17. Telegram From the Department of State to the Embassy in Burma1

228. In discussions with Burmese Ambassador September 15, it was apparent Battle Act complications future shipments rubber (aside from licensed 3000 tons) still principal problem. Barrington believes inclusion copper matte in trade agreements with CPR and USSR lesser problems as believes shipments these commodities could be avoided by Burma.

Informed Burmese most satisfactory arrangement for US would be for Burma give informal assurances it would not ship copper matte to any Communist Bloc country nor rubber to CPR. However we are not required by law to request such advance assurances therefore we could proceed on basis general recognition by Burma that Battle Act does set certain limitations upon ability US extend aid and leave possible future developments on this question aside for present assuming Burma will somehow find it possible keep situation from arising under which US would be compelled to terminate aid.

Also implied quite strongly, US ability aid Burma in other fashions aside from PL 480 would be considerably eased if Burmese [Page 24] could indicate to US Burma did not intend take any action which might force US consider termination aid under Battle Act.

Burmese stated they were of opinion direct sale agricultural surplus for local currency under PL 480 with funds not loaned to Burma would not come under Battle Act as it would be direct sale and not aid. Asked for confirmation, US replied this unconventional and in any event such program would be far less favorable to Burmese than traditional PL 480 program which permits large portion funds be available economic development purposes. (FYI Sale under PL 480 for funds not loaned would of course be possible and has been done before.)

Burmese also raised question whether Section 304, PL 480 would be impediment conclusion PL 480 agreement. Informed Burmese we believe no difficulties inherent in this section since we assume Burma would not re-export items similar those received from US to Communist Bloc countries. Ambassador agreed this should cause no difficulty.

Burmese also wished know if US would use local funds obtained PL 480 sale procure items in Burma which presently are foreign exchange earners for Burma. We replied matter was negotiable and we believed satisfactory agreement both parties could be worked out.

Ambassador Barrington cabling above information Rangoon and hopes for definitive reply some time next week.

In meantime at Burmese Embassy request State and Agriculture prepared informally discuss PL 480 agreement with Burmese beginning next week in hopes reply from Rangoon would permit entering into formal negotiations.

  1. Source: Department of State, Central Files, 411.90B41/9–1655. Secret.