66th anniversary of the SL – China Rubber – Rice Pact
The historic Rubber-Rice Pact between Sri Lanka (then Ceylon) and the People’s Republic of China was signed on December 18, 1952 by then Minister of Commerce, late R. G. Senanayake and his Chinese counterpart in the presence of the then Prime Minister of China, Zhou En Lai in Beijing (then Peking). This was five years before establishing diplomatic relations, and was the first trade agreement signed by China with a non-communist country. This year marks the 66th anniversary of that historic Rubber-Rice Pact between Sri Lanka and China. The Rubber- Rice Pact was the starting point for the expansion of bilateral trade between Sri Lanka and China, leading its way to closer and stronger economic cooperation between the two countries. It was promptly followed by the establishment of diplomatic relations with China, in 1957.
Feature - File picture of terraced rice fields in Sri Lanka.
In the early 50’s, there was a world shortage of rice which created a sharp increase in the international market prices. That was a period when the government of Sri Lanka was committed to provide two measures of rice per week to every person, at a subsidised price. Despite the shortage and exorbitantly high price, the government of Sri Lanka was compelled to buy this requirement to feed the nation. But, the government did not have sufficient foreign funds to continue with the purchases.
During the same period the global demand for natural rubber decreased due to the introduction of synthetic rubber as a substitute, which resulted in lowering the price of the natural rubber. Sri Lanka’s economy at that time depended to a large extent on the export of rubber. This situation resulted in Sri Lanka facing a severe economic crisis. Seeking a solution, Sri Lanka requested the US for a loan US$ 50 million and fair prices for import of rice and export of locally produced natural rubber. But all attempts failed and Sri Lanka was exposed to a disastrous situation with no rice to feed the people and no market for the rubber.
This was a period when China had a surplus of rice, whilst experiencing difficulties in purchasing its requirement of natural rubber due to competition between the western capitalist countries and the Asian communist countries. Furthermore the UN imposed a resolution prohibiting Malaysia, then Malaya, exporting its natural rubber to China, aggravating the problems faced by China.
The late R. G. Senanayake, who was the Minister of Commerce at the time, observed that China was unable to obtain her requirement of rubber following the UN resolution. The scenario at the time was that China needed rubber very badly while Sri Lanka wanted rice urgently. China had surplus stocks of rice whilst Sri Lanka had stocks of rubber without a market. China indicated that they were prepared to sell rice to Sri Lanka in exchange for rubber. Mr. Senanayake promptly realizing the mutual benefits that can be derived from this barter trade, started negotiating the Ceylon-China Rubber-Rice Pact in mid-1952, and proposed signing a trade agreement with China under which Sri Lanka would supply natural rubber and China to reciprocate with rice, for the mutual benefit of both countries. During this era Sri Lanka was politically favouring the west, but the local situation and conditions led the Sri Lanka government to take the bold decision of signing the proposed trade agreement. As for China it was to be the first trade agreement to sign with a non-communist country. And the “Ceylon – China Rubber – Rice Pact” was signed between the two countries on December 18, 1952, in Peking, China.
The late Mr. Senanayake paid an important tribute to China after negotiating the Trade Agreement, when he concluded his cabinet paper on the subject in the following words: “We noted on the Chinese side the absence of the spirit of bargaining and haggling on comparatively small points.
On the other hand, they gave us the impression of being large minded and forthright in their dealings”.
The agreement thus signed was effective for five years and renewable. The quantities to be exchanged annually were specified with provisions provided for negotiations on an annual basis. The trade was based on barter exports and imports and balanced every year, and the outstanding balance was to be settled in foreign exchange. But the trade was not balanced every year and the outstanding balance was carried forward to the next year without settlement in foreign exchange. China provided more benefits to Sri Lanka by offering prices higher than the world prices for rubber and giving rice at a price lower than the world price. Sri Lanka benefited both ways from the agreement. The agreement also covered trading of other commodities between the two countries without any specific commitments through its second part.
The Rubber – Rice Pact, which was mutually beneficial was renewed every five years by the successive governments of both countries until 1977, and in 1982 when Sri Lanka became near self-sufficient in rice and when rubber no longer had any restrictions in the world market, the pact was discontinued.
The Golden Jubilee of the signing of the Sri Lanka – China Rubber – Rice Pact was commemorated jointly by the Sri Lanka China Business Cooperation Council and the Sri Lanka China Society in December 2002 at the BMICH Colombo. The Chief guest was Karu Jayasuriya, who was then the Minister of Power and Energy. The Guest of Honour was the then Ambassador for China. The keynote address was made by Dr. J.B. Kelegama on “The Significance of the Ceylon – China Trade agreement of 1952”, which covered all the details pertaining to the Rubber – Rice Pact and the advantages gained by Sri Lanka.
The late Mr. Senanayake should be given the full credit of establishing the Rubber – Rice Pact having foreseen that China will very soon emerge as a world super power. The Sri Lanka China Business Cooperation Council, jointly with the Sri Lanka China Society, rightfully remembered and honoured Mr. Senanayake at a public ceremony by recognizing in person his beloved wife, late Mrs. R.G. Senanayake. A commemorative stamp and a first day cover were issued at this event, and a special full page newspaper supplement was published to mark the occasion
Though the Rubber – Rice Pact, is not in effect at present, it paved the way to establish and strengthen the bi-lateral business relationship between Sri Lanka and the People’s Republic of China. The late Mr. Senanayake, should be remembered and given all the credit for authoring the Rubber Rice Pact. His far sighted vision, foresaw the emergence of China as a future economic giant of the world, and was brave enough to pressurise the then government to take a bold step in signing the pact with China. Undoubtedly the Sri Lanka – China Rubber – Rice Pact is so far the best trade agreement Sri Lanka has entered into.
(The writer was President of the Sri Lanka China Business Cooperation Council from 2002 to 2012. He can be contacted on nihalmal282@gmail.com)