Foreign Relations of the United States Diplomatic Papers, 1939, General, The British Commonwealth and Europe, Volume II

811.24 Raw Materials/112: Telegram

The Secretary of State to the Minister in the Netherlands (Gordon)

Washington, May 5, 1939—6 p.m.

38. Your no. 58, April 29, 2 p.m., no. 59, April 29, 4 p.m., and no. 63, May 4, 1 p.m.⁸ The reply of the Netherlands Government is distinctly disappointing.

You are instructed to respond, in the form you consider most suitable, to the points set forth by the Netherlands Government in its aide-mémoire and in the explanation given by the Foreign Minister, stressing the following points:

1. The United States Government itself is strongly opposed to the barter of materials by governments where such transactions take the place of or interfere with normal channels of trade. This Government proposes quite a different type of arrangement, however. It wishes to stress particularly the fact that it will make its surpluses of wheat and cotton available for such exchanges only if these supplies are to be held as reserve stocks for war emergencies, with no possibility of their being substituted in commercial markets for supplies otherwise available through the normal channels of trade. Since this Government is prepared to hold stocks of strategic materials, including rubber and tin, in the same way, the proposed transactions would he entirely outside the channels of trade and should be free from the criticism or difficulties feared by the Netherlands Government.

2. With reference to the Foreign Minister’s observation as to the usual practice of the Netherlands in specifying in trade agreements that the other country take a variety of Netherland products along with tin and rubber, we do not believe that this fact is pertinent to the particular transaction which we have put before the Netherlands Government. Our proposal is based on the idea that if a war emergency came, the Netherlands Government would need the wheat and cotton just as much as we would need the tin and rubber. Furthermore, all of our ordinary trade arrangements are based on operative free market conditions. It is not perceived, therefore, how, if the Netherlands Government entered into the transaction proposed, it would be laying itself open to any justified claims on the part of other countries that would impair the commercial position of the Netherlands.

3. Although this Government needs large emergency reserve stocks of rubber and tin, it will be impossible to secure them unless other governments are prepared to work out some arrangement for supplying such stocks in connection with the acquisition of reserves of materials which this Government is prepared to supply. Although legislation providing $100,000,000 for the purchase of strategic materials has been under consideration in Congress, there is no prospect of securing this year more than $10,000,000, and even the appropriation of this amount is still uncertain. Should this sum be made available, small purchases of tin might be made although other strategic materials are also in demand. There is no prospect whatever that any part of this sum could be used for the purchase of rubber, since even the full $100,000,000 program would not have covered the acquisition of rubber.

Having reemphasized these points, you may then express the willingness of this Government to explore ways of working out the proposed transactions which will be acceptable to both governments. You may feel free to engage in such exploratory conversations, reporting fully before you indicate any possibility of acceptance by this Government.

It may be that the Netherlands Government would be much more responsive to our suggestion if publicity could be avoided. If in your opinion this is a matter of primary concern, the Department may wish to consider a new approach to the problem. If, on the other hand, there proves to be no disposition to consider an outright exchange arrangement under any conditions, you may wish to encourage the Netherlands Government to suggest ways by which the same objectives could be obtained without the appearance of a barter arrangement.

The Department assumes that if you find it effective you will enter into discussion of some of the background aspects of the present situation bearing upon the wisdom of stock accumulation by the Netherlands as well as by us. Certainly the possession of stocks would serve the Netherlands Government as well as it would ours to avoid burdens and risks of shipping. Neglect of opportunities offered now would lead to criticism later if unusual difficulties arose.

Hull

8. Telegram No.63 Not printed.