Still, there would be inevitable tin shortages until Malay Straits production became available again. Thanks to the Longhorn smelter, aggressive recycling campaigns, and the Bolivian contract, the War Production Board had been able to meet the needs of the U.S. war effort, but with the end of the war in Europe, “the situation materially changed for the worse.” The navy still demanded massive amounts of tin, liberated nations also demanded it for reconstruction, and domestic industries embarking on reconversion clamored for their share. These factors were only accentuated when, even after the Japanese surrender in August 1945, Malay Straits tin was still unavailable to meet the new demand; Director Erwin Vogelsang of the War Production Board’s Tin, Lead, and Zinc Division speculated that it might forever remain so.63
After a British scorched-earth retreat at the onset of the war, four years of fighting, and intense anti-Japanese guerrilla campaigns, no dredges and only forty-five mines remained in operation in Malaya. Hundreds of small European and Chinese mining companies there and in China might not ever be able to finance a full restoration of the facilities destroyed during the war. Moreover, imperial policy and the lack of foreign exchange made it unlikely that the British would request U.S. assistance to help restore tin productivity in Malaya. And, even though the Dutch government and Billiton Mastschappij (in which the government held five-eighths control) had at war’s end immediately ordered replacement equipment for their tin operations in the Dutch East Indies, it did not matter, Director Vogelsang argued, because production would ultimately be determined by a restored ITC, which would “not be enthusiastic about undertaking prompt and effective, yet costly, action” to restore tin mining in Southeast Asia that might lead to overproduction.64
For U.S. planners, it was therefore imperative that the ITC never be allowed to reconstitute. World War II had struck a decisive blow against the tin cartel; the International Trade Organization (ITO) and the United States would now finish it off. Chapter VI of the ITO Charter mandated that producers and consumers have an equal voice in any international commodity agreement, in effect banning price-fixing, government-ordered production restrictions, quota systems, or other stabilization schemes. That being the case, State Department functionary Donald Kennedy proclaimed that the ITC no longer served any “valid function.” Not surprisingly, Bolivian diplomats argued that the ITC should be restored and “revitalized with the goodwill and concurrence of the consumers to secure the harmonious development of the industry beneficial to all nations.” They soon learned, however, that Malayan producers, under pressure from the British government (itself coerced by Washington), were opting out. Although delegates from Bolivia and the Dutch East Indies desperately sought a formula that would salvage the ITC, they had to tread lightly “at all times,” so as “to not antagonize” the Anglo-American alliance.65 When the Bolivian ambassador asked for leeway to continue the ITC until the postwar transition was completed, the U.S. response was an “unequivocal” no. In November 1946, at the “suggestion of the United States” (although Bolivian ambassador Ricardo Martínez Vargas believed “the term ‘pressure’ would be more appropriate”), the only institution that had permitted long-term Bolivian competitiveness was formally dissolved.66
In the place of the ITC, Anglo-American planners formed the Tin Study Group and the Combined Tin Board as an “experimental” “first stage” in achieving an ITO-compliant commodity agreement in what they hoped would be an “atmosphere of mutual goodwill.” It quickly became clear that the study group was “not concerned with the arrangements governing the immediate supplies of tin” but was instead a toothless “opportunity” for “a broad exchange of views and information” and “purely routine” statistical compilations. The RFC considered it little more than a pointless and “continuous round of secret meetings, veiled threats, and open accusations of bad faith.”67
The true authority over tin production and pricing was vested in the Combined Tin Committee (CTC) in Washington. One of many emergency planning measures designed to efficiently allocate scarce resources during and after the war, the CTC exercised almost complete control over the commodity it monitored through firm national quotas. The Anglo-American technocrats of the CTC determined that all Bolivian tin, other than Patiño’s, which was committed to Great Britain was to be sold to the United States. For the RFC, the CTC represented nothing less than a unique opportunity to acquire for the United States and Great Britain the leverage the ITC had once wielded. Once either nation negotiated a price with its suppliers, usually after months of brutal negotiations, that price became the “world price,” which other producers would be obligated to accept. The ITC producers’ cartel was thus replaced by an “Anglo-American purchasing cartel” so domineering that some Bolivian tin producers found it preferable to negotiate with the potentially “gigantic market” of the Soviet Union.68
The implications went even further: U.S. planners considered the destruction of the ITC to be only the first step in dismantling trade restrictions on the tin industry imposed by the tin-producing states. The ITC was far from alone in imposing such restrictions. Through export duties on Malayan tin in 1903 and 1924, the British government had derailed U.S. plans to establish smelters before World War II. Even so, in the opinion of U.S. experts, Bolivia’s restrictions were the most onerous in the world. Because only an “infinitesimal number” of Bolivians paid any tax at all on real estate or income, the national government was funded almost entirely by a Byzantine system of taxes on the production and sale of tin. Through literally hundreds of national export taxes, local taxes, indirect excise taxes, income taxes, mining transfer taxes, dividend taxes, and a burdensome foreign exchange surrender scheme to finance imports, the Bolivian government extracted, by U.S. estimates, 15¢ of tax revenue from each pound of tin. Moreover, this list did not include regularly decreed (“often retroactive”) wage increases or other social benefits for workers or new taxes like one commemorating the four hundredth anniversary of the founding of Potosí. The obvious next step for the United States as it entered the postwar period was the elimination of this maddeningly unpredictable taxation scheme, in which La Paz alone had 468 different taxes and the national government another 366 taxes and duties.69
Ironically, the U.S. drive for “free markets” through the ITO could well have worked to the advantage of the Bolivians, at least for a few years, had these been regulated equitably. Although Bolivian tin was ordinarily unable to compete with alluvial tin from the East Indies and Malaya, the war and the Japanese occupation had crippled tin production in both these regions. Restoration of normal production in the Malay Straits was at least years away, and the soaring demand for tin created by postwar reconstruction gave rise to a tin shortage that augured well for the tin barons and any Bolivian government that subsisted off them. The U.S. decision to maintain smelting operations at Texas City, which the RFC considered the “most effective means of securing for the United States its share of limited world production,” should have guaranteed competition that would benefit Bolivian producers.70
Instead, as tin became, under the RFC regime, “the most controlled of all commodities” in the world, Bolivian diplomats entered annual negotiations with the ruthless technocrats of the RFC having little or no leverage. The Reconstruction Finance Corporation, the British Ministry of Supply, and private Dutch smelters all benefited from Combined Tin Committee collusion that forced Malayans, Bolivians, Nigerians, and Indonesians to sell their primary exports to a sole bidder. Although the RFC justified its monopoly by asserting that the world’s three largest producers were chronically unstable and that a crisis in any one would “mean a serious world shortage,” it clearly worked to U.S. advantage.71