Office of the Historian

846E.2395/2–2552: Telegram

The Ambassador in Ceylon (Satterthwaite) to the Department of State

confidential
priority
Colombo, February 25, 1952—5 p.m.

484. For Kennedy and Armstrong only. Gov Central Bank informed Emb that Finance Ministry and Central Bank today made strong reps to PriMin that Corea be instructed negot contract on basis American [Page 1507] proposal (Embtel 482, Feb 25).1 They argued it is to Ceylon’s advantage sell largest possible amt rubber for dollars and avoid bargaining over slight differences in price which might on any day exist in different markets. PriMin agreed but has been strongly influenced by Min Com, Min Agri, and Parl Secy MEA who argued:

1.
Trade will react adversely if forced at any time accept price less than best obtainable;
2.
Wld be polit unwise for GOC enter Colombo market as buyer or impose destinational control in order insure delivery 6,000 tons monthly to US; and
3.
Therefore, wld be preferable for PriMin who must have polit quid pro quo for stopping shipments to China to accept informal gentlemen’s agreement whereby US wld purchase 5,000 tons monthly in Colombo market without obligation on part GOC assure fulfillment this quota.

At this point PriMin uncertain but has instructed Central Bank draw up proposal acceptable to rubber trade whereby GOC cld assure 6,000 tons monthly to US. It wld assist Central Bank greatly to know whether:

(1)
With return rubber purchasing to private firms GSA wld buy entire 6,000 tons or only residual amts;
(2)
US planning make any alterations in its proposal; and
(3)
How prices wld be fixed for types crepe for which there are no comparable Singapore prices.

Emb questions ability Ceylon deliver 5000 to 6000 tons monthly of Rss 1, 2 and 3 and thick pale crepes (Deptel 315, Feb 20)2 as according Rubber Commr, Ceylon 1951 rubber exports totaled 103,633 tons divided as follows: Rss 57, 118; sole crepe 6,352; scrap crepe 19,029; latex crepe 19,708; liquid latex 1,426.

Emb also questions practicability implementing gentlemen’s agreement for fol reasons:

1.
If US makes commitment buy in Colombo open market, rubber undoubtedly wld be held here for unjustifiably high prices;
2.
PriMin presumably wld be unwilling announce embargo to China without actual record US purchases;
3.
US Govt wld be asked make commitment which US private trade later might be unwilling or unable fulfill.

Satterthwaite
  1. Telegram 482 from Colombo, not printed, reported that the Minister of Finance and the Central Bank representative had left a Ceylon cabinet meeting with the impression that Corea would continue to press for GSA acceptance of the Colombo market price. The American proposal based any U.S. purchase of rubber on the condition that GSA pay the Singapore or world price. (846E.2395/2–2552)↩
  2. Department telegram 315, not printed, stated that Corea had been handed a draft rubber agreement identical in all major respects to the current U.S. contract with Thailand. The Government of Ceylon was expected to fill in the beginning and termination dates of the agreement, the total tonnages, and the rubber grades to be sold. The Department urged that Ceylon prosecute the negotiations as rapidly as possible. (846E.2395/2–2052)↩