is an important factor. A very awkward situation would be created if wolfram supplies should fail to arrive promptly and if as a result of Japanese military activities shipments were subsequently interrupted.

As requested by you negotiations are now in course to obtain services of a truck maintenance man and a truck operator. [Rosenthal.]

  1. Not printed.
  2. J. Marshall Morris, metals and minerals representative of the Office of Economic Warfare, en route to China.
  3. Not printed.
  4. Chinese Minister for Foreign Affairs.
  5. Ante, p. 538.
  6. H. H. Kung.