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.