493.46E9/10–551
Memorandum of Conversation, by the Counselor of Embassy in Ceylon (Gufler)1
| Participants: | Sir Oliver Goonetilleke, Minister of Home Affairs and Rural Development and Leader of the Government party in the Senate, and Ambassador Satterthwaite and Mr. Gufler of the American Embassy |
Subject: Shipment of Rubber to Communist China
During the course of a courtesy call on Sir Oliver Goonetilleke, the Ambassador turned the conversation to the shipment of rubber for Communist China which left Colombo harbor last evening on the Polish ship Mickiewicz. The Ambassador expressed the hope that some means could be found of preventing further shipments in order that the relations between our two countries might be improved. Otherwise more rubber would certainly be sold to Communist China and this would aggravate the present situation.
Sir Oliver confirmed that he was familiar with the Ambassador’s representation to the Prime Minister regarding the sale of rubber to Communist China and with the Prime Minister’s reply. He asserted that it was a matter of absolute political necessity for the Government not to prohibit the shipment of rubber to Communist China or to engage in destinational control over rubber shipments leaving Ceylon. He complained of the British imposition of destinational control on rubber shipments from Malaya and of the circumstance that this control had been imposed without consultation with the Ceylon Government. He claimed that in so doing the British Government had acted in bad faith and had in fact violated an agreement not to do so. At the same time he mentioned British shipments of rubber, steel and many other items to the Soviet Union and added that, insofar as the Government of Ceylon was concerned, there was no difference between shipment to China and shipment to the Soviet Union.
The Ambassador replied that destinational control had been imposed by the British in accordance with a UN decision and that there was a difference between shipment to the Soviet Union and to Communist China, since the latter had been declared by the UN to be an aggressor and was actively engaged in combat with American, British, French, Turkish, Ethiopian and other UN contingents defending Korea against Red Chinese aggression. While we could well understand [Page 2070] and sympathize with the importance which the Ceylon Government attaches to its rubber industry, the Ambassador continued, the important factor to the American Government and people was that this rubber would go directly into the Chinese communist war machine and would be used against our troops. He also expressed the hope that the Ceylon Government would consider what the situation in Southeast Asia might well have been if the UN had not intervened in Korea; all of Southeast Asia would probably have fallen to the Communists by this time and Ceylon itself might have been in a critically exposed position.
Referring to the point that the embargo on Communist China had been imposed by the UN, Sir Oliver emphasized the fact that Ceylon is not a member of the UN. He endeavored to chide us by saying that neither the US nor the UK spent any sleepless nights over the Soviet veto preventing Ceylon’s admission. He then went on to say that he had almost succeeded on one occasion in persuading Vishinsky to vote for the admission of Ceylon. Vishinsky’s price had been an agreement on the part of Ceylon to sell all its rubber to the U.S.S.R. As a trick, Sir Oliver said he had tentatively agreed to this. The night before the vote however the Prime Minister had made a statement in Colombo saying that under no circumstance would Ceylon sell all its rubber to the U.S.S.R. This ruined any chance Ceylon had of preventing the Soviet’s veto. Vishinsky was so annoyed that he would not even speak to Sir Oliver for several days thereafter.
Sir Oliver went at length into the history of his experiences and those of his country in the rubber market. He stated that during the last world war Ceylon had produced 90 per cent of the natural rubber available to the United States and its allies and that it had agreed to content itself with a profit on its rubber business equivalent to the prewar normal peace-time profit and to sacrifice the large gains it could have made. He stated that a secret communication of President Roosevelt’s had been shown (but not handed) to the Ceylonese during the latter part of the war in which they were exhorted to tap their rubber up to the limit without regard to the damage they might do to the trees with the assurance that they would not lose thereby. He went on to say that after the war he had estimated that Ceylon had lost in one way and another some two hundred millions of rupees as a result of destructive tapping methods and sacrifice of profits that it would have made had it been able to continue business in a normal pre-war manner and at a normal pre-war profit markup. He had endeavored in vain to obtain compensation for this loss from both Great Britain and the United States.
[Page 2071]Reverting to the present situation, the Ambassador remarked that the Prime Minister had told him on several occasions that he, the Prime Minister, hoped no rubber would be shipped to Communist China, but that it would be impossible for him to do anything to prevent any such shipments if the facilities therefor became available. The United States had done its best, the Ambassador continued, to keep the Prime Minister from being conf routed with this situation by endeavoring to deprive the Polish vessels of the necessary bunkers. This effort was however unsuccessful as the Mickiewicz had arrived with sufficient bunkers to take it all the way to China and part way back.
Upon the mention of bunkers Sir Oliver, apparently with a guilty conscience, undertook to give an explanation of the role he had played in the incident raised by the attempt of Sir John Kotelawala, Minister of Transport and Works, to compel the British and American oil companies here to furnish bunkers to Polish Line vessels. Sir Oliver said that the Prime Minister had mentioned this to him and that he had told the Prime Minister that, of course, if the British and American oil companies felt they were unable to furnish bunkers to these ships the Government should not endeavor to make them do so. The Ambassador thereupon pointed out that he had indeed made representations on this subject at that time because the Prime Minister had given him repeated assurances that he would do nothing to facilitate the shipment of rubber to China. The order which Sir John had sent to the British and American oil companies ran directly contrary to these assurances.
Sir Oliver also contended that at the time rubber was bought for shipment to China no one was in the rubber market and that rubber sold to China would have lain on the market without takers with disastrous results to the price of rubber had it not been sold to the Chinese. He remarked that he was well aware that the extra profit on the sales to China arising from the premium prices paid by Red China had not benefited the growers and had remained entirely in the pockets of the shippers. This circumstance, he felt, should make it all the more easy for the U.S. to solve the problem by an agreement to buy up the entire Ceylon rubber output at the going market price. If, he said, the U.S. takes the entire output at the going market price, the Government of Ceylon will not be faced with the necessity of permitting sales of rubber to Red China in order to prevent available and unsold rubber from having a disastrous effect on the market.
The Ambassador stated that he did not want to enter into an argument with Sir Oliver in regard to the state of the rubber market, since [Page 2072] he did not pretend to be an expert on this matter, but added that it was his distinct understanding that the rubber that was sold to Red China would have been absorbed by the market had it not been sold to the Chinese. Sir Oliver was, however, firm in sticking to the point that only the sale to the Red Chinese had avoided the danger of a crash in Ceylonese rubber prices.
The conversation was amicable and on a generally cordial although “agree-to-disagree” basis. Sir Oliver several times verged on the emotional. For example, at one point he cited the things Great Britain and other nations had done in the way of trade with the Soviet Union and Iron Curtain countries and then went on to say these things had been tolerated but that we seem to be inclined to come down hard on “poor little Ceylon”. He did not, however, go off into a really emotional demonstration on this matter. He repeatedly returned-to the theme of how easy it would be for “your great country” to solve the whole matter by buying up the entire Ceylonese rubber production at the going market price. In this connection he referred to “this dying Ceylonese rubber industry” and remarked that it was now in such a state that a buyer could purchase an acre of rubber trees in some areas for £s.200, cut the trees down and sell them off for wood at £s.250 and have a £s.50 profit.
Upon our taking leave Sir Oliver said that he hoped we would not overlook all the occasions in which Ceylon had been helpful to the US and the UN. So long, however, as Great Britain was allowed freely to sell rubber and other products to the Soviet Union and other satellite states, it would be politically impossible for Ceylon to prevent the sale of rubber to Communist China. If the United Kingdom and other European nations imposed a complete and effective embargo on the shipment of strategic materials to all communist countries Ceylon would follow suit immediately. Moreover he could assure me that if a world conflict broke out the Prime Minister would immediately prevent the sale of rubber to communist China no matter what the consequence to him politically.
- Sent to the Department of State as enclosure 3 to despatch 311 from Colombo, October 5, not printed.↩