9161 79 A 5 A c A 1 m O 4 4 8 6 — =^ ^ Great Britain* Gonmittee on rubber situation In P'^itisb colonies and protectorates * ^'eport. REPORT OF A COMMITTEE Appointed by the Secretary of State for the Colonies to Investigate and Report upon the present Rubber Situation in British Colonies and Protectorates Presented to Parliament by Command of His Majesty. June, 1922. LONDON : PRINTED AND PUBLISHED BY HIS MAJESTY'S STATIONERY OFFICE To be purchased directly from H.M. STATIONERY OFFICE at the following addresses : Adastral House, Kin?sway, London, W.C.2; 120, C.eorpe Street, Edinburgh; York Street, Manchester; 1. St. Andrews Crescent, Cardiff; 15, Donegall Square West, Belfast; or through any Bookseller. 1922. ^Reprinted 1927.) Price 3d. net. Cmd. 1678. REPORT OF A COMMITTEE Appointed by the Secretary of State for the Colonies to Investigate and Report upon the present Rubber Situation in British Colonies and Protectorates. TKRMS OF IJHFEEENCE. To investigate and report upon the j^resent iliibber situation in British Colonies and Protectorates for the information of the Secretary of State for the Colonies, and to advise what remedial ui('asn?-es should be taken to improve the existing- position." CONSTITUTION OF COMMITTEE. Sii' James Stevenson, Bart., G.C.M.G. (Cliainnan). Sir StanlEiI Bois. Sir Edward Brockman, K.C.M.G, Mr. E. J. Byrne. Mr. Wm. Duncan. Sir Gilbert Grindlr, K.C.M.G., C.B, Mr. H. Eric Miller. Sir Edward Rosling. Mr. S. H. Leake. O.B.E. (Secretary). Note.— No expenses have been incurred on acccunt of this Committee except those of printing and publication, amounting to £o 5s, HD 9l(o\ REPORT. C,-?9A^ I ^ Z/2^ Mr. Churchill, The Committee's terms of reference were : — To investigate and report upon the present Eubher situation in "British Colonies and Protectorates for the information of the " Secretary of State for the Colonies, and to advise what remedial " measures should be taken to improve the existing position." •2. The Conmiittee have had many suggestions and much informa- tion before them, including the Reports of the Duncan Committee submitted to the Government of the Straits Settlements and Federated Malay States on January 26th, 1921. and the Report, dated October 1st, 1921, of the Commissions appointed by His Ex- cellency the Governor of the Straits Settlements and High Com- missioner of the Federated Malay States to enquin^ into and i-eport on : — ia) the present state of trade depression brought about in the main by the continued depression in the Rubber Industry : and {h) the extension ol' credit facilities. 3. The Committee devoted their attention in the first place to ascertaining the present state of the Rubber Industry. In the absence of complete oti&cial statistical information, the Committee carefull}' investigated the relevant statistics from such oificial and unofficial souices as were available, and have concluded that the following figures of Plantation and Wild Rubber may be taken as showing approximately the [)resent position : — Production : — The actual production of Crude Rubl^er m 1920 and 1921 was : — Plantation. Wild. Total. Year. 1920 1921 The normal unrestricted out[)ut of IMantation Rubber during 1922, is estimated at 380,000 tons, whilst the production of Wild Rubber is estimated at 20,000 tons, or 400,000 tons in all. Consumption. — The average annual world absorption during the years 1919-21 was 300,000 tons, viz. : — 1919 330.000 tons. 1920 310.000 1921 ... 205,000 Tons. Tons. Tons. 335,000 35,000 370,000 260.000 22,000 282.000 28i^.i'.>L Ill llir picsi'iit sl;i(c of world lindr, il is iiol possible to' cstiiiialc tli(M(Hisiiiiipiion of C'iihIi' I{iiI)I)ii in 1 022 at more than the foregoing jiverage, viz. : .'M)0,()0() ions, hut soiiic aiitlioritios place the prohable (•()nsurn|)iion iis low as 260, 000 tons. Stocks. — The total world stocks of Cnide KuhhiT on Janiiaiy 1st. 1922, are estimated at : — III consimiing countries ... ... ... 210,000 tons. In producing countries ... ... ... 00.000 ,, Afloat 40,000 ,, 310,000 ,, This estimate of the total amount of Crnde Ruhher in existence includes the invisible .stocks in the hands of both producers and manufactLU^ers. Necessary stocks of Crnde Rubber may be estimated at theequivalent of eight months' consumption , which on the foregoing estimate for 1922, would call for 200,000 tons. On this basis the surplus stocks at January 1st, 1922, amounted to 110,000 tons. 4. From these figures it appears that, in order to reduce the pro- duction of Plantation Rubber to the level of probable consumption during 1922, a restriction to at least 75 per cent, of normal production would be required. The Committee were of the opinion, however, that the depression in the Industry could not be sufficiently rapidly relieved unless a substantial inroad were made into the existiiij^ sui*plus stocks during 1922, and that a more drastic restriction is imperative to ensure this. 5. On these figures, the Committee cannot fail to advise you to contemplate with grave concern the position of the Industry in British Colonies and Protectorates, unless steps are taken to reduce stocks and, further, to prevent over-production of rubber so long as the potential normal production continues to be substantially in excess of consumption. They are of opinion that consumption is not likely to overtake potential production for some years. 6. The Committee next directed their attention to the manner in which the existing surplus could be reduced and future supplies so regulated with a view to establishing an equilibrium between supply and demand, and stabilising the Industry on a sound footing. They have examined this problem from four points of view : — (a) Stimulation of new and extended uses of rubber. (6) Voluntary restriction. (c) The laissez-faire argument. {d) Government action. 7. With legaid to (a), there i.-, uo doubt that much cau be done in the direction of stimulating new and extended uses of rubber, but this cannot, in itseh', provide an immediate solution of the problem, since much time must necessarily elapse before aiiy new and extended uses of rubber can become'sufficiently operative to bring about materi- ally increased consumption. Further, il should be reahsed that improved methods of manufacturing rubber products, such as tyres, undoubtedly prolong the life of the article and consequently curtail the demand for raw rubber. 8. With regard to {b), the ilubber Growers' Association, which represents about 'SI per cent, of the plantation rubber-producing interests, secured the adliesion of nearly all their members to a voluntary restriction of output to 75 per cent, of normal during the period November 1st, 1920, to December 31st, 1921. Uming December last, they endeavom'ed to secure the assent of their members to continue voluntary restriction by undertaking not to produce more rubber during the first six months of 1922 than they produced during the corresponding period of 1921, or alternatively, than 75 per cent, of their output dming the conesponding period of 1920. The Council of the Association was able to secure the assent of only do per cent, of the producing interests represented by members of the Association, as compared with the minimum of 70 per cent, deemed necessary to make the scheme operative. Not- withstanding this, it is evident that the necessity for continuing to restrict output is appreciated by a large proportion of the members of the Association, who will, no doubt, continue this policy on an independent voluntary basis. 9. ^^ ith regard to (c), the advocates of the laissez-jairc policy desire to see a survival of the fittest. They rely on being themselves amongst the survivors, and disregard entirely the hardships which must fall on the many tens of thousands of shareholders in this country alone, and the many thousands of European and Asiatic owners and shareholders resident in the countries of production, if the Industry is to drift along unprofitably until the weakest have been eliminated. It must l^e borne in mind that even though a pro- portion of existing proprietors ai'e forced to abandon their estates, the rubber trees thereon will remain a potential source of rnbl>er and will be brought into production again by someone as soon as a margin of profit can be secured. The Committee could not, therefore, advise you to leave things in their present unsatisfactory stare, unless all efforts to find a positive solution of the problem fail. 10. With regard to (rf), the Committee are fully aware of the grave objections to CJovermneJit interference with industry, especially when it takes the form of restricting the output of an iiii|i()itant law 784 A -2 6 iiiiileri.il. I ht'He ()l)joction.s are obvious to all and Jieed not be set out in detail. It was only witli reluctance and with a lively appre- hension of the dangers which thieaten both the Industi-y and the countries in which it is so hugely carried on that the Committee agreed to conside)" a measure oi' compulsory restriction as an alternative to what seemed to be worse evils. J 1 . Further, the Connuittee desireto put on record that at tiie outset ol' their enquiry, they formed and have never departed from, the conviction that it was impossible to deal with the problem as one affecting only the British Colonies and Dependencies in which rub- ber is produced. They recognised from the fiist that no scheme of restriction, whether voluntary oi' compulsory, could usefully be applied in Malaya unless it was simultaneously applied in other countries in which there is production of rubber on a large scale. This conviction formed the basis of the Committee's deliberations, and, in particular, they have throughout kept in view the fact that no scheme, however excellent in itself, could properly be recom- mended to you for adoption unless it commended itself to the Authorities of the Dutch East Indies, who control the only im- portant source of Plantation Rubber outside British Colonies and Dependencies. As indicatmg the relative importance of different plantation rubber-producing countries, the following approximate percentages are given : — Malaya Ceylon ... South India and Burma Netherlands East Indies OtluM' Countries Percentage of Total Production . 57.5 12.5 2.0 26.5 2.5 100.0 12. The Committee had numerous schemes before them involving Government action, but as several had fundamental objections it i;^ not proposed to refer to them all in this Report. TWo schemes, how^ever, appeared to offer a practicable solution of the problem, and are briefly described below : — Scheme (/) is that suggested by the Duncan Committee in their Report of January, 1921. and involves legislation prohibiting both the production and export of any quantity of rubber in excess of a prescribed percentage of that produced or exported during a specified previous period. Scheme {11) was proposed by the Chairman, and comprises a gi-aduated scale of export duties, varying with the percentage of standard [)roduction {i.e. output during a." specified previous period) exported ; a low duty being fixed on the amount exported within a ])erinissil)le peicentage aiul [)i()liil)ili^e (luties being fixed if more than tile permissible standard production be exported. The outlines of these two schemes are as follows : — Schotw (I) : — ■ (a) adopts, as the standard production, the actual output of each producer during the twelve months, November, 1919, to October, 19'20, estimated to aggregate 330,000 tons of Plantation Eubber from all jiroducing countries ; (t>) restricts to a percentage of the standard production, leaving a margin of production available to meet forward con- tracts or cases of special hardship; such percentage being" fixed from time to time b}" notification in the Government Gazette ; (c) sets out draft enactment and I'ules to carry the scheme into effect . Scheme {II). — " Standard Production " would be the same as in Scheme (I), and the following scale of duties is proposed :- — Percentage of Standard Subject to duty par 11). Production exported. over all. Per cent. ,v. d. Over 100 12 91 to 100 10 81 to 90 10 76 to 80 8 71 to 75 6 66 to 70 4 61 to 65 ... ... ... ... ... 2 60 and under ... ... ... ... 1 Of these rates of duty, Id. per lb., irrespective of the price of rubber or quantity exported, would be imposed permaneiitly in lieu of the existing" ad valorem duty, bu.t rates in excess of Id. would bo temporarily imposed, say for three years. When the rubber situa- tion improved so as to justify an increased percentage of standard production being exported, the necessary elasticity would be secured by fixing" the minimum rate of Id. just below the increased percent- age required; thus, if export of 70 per cent, instead of 60 per cent, could be absorbed, the duty on export of 70 per csnt. and under would be fixed at Id., duty on 71 per cent, and over remaining as in the scale. 13. It will be seen that ihe essential differences between the two schemes are that the fiist prohibits output over a fixed percent- age and secures no revenue to the State, whilst the second woidd have a tendency to restrict exports over a fixed percentage, but not directly production, would bring in a revenue to the State from duty, and should not prove difficult to administer. 14. The Committee regard Scheme (II) as the preferable of the two and easily workable. If adopted, the percentage of standard piodiiction to l)(' ;iII()\\cmI (lining; tlu; twelve iiioiitlis IoIIovnIiil; tke iiilr()(liicti(Hi (>r llie sclieine should l)C fixed at 60 per cent., which, with the iiiiugiji to jiieet lorvvaid contracts or cases of s|)ecial hard- ship hy reason of the period selected for tlie standard, would ensure a snl)staiitial diminution of tlie surplus stock of Crude Ruhber. Alterations in t.lic percentage of standard production should hvi governed by tlie jirice of standard (piality Smoked Sfieet in the Tiondon market, and it was proposed that when the price for sueh rubber had been maintaiiKMl at not less than l-v. ;W. per lb., I^jndon landed terms durmg tlie whole of three consecutive months, the liercentage of production which may be exported at the mini- mum duty should be raised automatically by 5 for the next ensuing quarter. At the end of every quarter a^ similar adjustment, either upwards or downwards, in the permissible percentage exported at the minimum rate of duty would automaticMlly take place, but the percentage would not fall below 60 per cent. In arriving at this formula the Committee had most prominently in view the desirability ol taking no steps which would be liable to prejudice the legitimate development and ex2)ansion of the uses of rubber. A policy of restriction can only be a temporary palliative, but, in fixing the price which shall govern the alterations in the percentage of standard production exported at the minimum rate of duty, the Committee arrived at what they believed to be a figure which would ensure a satisfactory margin of profit, notwithstandmg the somewhat higher cost of a restricted crop. At the same time, the manufacturers of rubber goods should be able to obtain their supplies of crude rubber at a reasonable price with much less risk of the violent fluctuations which have been such a drawback in the past, and should thus have every encouragement to develop new uses for rubber, many of which have already been suggested and are only awaiting practical ex[)loitation on a substantial scale. 15. The minimum rate of Export Duty allowed in the scale is approximately twice the amount now payable in Ceylon and in the Federated Malay States at the price indicated, and the Committee contemplated that increase only because the working of the scheme may involve soane additional expense on the part of Government in administering it. They are of opinion that a substantial propor- tion of any additional revenue obtained under the scheme should be specifically set aside and applied for the direct benefit of the Planta- tion Rubber Industry in such \va.ys as Scientific Research, and the develojinient of new uses for rubber. 16." Having reached a tentative agreement to siihmit the two schemes, the Committee, being convinced that it was essential that any policy of restriction, if it is to be effective and not to injure one producing country to the advantage of others, must be applied simultaneously in all the chief producing countries, viz. : Malaya, 9 Netherlands East Indies and Ceylon, considered it advisable that steps should be taken to have their schemes submitted to the [)roper authorities in those counti-ies. ^ 17. The Chairman aecordinoly rei)orted the position to you towards the end of November and obtained your authority to ap- proach the Netherlands Government, with a view to ascertaining whether they would be ])repared to co-operate in the adoption of one or other of these two schemes. 19. Until the attitude of the J)utch is definitely known, the Committee are unable to can-y their encpiiry further, as they cannot recommend the adojjtion of either of the proposed schemes by only one or moi'e British Colony or Protectorate. In view of the present dispai'ity between probable dt-mand and j>otential production, and the large surplus stocks which exist, the immediate outlook of the Uubber Industry is a serious one, but the Committee desire to record theii- unanimous conviction that stabili- sation on a sound basis Can be secured by fT'iendly co-operation amongst the principal producing countries. So strongly do the Committee believe this to be the case that they consider the (xovern- ments concerned would be well advised actively to- encourage such co-operation, and they trust that you may consider it worth while, in the light of this report, to cai]#e further re)3resentations tO' be made to the Dutch (lovernment oai the subject, with a view to holding an International Conference in TiOndon of the [)rincii)al interests concerned. • J. STEVENSON (Chairman). STANI>EY BOIS. E. L. BPtOCKMAN. E. J. BYRNE. Wm. DTTNCAN. a. GRINDLE. H. ERIC MnjLER (subject to rider rr para. 15V EDWARD ROSTJNG. S. H. TjE.'Vke, Secretary. May 19th, 1922. Riper. — With reference to para. 15 of this Report, T am unable to agree that Government would be justified in retaining any portion of tb(> additional revenue accruing under the scheme after defraying the cost of administering it. I am of opinion that all such surplus revenue should be specifically applied for the benefit of the Industry. — H. Enic Mn.i.i-,n. f 784-1) Wt, 172n6-.'53]. 250 n'27 H. St. G. 3 2HtM'H UNIVERSITY OF CALIFORNIA AT LOS ANGELES THE UNIVERSITY LIBRARY This book is DUE on the last date stamped below MAR 2 2 I960 OCT 2 «61 ULU4 syoi Form L-9-20m-8,'37 AT LOS A K^T^T, IT- LIB ED 9161 r^t. Brit. Com. a79A5 on.rubb_er_ 19'^^ — situalloii ^lni Briti_sh___co2L lonies^and prir^J-^iir- ^SoraTes - "Report:. HD 9161 G79A5 1922 UCLA-Young Research Library HD9161.G79 A5 1922 II 11 i 1 ' ! ' II i III 1 III 1 1 IN III L 009 530 905 Fp^- ■ w DEMCO LIBRARY SUPPLIES 114 South Carroll SlrMl Madison. Wisconsin ^