846E.2395/2–2752: Telegram
The Acting Secretary of State to the Embassy in Ceylon
priority
323. Deptel 320 Feb 26.1 Gunaratna today asked Depts reaction to gen understanding under which US wld buy 5,000 tons rubber a month in Ceylon market. Request based on difficulties with Ceylon rubber trade which wld arise from restrictions involved in contract. If US wld buy reasonable quantities, based on 3-year pattern of 4,000 tons a month going to US, GOC cld explain to trade stoppage shipments to Chi on grounds Chi trade new development.
Gunaratna informed gen understanding not feasible since after [Page 1509] June 30, no machinery available US Govt enforce specific purchases in Ceylon by private trade except through GSA contract, with GSA agents residual purchasers for stockpile if private trade purchases fell short of agreed amt. Without contract GOC wld have no assurance US purchases and misunderstanding might lead to recriminations. Emphasized that contract price wld be floor, price and GSA wld not need enter market if private traders US bought full quantity specified. This wld permit maximum amt free trade at highest prices obtainable with minimum interference by govt.
Dept explained that even under proposed gen understanding restrictions on Ceylon rubber traders involved since stoppage sales to Chi wld require restrictions. Restrictions on liberty of rubber traders cld be explained Ceylon people as in natl interest, inasmuch as assurances wld be gained of stable sizeable dol earnings which wld enable Ceylon economy continue and even expand needed imports from dol area. Other countries faced with exchange problems have found it wise to subordinate particular export and import interests to over-all natl interest. All this undoubtedly familiar GOC Central Bank which must have informed GOC these facts.
Point made that if GOC fearful 6,000 tons a month shipments required undue restrictions, that amt proposed originally by GOC. If smaller amt, which wld nevertheless be consistent with desire both parties maximize quantities, wld leave more flexibility, GOC cld discuss with GSA.
Gunaratna referred Battle Act and asked whether these negots wld be separate from any rubber agreement. Dept stated rubber agreement stood on own feet. However, referred to Corea’s earlier statement that control exports to Chi implicit in rubber agreement; this wld of course ease Battle Act discussions when held.