Telegram from Joseph Satterthwaite to Secretary of State Dean Acheson

INCOMING TELEGRAM Department of State RE SECRET SECURITY INFORMATION 26 Action Control: 11399 NEA Rec'd: October 27, 1952 FROM: Colombo 5:01 p.m. Info SS TO: Secretary of State G EUR NO: 203, October 27, 6 p.m. FE DMS DEB SMSA PRIORITY E DCL SENT DEPT 203 RPTD INFO LONDON 46 PARIS (FOR EXCON AND MERCHANT) FEP 27 RANGOON 4 DJAKARTA 3 SINGAPORE I NEW DELHI 9 OLI CIA I have just conveyed orally to PRIMIN US views re Commie ARMY Chinese rice-rubber proposals substantially as set forth in AIR DEPTEL 129, Oct 23. Perm Sec Vaithianathan and Black also NAVY present. In subsequent discussion PRIMIN. (1) Gave categorical assurances his intention to continue fight on communism, (2) Stated he had given most serious consideration to all implications rice-rubber proposals and while he is not parti- cularly happy about situation, can see no (rpt no) satisfac- tory explanation to electorate if govt rejects them. (3) Pointed out that proposals offer solution to 3 most critical politic-econ problems confronting Ceylon today, i.e., assurance adequate rice supply, necessity obtaining econ price for rubber and amelioration balance of payments position. He emphasized that surest way for GOC to play into hands local Commies wld be to reject this solution. He had sent Min Food Goonetilleke to US in effort to obtain our aid in solving these problems but aid had not (rpt not) been forthcoming to degree necessary. (4) Emphasized that as far as danger of Commie Chinese press- ing to establish trade or diplomatic mission concerned, Ceylon only country in area which consistently has rejected request of Commie countries to establish such missions. (5) Made much of fact that UK is selling rubber to USSR and that both UK and India are carrying on large scale trade with China. In this connection PRIMIN commented that it is un- fortunate that one of three of Ceylon's major export commodi- ties has to be a strategic material. So far as change in pattern trade concerned, -221 REPRODUCTION FROM THIS SECRET SECURITY INFORMATION COPY, IF CLASSIFIED, IS PROHIBITED 16-67338-1 GPO