841.6176/40: Telegram The Ambassador in Great Britain (Houghton) to the Secretary of State [Paraphrase] LONDON, November 25, 1925-noon. [Received 1:46 p. m.] 358. Department's telegram number 345, November 24. Work, President of the Goodrich Company, told me following late yesterday: Several months ago Winston Churchill 89 proposed to certain persons that a banking syndicate composed chiefly of Americans should be formed to regulate the price of raw rubber. Such a syndicate under the lead of Dillon, Read of New York was formed to cover rubber demands of Fiske, Goodrich, Goodyear and United States. Their representatives, Dunn of Fiske and Erdman of Goodyear, came to England, but found it impossible to work out a satisfactory agreement. Work later joined them, and an entirely new plan was developed, acceptable to these American interests. Dunn has sailed for America to see you to learn if you are willing to inform the Government of Great Britain broadly that a plan acceptable to the Rubber Association will be acceptable to you. The plan in substance contemplates the removal of all restrictions on February 1. Three months later, should the price decline, it shall be supported at the rate of 3 shillings 6 pence a pound, but each succeeding quarter the supporting price shall be reduced 3 pence a pound until the price of 2 shillings is reached. This will be regarded as the permanent base price. Stevenson will accept this plan provided the Government of the United States gives its assent; and inasmuch as it will prevent violent fluctuations of price and move the base price steadily downward and is open to all purchasers of rubber, Work and his associates think it should be accepted. Dunn will furnish you with the details. Churchill has assured Work and his associates that much of his interest in plan is based on his desire to strengthen British position in international exchanges. According to Work, Stevenson's position has been seriously shaken because of our representations. The British apparently will deal with Work only with your approval. 90 This new development has taken me wholly by surprise. In our talk at Hatfield House, Amery mentioned casually that certain American interests had been seeking to purchase rubber on long-time contracts, and, as reported to you, Chamberlain yesterday spoke a 89 'British Chancellor of the Exchequer. See letter from Ambassador Houghton to the Secretary of State dated Nov. 9, 1925, p. 259. little more definitely. Aside from this I have received no information at all regarding the formation of an American syndicate to control the entire rubber supply or that negotiations to that end had been carried on for several months. Whether the same is true of the British Foreign Office I cannot say. Would it not be advisable for me to inform Chamberlain that the Government of the United States is wholly without information regarding this movement? HOUGHTON 841.6176/43: Telegram The Secretary of State to the Ambassador in Great Britain 352. (Houghton) WASHINGTON, December 1, 1925-3 p. m. Your 357,91 358,92 and 362.93 (1) Until receipt of your recent messages I was entirely ignorant of these negotiations of rubber interests. You may so inform British officials. (2) This Government cannot countenance any plan to fix the price of rubber or any other commodity. Furthermore, participation by American citizens would certainly be a violation of the spirit if not the letter of our anti-trust laws. I would be glad if you would as soon as possible take occasion informally to explain to Chamberlain our views in a much wider sense than the question of rubber. We believe that the whole fabric. of international commerce and even of wholesome international relations may be undermined unless a halt can be called to governmental price fixing of commodities in international trade. And we believe that Great Britain and the United States, the two greatest importers of raw materials, have the most to lose by such a development. At the present time the price of some 12 different commodities is being fixed by direct or indirect governmental action, and price fixing in at least two more important commodities is now in process of negotiation between different governments, in both of which American and British industry and consumers will be the sufferers. Moreover, the apparent success of price fixing in rubber has given great strength to the movement along similar lines among American cotton growers and among other American agricultural industries where the costs of production have been inadequately met by world prices. If our government becomes a party to such practices as to imports it cannot consistently refuse to allow such combinations upon our own soil. This trend in 91 Ante, p. 261. » Supra. international commerce cannot fail to increase unless the great trading nations unitedly oppose it. Recently an attempt to finance the coffee price-fixing in São Paulo with American capital was prevented by our government in the interest not only of our consumers but of those of the rest of the world.94 We felt that it was a primary duty to discourage international combinations to fix prices from becoming interlocked with international finance, although we understand that British financiers may supply the capital wanted to continue this combination. We have the same situation in potash. We do not come to our conclusions solely from the above reasons. It appears to us that the very fact of discussions between ourselves and Great Britain upon rubber prices is but an indication of the inevitable result of governmental price fixing in that the discussions, which should be kept to the markets, will be at once elevated into international negotiations between governments with the addition of innumerable conflicts and arousal of bitter public sentiments upon all sides. Moreover, we know that in the long run industry itself will not develop efficiently or wholesomely under price fixing. It discourages progress in production methods, stifles consumption, increases the use of less efficient substitutes, stimulates abnormal production in non-price-fixing areas where production cannot exist on a sound economic basis. It would seem to us a most forward step in the progress of international trade and world welfare if the British Government would join with us in discouraging such combinations and the financing thereof. This would, of course, imply the abandonment of the rubber control in respect to which our conclusion is that the world outlook, both consumption and production, makes profitable prices to planters a certainty for many years to come and no such control is longer necessary. Our government trusts these considerations may appeal to the British Government as put forward in every sincerity and in the interest of the world as a whole. KELLOGG 841.6176/45: Telegram The Ambassador in Great Britain (Houghton) to the Secretary of State LONDON, December 4, 1925—11 a. m. [Received 11:45 a. m.] 372. Your 352, December 1, 3 p. m. Saw Chamberlain late yesterday and made statement as directed. "See vol. 1, pp. 533 ff. Chamberlain said very frankly that he too had known nothing of the negotiations being carried on by certain American [s] until just before he had spoken to me. He does not know whether negotiations were initiated by Churchill or by the Americans, but in any event, he says his Government can hardly be supposed to have knowledge of American law and to determine whether or not persons applying to it are within their legal rights. Chamberlain went on to say he had promised me an answer before he left for Geneva and that he had put his answer in the form of an aide-memoire and that he thought on the whole he had better make the answer as he had originally planned. He then read me the fol lowing statement: "In view of the continued high prices of rubber His Majesty's Government have decided that the exportable percentage of rubber from Ceylon and Malaya on the first February next shall be raised 15 points to 100 percent of the standard production instead of to 95 percent which would be the normal figure on that date under the rubber export restriction regulations. This constitutes the maximum measure of relief which can be made effective in the time and it will in fact be equivalent to the virtual suspension of the existing restriction on exports of rubber. It may further be stated for the very confidential information of the United States Government that the above represents an interim measure pending the probable introduction of a modified scheme which has for some time been engaging the earnest consideration of the authorities. Various proposals for a modification of the existing scheme have been studied with a view of meeting the present abnormal situation. The advisory committee over which Lord Stevenson presides has already been in consultation on this subject with the more important United States rubber-using interests and His Majesty's Government are now awaiting a further expression of the views of those interests before finally reaching a decision. A certain amount of delay is naturally entailed by this consultation but every effort is being made to hasten the proceedings. The United States Government will readily agree that to give any publicity to the fact that a revision of the scheme of restriction is under consideration would create extraordinary difficulties in the rubber market and could only do harm to all concerned until such time as the new arrangements have been definitely settled. The advisory committee have expressed themselves as most willing in the future to meet the representatives of the United States rubber industry in informal conference either at periodic intervals or whenever the representatives in question may find it convenient to come to this country for the discussion of matters of mutual interest." When Chamberlain finished reading he said again that this was the answer he had originally planned to make but that in view of my representations this answer need not now necessarily be regarded as final. He stated frankly that he thought there was little hope that his Government would change their position. He believed the plan was useful and perhaps necessary to enable rubber production under proper conditions and he pointed out that the laws controlling and restricting output are local laws enacted in Ceylon or the Malayan States and the like. Chamberlain leaves for Geneva tomorrow. I fancy, therefore, some weeks will elapse before any reply is vouchsafed. Official notice has been received today that percentage of rubber for export for the quarter beginning February 1st next will be raised by 15 points to 100 percent. See Embassy's 338 November 3 [2?], 11 [10?] a. m.95 HOUGHTON ARRANGEMENT BETWEEN THE UNITED STATES AND GREAT NORTHERN IRELAND GRANTING RELIEF FROM DOUBLE INCOME TAX ON SHIPPING PROFITS BRITAIN AND 811.512341Shipping/28 The Acting Secretary of State to the British Ambassador (Howard) WASHINGTON, August 11, 1924. EXCELLENCY: Referring to the Embassy's note No. 138 of February 11, 1924, and to previous correspondence relating to a proposed arrangement between the Internal Revenue authorities of the United States and Great Britain with a view to granting relief from double income taxation in cases where the profits arising from the business of shipping are chargeable to both British income tax and to income tax payable in the United States, I have the honor to inform you of the receipt of a letter on the subject from the Secretary of the Treasury.96 It appears therefrom that Section 213(b) (8) of the Revenue Act of 1921 which has been reenacted as Section 213(b) (8) of the Revenue Act of 1924 exempts from tax so much of the income of a nonresident alien or foreign corporation as is derived from the operation of a ship or ships documented under the laws of a foreign country if that foreign country in turn exempts from tax so much of the income of a citizen of the United States nonresident in such country and of a corporation organized in the United States as is derived from the operation of a ship or ships documented under the laws of the United States. The question of the exemption from tax of income derived from the operation of British vessels has, as the Embassy has observed, previously been discussed by officials of the * Not printed. None of this correspondence printed. |