The Ambassador in France (Wallace) to the Secretary of State
[Received February 2—11:58 p.m.]
324. For War Trade Board and Davis. R–277.
- German dye experts propose we disregard strict interpretation 25 per cent option clauses and measures of control which paragraphs 3 and 4 of annex VI give us. In return Germans would agree to fill all bona fide needs Allies even beyond 25 per cent of normal daily production to be invoiced at prices not greater than those quoted during month of delivery to any other purchaser, German, neutral or Allied and to [be credited to?] reparation account, would also give Allies’ needs priority over all others but would want bona fide needs of German textile industry to be considered on same footing as Allies’. Tentatively dyestuff sub-commission has agreed whilst reserving all rights in treaty to try this out. By March 1st Allies are all to furnish list of their needs for April, May, June Before April 1st Germany to advise us what they can deliver and at what prices and also what raw materials they may need to fill balance. This proposal of Germany, with favorable recommendation of dyestuff sub-commission, will come before Reparation Commission as soon as it is finally formulated. If Germans show goods and arrangement works satisfactorily it would be continued from time to time, if not we would demand strict compliance with treaty clauses but in that case no goods from 25 per cent option could be ordered until stipulated first six months’ period had elapsed when Germans would have to furnish list of what had been manufactured and we would base our orders on this list. Also Germans contended normal production cannot be considered to be normal pre-war production and this would cause endless discussion and might result in our legitimate needs not being satisfied. By above agreement we cannot yet state just what we wanted manufactured and they would fill all the legitimate home needs of each country. However, Germans intimate that a condition of their agreeing to above modification would be an undertaking on the part of the Allies that dyes so supplied would not be reexported. This condition would not apply to delivery of what remains available under 50 per cent option.
- As mentioned in our R–243, first [second] paragraph,6 Belgians are also urging ruling forbidding reexportation reparation dyes because of rumors British have fund two and a half million sterling to buy up all available dyes and because recent orders from them and French to British dyes factories have been filled with German goods.
- We feel it would be difficult for United States Government to guarantee reparation dyes would not be reexported but believe Germans and Belgians would be satisfied if individual consignees of reparation dyes signed agreement to that effect.
- Pending conclusion agreement outlined [in] 1: In order to allow Allies to fill immediate needs for dyestuffs Germans have signed statement pledging themselves to give absolute priority over everybody, themselves included, to orders of Allies up to 25 per cent of their present daily production. These orders to be filled at lowest price quoted for cash f.o.b., factory. In return we are to agree to release present control over their factories in occupied territory which Rhineland Commission is still provisionally exercising without any real legal right. At any time if Germans do not act in good faith right of Reparation Commission to reestablish control is reserved. This temporary arrangement has been approved by dye-stuff sub-commission and is on agenda of Reparation Commission.
- As Jacoby fully approves of arrangements above indicated I shall make no objection to Reparation [Commission] following recommendations of dyestuff sub-commission unless you instruct to the contrary.
- Germans in conference yesterday brought up difference between English and French text of paragraph 5 of annex VI and claimed English version was the more correct and the one they were guided by. We informed our jurists thought the contrary as mentioned in our R–239.7 They are to submit their arguments in writing and Reparation Commission will consider both sides and make ruling. French version gives us wider latitude regarding intermediates and other products.
- Shipment Reparation vat dyes began January 23 and should be completed two weeks from that time. Reparation non-vat expected to begin moving week February 2nd. Cartel goods ready to begin moving and merely awaiting conclusion proper banking arrangements about which Stephenson has cabled textiles [Textile Alliance].
- The following agreement signed January 28th:
“Hards Stephenson, representing the dollar credit with a bank in Amsterdam to be later designated, which bank will pay in dollars all amounts due for dyes ordered by the Textile Alliance under the Herty offer immediately upon presentation to it of the proper documents. It is further agreed that on or after July 1st, 1920, the Textile Alliance has the privilege of cancelling any orders for any quantities placed under the Herty offer remaining undelivered at the time. It is further agreed that the German dye manufacturers will furnish to the Textile Alliance standard type samples of each and every color immediately upon shipment of the first lot of each color.”
- Important you cable us promptly your views in regard to above matters and answer our R–239 paragraph 7. Rathbone.