367. Position Paper Prepared for the Delegation to the London and Paris Rubber Meetings1
The two attached position papers set forth the detailed positions which the US Delegate should take on various matters which will come up at the Natural and Synthetic Rubber Producers’ Consultative Committee Meeting in London, May 22–23, and at the International Rubber Study Group Meeting in Paris, May 27–31.2 This memorandum describes in broader terms the basic position which he should take, the tactics which he should follow and the considerations on which that position and those tactics are based. Essentially, the basic position is similar to that taken in the rubber meetings of October and December, 1967.
The Problems Confronting Rubber Producers
Natural rubber prices are at the lowest level since 1949 (Table 1).3 Although a long-term price decline was anticipated, the sharp drop in 1967 (4 cents a pound and there has been no substantial recovery) pre-sents a serious problem to the principal natural rubber producers. While total export earnings of three of the five major natural rubber producing countries increased from 1960 to 1966 (Table 2), earnings from rubber decreased during the same period in the case of all five—even while total quantities of rubber exported were increasing (Table 3).
The situation in synthetic rubber is less clear because published price data are largely meaningless and prices at which synthetic rubber is sold are closely guarded commercial secrets. Synthetic rubber price data derived from US export statistics indicate, however, that synthetic rubber prices, especially for the major synthetic rubber, “SBR,” have also been declining (Table 4). These data, indicative but not conclusive, tend to bear out comments by synthetic rubber producers, at least those not integrated with rubber manufacturers, that they would also welcome a price rise.
But while certain aspects of the immediate situation are reasonably evident, others are not. Further, while natural rubber seems to be facing a long-term problem, the situation over the longer term (say, through 1975) is obscure.
[Page 860]Lack of Information
Total consumption of all rubber increased from 3.9 million tons in 1960 to 5.8 million tons in 1967 world-wide (except certain East European countries and the Asian communist countries). At what rate will rubber consumption continue to rise? Synthetic rubber’s share of the total rubber market increased world-wide from 54% in 1960 to about 63% in 1967; at what rate will this trend continue? What will happen in the communist countries where the use of synthetic is expected to rise? What are the forces affecting the competitive positions of synthetic and natural rubber? What will be the supply/demand balance in both synthetic rubber and natural rubber in 1975? These are some of the major questions confronting producers—and consumers—questions which governments should make every effort to answer before deciding what, if any, international action should be taken on rubber. But while the IRSG has done a great deal of useful work in collecting data on rubber production and consumption it is clear that agreed data on long-term prospects are lacking on which governments, acting collectively or individually, might have to base policy decisions.
Position of LDC’s at May Rubber Meetings
The natural rubber governments are going to meet in London just before the consultative meeting. It is difficult to say at this time what proposals will emerge from the meeting of natural rubber producers. The Malaysian Government has informed us, however, that they will want to talk about such matters as a buffer stock and greater cooperation between natural and synthetic producers.
Perhaps the best judgment that can now be made is that the chances are better than even that at London and Paris the natural rubber governments will make proposals for some sort of short-term action, although they may be unable to agree among themselves on, for example, temporary restrictions on production or exports, the establishment of a buffer stock, or some combination of these measures.
There would also appear to be a possibility that there will be proposals for some sort of long term action, for example, the establishment of an international rubber agreement covering both synthetic and natural rubber.
US Position
Regarding any short-term measure, the US Delegate should adopt essentially the position that has been adopted in the past. That is, even if he believes that such measures are unlikely to be successful, he should not object to them provided that they do not call for any commitments on the part of either the US Government or US industry or for any contributions by the US. He should be sympathetic to the problems of the natural [Page 861] rubber producers but at the same time he may point out that such meas-ures may not confer the benefits that their proponents desire.
The US Delegate should refrain from encouraging any proposals for international action over a longer term and should resist any which call for commitments by or contributions from the developed countries. He should note that while many opinions exist, the IRSG has not made a decision collectively as to whether a long-term problem exists. He should argue, in the manner that he deems most appropriate, that the first step is for the IRSG to see whether any problems exist by attempting to arrive at a consensus regarding the rubber situation in the mid-70’s.
To buttress his argument the US Delegate may wish to tell other delegates about some preliminary forecasts which the USG has been making by using computer techniques. And clearly, to the extent he can do so, he should enlist support among other developed country governments for the theses that more information and accurate forecasts are needed and that, in the absence of such information and forecasts, any proposals for long term international action are premature. He may, however, wish to elicit informally some views on what forms long term, international action—if indicated—might take.
The US Delegate should be as forthcoming as possible to the wishes of the rubber producing countries regarding the nature and pace of the future work on rubber in the IRSG, in view of (a) the serious problems faced by these countries and (b) the ever-present threat that UNCTAD will preempt the IRSG role in rubber if the producing countries become disillusioned with the Study Group’s ability and willingness to help them with their problems. The US Delegate, therefore, need not oppose proposals to study possible forms of international action, except those which the US Government clearly could not accept.
Further Meetings
It is unlikely that the IRSG will be able to complete at Paris basic studies, such as long-term forecasts. The US Delegate may suggest a special meeting of the IRSG Statistical Committee within several months to complete any such work.
He may also agree to another meeting of the Consultative Committee at a time approved by the IRSG Assembly. The US Delegate should note that it is important to have adequate reports so as to provide the bases for substantive discussion by the IRSG at its next session.
Greater Participation by the USSR
The USSR is a recent member of the IRSG but furnishes no statistics, is an observer but not a member of the Consultative Committee, and, in general, does not participate to any great extent in international rubber meetings. Because the Soviet Union is an important producer and consumer [Page 862] of rubber, because there is a need to know more about its activities in rubber, and because of general foreign policy considerations, the Soviet Union should play a greater part at rubber meetings. The US Delegate may give quiet encouragement to the Soviets’ assuming a larger role, and he may, if he considers it advisable, urge in low-key that the Soviet Union become a member of the Consultative Committee.
- Source: Department of State, EB/ICD Files: Lot 81 D 344, ISRG Assembly, London 1968. Limited Official Use. The source text is Tab A to a memorandum from Julius L. Katz (E/ICD) to Assistant Secretary Solomon, dated May 17.↩
- The papers are attached to the Katz memorandum as Tabs B and C, not printed.↩
- None of the tables is printed.↩