Papers Relating to the Foreign Relations of the United States, The Paris Peace Conference, 1919, Volume X

Paris Peace Conf. 180.0501/14

Supreme Economic Council: Special [Fourteenth] Meeting Held at the Ministry of Commerce [on 23d April, 1919, at 10 a.m.]

April 23, 1919, 10 a.m.

The Supreme Economic Council held its Fourteenth Meeting on Wednesday, 23rd April, 1919 at 10 a.m. under the Chairmanship of Lord Robert Cecil.

The Associated Governments were represented as follows:—

Great Britain	Sir H. Llewellyn Smith.
	Sir Wm. Mitchell Thomson.
	Mr. E. F. Wise.
U. S. A.	Mr. Hoover.
	Mr. Robinson.
France.	M. Clémentel.
	M. Boret.
	M. Vilgrain.
	M. Celier.
Italy.	Professor Attolico.
Belgium.	M. Jaspar.

114. Relations With Germany and Derationing of Northern Neutrals.

With reference to Minute 113 the Chairman urged upon the Council the necessity, in the economic interests of the European nations as a whole, of taking such steps as would publicly encourage and foster at the earliest possible date the resumption of normal trade conditions both in Germany and in the other European countries.

He suggested, therefore, that the Council should endeavour to agree upon certain proposals (109) for transmission to the Council of Four for their approval.

The French Delegates speaking on behalf of their Government stated:—

(a) That, while fully realising the desirability of a speedy return to normal conditions, they were unable at the present time, in view of the proposed early presentation of the terms of the Preliminaries of Peace to the Germans at Versailles, to concur in any proposals which would result in a further relaxation of the Blockade restrictions on Germany.

(b) That they were in favour of an, immediate public announcement setting forth what relaxations had already been authorised and what steps had been taken to supply Germany with or to assist her to obtain food. Further, if it were considered desirable as an emergency measure immediately to increase the rations or even to divert cargoes, the French Government would be prepared favourably to consider the proposal.

(c) The French Government was fully prepared immediately to consider in the Council what additional relaxation of trade restrictions should be authorised as soon as the Preliminaries of Peace were signed, and what means should be adopted to effect the restoration of normal trade conditions all over the world.

The American delegates observed that a statement of their present view would be simply a reiteration of the position taken by them as early as December 1918, namely that it was from a political and an economic standpoint against the interests of the Allies to continue the blockade on Germany, a view which in their opinion has been amply warranted by subsequent developments. It was their view then and now that the blockade, in preventing the population of Germany from returning to productivity and employment, could only stimulate social disorder and undermine the possibilities of Peace. That from an economic point of view the only hope of reparation to the Allies and of the ability of Germany to feed her population, thereby maintaining order, was by the earliest possible return to productive labour; that with the surrender of the German fleet and the control of the Rhine, the blockade on Germany could be resumed at any moment as a physical blockade, without maintaining the, vast machinery that was necessary while Germany was still a potent military power; that the political value of the blockade as a measure for enforcing peace would be materially increased if the German people returned to employment and substantially increased their present standard of living; that this was evidenced by the Austrian situation whereby order was maintained by threat of cessation of the thin stream of food which kept the population alive. The only hope for the reconstruction of Germany, her return to productivity and orderly government, or her ability to pay reparation lies with the Middle Classes who are totally discouraged and who show a tendency to despair and complete inactivity by reason of which the whole possibilities of peace are jeopardised. The extension of unemployment in Germany since the Armistice and the acute food situation both build constructively for Bolshevism, and with bolshevism there could be no peace in Europe. The American Delegates wished to emphasise the fact that they would not be a party to any proposal which would damage the interest of France, but they felt that in adopting the principle which they had adhered to that they were doing France the best service of which their Government was capable.

Replying to the suggestions of the French delegates, they felt that a review of what had been accomplished under the relaxation of the blockade would make but a meagre showing due to the amount of mechanical restriction that had been placed around every effort at relaxation; that it was impossible for credit and trade to revive so long as these restrictions existed; that the total result was to draw a stream of gold out of Germany. They further stated that it was the view of the Government of the United States that there was no question of blockade measures after peace, as with peace the blockade falls.

The French Delegates pointed out that ever since the Armistice their Government held the view that Germany should be fed and that the execution of a revictualling programme should be a common charge on the Inter-Allied organisations already existing at the time of the Armistice which would secure fair distribution as between the allies and Germany, the necessary finance being supplied by Joint Allied loans. This proposal could not be carried into effect as the United States Government were unable to concur therein; it appears to the French Delegates therefore that the delays in the execution of a programme have been due to financial difficulties rather than to blockade restrictions.

Further, in the two instances where Germany has had materials for export, namely, coal and dyestuffs, she has evinced no desire to carry the negotiations to a successful conclusion.

The American Delegates remarked there was a total diversion of view as to principle. They had held from the beginning that the only basis of food supplies should be the exchange of products, and that the employment involved in their production was of equal importance politically and economically with the supply itself; that from the American point of view the French financial proposals meant only a further increase in the burden of credit already assumed by the United States, as the cycle suggested by the French Delegates simply involved further extension of credits by the United States to Europe; that in this connection they had recently prepared an estimate showing that during the present harvest year the United States will have supplied Europe with foodstuffs to the value of two-and-one-half billion dollars, for which it will have received in payment only four hundred million dollars in goods or securities; that there was an absolute limit to amount that can be drawn from any bank.

The Italian Delegate said that having regard to the economic side of the question he concurred in the Chairman’s proposition. The lifting of the Blockade was also essential in order to show that after that something more in the way of financial arrangements was necessary in order to restore normal life and that it was in the general interest that this should be realised immediately.

The American, Italian and British Delegates then considered in detail the proposals put forward by the Chairman, the French Delegates taking no part in the discussion.

The recommendations finally agreed upon by the American, Italian and British Delegates for submission to the Council of Four were as follows:—

The Delegations of America, Italy, and Great Britain, as far as their functions extend, being of the opinion that:—

(a) In view of the exceedingly critical economic conditions of Europe it is of urgent importance to re-establish as soon as possible normal commercial conditions in European countries and;

(b) Though much has been done to relax Blockade restrictions in Europe, there still remain considerable obstacles to the free course of trade particularly with respect to Germany and the countries bordering thereon:—

They Recommend that:—

(1) All remaining regulations restricting free commerce with the Scandinavian countries, Holland and Switzerland be suspended including:—

Action already taken.	}	(a)	The Black list.
		(b)	the rationing of imports into these countries.
		(c)	the guarantees against re-export.

Note: (In making this recommendation the Council is greatly influenced by the facts that the maintenance of any conditions such as guarantees however simplified will seriously hamper trade and that in present financial conditions it is highly improbable that Germany will be able to import any considerable quantity of goods.)

(2) All restrictions on imports from Neutrals into Germany and on exports from Germany other than gold, silver, securities and materials of war should be also suspended, with the reservation that the Germans shall hold 50% of their existing stocks of dyestuffs for purchase by the Allies at prices not exceeding twice those current before the war.

(3) Each of the Allied and Associated Governments will determine for itself the extent to which it will permit its subjects to enter into trading relations with enemy subjects.

(4) These relaxations are temporary in character and will be withdrawn if the German Government takes up a hostile attitude to the Allied and Associated Governments or is succeeded by a Government which does not in the opinion of the Allied and Associated Governments afford the necessary guarantees of order and stability.

(5) The terms of these resolutions and recommendations should be published.

115. Resumption of Trade With Occupied German Territories.

Resolutions from the Blockade Section (110) regarding the removal of restrictions on exports from and imports to the Occupied Rhine Territories after the signing of the Preliminaries of Peace were considered and deferred for further consideration, if necessary, on receipt of a report from the Inter-Allied Rhineland Commission recently formed.

116. Transport by the Danube.

The American Delegates referred to a statement (111) received from their Representative regarding the existing military control of the Danube traffic and to recommendations made for the relaxation of that control.

It was agreed:—

(a) That, judging from the information before them, the Council is of the opinion that all traffic on the Danube except in the case of certain prohibited articles should be free.

(b) That the Communications Section should be notified of the above decision and requested to prepare for submission to the Council at its next meeting a scheme for carrying it into effect.

Appendix 109¹

Draft Resolutions Submitted by the British Delegates Regarding Relations With Germany and the Derationing of Northern Neutrals

The Council being of opinion that—

(a) In view of the exceedingly critical economic condition of Europe it is of urgent importance to re-establish as soon as possible normal commercial conditions in European countries; and

(b) Though much has been done to relax blockade restrictions in Europe, there still remain considerable obstacles to the free course of trade, particularly with respect to Germany and the countries bordering thereon,

It recommends that—

1. All remaining regulations restricting free commerce with the Scandinavian countries, Holland, and Switzerland be suspended, including—

(a) The black lists.

(b) The rationing of imports into these countries.

(c) The guarantees against re-export.

(In making this recommendation, the Council is greatly influenced by the facts that the maintenance of any condition, such as guarantees however simplified, will seriously hamper trade, and that in present financial conditions it is highly improbable that Germany will be able to import any considerable quantities of goods.)

2. All restrictions on export from Germany should be also suspended. At the same time the German Government should be informed that the Allied and Associated Governments will not recognise any transactions other than genuine commercial transactions for immediate consumption, and reserve the right to require the recision of any others.

3. The Allied and Associated Governments are prepared to enter on negotiations for dealing with such stocks as the German Government may have to dispose of immediately.

4. Each of the Allied and Associated Governments will determine for itself the extent to which it will permit its subjects to enter into trading relations with enemy subjects.

5. These relaxations are temporary in character, and will be withdrawn if the German Government takes up a hostile attitude to the Allied and Associated Governments or is succeeded by a Government which does not, in the opinion of the Allied and Associated Governments, afford the necessary guarantees of order and stability.

6. The terms of these resolutions and recommendations should be published.

Appendix 110

[Resolutions From the Blockade Section Regarding the Reopening of Trade With the Occupied German Territories]

The Blockade Section ask that the following resolution should be considered as a matter of urgency;

At a meeting of the Blockade Section held on the 19th April, a memorandum on the re-establishment of trade relations with the occupied German territories was considered.

The following resolution was adopted for submission to the Supreme Economic Council:

Resolved that after the day when the Preliminary Peace Treaty is presented to the German Delegates, it should be announced that importations into the occupied Rhine territories (including of course Luxembourg) are free, with the exception of commodities specified on the prohibited list as set out in para. 51 of the 11th meeting of this Council concerning the restoration of trade with Austria and, in the case of shipments from the Associated countries of commodities the exportation of which may be restricted by domestic regulation.

Further resolved that purely from a blockade point of view there is no reason for control over exports from the occupied Rhine territories, except in the case of exports to non-occupied Germany, which should still be subject to the control of the Interallied Committee of Luxembourg, and the Blockade Council refer this question to the Supreme Economic Council for consideration from all other points of view, with a view to determine as early as possible what measures, if any, are necessary for the control of exports from occupied Rhine territories.

M. Seydoux has reserved his assent to this action, in so far as the same relates to export from the occupied Rhine territories.

Appendix 111²

Memorandum Submitted by the American Delegates Regarding the Military Control of the Danube Traffic

The entire river traffic of the Danube is to-day under the military control of the Allied High Command at Constantinople. This command has recently ordered the subdivision of the control of this river in the following manner, viz.:—

So much of the river as is in Roumanian territory is under the immediate control of a French naval captain, whose office is at Bucharest; the balance of the river is under the control of the British Admiral Troubridge, whose office is at Belgrade. Commercial traffic on this river to-day is practically suspended. Great fleets of river barges, of boats, &c., are tied up at various points, resulting in a complete paralyzation of the normal economic activities of this great and important economic artery. I am constrained to believe that the existing situation is more or less the result of the enforcement of the existing military control of the Danube, and, particularly, the organisation which the Allied High Command has adopted in dividing the control of the river in the manner indicated. No traffic is allowed on the river whatsoever without special permits obtained in each case either at Belgrade or Bucharest.

The almost complete interruption of mail and telegraphic communication throughout this territory interposes an almost insurmountable barrier for commerce to obtain such permits. None of the existing commercial river companies are allowed to operate without specific authority of either the British or the French controls. Prior authority must be arranged at both Bucharest and Belgrade before the artificial limits of the British and French controls can be passed by river traffic. From a commercial operating point of view this situation is obviously intolerable. The Danube is not to-day an important military line of communications, and no military reason exists for continuing the control of this river in the hands of the military authorities. On the other hand every economic reason exists for breaking down immediately every artificial control and every military restriction.

The quicker we can set up some organisation to take this matter in hand and to completely open the river for unrestricted commercial traffic the better it will be for all concerned and for the peace of the neighbouring nationals. The Serbians are to-day quite critical of the present arrangement. I was informed by one of the Serbian Ministers that the cost of moving supplies from Zemlin, a town directly across the river from Belgrade, to Belgrade was approximately the same as the cost for the movement of the same supplies from Fiume to Zemlin. I had no opportunity to verify this statement, and report it simply as showing the existing dissatisfaction with the present methods of control. Admiral Troubridge is carrying out the orders which have been communicated to him by the French High Command at Constantinople, and is therefore in no way responsible for the existing situation. I believe this same remark will apply to the French naval captain at Bucharest.

I recommend the following line of action by the Supreme Economic Council as being the most practical solution of this matter:—

1. That no military reasons exist to-day for continuing the control of the Danube under the Allied High Command at Constantinople, except so much of the river as passes through the present disturbed territory of Hungary, and that as soon as this disturbed condition is alleviated there will exist no further necessity for military control of even this portion of the river.

2. That every economic reason exists, and the re-establishment of order throughout this territory largely depends upon the utilisation of this river and the existing river equipment to its maximum capacity for the supply of the territory through which it passes, and to permit the greatest possible freedom in exchange of commodities between the various nationals, and that to accomplish this purpose the control of the river and the river traffic should be assumed by the Supreme Economic Council, and that such control by the Supreme Economic Council should be exercised through the Director-General of Belief by a Danube River Economic Commission, comprised of a British, French, Italian, and American representative, with a rotating chairmanship as between the principals of the four nations. It would follow that this Commission would entirely supplant and replace all of the existing military commissions and military agencies at the present time concerned with the Danube River, or its traffic, except in so far as it may be temporarily necessary to maintain military control over such portion of the Danube River as passes through Hungarian territory, where at present disturbed conditions exist.

3. That it is not intended by the foregoing that the proposed Danube River Economic Commission would assume control of the existing Danube River gunboats, or other armed river craft. The control of these latter would be under the complete jurisdiction of the military or naval authorities, but their function would be purely that of normal and ordinary pre-war functions of the protection of the commercial traffic operating under the exclusive jurisdiction of the Danube River Economic Commission. If the proposed Danube River Economic Commission be established, as proposed, it is recommended that this Commission be instructed to devote its entire efforts to re-establishing the normal economic life of the river; or, in other words, that it devote its efforts to fostering the re-establishment of the old lines of traffic under existing river traffic companies to the end that pre-war conditions be established with a very minimum of delay: It would naturally follow that the President of the temporary Allied Military Railway Commission for the old Austro-Hungarian Empire would be instructed to facilitate the delivery of fuel necessary in putting all the Danube River equipment in movement at the earliest practicable date:

Logan

April 23, 1919.

1. Appendix 109 is filed separately under Paris Peace Conf. 180.0501/34.
2. Appendix 111 is filed separately under Paris Peace Conf. 180.0501/34.