The Ambassador in Ceylon (Satterthwaite) to the Secretary of State
27. At his request I discussed today matters raised Deptel 1 July 2 re rubber contract with Vaithianathan Permanent Secty MEA.[Page 2032]
Permanent Secty began conversation by stating that in PriMin’s opinion GOC cld not consider US proposal in present form but was reluctant reject it without consultation with trade. GOC therefore suggested US rep proceed Colombo for discussions with trade.
I replied that in view PriMin’s attitude I questioned desirability US sending rep to Colombo merely to be told proposal was unacceptable and raised question whether if it were as unlikely as Permanent Secty indicated that agreement cld be concluded, it wld not be advisable drop whole matter rather than bring trade in and create expectation Which wld not be fulfilled.
Permanent Secty choosing words very carefully explained that perhaps he had oversimplified situation initially and GOC’s attitude is that considering terms proposed contract and US as well as GOC preference that commercial channels be used GOC wld necessarily play minor role. If trade desired contract however GOC wld do utmost establish admin procedures to facilitate carrying out terms. He emphasized however that decision must be taken by trade and not by GOC and raised question as to time and circumstances under which trade should be brought into discussions and he repeated that GOC considered advisable that rep come from US.
I again questioned whether it was necessary for rep to come from Washington before it was ascertained that basis for agrmt actually exists and suggested that GOC might hold exploratory conversations with trade. If reaction favorable and agreement appeared probable, rep cld come from Wash to carry on actual negots.
Permanent Secty said that GOC had not yet sent any instrs to Amb Corea but that GOC wld telegraph him views outlined para 4 above.
Emb considers permanent secty’s initial statement probably represents real attitude PriMin and under circumstances doubts advisability US sending rep to Ceylon without some prior indication that satisfactory basis for negot exists.
Department pass London; sent Department 27, rptd info London 5.