825.2542/8–2853

Minutes of the 45th Meeting of the Defense Mobilization Board, Held in Washington, August 26, 1953 1

top secret

[Here follows a list of those present (23).]

1. Chilean Copper Problem

At the Defense Mobilization Board Meeting this morning, General Smith said that State considered that the question of buying Chilean copper was primarily a defense decision. The State Department would no longer use the argument that a weak government must be bolstered [Page 722]up by measures of this kind for fear it would be replaced by something worse; it was impossible to buy strength. If on the basis of coldly calculated defense considerations it was determined that we should buy the copper, State had plenty of arguments to support this position but would not take it on political considerations alone.

Secretary Humphrey said that he welcomed this change in the State Department’s attitude with regard to bolstering up weak governments. Nevertheless, he did feel that there was something more involved in this question than defense. The fact was that Chilean copper is essential to American economy in peace as well as in war. Secretary Humphrey intimated that he was inclined to accept the proposal to buy the copper.

A lengthy discussion followed as to the statistical position of copper. In the course of it, Mr. Flemming brought out the desirability of preclusive buying since there was strong reason to believe that the Russians would take the larger part, if not all of it, once given a chance; they had bought 50,000 tons at high premium prices despite the western world’s rigid controls. Mr. Vance 2 pointed out that although the stockpile might be filled under floor-price contracts in several years, at the moment the stockpile was not full; in fact, we had less than a year’s required imports at peace-time levels in the stockpile today. What would happen if a crisis arose before the floor-price contracts filled the pile? Moreover, a substantial part of the copper included in the estimates for meeting war-time requirements was to come from Chile and even more distant sources which we could not count on in an emergency. This being the case, the stockpile was unrealistically small.

The sense of the meeting was that the copper should be purchased at market prices for the stockpile for preclusive purposes. Mr. Flemming pointed out that the Defense Mobilization Board had authority to engage in preclusive buying.

Assistant Secretary Anderson 3 agreed, but pointed out the strong desirability of attaching definite conditions to the purchase to rescue the American copper companies from an intolerable situation and to help out the Chilean financial situation.

General Smith said that he did not like to tie the negotiators’ hands by telling them that they should secure conditions in connection with the pile. He understood that it was agreed that it was in the national defense interest to buy the copper and, if that was the case, conditions should not be attached tying down the negotiators.

Secretary Humphrey said that he did think that it was highly important to straighten the situation out with the American copper companies involved. General Smith agreed provided our negotiators would be [Page 723]given room to maneuver. That appeared to be the sense of the meeting.

There was considerable discussion as to terms. It was suggested that it would be better to purchase the amount of copper over a 12-month period at market prices since prices were showing a tendency to sag. In this way the companies would be left with the present accumulation to liquidate in an orderly manner. It also appeared to be the sense of the meeting that we should offer to buy 85,000 tons but that if better conditions could be secured by upping this figure by 5,000 or 10,000 tons, the negotiators might do this.

Mr. Flemming stated that he would write a letter4 to State setting forth the agreed points and informing us of the man appointed to represent the defense mobilization agencies in the negotiations.

[Here follows brief discussion relating to defense mobilization assumptions and objectives.]

  1. Under Secretary Smith represented the Secretary of State at this meeting; he was accompanied by Assistant Secretary Cabot, who drafted this memorandum.
  2. Harold Vance, Special Assistant to the Director, Office of Defense Mobilization.
  3. Samuel W. Anderson, Assistant Secretary of Commerce for International Affairs.
  4. See infra.