Rubber, the United States, Great Britain and Malaya during the Interwar Years

Scott Abel

To maximize profit for planters and revenue for the government, Great Britain

threatened thousands of American jobs in the rubber and automotive industries during the

1920s and 30s through price control schemes that raised prices and threatened occasional

shortages. During the years between the world wars, the United States depended on

rubber production from the Malay Peninsula, Borneo, and elsewhere in southern Asia for

its burgeoning automobile and tire industries. The United States State Department, at the

request of the American rubber lobby, fought for open trade with the British colonies of

Malaya and in Borneo against British attempts at forming cartels. The interwar years

marked an important turning point in American trade history with Malaya as the United

States advocated for greater trade with it for economically and strategically critical rubber

and therefore made Malaya a critical trading partner for the United States during that

time.

Malaya linked both British and American interests in the years after World War I

as a British colony and important exporter to the United States. Great Britain employed

financial gains from Malayas trade with the United States as a means for paying off its

$4.7 billion debt with the over $1 billion from imperial government revenues from

Malaya. However, the collapse of the price of rubber from 1920 with $1.05 a pound to

$0.16 a pound by 1922 threatened the entire industry. In response, the British Colonial

Office and the Rubber Growers Association formed the Stevenson Plan as a means for

1
increasing the price of rubber.1 Great Britain used Malaya as leverage with the United

States but found that the dramatic fall in the price of rubber threatened its clout and

sought price controls in the rubber market.

The growth of the American automobile industry among others resulted in an increased

demand for rubber goods during the early 20th century. The climate of the United States

was not conducive for the growth of rubber, which meant the United States required the

importation of the good from overseas. The Rubber Association of America complained

to the United States State Department in 1925 regarding the British Stevenson Scheme

that restricted the sale of rubber to American consumers through legislation designed for

the increase in rubbers price on the global market. Great Britain controlled 70 percent of

worlds four million acres of rubber plantations with its colonies of Ceylon (Sri Lanka),

the Malay States, and the Straits Settlements. The United States accounted for three-

quarters of global rubber consumption and therefore possessed a sizeable stake in the

status of the rubber industry.2 The production and export of rubber in the Malay States

and the Straits Settlements, or what became Malaysia and Singapore, became a key

economic interest in the United States because of its domestic demand for the product.

As a means for the increase of profits and preservation of plantations, Great Britain

implemented a restriction system by leveraging its high percentage of production of

rubber. Shortly after World War I, in 1919 the demand for rubber increased too slowly to

meet with production and by 1921 the price for crude rubber fell to 14 cents a pound.

The Stevenson Committee, named for British Secretary of State for the Colonies Sir

1 Jim Baker, The Eagle in the Lion City: America, Americans, and Singapore (Singapore:
Landmark, 2005), 126-128.
2 Rubber Association of America to the State Department, July 17, 1925, in US State
Department, Foreign Relations of the United States, 1925, Vol. II, 245-246.
2
James Stevenson, proposed the Stevenson Scheme as a temporary measure for the

reduction of the excessive production and oversupply of rubber in 1922. The Dutch

government refused any part in the scheme, but the scheme proceeded anyway with the

proposal sent to Ceylon, the Malay States, and the Straits Settlements as a means of

intervention by the British State.3 In response to a fall in rubber prices after World War I,

the British government sought the amelioration of the rubber price situation for the sake

of its planters and exporters.

The Stevenson Scheme helped increase the profitability of the rubber trade for the

colonies in Malaya but at the expense of American consumers. The implementers of the

Stevenson Scheme hoped the increased price of rubber of around 36 cents a pound would

give a profit for the producer and leave enough capital for the expansion of plantations.

The British government allowed the planters exportation of only 60 percent of his crop

and any crop sold in excess of that cap received a prohibitive tax depending on rubbers

current price at the time. The Stevenson Scheme came into effect on November 1, 1922

and eventually tripled the price of rubber while also threatening a shortage according to

the Rubber Association of America. From February 1, 1925 to April 30 of the same year,

the scheme permitted planters exportation of 55 percent of their rubber crop with a price

of around 38 cents a pound. But by July 16, 1925, the price of rubber skyrocketed to

$1.15 a pound.4 The Stevenson Scheme, according to the Rubber Association of

America, restricted the supply of rubber on the world market as a means for the increase

of profit, but excessive restrictions caused the dramatic increase in prices and the

possibility of a global rubber shortage.

3 Ibid., 246-247.
4 Ibid., 247-248.
3
The American rubber manufacturers and general public became at risk for a shortage of

rubber that might temporarily cripple various American industries. The American market

demanded more rubber because of a growth in population and of the automobile industry

that needed rubber for tires. The increase in demand from the market in the United States

threatened a shortage unless the British government and producers took action, but

negotiations between the Rubber Association of America and the Rubber Growers

Association, which proposed the Stevenson Scheme to the British government, faltered

despite their agents visits to rubber manufacturing plants in New Jersey, Ohio, and New

England. Despite such efforts from American manufacturers, the British government

maintained the restriction scheme for the health of its own planter industry.5 Finding no

recourse through the British government or directly through the growers, the rubber

manufacturing industry petitioned the US State Department for intervention as a means

for bringing pressure on the British government to relax restrictions on exports.

The United States government responded as did the British government for the aversion a

global rubber shortage under the leadership of Secretary Kellogg. The United States

Secretary of State Frank Billings Kellogg took an activist policy during his tenure with

the negotiation or signing of more treaties than any of his predecessors, along with the

formation of the Kellogg-Briand pact of 1929.6 The House of Commons took up the

issue of the pending rubber shortage on July 13, 1925. Regardless, Kellogg instructed

Ambassador to Great Britain Alanson Houghton to informally deal with the impending

situation and remind the British Foreign Office of the lack of U.S. export duties.

5 Ibid., 249-253.
6 Biographies of the Secretaries of State: Frank Billings Kellogg, Office of the
Historian, US State Department,
http://history.state.gov/departmenthistory/people/kellogg-frank-billings.
4
According to intelligence provided by the U.S. consulate in Penang, the planters in the

Malayan plantations were incapable of increasing production because of a labor shortage

there.7 The United States government saw the drastic increase in the rubber price and the

potential shortage as an important issue within its economic interests, which revealed the

importance of the Malay Peninsula a half a world away from the manufacturing centers in

the United States.

The United States government requested that the British government allow the planters in

its colonies to export their goods without excessive or preferably no duties. The British

Foreign Minister at the time was the Francophile and conservative Austen Chamberlain

who dismissed the United States generally as less significant than European nations.8 In

an American Aide-Mmoire to the British Foreign Office, the United States decried the

Stevenson Schemes restrictions of rubber from the Federated Malay States and Ceylon

as creating a critical situation. It explained the significance of the rubber industry to

the United States as a one billion dollar industry with its consumers purchasing 70% of

the worlds rubber. Furthermore, the rubber industry employed, directly and indirectly,

one million people. The rapid increase of prices from 1 schilling sixpence to 4 schilling

sixpence partially resulted from speculation and a lack of stocks in Great Britain and the

United States. Without some price stabilization, the rubber industry might partially close

and therefore harm both producers and consumers.9 The United States saw the

7 Frank Kellogg to Alanson Houghton, July 18, 1925, tel. 232, in FRUS 1925 Vol. II, 253,
254; Alanson Bigelow Houghton, Office of the Historian, US State Department,
http://history.state.gov/departmenthistory/people/houghton-alanson-bigelow.
8 Austen Chamberlain, Foreign and Commonwealth Office,
http://www.fco.gov.uk/en/about-us/our-history/a-brief-history-fco/foreign-
secretaries/austen-chamberlain.
9 Houghton to Austen Chamberlain, British Foreign Office, April 23, 1925, tel. 213, in
FRUS 1925 Vol. II, 254-256.
5
production of rubber in Malaya as enough of an economic interest to pressure the British

government at high levels into action.

The British response increased the allowance of exports of rubber as Great Britain

recognized the possible impact of a global shortage of rubber. Chamberlain noted the

unusually high price of rubber, and the Federated Malay States responded with the export

of 6,000 tons of rubber while increasing the maximum assessment rate from 400 pounds

to 500 pounds per acre. Furthermore, regulators sought the increase of export allowances

from 60 percent in October 1922 to 80 percent. Chamberlain blamed the fall of available

goods on a labor shortage that required two months before hiring new laborers while

many cultivation companies lacked the necessary capital for additional cultivation. The

British government assured the United States that any risk of global shortages passed and

the Stevenson Scheme had no intention of hurting American consumers as prices would

soon drop.10 British actions in 1925 kept the scheme in place but employed a lessening of

regulations for the prevention of a rubber shortage.

The United States government objected to the whole concept of a government body

regulating prices as contrary to the principles of free trade. Kellogg, on behalf of the

United States government, explained the unacceptability of price fixing of commodities

and that participation in such action was contrary to the spirit or possibly even letter of

important U.S. anti-trust laws. He warned of the consequences regarding government

price fixing on international commerce and relations as both the United States and Great

Britain stood to lose from such policies. The employment of such policies threatened the

wholesome development of industry because of its negative effects on domestic

consumption and the likely replacement of rubber with inferior products, which all

10 Chamberlain to Houghton, August 15, 1925, W. 775/5203/50, in ibid., 256-258.

6
endangered global welfare and international trade according to Kellogg.11 The United

States objected to government intervention in the form of price regulation as it

contradicted the spirit of the time in America regarding imports and damaged the

American consumers interests.

The British government adjusted its policy again after pressure from the US government

in regard to rubber export duties for the prevention of a shortage. His Majestys

Government found the rubber situation severe enough for the temporary elimination of

the standard production rules by permitting planters to sell their rubber at will without

additional fees for excessive export. The new rate of 100 percent took effect on February

1, 1926 while the government attempted a modification of the Stevenson Scheme. The

government at the time offered little hope of a change in policy as it deemed control over

Malayas exports as still necessary.12 The British governments policy essentially

contributed to a panic regarding the sale of rubber to the United States and elsewhere.

The United States pressured Great Britain on its colonial policy regarding Malaya as a

means for the American consumer to buy goods at a cheaper and more stable price by

keeping the supply of crude rubber plentiful and consistent.

The trade dispute continued between the United States and Great Britain over Malayas

rubber exports because of its significance to both economies. Great Britain failed in

bringing in other rubber producers into the scheme such as the Dutch East Indies, Siam,

and French Indochina. The scheme brought initial success and great profits to British

planters and exporters. Some American firms that invested in plantations in Malaya and

Sumatra, such as Goodyear and U.S. Rubber, also prospered. However, as politics

11 Kellogg to Houghton, December 1, 1925, tel. 352, in ibid., 264-265.

12 Houghton to Kellogg, December 4, 1925, tel. 372, in ibid., 265-266.
7
dictated the rubber supply rather than demand, prices fluctuated immensely and resulted

in a significant loss of market share for British firms and colonies. Malayas market

share dropped to roughly half the global output and ultimately the scheme collapsed by

1928.13 The United States relied on Malayas rubber significantly less as a result of the

Stevenson Scheme because other territories undercut its prices.

The Great Depression of the 1930s brought about a renewed need for control over the

rubber supply with the fall in rubbers price. Great Britain and the Netherlands desired

the preservation of their plantations in their colonies, such as Malaya, as a means for their

profitability. In November 1933, Ambassador to the Netherlands Laurits S. Swenson

reported that the major Southeast Asian colonial powers, Great Britain, the Netherlands,

and France, convened in London on October 26 regarding negotiations for the restriction

of rubber exports. The Commission for Rubber Restriction from the International

Association waited in anticipation of an agreement regarding the restriction of rubber.14

Acting Secretary William Phillips expressed very great interest in any plan regarding

the restriction of rubber on behalf of the United States government because of Americas

status as the largest consumer of the product. The interest of the American consumer

required safeguards regarding the supply of rubber at as low as the industry could allow

without jeopardizing itself. He instructed ambassadors in the Netherlands and Great

Britain that they by no means consent to such plans.15 Contrary to Great Britains and the

Netherlands interest in high rubber prices, the United States desired low prices and such

schemes threatened American trade with Malaya.

13 Baker, The Eagle in the Lion City, 129-130.

14 Laurits Swenson to William Phillips, Acting Secretary of State, November 18, 1933,
tel. 832, in Foreign Relations of the United States, 1934, Vol. I, 615.
15 Phillips to Swenson, December 8, 1933, tel. 34, in ibid., 616.
8
The British government responded to the United States governments interest in the

restriction plan by stating its importance to the colonial economies. In response to the

rubber exporting sector strong desire for a restriction of rubbers export, the British

government sought an international restriction to avoid other producers from

undermining such restrictions. However, problems within the Dutch East Indies stalled

progress on the establishment of a cartel with non-European planters rejected government

controls on their production. If, the Dutch government satisfied the other countries on

that issue, the various other governments planned legislation regarding the restrictions.

The three European countries required either a few months for its enforcement while the

agreement would likely last for a few years as means for dealing with price fluctuations

that favored consumers according to the British Office of Trade.16 Unlike the Stevenson

Scheme, a new cartel forged, likely because of the depths of economic depression,

between various countries as a means for the stabilization of rubber prices.

The United States government strongly disagreed with such a policy by the countries who

sought an international cartel. The Secretary of State, Cordell Hull, advocated for

international trade without excessive regulation and taxation during his lengthy tenure.17

Although Hull and the United States government knew of the large fluctuations of

rubbers price and the potential benefits of price stability, the establishment of a

monopolistic restriction program in coordination with governments was an action of

great moment. Hull expressed his concern about the impending restrictions as a threat

to consumer counties welfare without restriction planners thoughtful consideration in

16 Ray Atherton to Williams, January 16, 1934, tel. 11, in ibid., 619, 659.
17 Biographies of the Secretaries of State: Cordell Hull, Office of the Historian, US
State Department, http://history.state.gov/departmenthistory/people/hull-cordell.
9
drawing the operations.18 The establishment of an international cartel restricting rubber

exports challenged popular ideas regarding international trade in the United States at the

time, along with the interests of the American consumer if restrictions were excessive.

The United States government recognized the interests of the planters and their

governments that required a form of market protection but desired a degree of price

fairness from such regulations. Hull requested that the prices not reflect maximum profit

for the planters in a monopoly as his government regarded [such prices] with anxiety in

this country [the United States]. As safeguards against such instances, he requested

adequate representation on the International Committee for consumers, full reports for the

public sent periodically, and an adequate rubber supply in the global marketplace.19 Hull

recognized that the United States was nearly incapable in stopping the great powers from

implementing a restriction scheme that impacted US trading relations with Malaya, but

sought the mitigation of its effects.

The rather difficult goal of setting up a cartel meant colonial powers needed secrecy for

its establishment. Despite the lack of agreement between Great Britain and the

Netherlands regarding supply regulation, Sir Robert Gilbert Vansittart, Permanent Under-

Secretary for Foreign Affairs ensured the United States that a final measure would result

in a government-run program.20 Aside from passing national legislatures in Europe, the

program required passing in various colonial legislatures such as Burma and Ceylon. 21

The United States government received intelligence from the United States Rubber

Company that suggested Great Britain and the Netherlands planned the signing of a

18 Cordell Hull to Swenson, January 23, 1934, tel. 5, in FRUS 1934, 620-621.
19 Ibid., 621-622.
20 Atherton to Hull, February 15, 1934, tel. 59, in ibid., 623.
21 Hull to Swenson, February 23, 1934, tel. 10, in ibid., 263-264.
10
restriction agreement on March 7, 1934 and the commencement of their agreement on

May 1. However, according to Atherton, the British government informed him that they

possessed no official consideration of restricting the rubber supply.22 The US rubber

industry worked with the US government for their mutual interest in keeping rubber

prices low. The colonial powers and rubber producers held the rubber restriction meeting

in secret because they likely believed the United States, the largest consumer of rubber,

strongly disagreed with such measures and would apply pressure regarding the issue.

The new restriction scheme ran into some difficulties with disagreements between

the participants while the United States government pressured Great Britain and the

Netherlands for assurances regarding adequate supply and representation. With the

alleged signing day of March 7, the United States sought special consideration for US

rubber manufacturers, realizing that the agreement only came into effect once all parties

signed it. The manufacturers required special types of rubber compounds not sold in

normal markets, but through private contracts and wanted an exemption for that

compound from the restriction.23 The Dutch rejected the proposal for special

considerations, but also found themselves in disagreement regarding the maximum price

with Great Britain and had a questionable ability to control Indonesian planters.24 The

implementation of such policies proved difficult given the varied situations in various

colonies in South and Southeast Asia, while the United States unsuccessfully sought

concessions regarding rubber exports.

22 Hull to Robert Worth Bingham, March 5, 1934, in ibid., 631; Robert Worth
Bingham, Office of the Historian, US State Department,
http://history.state.gov/departmenthistory/people/bingham-robert-worth.
23 Hull to Bingham, March 6, 1934, tel. 86, ibid., 632-633.
24 Warden Wilson to Hull, March 15, 1934, tel. 17, ibid., 634, 662.
11
 The British government assured the Americans that their new plan would become

successful despite their past failures. The Foreign Office recognized there was no

resolution of disagreements as of March 23, 1934 and the agreement conformed to the

Monetary and Economic Conferences section D. The British government also assured

the US government that it learned from the failure and elimination of the Stevenson

Scheme in April 1928. The demand for rubber absorbed the large quantities of rubber on

the market in 1929 to save the industry, but rubbers fall in demand in 1930 and 1931

required action by the British government in coordination with the Dutch Royal

government. Government officials spoke off the record to industry representatives on the

issue of rubber restrictions. With the failure of price controls, the governments moved

toward reducing the rubber in stock as a means for the reduction of losses. The new

restriction plan hoped for price stability, representation of the major producing countries,

and general acceptance by producers governments.25 The British government hoped that

new restrictions on rubber exports might increase profitability of the rubber plantations

during the depths of the Great Depression.

The US government and rubber industry accepted the formation of such restrictions but

sought greater consumer representation and lower prices. The US government accepted

the plans objectives but desired more safeguards for American industry. For example,

Hull expressed his concern regarding adequate supplies of rubber at reasonable prices and

the lack of consultation between the consuming and producing interests. Furthermore, he

feared large price fluctuations in rubber given Americans experiences under the

Stevenson Scheme and therefore desired some form of price protection. American rubber

manufacturers wanted to participate in the meetings even if they lacked the right to vote

25 Bingham to Hull, March 23, 1934, Tel. 127, in ibid., 637-639.

12
on the international rubber consortiums decisions. Hull rejected the notion that the new

scheme adhered to concepts of free trade as government restrictions were contrary to its

principles.26 The United States recognized the importance of price stability and hoped the

restriction plans might keep supply and price levels steady in contrast to the Stevenson

Scheme of the 1920s.

In avoidance of the Stevenson Scheme problem, the new cartel organized a relatively

sophisticated system within an international organization. Sir John Campbell of the

British Colonial Office explained the new restriction plan to the U.S. State Department.

The plan allowed the holding by planters of six to eight weeks of rubber production in

their stock and dealers one-eighth of the worlds annual production. The Control

Committee of the International Rubber Committee managed a pool of rubber and

alleviated potential shortfalls through expanded production. Plenipotentiaries from the

International Rubber Committee bounded their governments to its decisions in meetings

planned for roughly once a month. The committee lacked a regular statistical service but

offered figures on exports and production for those interested.27 The British government

wrote to the US government that its concerns regarding the price of rubber were unduly

enhanced. The governments controlled the power of the committee and producers

desired enough rubber for the market. The Rubber Regulation Committee determined the

export quotas for the maintenance of a stable price ultimately by the adjustment of supply

of rubber in reaction to market demand. The agreement lacked a price ceiling arguing

that it would likely become the floor and invite speculation.28 The British government

26 Hull to Bingham, March 28, 1934, Tel. 118, in ibid, 640-641.

27 Bingham to Hull, April 4, 1934, Tel. 151, in ibid., 643-645.
28 Bingham to Hull, April 10, 1934, Tel. 158, in ibid., 647-649.
13
acted within the interests of the planters in Malaya and Borneo while balancing its

relationship with the United States in this plan.

The British government sought the ease of such fears and to persuade the US government

and rubber manufacturers that the new scheme was not entirely contrary to American

interests. Sir John Simon, British Secretary of State for Foreign Affairs, sent assurances

that the new plan lacked the necessary machinery for the establishment of a maximum

price and that reducing stocks of rubber beyond the point of a shortage as such was not in

the interest of the planters because a reduction of demand would accompany it. Unlike

the Stevenson Scheme, the new plan operated based on the demand within the market

rather than the price.29 According to George Mounsey, a British official, the new plan

sought quickly adjustable supply with regulations controlled by the International

Regulation Committee, which would possess a member from the United States. Great

Britain reminded the United States that it consumed 80,000 tons of rubber in 1933 and

the industry required no substantial increase in price.30 Great Britain sought a more

balanced approach than previous attempts with consuming interests receiving as avenue

for complaint within the cartel.

The cartel came into existence once negotiations finished with a group of producer

nations restricting the export of rubber. The overall signatories of the restrictions

included on rubber and latex included Siam and France with its colonies in Indochina.

Great Britain had eleven representatives with one from North Borneo and another from

Sarawak. The new legislation gave complete government control over planting from

June 1, 1934 to December 1938 with the hope of offering a fair and equitable price and

29 John Simon to Bingham, April 26, 1934, Tel. W3750/89/29, in ibid., 653-656, 660.
30 Bingham to Hull, April 30, 1934, Tel. 665, in ibid, 659-661.
14
a safeguard against extreme price movements through supply reserves.31 The main

players, Great Britain and the Netherlands finally made progress in the agreement with

the Dutch dealing with Indonesian planters. Furthermore, the negotiations between the

Dutch and British agents agreed to restrictions of 25 percent effective until January 1,

1935. The Dutch officials recognized the importance of recycled rubber technology and

synthetic rubber in the United States.32 The new international cartel included not just the

British territories in Southeast Asia such as Malaya, but also the Dutch East Indies and

French Indochina.

On the eve of World War II, the United States began a calculation of the strategic natural

resources it required for war and gained more power with the rubber cartel. By January

1939, the price of rubber in New York remained around 16 cents a pound with the onset

of another recession. The Rubber Manufacturers Associations representative managed

an increase of the release amount from the International Committee from 45 to 50

percent, despite complaints from producers that the committee kept the price of rubber

too low.33 According to research by the US Army and Navy, the United States required

strategic resources found in Malaya such as rubber and tin for potential the outbreak of a

war. Sales of private rubber stocks reaching 10,000 tons overseas and of considerable tin

amounts since September 1st threatened the United States warfare capabilities.34 The

application of pressure on the International Rubber Regulation Committee eventually

resulted in the addition of another American representative on its committee.35 With the

31 Grenville Emmet to Hull, April 28, 1934, Tel. 30, in ibid, 624, 657-658.
32 Wilson to Hull, December 3, 1934, Tel. 120, in ibid, 662-663.
33 Roy Veatch, January 17, 1934, in FRUS 1939 Vol. I, 858-859.
34 Army and Navy Joint Munitions Board, October 11, 1939, in ibid, 855.
35 Herschel Johnson to Hull, March 10, 1939, Tel. 2254, in ibid, 861-862.
15
outbreak of World War II, the United States required a strategic stockpile but restrictions

on purchasing made acquisition of rubber more difficult.

The United States pressured Great Britain for greater access to rubber during the early

war years as a means of increasing its stockpile in case it lost its supply access or prices

rose too high. The United States requested an increase in allowances from the cartel

between at least 60 and 65 percent for the avoidance of shortages particularly during a

long war that threatened both commercial and government stocks.36 The United States

also requested the colonial officials in Malaya and officials elsewhere deal with

speculators as Singapore reported shortages of rubber.37 All producers, save the Dutch at

first, agreed for an increase of export allowances to 70 percent as means of dealing with

war shortages, which came into effect for the last three months of 1939.38 On September

21, the committee agreed for the release of 5 percent of the stocks under war emergency

article of the treaty, despite the loss of Germany, Poland, and other countries with the

wars start.39 Secretary Hull desired the export rate at least 75 percent, which also was

the production rate for Malaya at the time according to the US consulate in Singapore,

but implied an interest in a 10 percent increase to the rate of 85 percent for the quarter.40

The United States pressured Great Britain for greater access to Malayas rubber with the

outbreak of war, to which the latter agreed.

The pressure on rubber producing and exporting nations likely worked as the rubber

cartel increased export allowances for 1940. The International Rubber Regulation

36 Hull to Joseph Kennedy, September 3, 1939, Tel. 772, in ibid., 864-865.

37 Hull to Kennedy, September 6, 1939, Tel. 803, in ibid., 865.
38 Kennedy to Hull, September 6, 1939, Tel. 1486, in ibid., 866; Kennedy to Hull
September 8, 1969, Tel. 1529, in ibid., 870.
39 Kennedy to Hull, September 22, 1939, Tel. 1776, in ibid., 879-880.
40 Hull to Kennedy, October 31, 1939, Tel. 1339, in ibid., 885-886; .
16
Committee permitted 80 percent export rates for the first quarter of 1940 with the

projected increase demand in the United States. However, for the whole of 1940, the

committee averaged the allowances at 70 percent with expectation of rubber losses in

transit at sea because it expected an eventual sudden drop in demand.41 Despite such

assurances, the United States remained displeased at rubber allowance trading levels

because they only reached sufficient levels as the producers exported in excess of

requirements from Malaya in particular and because of Malayas advanced releases. The

rest of the year seemed bleak for Hull as Malaya seemed poised for a downturn in exports

despite its 70,000 tons of rubber in stock. Furthermore, a lack of shipping tonnage and

rubber meant less rubber headed to the United States because many hulls would depart

unfilled unless the committee took more action.42 Hull expressed his deep concern for the

issue of a lack of sufficient trade with Malaya and its rubber exports as a threat to the

United States strategic and economic interests. He sought the alleviation of potential

shortages through pressuring various rubber producing countries and the cartel into

releasing more rubber.

With the formation of an international rubber cartel, the United States applied immense

pressure for assurances from Great Britain and the Netherlands for a sufficient supply of

rubber. The economic importance of rubber to the United States meant the necessity of it

advocating its own trade interest through the concept of free trade as a means of

maintaining its economically and strategically important trade relationship with Malaya.

The United States depended on Malaya for much of its rubber trade, but such dependence

41 Kennedy to Hull, November 1939, Tel. 2407, in ibid., 896-897.

42 Hull to Kennedy, November 24, 1939, Tel. 1496, in ibid., 898-899.
17
made it strategically and economically vulnerable to the policymakers in Europe and

others in Asia through rubber restriction schemes and war.

18