Foreign Relations of the United States, 1952–1954, General: Economic and Political Matters, Volume I, Part 2

398.2395/3–3153

Memorandum by the Assistant Secretary of State for Economic Affairs (Linder) to the Secretary of State¹

confidential

Washington, March 31, 1953.

• Subject:
• Position of the United States concerning Rubber Agreement

The Department’s proposed position for the next meeting of the International Rubber Study Group has been cleared with all interested political and economic offices in the Department and distributed to other agencies for comment. Since you may receive calls on it from other members of the Cabinet or industry officials, I believe you should know what is involved.

We believe the United States Delegation should be authorized to concur in a decision to convene an international conference for negotiation of a rubber buffer stock agreement. Such an agreement, if negotiated, would require Congressional ratification. Its purpose would be to prevent wide swings in world rubber prices by joint action among producing and consuming countries.

There is some threat of a rubber surplus in the near future, followed by a shortage in a few years. Most experts expect a slump in rubber prices in 1953 and 1954. This could be dangerous politically and strategically, because of the dependence of Indonesia and Malaya on rubber revenue and because of the danger of increased rubber shipments to Communist China. In any collapse of rubber prices, the United States would be held largely to blame. The United States, therefore, must not at this time be in the position of blocking the search for a solution, despite the fact that at the moment there does not seem to be a clear economic case for an agreement.

The problem of a United States position and the features of a workable buffer stock agreement have been discussed informally with members of the Foreign Affairs Committee and the House Armed Services Committee, and will be similarly reviewed with the Foreign Relations Committee. While the proposed position will not be fully revealed to the industry until it has inter-agency clearance, the rubber manufacturers have made clear their strong opposition to any agreement. This opposition stems largely from prewar experience with producer cartels.

If any serious controversy develops over the proposed position, we shall want your personal reaction before final instructions are issued.

1. In the margin of the source text, which was drafted by Armstrong, appear Secretary Dulles’ initials and a notation by Roderic O’Connor which reads: “Sec[retary] saw 4 April. RLO’C”. An attached note of Apr. 7 by Assistant Secretary Linder’s Special Assistant, J. Robert Schaetzel, to Armstrong indicated that the Secretary’s initials should be construed as approval of the line being taken.