462.00 R 29/97: Telegram

The Acting Secretary of State to the Ambassador in France (Wallace)

534. For Rathbone from Department and Davis. Treasury R–272.

Reference your R–382, March 2, regarding interpretation of Treaty.

We appreciate fully under what difficulties you have labored in dealing with this question and that the proposed communication to the Germans quoted in your telegram is a concession to your views. It appears to us however that the procedure indicated may force Germany by questionable expedients to take certain serious and far-reaching measures which according to our view are not required of her by either the letter or the spirit of the Treaty. Even assuming that the Commission would be within its rights in imposing such conditions, it would not in our judgment be good policy from the standpoint of obtaining from Germany the greatest amount of reparation. Germany has already disposed of a large amount of her saleable foreign assets and if she now has to dispose under forced sales of the balance of her neutral holdings in order to get food and raw materials, of which she is in urgent need, she cannot possibly make advantageous sales which would be possible under an orderly process with ample time and facilities for negotiating with competitive purchasers. We fear that the prime objective is to force Germany [Page 369] to sell certain holdings in neutral countries, of which certain powers are most covetous, rather than a recognition of the necessity and desirability of providing Germany with food and raw materials. There is certainly an implied, if not a definite, obligation even dating from the Armistice to facilitate the obtaining by Germany of food and raw materials. We do not think it is good policy or within the powers of the Reparation Commission to tell Germany now that she cannot obtain what she is entitled to under the Treaty unless she does something else, which in our opinion she is not obligated to do under the Treaty.

The Department has received a communication from a prominent Senator stating he had been informed that an attempt was being made by the Allies to obtain certain German property in South America by an undue interpretation of Article 235. As you have been informed we are entirely in agreement with the dissenting opinion rendered by Mr. Bayne in respect to the interpretation of this article. This Government is unalterably opposed to any other interpretation of that article and to any procedure in violation thereof. A broader interpretation is regretable as it amounts in effect to an additional indirect violation of private property. This Government feels that once the broader interpretation of Article 235 is admitted though applied only at present to private German securities in neutral countries a dangerous precedent will be established which may be utilized on one excuse or another to interfere with privately owned German commodities or foreign credits. The assumption and use of such general powers might give rise to serious political complications in Germany; would be prejudicial to general economic reconstruction and offers an opportunity to the governments dominating the Reparation Commission indirectly to exercise a dangerous controlling influence on private trade with Germany. Since by the terms of the treaty the influence and power of a large part of the civilized world may be concentrated behind decisions of the Reparation Commission the broader interpretation of Article 235 besides being in our opinion indefensible on terms of the treaty and letter to German Commissioners, contains a possible menace to American trade interests if the treaty is not ratified and the United States is not entitled to its veto power on the Reparation Commission. The strongest protest possible should therefore be made against the majority construction of Article 235. A reasonable accomplishment of the result desired by your compromise plan may be established by means other than reliance on powers based on broader construction of Article 235. The Department will if you consider it necessary or advisable address a separate note to the respective Governments defining its position.

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We are equally opposed to any construction of the treaty which will not allow ships and other property ceded by Germany to be credited against the twenty billion mark initial payment. We will cable you more fully on this point.