446E.119/7–2852: Telegram

The Secretary of State to the Embassy in Ceylon1


35. No distribution outside Department. Pts made and results mtgs noted Deptel 25 rpt info London 4362 summarized by Goonetilleke and delegation in final meeting with Byroade and Thorp July 24.

Ceylon can get all flour desired on US market.
Can expect get through US commercial channels 60–100,000 tons rice by Feb from oncoming crop. Because Japan contracts about 70,000 tons early delivery from this crop will be difficult Ceylon get 40,000 tons before Nov. Ceylon has arranged one cargo for Oct shipment and attempting more. Ceylon unwilling pay price 10.5 cents pound for CCC held rice which has dwindled from 7,000 to about 5,000 tons since talks began. Dept offered investigate possibility selling this rice at 9 cents which Ceylon wld pay.
Re arrangements with trade for 5 year supply 200,000 tons US rice annually, Agri will take Ceylon demand into account in its regular advice to domestic producers on production planning. Ceylon approach to trade to contract for future years supply on large scale might affect price rather than supply.
Rubber discussion yielded:
Goonetilleke view developed since previous rubber purchase discussion (1) China shipment brought 7 pence premium and falling world price most grades severely damaging Ceylon marginal producer; (2) Rice need by Ceylon is and will be near future in dollar area.
US suggested (1) Ceylon produce more pale crepe, partly in lieu sole crepe now being produced; sure market exists in US, and necessary creping batteries easy to acquire; crepe sales could be expanded from 1900 per month to 2900–3000 per month in this way. (2) Greatest problem for GOC with Ceylon producers was relationship auction system to some form of channeling to dollar area, so might develop incentive plans for producers to make sales in dollar areas attractive. Goonetilleke noted these suggestions and appeared grateful for them.
In intimate conversation with Dept officer Goonetilleke said wants assured sale 5,000 tons monthly and gave impression wld accept following: (1) Statement that crepe normally comes to US through regular channels, with reference to US–Ceylon consultation to attempt adjustment of flow crepe if drops below 2,500 tons, assuming Ceylon increases output to that figure. (2) US purchase residual amount 2,000–2,500 tons month sheet grades 1X to 3 for 21 months. (3) Wld accept Singapore price, no premium.
If legal requirements met US wld be able extend TCA aid $300,000. In face very severe cuts funds available most difficult increase this amt fiscal ‘53 but might find up to $200,000 additional for FY 53 if urgent situation develops which justifies this. Cannot commit Congress to five year program for Ceylon, but Goonetilleke informed that on basis present info Dept might consider recommending presentation to Congress program about one million for FY 54, which info might help Goonetilleke in his approach this problem. Goonetilleke said amt too small meet need of 50 million dollars US aid for program (designated as 6 year program in previous conversation) improve agri production—particularly rice—and meet his problem re rubber. Other than gen idea of 100 million dollars joint program (in addition to Ceylon 6 year plan) for improvement seed, tanks and implements, Goonetilleke did not present details, although at earlier meeting he stated that complete info cld be made available. Dept noted present lack basic info and availability of funds even if need proven and suggested best procedure wld be establish FY 53 pt 4 program, whereupon TCA mission working with GOC cld develop best program economic development.
Goonetilleke said he cld publicize and use for presentation cabinet US rice developments and rubber agreement in achieving embargo rubber Chi if US aid forthcoming in order 50 million dollars. He cld force rubber producers comply with embargo by administrative means. Dept informed Goonetilleke that Battle Act requirements wld be met if informal assurances given and shipping statistics proved no rubber shipped Chi. Dept said wld investigate matter of US aid possibilities but no assurances given re order magnitude mentioned by Goonetilleke. Goonetilleke said he arrives Colombo July 29 and hoped US aid info will be available then. Coomaraswamy mtg with TCA July 29 for further discussions aid matter. Goonetilleke read from tel from PriMin stating Commie Chi Amb at Rangoon had approached Ceylon Amb with offer 100,000 tons rice for sterling and hoped receive Ceylon delegation Peking discuss this and greater development trade; PriMin wished discuss matter with Goonetilleke upon his return.
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Goonetilleke informed that full investigation possibilities above rubber agreement cannot proceed until Goonetilleke indicates GOC acceptance 2(c) above and willingness assure US no shipment rubber to Chi if rubber agreement signed. FYI Dept has not made proposal GSA who understood be very reluctant agreement now. Goonetilleke has been told that even if GOC accepts Dept is not sure it can arrange contract for rubber.

Emb shld mark any response this tel for Dept distribution only.

  1. This telegram was repeated for information to London as telegram 615.
  2. Dated July 19, p. 1528.