846E.2395/9–2953: Telegram
The Secretary of State to the Embassy in Ceylon
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81. FYI only. Department concurs general sentiment your telegram 94.1 It would appear that U.S. interest dictates sincere effort in response to Corea on possibility, if not probability, that concrete proposals may help (a) reduce flow strategic commodity to Commie China, (b) get Ceylon “back in step”, (c) reduce Ceylon dependence on Commie China markets and supply.
If Ceylon met legal requirements of U.S., i.e., ceased shipments to Commie China, U.S. might make following type proposals which not yet firm in Department or Executive Branch:
- 1.
Rice
(a) US supply up to 50,000 tons wheat as rice substitute under Section 550 MSA, estimated value up to $5 million. Statute requires price [Page 1583] be consistent with maximum world market prices; Ceylon put up local currency equivalent which would be used as part US economic aid in Ceylon. Possible but not probable other Section 550 US surplus commodities may be used get rice for Ceylon from third country. Such commodities cannot replace regular free world purchases. US Department of Agriculture would aid and advice Ceylon purchase US rice.
- 2.
- Rubber
- (a)
- Not proposing preclusive buying.
- (b)
- Additional stockpiling rubber appears not feasible, but GSA willing buy from all sources perhaps 100,000 tons rubber year for rotation purposes. GSA willing contract 100,000 tons, apportioning contracts among rubber producing countries. Ceylon’s share world production low. Contemplated procedure, however, would be tell Ceylon we will perhaps consider contracting for Ceylonese rubber and from all sources for stockpile rotation at world market price without committing ourselves to any quantity in initial discussion. If Ceylon indicated interest producing countries would be invited offer amounts. Would attempt workout contract quantity for Ceylon which might be helpful Ceylon (say 20,000 to 25,000 tons) and still be on basis some principle applied equally all producers.
- 3.
- US technical and economic assistance to Ceylon in
approximate amount $7.5 million including:
- (a)
- Local currency derived from up to $5 million surplus wheat 1 (a) above.
- (b)
- Technical assistance for purposes in (c) below and related purposes about $450,000;
- (c)
- Economic assistance combined with (b) above for rehabilitation or conversion marginal rubber plantations, irrigation, agricultural extension, etc., of about $2 million foreign exchange costs. This amount aid not on recurring basis since Congress determines annual appropriations.
Believe offer should attempt find balance between magnitude needed have chance of being effective achieving US objectives and realization that excessive amount of aid to Ceylon at this time might react disadvantage US by damaging our relations with other countries in the area.
If response to Corea to be of use, believe must be made by October 6 in view GOC cabinet meeting October 8 on Commie Chinese arrangement. Desire Embassy comment soonest on proposal as a whole, and on individual sections, including need to make such response to Corea, magnitudes proposed, and possibility or advisability deletion or amendment any parts of proposal. End FYI.