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THIS DOCUMENT IS THE PROPERTY OF HIS BRITANNIC MAJESTY'S GOVERNMENT.

Printed for the Cabinet. January 1931.

SECRET. Copy No. 5

C P . 7 (31).
CABINET.

TIN RESTRICTION.

MEMORANDUM BY THE SECRETARY OF STATE FOR THE COLONIES.

T I N m i n i n g is one of the p r i n c i p a l industries of M a l a y a , which produced

69,366 tons*' in 1929 out. of a total world production of 186,518 tons. It is also a n
important i n d u s t r y in Nigeria, w h i c h in 1929 produced 10,412 tons. The Govern­
ments of both these countries have been seriously affected in revenue by the recent
collapse in the price of tin. The extent of this collapse is shown by the following
figures of the average cash price of metallic t i n on the London market :—
£ £
1921 165 1926 291
1922 159 1927 289
1923 202 1928 227
1924 249 1929 204
1925 261

For the j^ear 1930, the monthly a v e r a g e price w a s as follows :­

£ £
January 176 June 136
February 174 July 135
March . 165 A u g u s t ... 135
1 oo
April 163 September lOO
May 145 October 133
Since tihen i t has been a s low a s £105, but rose as the proposals for restriction became
known, a n d on the 8th J a n u a r y stood at £120.
I n view of the fall in price and the accumulation of stocks, efforts have been
made throughout the past y e a r by the T i n Producers' Association to restrict
production. A scheme was formulated by the Tin Producers' Association in
December 1929, and w a s widely adopted about F e b r u a r y 1930. The details of t h i s
scheme, which w a s modified in A p r i l 1930, were briefly as follows :—
(1) A l l p l a n t s in operation throughout 1929 and w o r k i n g in 1930 shall be so
r e g u l a t e d as to produce in the calendar y e a r 1930 not more t h a n 80 per
cent, of their output in 1929.
(2) A l l p l a n t s which began operations later than the 1st J a n u a r y , 1929, shall
be so r e g u l a t e d as to produce in the calendar y e a r 1930 not more t h a n
80 per cent, of their estimated production for 1930.
(3) W h e r e methods (1) a n d (2) a r e inapplicable, regulation on a time basis m a y
be adopted, provided the m a x i m u m working time does not exceed
80 per cent, of the normal.
The M a l a y S t a t e s and N i g e r i a n Governments were not asked to assist in this
voluntary restriction scheme, but botih Governments realised that it w a s not in their
interests t h a t their t i n ore reserves should be depleted at uneconomic prices. The
Federated M a l a v S t a t e s Government, i n November 1929, decided to consider no
* Tin statistics are quoted in long tons, each equalling 2,240 lbs.
[22335]
further applications for m i n i n g leases of t i n m i n i n g land, or for the conversion of
a g r i c u l t u r a l to m i n i n g land, except in special cases, a n d the N i g e r i a n Government
w a i v e d its normal requirements as to the amount of work necessary in each mining
area, a n d decided not to g r a n t new m i n i n g leases.
The voluntary restriction scheme h a s h a d a certain measure of success. The
T i n P r o d u c e r s ' Association claims that, without it, the 1930 production would have
been between 30,000 a n d 40,000 tons more than it actually w a s , but, throughout
1930, there w a s a r a p i d f a l l i n g off in t i n consumption, despite the heavy falls in
the p r i c e of the metal, w i t h the result t h a t visible supplies of tin, which were
29,249 tons i n November and 32,449 tons in December 1929, h a d by J u n e 1930
increased to 46,385 tons, a n d remained round about t h a t figure for the rest of 1930.
T h a t this accumulation represents l a r g e overproduction is shown by the fact that
the average visible world stocks for each of the preceding ten y e a r s were as
follows :—
Long tons. Long tons.
1920 19,725 1925 19,538
1921 19,697 1926 ... 15,386
1922 24,683 1927 14,925
1923 ... 21,740 1928 ... 18,393
1924 21,254 1929 ... 25,381
The estimated figures for world consumption of t i n are : —
Tons. Tons.
1926 133.362 1929 165,900
1927 138,908 1930 11 months: J a n u a r y
1928 152,602 to November) 129,000
The voluntary restriction scheme w a s n a t u r a l l y difficult to work. Tin pro­
duction in the Netherlands East Indies is e a s i l y controlled, a s it is concentrated in
three concerns : B a n k a , a Government M i n e ; Billiton, a Government-controlled
C o m p a n y ; and S i n g k e p , a small independent producer. The Dutch seem to have
h a d some justification for t h i n k i n g t h a t i n M a l a y a , where there a r e many producers,
the curtailment achieved under voluntary restriction was not as much as had been
promised. They a r e in a strong position, a s it is admitted that the Dutch are the
cheapest producers. (They claim to be able to produce at a profit at the B a n k a Mine
w i t h tin a t £80 a ton.) They informed the Tin Producers' Association that they
would cease to p a r t i c i p a t e in restriction as from the end of 1930 unless curtailment
could be placed under Government control. M a n y M a l a y a n producers were also
dissatisfied w i t h the f a i l u r e of the scheme to m a i n t a i n the price of tin at a
reasonable level, which they a t t r i b u t e d —
(a) To u n c e r t a i n t y as to how long the scheme would continue on a voluntary
basis; and
(b) To f a i l u r e of certain producers to take their proper p a r t in it.
A s a result of the difficulties experienced, the T i n Producers' Association
a r r a n g e d a Conference in London on the 26th November, 1930, which w a s attended
by the Governor of the S t r a i t s Settlements (Sir Cecil Clementi), the Director of
I n d u s t r i e s of the Netherlands East Indies (Mr. de J o n g h ) , two Directors of the
B i l l i t o n Company, two representatives of Bolivian producers (one of whom was
M r . P a t i n o ) , and S i r P . Cunliffe Lister, S i r W i l l i a m P e a t and M r . J . Howeson.
representing the T i n Producers' Association. The Conference recommended—
(a) T h a t the w o r l d ' s production of tin metal for 1931 should be fixed at
145,000 long tons. This figure to be capable of alteration from time to
time by m u t u a l agreement.
(b) T h a t the quotas of production permitted to be exported d u r i n g 1931 and
1932 should be based upon the actual output in 1929 in the following
ratios :—
P e r cent.
Federated M a l a y S t a t e s ... ... ... 35-9
Netherlands East Indies, Bolivia and N i g e r i a ... 49-6
the rest of the world having produced in 1929 14-5 per cent., of which
5-3 per cent, w a s produced in S i a m .
 (c) T h a t on the definite conclusion of a n agreement between the Governments,
r e p r e s e n t a t i o n s should be m a d e to the Government of S i a m , but t h a t the
agreement should not be m a d e dependent upon the consent of the Siamese
Government to become a p a r t y thereto.

B y a supplemental agreement signed by the Bolivian and Netherlands East

Indies' representatives a n d by S i r W i l l i a m P e a t a n d M r . Howeson, i t w a s a g r e e d
that the quota of 49-6 per cent, allotted to the Netherlands East Indies, B o l i v i a a n d
N i g e r i a a n d r e p r e s e n t i n g 71,920 tons on the basis of a total world production of
145,000 tons should be apportioned a s follows : —
Tons.
Banka ... ... ... ... 19,070
B i l l i t o n a n d S i n g k e p Companies . . . ... 10,840
Bolivia ... ... ... ... 34,260
Nigeria ... ... ... ... 7,750

Total ... ... ... ... 71,920

I t w a s f u r t h e r agreed t h a t a n y increase i n the tonnages permitted to be exported

will be d i v i d e d i n the above-mentioned proportions.
I t w a s subsequently e x p l a i n e d t h a t the M a l a y a n quota of 35-9 per cent, d i d not
include the output of the U n f e d e r a t e d M a l a y S t a t e s , the allocation of which w a s
agreed (in a supplemental m i n u t e ) to be 1-24 per cent., t h a t is, in 1931 on the basis
of a world production of 145,000 tons, 1,798 tons, m a k i n g a total quota from M a l a y a
of 37-14 per cent., t h a t is, 53,853 tons.
A f u r t h e r meeting of r e p r e s e n t a t i v e tin producers organised by the T i n
P r o d u c e r s ' A s s o c i a t i o n . w a s held in P a r i s on the 4th December a n d w a s attended by
Mr. Groothoff, a s a delegate from the Netherlands E a s t Indies Government. The
following h a s been supplied a s a record of t h a t M e e t i n g :—
" I t is recommended t h a t : —
" 1 . The quotas shall become operative as from the first day of January, 1931, and continue-—
save as hereinafter provided-for a minium period of two years. The quotas have been so
calculated as to provide in the first instance that the maximum supplies of tin to be made
available shall not exceed the monthly equivalent of 145,000 tons per annum, and for this purpose
the monthly quotas have been assessed on the annual basis of—
; " (a) 53,253 tons for the Federated and "Unfederated Malay States, and
" (b) 71,920 tons for Bolivia, the Dutch East Indies and Nigeria, that israteably in both
cases to the actual agreed outputs in 1929.
" In order to enforce these respective quotas, the Malayan, Bolivian and Nigerian Govem­
ments will introduce the appropriate legislative enactments, and the Dutch East Indian
Government will furnish a statutory declaration in form acceptable to the three other
Governments. The four Governments are hereinafter referred to as the ' interested parties.'
" 2. A Special International Committee shall be appointed in the form and manner suggested
in the Appendix hereto, this Committee to meet at regular intervals to inquire into the general
conditions of trade and the tin industry, to report in an advisory capacity and, when necessary,
to submit proposals to the Interested Parties.
" 3 . The quotas shall not be increased unless the current "visible supplies,' having been
depleted to a maximum quantity of 25,000 tons, shall not exceed that figure during three
consecutive months, or unless the average price quoted for standard tin on the London Metal
Exchange shall for three consecutive months have exceeded £180; and then only provided that
either one of the interested parties or the special Committee shall propose an increase of
production and that such rate of increase is mutually agreed. For the purpose of this clause
the term ' visible supplies ' shall be interpreted to mean the figure of total visible supply published
monthly in the Official Tin Statistics of the London. Metal Exchange, to which shall bo added
the quantity of tin referred to in the same Statistics -as ' Carry Over in Straits.'
" 4 . If mutual agreement shall not be reached in the terms of the preceding clause within a
period of six months of the Meeting of the Special Committee called to consider, an increase of
production, then the International agreement can be cancelled by any of the interested parties.
" 5. If an increase has been mutually agreed in the terms of clause 2, and thereafter the
visible supplies' shall again have exceeded 25,000 tons for more than one month or during
the same period the average price of tin shall have fallen below £180 per ton, then the Committee
shall meet to consider a reduction of output. Similarly, should the production be found to be
too high after the initial quotas have been in force for a period of three months, then also shall
the Committee discuss the desirability of a reduction of output.
" 6 . Any agreed increase in the rate of output shall be apportioned in strict ratio to the
quotas set forth in clause 1.
" 7. Each of the interested parties shall communicate by telegraph at the end of every
month to the Secretary of the Special Committee the official figures relating to the tin exported
from their respective territories.
[22335] B 2
 " S. Any lesser quantity exported than the allowance for the month may be exported during
the ensuing three months. Any greater quantity-which (excepting in the case of force majeure)
shall not exceed the allowance by more than 10 per cent.-shall be deducted from the allowance
for the ensuing two months.
(Signed) "A. GHOOTHOFF. "A. PATINO PI.
"P. J. HODWEUT. ' "JOHN HOWESOX.
" Pu. MARTINEZ VARGAS. " H . WAUGH.
" J. V. DEN BROECK.
" Paris, December 4, 1930.

" APPENDIX TO THE RECOMMENDATIONS OF THE INTERNATIONAL COMMITTEE MINUTED AT THE

MEETING HELD IN PARIS ON DECEMBER 4, 1930.
" International Quota Agreement—Appointment of a Special Committee.
" 1. The Special Committee to consist of Official and non-Official Members.
" 2. All appointments to the Special Committee to be submitted in writing and to be attested
by the respective Government in the case of Official Members nominated by the Governments
concerned, and by the Tin Producers' Association in the case of non-Official Members.
*' 3. The Special Committee to appoint.a Chairman and two Vice-Chairmen, each of whom
shall hold office for six months from the date of appointment, and thereafter shall not be eligible
to hold the same office for a period of one year. The first Chairman to be a British Member,
and the two first vice-Chairmen to be respectively Dutch and Bolivian Members. The two first
Vice-Chairmen in rotation shall be appointed Chairmen during the second and third half-yearly
periods.
" 4. The Special Committee to appoint a permanent Secretary, who shall be responsible
inter alia for the Minutes of all Meetings and for the records of the correspondence exchanged
between the Committee and the ' interested parties.'
;
' 5. The official language of all Meetings shall be English, but the Minutes and other
necessary documents shall, if required, be translated into Spanish and Dutch for the convenience
of the Bolivian and Dutch Governments.
" 6. The Special Committee to be primarily an Advisory body, but its resolutions, if and
when accepted by all the ' interested parties,' shall bind those parties."

I consulted the Governments of N i g e r i a and the F e d e r a t e d M a l a y S t a t e s by

t e l e g r a p h on the general aspects of the scheme, and the A c t i n g Governor of Nigeria
replied t h a t he considered t h a t N i g e r i a , which is a comparatively h i g h cost producer,
would benefit by restriction. Subject to my being satisfied that N i g e r i a ' s quota had
been fixed on an equitable basis, he recommended t h a t N i g e r i a should p a r t i c i p a t e in
the scheme. I am satisfied t h a t the quotas are equitable.
A s r e g a r d s M a l a y a , it a p p e a r e d t h a t there w a s a certain amount of local
opposition, which m a y be attributed, a t least in p a r t , to the smelters. In order to
a s c e r t a i n the views of the M a l a y a n producers, a circular w a s issued on the
30th December by the W a r d e n of Mines, and local meetings of producers a r e being
held. The M a l a y a n Government w i l l be p r e p a r e d to come in if the bulk of local
producers declare i n favour of the scheme, and the necessary legislation is mean­
w h i l e being p r e p a r e d . They would have preferred t h a t the scheme should not be
retrospective to the 1st J a n u a r y , but it is clearly essential to adhere to that date if
the present scheme i s to be adopted. The T i n P r o d u c e r s ' Association has reported
that the Netherlands E a s t I n d i e s and Bolivian Governments have approved the
present scheme on the u n d e r s t a n d i n g t h a t it comes into force as from the 1st J a n u a r y ,
a n d t h a t they confidently a n t i c i p a t e the adherence of S i a m . A n y interval between
the end of the voluntary restriction scheme on the 31st December, and the
introduction of the compulsory one would upset the basis on which the compulsory
scheme has been calculated. Hence, any ore exported from M a l a y a from the
1st J a n u a r y o n w a r d s must be included in M a l a y a ' s quota, even though the necessary
l e g i s l a t i o n to restrict exports to the agreed quota is not yet enacted.
Malaya, would also have g r e a t l y preferred t h a t the scheme should be one for
a c t u a l restriction of production, as in the case of the voluntary scheme, instead of
merely restriction of exports. W h i l e I do not r u l e out the possibility that the
Government representatives who w i l l control the working of the scheme might
discuss t h a t suggestion a n d adopt it if all agree, i t a p p e a r s unlikely that
i n t e r n a t i o n a l agreement could be reached on that basis. Exports can be controlled,
but control of a c t u a l production would be difficult. Moreover, if export is curtailed,
i t a p p e a r s improbable t h a t a n y gre at number of producers will mine more ore than
they a r e allowed to export, as t i n ore is expensive to produce and store, and capital
w i l l not be forthcoming to finance local stocks which cannot be exported.
T h e grounds for advocating a compulsory restriction scheme a r e as follows :
Stocks are still a c c u m u l a t i n g and t h e price has fallen to a figure which is not
remunerative to most producers. In M a l a y a , costs of production v a r y considerably.
 jmt it is estimated by the M a l a y a n Government that the average cost of production
Iby dredging is £115, a n d that a normal Chinese mine can produce at £200, including
depreciation, &c. Over 50 per cent, of the M a l a y a n production is from Chinese
mines. The T i n Producers' Association states that it has detailed cost figures of
a i i classes of production other t h a n Chinese, and that only a very small proportion
of the dredging o u t p u t can be obtained at an all-in cost of £115 per ton of metal.
Voluntary restriction has failed, and the Dutch, who a r e the cheapest producers,
liave rejected voluntary restriction as ineffective, but a r e prepared to adhere to a
compulsory scheme. If restriction, is not enforced, over-production w i l l continue,
jbrices may fall still further, and a l a r g e number of mines w i l l be forced to close
down. The unemployment problem in Malaya, which is a l r e a d y serious, w i l l become
acute. The Governments of M a l a y a and N i g e r i a have a great financial interest in
She continuance of tin-production, on which much of their revenues depend. In the
interest of the tin consumers, as well a s of producers, it is desirable that some
stability of price should be attained, instead of violent fluctuations. The compulsory
scheme will cover at least 86 per cent, of the world's production. The Tin Producers'
Association claim t h a t it w i l l cover p r a c t i c a l l y 90 per cent, of the world's output, or
95 per cent, if, as is probable, S i a m adheres, so it has good prospects of being
successful.' I t is unlikely that producers outside the scheme could increase their
production to any serious extent.
i A less obvious a d v a n t a g e to t h i s country which would result from an improve­
rnent in the price of tin is its effect on the U n i t e d S t a t e s Exchange. Of the total
Malayan exports of 102,026 tons in 1929, 57,696 tons were destined for the U n i t e d
States, as a g a i n s t only 15,395 tons for the U n i t e d Kingdom. On the basis of an
export to the U n i t e d States of only 50,000 tons, a fall in the price of tin from £200
to £100 a ton means a decrease in the a n n u a l sterling payment by the U n i t e d States
i f £5,000,000.
It is not proposed that any expenditure in connection w i t h this restriction
scheme should fall upon H i s M a j e s t y ' s Government, but the matter is one that should
be brought before the Cabinet as. it may be represented t h a t the scheme affects the
interests of tin consumers here. There is, however, good ground for a r g u i n g that in
the long run consumers also w i l l benefit from price stability at a reasonable level,
instead of fluctuations betw ecn £100 and £400 per ton.
r

1 No u n d e r t a k i n g of approval of the scheme as prepared by the T i n Producers'

Association h a s been given. U n t i l I know that H i s M a j e s t y ' s Government is
prepared to allow the Governments of N i g e r i a and M a l a y a to p a r t i c i p a t e in the
scheme, I have felt it would be premature to consider details. I am satisfied that
it will be to the public interest to adopt the m a i n essentials of the present scheme,
tbat is, to let the Governments enforce it from 1st J a n u a r y , 1931, restriction to
be only of exports unless all the Governments should a g r e e to restrict production, the
several quotas to be the agreed percentages of the 1929 production, whilst, almost
llertainly, 145,000 tons w i l l be taken as the basis for the a g g r e g a t e of quotas at the
start. But I am not at all satisfied w i t h the machinery proposed by the P a r i s
Hieeting for working the scheme. I consider that control must be in the hands, not
g f the tin producers or their association, but of a Committee of representatives of
the four Governments concerned. The Tin Producers' Association m a y appoint
pome of its members to offer advice and suggestions to the Government represen­
[ tatives, but the fixing of the i n i t i a l quotas and any subsequent alterations of them in
an upward or downward direction must be at the absolute discretion of the
representatives of the four Governments. I contemplate that the Dutch and
I Bolivian Governments should be asked officially to appoint their representatives (the
Tin Producers' Association have informed -me that the Netherlands East
Indies' Government has already appointed M r . Groothoff a s its representative and
that the Bolivian Government has appointed M r . V a r g a s and M r . P a t i n o ) . Then the
Government representatives would meet and review the o r i g i n a l scheme and the
Supplementary recommendations resulting from the P a r i s meeting and agree among
Biemselves on the details of the scheme which they would enforce. If the Governments
.Hontrol the scheme it may be assumed that no attempt will be made to force up the
piice too high. I understand that the Dutch, as the cheapest producers, have
Kjheady indicated that they are opposed to the figure of a s much as £200 a ton which
Maine members of the Tin Producers' Association had in view. In both N i g e r i a and
fc% Federated M a l a y States there is an official m a j o r i t y in the Legislature, so H i s
Bfajesty's Government could a l w a y s require the legislation, which w i l l have to be
passed l i m i t i n g the export of tin ore, to be in such terms a s it desires.
 Accordingly, on the assumption t h a t the M a l a y a n Government accepts the
p r i n c i p l e of restriction—as to w h i c h a definite reply m a y be expected any day—I
recommend t h a t I be authorised to allow N i g e r i a a n d M a l a y a to join a compulsoiv
restriction scheme for the i n i t i a l period of two y e a r s , on the definite understanding
t h a t the scheme is controlled by representatives of the four Governments concerned
a n d that I am satisfied a s to the d e t a i l s .
P.
Colonial Office, January 9, 1931.