398.2395/10–1753: Telegram

The Ambassador in the United Kingdom (Aldrich) to the Department of State

confidential

1668. For OMP and IC from Armstrong. Rubber meeting1 reveals serious current situation. Price has been at or below 20 cents for more than week. US stockpile rotation clearly responsible for widening spread between higher and lower grades, which penalizes small-holder rubber while benefiting estate production. 1953 surplus all grades estimated at 169,000 tons; about one-half taken off market by US stockpile during first half year, but this outlet not available for bulk of other half, which is now beginning overhang market. Consumption estimates for balance of year and for 1954 do not give any basis for assuming this quantity will be absorbed; in fact it may be increased during 1954. Statistically surplus is small and should not be burdensome. Forecasts for 1955 and thereafter give no ground for pessimism.

Industry advisers in USDel recognize serious political and economic aspect present low price, tend to blame it on others, have no suggestions for action. They have predicted in meeting that their Copenhagen forecast will come true, but are unable explain publicly or privately why or how, in face foregoing data. Their viewpoint completely unconvincing producer delegations.

Meeting has agreed examine: (1) Remedies for current situation; (2) Longer time problem. Confidential information reveals producer delegations did not expect recent fall in market and were prepared consider buffer stock as relatively academic matter. Price fall has [Page 1028] altered this situation so that they are now demanding buffer stock (although statistical forecast scarcely proves its need), and US action of some kind to alleviate short term problem reflected in present price level.

Recommend Department consider: (1) Increased stockpile buying within present formal objective as exception general freeze, (2) Confinement of rotation to that necessary for reasons of condition, so long as market remains depressed.2 These two steps should be taken together as neither by itself would be adequate remedy because of difference in grades involved. If other governments had full information on US stockpile policies and practices this is exactly what they would press us to do. Other delegations rapidly deducing need for change in rotation policy, and it would be possible for US obtain political benefit by moving first. Present rotation practices and results when compared CA–1394, September 113 tend impair US Government’s reputation for credibility.4

Aldrich
  1. Regarding the origins of the special Management Committee meeting of the International Rubber Study Group under reference here, see the memorandum by Armstrong to Alexander, Apr. 13, 1953, p. 947.
  2. In telegram 2111 to London, Oct. 19, 1953, the Department of State replied to these suggestions by noting that the U.S. rubber stockpile objective was virtually complete and that rotation of the stockpile was then carried out only for the purpose of preventing deterioration of the rubber. (398.2395/10–1753)
  3. Not printed; it transmitted a statement by the General Services Administration assuring the major rubber producing countries that the U.S. Government would not use its stockpiling activities to manipulate the natural rubber market. (711.61/9–1153)
  4. Having lasted one week, the special meeting of the Management Committee adjourned after deciding to present at the Eleventh Meeting of the International Rubber Study Group at Colombo scheduled for May 1954 a draft commodity agreement providing for the creation of a buffer stock of rubber among the major producing and consuming nations. For the policy adopted by the United States with regard to this issue at the Colombo meeting, see the NSC memorandum of discussion of Apr. 29, 1954, and NSC 5417/1, Apr. 30, 1954, pp. 1153 and 1157.