The Secretary of State to the Ambassador in France (Wallace)
Washington, January 31, 1920—3 p.m.
252. For Rathbone from War Trade Board and Davis.
- Paragraph 1. We are in entire accord with the recommendation of the Belgian Delegate referred to in the second paragraph of Embassy’s 256, January 24, 10 p.m. R–243, provided the Allied countries will give definite assurances that they will not draw on their respective allotments beyond the amount required for domestic consumption and provided some practical plan can be devised which will give reasonable assurance of being carried out in good faith, and which will not give any one country an undue advantage. If such assurances are given and if such plan can be devised then you should urge the adoption of the policies enunciated in Paragraphs 2 and 3 below.
- Paragraph 2. With respect to the dyestuffs and chemical drugs provided for in Paragraph 1 of Annex VI the Allied countries should draw on their allotments only to satisfy their requirements for domestic consumption. The balance of these allotments should be sold by the Reparation Commission at the best price and the Reparation Commission should credit Germany with the proceeds of the resales. In other words, with respect to the 20,000 tons of stocks on hand, the Reparation Commission, after having disposed at the list price of such part thereof to the Allied countries as may be required for their domestic consumption, should dispose of the balance at the real market price and credit Germany with an amount corresponding to the proceeds thus obtained. The effect of this policy would be to immediately place a large sum at the disposal of the Reparation Commission and will accelerate a reimbursement to the Allies for the expenses incurred by them in maintaining the Armies of Occupation.
- Paragraph 3. Similarly, with respect to the dyestuffs and chemical drugs provided for in Paragraph 2 of Annex VI, the Allied [Page 480]countries should draw on their allotments only to satisfy their individual requirements for domestic consumption. In this case however, the balance should be surrendered to Germany to be disposed of by Germany without restriction. The effect of this policy would be to enable Germany to dispose of a larger surplus of dyestuffs and chemicals at much higher prices to which in our opinion she is entitled, and by thus increasing her general economic resources it would facilitate her in making the gold payments which she is required to make under the terms of the treaty.
- Paragraph 4. If the Allied countries will not give the definite assurances which are referred to above or if the practical plan referred to above cannot be devised, then you are authorized to state that this Government proposes to exhaust all of the allotments which will be accorded to it under both Paragraph 1 and Paragraph 2 of Annex VI, irrespective of whether or not those allotments are in excess of our domestic requirements for consumption and that we will make whatever disposition thereof we deem expedient. In the event that we should find it necessary in the absence of the assurances or of the plan referred to above to exhaust all of our allotments from the stocks on hand as well as from the daily production, it is our present intention not to derive profit from the resale of the surpluses beyond what will be required to satisfy our needs for domestic consumption, at the expense of Germany but to impute the profits derived from the resale of our surpluses to the payment of Germany’s debt to us. Thus we might impute the profits from the resale of the surpluses to defraying the costs of maintaining our Armies of Occupation or to the payment of any other debt owed by Germany to this Government or to its nationals.
- Paragraph 5. It is our belief that the option clauses of the Treaty relating to dyes and chemicals were intended only to supply the Allied Governments at reasonable price with dyes and chemicals actually required by each for its domestic consumption and were not intended to yield unreasonable profits to the Allied countries at the expense of Germany.
- Paragraph 6. You should advise us immediately of the date on which our option on our allotment of 1,500 tons of the 5,000 tons of stocks on hand already impounded will expire.
- Paragraph 7. The questions herein raised should be accorded the promptest consideration in order that dye users and dye makers throughout the world should be informed as soon as possible of the disposition that will be made of these large stocks and make their plans accordingly.