Foreign Relations of the United States, 1952–1954, East Asia and the Pacific, Volume XII, Part 2

493.56D9/7–1354: Telegram

No. 280
The Acting Secretary of State to the Embassy in Indonesia

secret

Washington, July 13, 1954—7:30 p.m.

48. Department concurs proposal last paragraph your 83.¹ Should it seem appropriate you may find some of following useful.

Indonesian responses U.S. representations re sale rubber China have stressed alleged difficulty finding markets Indonesian rubber especially smallholder your 27 para. 2.² This allegation contrary facts known almost every rubber trader New York. Leading New York purchaser Indonesian rubber indicates very substantial purchases occurring October to mid-June have been reduced because rubber not available. During last few weeks there has been extreme difficulty locating Indonesian rubber for sale. Furthermore some Indonesian national firms have defaulted on contracts for substantial amounts rubber thus causing serious financial loss American firms required buy cover their sale commitments. Understand situation further complicated by Indonesian Government action prohibit export slab and recent order prohibit export to Singapore of crepe, 1, 2, 3 RSS, 1, 2, 3 estate browns, flatbark, 3 and 4 ambers. Can Embassy confirm whether such embargoes established?

Quantity smallholder rubber coming to U.S. very much reduced and American rubber importers mystified where rubber being sold, why Indonesia complaint re market because prices high and favorable and activity great.

If Indonesia artificially restraining rubber exports or if Indonesia accumulating rubber for sale China or if Indonesia making rubber exports almost impossible as result license exchange other regulations only net result will be substantial increase use synthetic by American industry and more interest in synthetic by European industry. From standpoint rubber market it appears Indonesia exerting maximum effort jeopardize its competitive position as major rubber supplier.

Point is during past year American manufacturers have swung heavily from synthetic to natural but will swing back if continued supply natural not available. Such conversion to synthetic might tend to be more or less permanent if there were real doubts as to Indonesian rubber availability.

Technical factors make it possible U.S. manufacturers use large tonnage either synthetic or smallholder lower grades. Market these lower grades does not exist elsewhere for technical reasons.

Should Embassy wish use any foregoing in talk with Ali or others it should of course make clear these simply technical facts rubber industry and should avoid any implication U.S. threat.

Smith

1. The last paragraph of this cable, July 13, reads as follows:

   “I am trying to see Ali within the next two days primarily introduce Jones at which time I plan take up few other minor matters and in addition unless instructed otherwise will use that opportunity to draw out Prime Minister on rubber subject.” (493.56D9/7–1354)

2. Document 276.