611. 626/54: Telegram

The Secretary of State to the Commission to Negotiate Peace

3383. Your Garvan from Herty 4551, October 6, 9 p.m.

1.
In reference to the “incredible decision of the War Trade Board outlined in the Department’s 3325 October 3” and referred to in your cable. Please inform Mr. Herty that the decision of the War Trade Board was directed by the Department of State for certain important reasons here but that if dyes can be obtained promptly through the Reparations Commission it is the opinion of the Department that practically all the dyes licensed to be imported will be purchased through the channel of the Reparations Commission.
2.
Concerning Mr. Herty’s reference to the War Trade Board in No. 3325 as questioning the accuracy of his statements as to price of dyes under Peace Treaty distribution, please inform Herty, Dresel and Rathbone96 of the following: The War Trade Board had no intention of questioning Herty’s understanding of agreement with the Germans but both the Board and Department of State were doubtful of the ratification by the Reparations Commission itself of [Page 465]such a proposition. Norman Davis,97 Dulles and others handling reparation matters in the Department feel there is grave danger in doing anything which will establish a precedent that the value of commodities handed over by Germany as part of reparation should be credited to her against the reparations bill at a depreciated rate. The money paid for the dyes will go to the credit of the reparations account. It is felt that the rate of exchange between German marks and American dollars for instance is due to abnormal conditions of foreign trade, etc., and that the value of the dyes in dollars at the current rate of exchange is not a fair credit to the reparations fund. Exhaustive study is being made of this general matter in the Treasury and State Departments at the present time and it is felt of utmost importance that until a conclusion is reached the American representative on the Reparations Commission, if consent is given at all to such a policy in reference to dyes, will make it clearly understood that the action taken in reference to the dyes will in no way stand as a precedent or effect [affect] the adoption of a definitive policy as regards credits in reparations. We realize the amount involved in respect to the dyes is small and if decision has been taken already in this matter by the Reparations Commission no objection will be made by the Department provided reservation is made as outlined above. It is important that you let us know as soon as possible whether the Reparations Commission has ratified the basis of settlement on current exchange rates.
3.
Please explain to Herty the Department’s appreciation of his efficient work and that it considers of great importance Mr. Herty’s presence in Paris as a dye expert. It is felt inadvisable that Mr. Herty, a Government employee, should for himself or the Government take the responsibility of the details of the commercial transaction of actually buying the dyes. The handling of this matter by the Textile Alliance will probably relieve the Government of a great deal of the responsibility and obnoxious details in the matter. The arrangement for treaty dyes should be pushed rapidly to its conclusion. Representative of the Textile Alliance should be on the spot in a few days, to arrange the details with power to take the dyes and pay for them.
4.
As regards offer of Germans regarding needs above distribution share we see no objection to the Textile Alliance closing with Von Weinberg for the dyes it will need to supply consumers ordering dyes through them. It would seem wise, however, that this transaction should be considered a private commercial transaction on the part of the Textile Alliance. There would appear to be no real difficulty in the Textile Alliance prorating the dyes and the different prices.
5.
This cable approved by A[lien] P[roperty] C[ustodian].
Lansing
  1. Albert Rathbone, Assistant Secretary, U. S. Treasury, in Europe to handle matter relating to reparations; unofficial representative on the Organization Committee of the Reparations Commission, after Jan. 10, 1920, the Reparation Commission.
  2. Norman H. Davis, technical adviser, American Commission to Negotiate Peace; Assistant Secretary, U. S. Treasury, Nov. 1919 to June 1920; assumed duties as Under Secretary of State, June 15, 1920.