811.24 Raw Materials/411: Telegram
The Ambassador in the United Kingdom (Kennedy) to the Secretary of State
[Received November 10—3:57 p.m.]
2329. Embassy’s 2315, November 9, 4 p.m.53 Following from the Ministry of Supply:
“You were inquiring of Mr. Riddell with reference to his position in regard to purchase of rubber under the Cotton-Rubber Exchange Agreement. I have gone into the position with him and on present estimates based on a 75% release it appears that the surplus of supplies for absorption during the 6 months October to March would amount to 85,000 tons. This is equal to the quantity required by the Agreement but leaves no margin. American manufacturers have, however, been buying heavily in recent weeks and their demands exceed their current trade requirements; in other words they are endeavoring to build up their stocks. In these circumstances there [Page 893] can, I think, be no doubt that the persistent buying which would be necessary in order to implement the Agreement for shipment in full by the 31st March would cause prices to rise to undesirable levels. This increase could be avoided, however, if it could be agreed to allow Mr. Riddell to extend the shipment period up to say the end of September next. He would then continue to buy as rapidly as possible consistent with his avoiding undue pressure on the market. By adopting this procedure the supplies coming forward for near shipment could be made available for the ordinary trade buyers at prices which would not be subject to the pronounced influence of any enforced Government buying.
There remains the question of an increase in the quota release. I have had an informal talk with two or three members of the Regulation Committee. I gather that it is felt strongly that an increase in the current quarter is impracticable owing more particularly to administrative difficulties in the Dutch East Indies while any share increase the first quarter of 1940 would cause a corresponding heavy decrease in subsequent quarters. This would entail various disadvantages, for example dislocation in labor conditions on the estates. Further it is desirable in the interests of both producers and consumers that a reasonably steady price should be maintained and to achieve this drastic and frequent changes in the quota releases.
I feel that there is much weight in the above considerations. What I have in mind therefore is the possibility on the one hand of an extension of the shipment period for barter rubber and on the other hand (to quote the Agreement) of our “using our best endeavors” to see that the quota release should be raised to 80% during the coming quarter. This should enable stocks in the United States to be built up while avoiding any undesirable increase in price and at the same time it would lessen the danger of marked changes in demands and in the quota releases next year with their attendant disadvantages.”
- Not printed.↩