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

856D.2395/11–1954

No. 299
Memorandum by the Assistant Secretary of State for Far Eastern Affairs (Robertson) to the Under Secretary of State (Hoover)¹

secret

Washington, November 19, 1954.

Subject:

• United States Rubber Policy, Indonesia

The President on July 16, 1954 directed the OCB to develop a feasible integrated program with respect to the rubber problem of Southwest Asia, particularly Indonesia, and to report to the Council with estimates of the general magnitude of costs. Such a paper was prepared by the Department (OMP and PSA) in conjunction with FOA, approved by the OCB, and submitted to the NSC in NSC 5417/3 on September 24, 1954. The paper recommended, as a course of action to improve the Indonesian smallholder rubber situation, the planting of 380,000 acres with new high-yielding rubber trees, the establishment of cooperative processing centers with working capital to buy rubber from smallholders, and the establishment of schools to teach smallholders approved methods of planting, tapping, and processing. The paper also recommended that Indonesia should bear as much of the cost as feasible but recognized that economic conditions in Indonesia at present are such as to suggest that the United States be prepared to underwrite a substantial portion of the total. The total cost of the program is estimated at $60 million over a twelve-year period. All but $3 to $5 million of the total would be local currency costs. The United States share could be financed through surplus agricultural commodities or through commodities other than agricultural surpluses under foreign aid appropriations or under separate legislation.

On October 18 [14], 1954, the NSC adopted the recommendations of the OCB approving this project, subject to certain conditions, one of which was “… a determination by the Secretary of the Treasury that the program will not adversely affect the sale of U.S. Government-owned synthetic plants”.² Secretary Humphrey responded by suggesting that the Indonesian program be delayed for approximately six months.³ The OCB Assistants considered this aspect of the problem and have prepared for OCB transmittal to the NSC a statement that says the Treasury recommendation is acceptable and that the Department will not take definitive action or make commitments in response to a specific request from Indonesia without further reference to the OCB. It is understood, however, that the Department would be obliged to talk to the Indonesians about their needs for assistance to smallholder rubber since the U.S. has already, on the basis of NSC action, stated publicly that it would consider sympathetically proposals for assisting the natural rubber industry.

1. An attached note and a handwritten notation on the source text indicate that Hoover left Washington before this memorandum could be studied by him. Following his return, it was brought to his attention on Dec. 6.
2. Ellipsis in the source text.
3. During the discussion of NSC 5417/3 at the 217th meeting of the National Security Council on Oct. 14, Humphrey expressed his strong disagreement with the rubber proposal and requested that his fundamental opposition be placed on the record. This was done in NSC Action No. 1243b(4). (Eisenhower Library, Eisenhower papers, Whitman file)