Annex IV (1 to 7)

Note to VIII, Annex IV

The German delegation declared that Germany was ready to accept the principle of devoting its economic resources “directly to the purposes of restoration”, on condition that its economic sovereignty remained intact (Foreign Relations, The Paris Peace Conference, 1919, vi, 859). It therefore proposed the establishment of a German commission to work with the Separation Commission, whose “one sided powers of decision and control” could not be recognized. The requisition of materials must not involve the disorganization of German economic life, so that milch cows, cattle, goats, etc., could not be delivered until the supply in Germany had increased considerably. Germany was willing, however, to purchase cattle abroad for delivery to the Allies.

Reparation in the form of deliveries in kind, as distinct from cash payments across international exchanges, underwent a number of developments. The treaty itself provided in annexes III–VII [Page 500] of part VIII for specific deliveries in the nature of reparation strictly speaking, that is, to make good particular kinds of losses. Fulfilment of those provisions was by no means simple, but the definite requirements of specific provisions were in general met, or satisfied, by substitute arrangements. Almost every item involved was the subject of detailed and specialized negotiations and arrangements which, however important in themselves, were not usually of wide significance. For the most part, such deliveries in kind under the treaty have been accounted for in these notes by recording the amounts credited to Germany with respect to the provisions concerning them.

The other phase of deliveries in kind, as a means of payment in addition to, or in lieu of, cash payments, steadily increased in importance. The reason was clear and inevitable. Reparation and intergovernmental debts constituted the financial heritage from the war and differed fundamentally from ordinary commercial payments in that they were one-sided transactions.

These intergovernmental obligations represented debts incurred wholly or largely outside of the economic field within which their liquidation fell. Payments in cash depended upon the quantity of international exchange available for the purpose. In the case of these obligations international exchange, which in normal trade is both self-generating and self-liquidating, was exhausted by its employment rather than serving as a normal means of transferring values from one national economy to another. Payment in cash was limited by the amount of international exchange created by economic activity over and above its requirements. Payments in kind represented a diversion of the product of economic activity from the normal trade system but presumably made possible the transfer of values without translating them into the measures of international exchange.

In reparation history the competition between payments in cash and kind appeared at an early date. Armistice deliveries and the early deliveries under the treaty, which were stipulated to amount to 20 billion gold marks in value by May 1, 1921, were almost wholly deliveries in kind of specific things. The problem of appraisal was immense and many of the values were tentatively assigned. Disagreement over the values involved and over the ability of the German economy to support the requirements made upon it accounted in a large measure for the default found by the Allies on March 7, 1921 with its consequent imposition of sanctions.

[Page 501]

The disturbance attending the payment of the billion gold marks by May 30, 1921 (see p. 439) accelerated attention to the alternative system of payment in kind. The United Kingdom had by the Reparation (Recovery) Act of March 24, 1921 provided for a system of payments derived from normal commercial transactions; 26 percent of payments due by British purchasers to German sellers was thereby diverted to the government’s reparation account. More significant was the restriction of annex II, paragraph 19, which, contemplating both payments in cash and kind, applied to rights or chattels only upon spontaneous offers by Germany. This provision was practically inoperative up to the time when, in May 1921, the Allied and Associated Governments utilized their power of amendment and, by a unanimous decision of the governments represented, adopted paragraph 19A on May 5 and made it incumbent upon Germany to provide labor and material for the purposes of restoration.

Previously, orders under annex IV, paragraph 2, had been received by the commission from reparation creditors for a wide variety of articles to be supplied by Germany in a manner approximating as closely as then possible to ordinary commercial usage. The total of the list amounted to nearly 10 billion gold marks. Germany, on the other hand, was offering material to an estimated value of only 550 million gold marks, some of the offerings being of no practical interest to the creditors. The latter, and particularly France faced with the problem of restoring the devastated regions, wanted material they could use, while Germany was offering materials which it wished to supply. It came to the attention of the Reparation Commission at the end of 1920 that German authorities had received more than 10,000 proposals for the supply of machine tools satisfying Allied conditions which Germany had failed to transmit for consideration. A plan was, therefore, instituted by which direct contact could be established between reparation creditors and German supplying firms under contracts which were to be paid by the German Government and credited to reparation. Great difficulty was encountered with respect to prices and eventually the Reparation Commission decided that the question of deliveries was independent of that of prices. In June 1921 it became possible to transform private agreements arrived at in the ordinary course of trade into orders on reparation account.

A notable step was taken in the Wiesbaden agreement of October 6, 1921 between France and Germany, which provided for the formation in Germany of an organ for the delivery on private order of [Page 502] plant and materials that might be required by the French in the devastated regions (Agreements Concerning Deliveries in Kind To Be Made by Germany Under the Heading of Reparation, p. 3, Reparation Commission II). Articles 3–9 of the Finance Ministers’ agreement of March 11, 1922 dealt with specific phases of the subject.

This bilateral arrangement was followed by an agreement of June 2, 1922 between the Reparation Commission and the German Government in which a procedure was laid down for the acceptance of contracts “directly concluded between Allied and German nationals in accordance with ordinary commercial practice in which the German Government will only intervene to the extent specified in the present arrangement.” It was stipulated that the agreement was concluded with a view to facilitating the payment of reparation and was “based solely on the economic considerations which govern ordinary trade”.

This Bemelmans-Cuntze agreement (ibid., p. 14) was preceded by the Franco-German agreement known by the names of its makers, Messrs. Gillet and Ruppel, which was signed at Berlin on March 15, 1922 and related more, particularly to the French devastated regions.

These two agreements, out of which grew a considerable amount of regulations, continued in force until 1930 and constituted the foundation upon which an extensive system of special trade was built. Literally thousands of contracts were made under the general scheme which permitted individual German suppliers to make arrangements with those who desired goods and these contracts became final after 14 days from their communication to the Reparation Commission and the Kriegslastenkommission. A great variety of goods was called for under the contracts, which in general were passed under paragraph 19 of annex II.

The system of deliveries in kind as it had developed continued, with adjustments, during the period, September 1, 1924 to May 17, 1930, of the Experts’ (Dawes) Plan. Regulations for deliveries under the plan were approved on May 1, 1925. Germany and the United Kingdom on April 3, 1925 signed an agreement for amending the Reparation Recovery Act of 1921 to conform with the Plan by placing the payments on a statistical instead of a transaction basis. The Agent-General for Reparation Payments under the Dawes Plan transferred 51.77 percent of the total amount credited to Germany in Reichsmark payments, which in general represented deliveries in kind of some sort.

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The New (Young) Plan recommended the cessation of deliveries in kind after a period of 10 years during which their amount should decrease from 750,000,000 to 300,000,000 Reichsmarks, disbursements to be managed by the Bank for International Settlements. The plan stated:

The recommendations of the New Plan were embodied in a protocol signed at The Hague August 31, 1929 and elaborated into new “regulations for deliveries in kind” which were brought into force as annex IX of the agreement with Germany signed at The Hague January 20, 1930. Annex X was two agreements amending the method of administering the Reparation Recovery Acts of the United Kingdom and France, the former to receive 23.05 percent and the latter 4.95 percent of the total deliveries. The remaining 71 percent was destined for Italy, Belgium, Japan, Yugoslavia, Portugal, Rumania, and Greece.

1.

The Allied and Associated Powers require, and Germany undertakes, that in part satisfaction of her obligations expressed in the present Part she will, as hereinafter provided, devote her economic resources directly to the physical restoration of the invaded areas of the Allied and Associated Powers, to the extent that these Powers may determine.

2.

The Allied and Associated Governments may file with the Reparation Commission lists showing: [Page 504]

(a)

Animals, machinery, equipment, tools and like articles of a commercial character, which have been seized, consumed or destroyed by Germany or destroyed in direct consequence of military operations, and which such Governments, for the purpose of meeting immediate and urgent needs, desire to have replaced by animals and articles of the same nature which are in being in German territory at the date of the coming into force of the present Treaty;

(b)

Reconstruction materials (stones, bricks, refractory bricks, tiles, wood, window-glass, steel, lime, cement, etc.), machinery, heating apparatus, furniture and like articles of a commercial character which the said Governments desire to have produced and manufactured in Germany and delivered to them to permit of the restoration of the invaded areas.

Note to VIII, Annex IV (2)

Under annexes II and IV and the deliveries-in-kind agreements of March 15 and June 2, 1922 the following lump-sum contracts were made:

Country	Date	Gold marks
Serb-Croat-Slovene State		238,935,628
Italy	April 28, 1926	73,234,533
Greece	June 22, 1926	4,890,053
Belgium	July 19, 1926	34,503,615
Rumania		23,765,626
France	April 9, 1927	23,930,000

Note to VIII, Annex IV (2, 6)

Up to December 31, 1922 deliveries of livestock, other than poultry, under paragraphs 2 (a) and 6 amounted to 528,926 head as follows: Horses, 101,661; cattle, 174,208; sheep, 231,393; goats, 21,664. These were provisionally credited at 158,045,745 gold marks. Deliveries of 245,688 poultry were valued at 831,409 gold marks. Livestock demanded amounted to 165,346 horses, 927,675 cattle, 15,250 swine, 917,135 sheep, 25,165 goats, and 1,740,000 poultry (Report on the Work of the Reparation Commission from 1920 to 1922, p. 240). Altogether 146,223,775 gold marks was credited in respect of livestock under these clauses.

Miscellaneous deliveries under paragraph 2 (a) up to December 31, 1922 were credited at 35,133,312 gold marks and reconstruction material delivered under paragraph 2 (b) at 29,771,647 gold marks.

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3.

The lists relating to the articles mentioned in 2 (a) above shall be filed within sixty days after the date of the coming into force of the present Treaty.

The lists relating to the articles in 2 (b) above shall be filed on or before December 31, 1919.

The lists shall contain all such details as are customary in commercial contracts dealing with the subject matter, including specifications, dates of delivery (but not extending over more than four years), and places of delivery, but not price or value, which shall be fixed as hereinafter provided by the Commission.

Note to VIII, Annex IV (3)

The last date for filing lists was fixed by the Reparation Commission as August 15, 1920.

4.

Immediately upon the filing of such lists with the Commission, the Commission shall consider the amount and number of the materials and animals mentioned in the lists provided for above which are to be required of Germany. In reaching a decision on this matter the Commission shall take into account such domestic requirements of Germany as it deems essential for the maintenance of Germany’s social and economic life, the prices and dates at which similar articles can be obtained in the Allied and Associated countries as compared with those to be fixed for German articles, and the general interest of the Allied and Associated Governments that the industrial life of Germany be not so disorganised as to affect adversely the ability of Germany to perform the other acts of reparation stipulated for.

Machinery, equipment, tools and like articles of a commercial character in actual industrial use are not, however, to be demanded of Germany unless there is no free stock of such articles respectively which is not in use and is available, and then not in excess of thirty per cent. of the quantity of such articles in use in any one establishment or undertaking.

The Commission shall give representatives of the German Government an opportunity and a time to be heard as to their capacity to furnish the said materials, articles and animals.

The decision of the Commission shall thereupon and at the earliest possible moment be communicated to the German Government [Page 506] and to the several interested Allied and Associated Governments.

The German Government undertakes to deliver the materials, articles and animals as specified in the said communication, and the interested Allied and Associated Governments severally agree to accept the same, provided they conform to the specification given, or are not, in the judgment of the Commission, unfit to be utilized in the work of reparation.

Note to VIII, Annex IV (4)

The Reparation Commission decided that restitutions of animals included only one generation of their increase. As to France 6000 colts and as to Belgium 4500 colts were affected by this decision.

5.

The Commission shall determine the value to be attributed to the materials, articles and animals to be delivered in accordance with the foregoing, and the Allied or Associated Power receiving the same agrees to be charged with such value, and the amount thereof shall be treated as a payment by Germany to be divided in accordance with Article 237 of this Part of the present Treaty.

In cases where the right to require physical restoration as above provided is exercised, the Commission shall ensure that the amount to be credited against the reparation obligation of Germany shall be the fair value of work done or materials supplied by Germany, and that the claim made by the interested Power in respect of the damage so repaired by physical restoration shall be discharged to the extent of the proportion which the damage thus repaired bears to the whole of the damage thus claimed for.

6.

As an immediate advance on account of the animals referred to in paragraph 2 (a) above, Germany undertakes to deliver in equal monthly instalments in the three months following the coming into force of the present Treaty the following quantities of live stock:

(1) To the French Government.

• 500 stallions (3 to 7 years);
• 30,000 fillies and mares (18 months to 7 years), type: Ardennais, Boulonnais or Belgian;
• 2,000 bulls (18 months to 3 years);
• 90,000 milch cows (2 to 6 years);
• 1,000 rams;
• 100,000 sheep;
• 10,000 goats.

(2) To the Belgian Government.

• 200 stallions (3 to 7 years), large Belgian type;
• 5,000 mares (3 to 7 years), large Belgian type;
• 5,000 fillies (18 months to 3 years), large Belgian type;
• 2,000 bulls (18 months to 3 years);
• 50,000 milch cows (2 to 6 years);
• 40,000 heifers;
• 200 rams;
• 20,000 sheep;
• 15,000 sows.

The animals delivered shall be of average health and condition.

To the extent that animals so delivered cannot be identified as animals taken away or seized, the value of such animals shall be credited against the reparation obligations of Germany in accordance with paragraph 5 of this Annex.

Note to VIII, Annex IV (6)

The value of livestock delivered under paragraphs 2 (a) and 6 before January 1, 1921 was 80,626,775 gold marks, of which 54,504,240 gold marks went to France, 26,121,090 to Belgium, and 1445 to Italy. After January 1, 1921 a total value of 65,597,000 gold marks was delivered: France, 28,710,000; Belgium, 14,490,000; Italy, 13,697,000; and the Serb-Croat-Slovene State, 8,700,000.

7.

Without waiting for the decisions of the Commission referred to in paragraph 4 of this Annex to be taken, Germany must continue the delivery to France of the agricultural material referred to in Article III of the renewal elated January 16, 1919, of the Armistice.

Note to VIII, Annex IV (7)

Article III of the renewal of the armistice dated January 16, 1919 read:

For the deliveries still to be made at the entrance into force of this treaty see paragraph 8 of the protocol of January 10, 1920, p. 745.

Deliveries of agricultural material under this provision up to August 31, 1924 amounted to 20,809,810 gold marks, of which 16,615,838 was to France and 4, 193,972 to Belgium.