462.00 R 294/201½

Memorandum by the Secretary of State of a Conversation with the French Ambassador (Jusserand), May 5, 1923

Army Costs.—The Ambassador said that he had endeavored to convey to his Government the Secretary’s views and there was not any great difficulty, so far as the French Government was concerned, but that it [there?] seemed to him considerable difficulty with the British and Belgians. The Ambassador said that he had been instructed to ascertain if the Secretary could not suggest some formula which would prove a way out of the difficulty.

The Secretary said that he had no formula to suggest; that the United States Government had been asked to make one concession after another and had made them in the interest of reaching an agreement. But now it came to the point that the agreement was not to continue binding, or, at least, the Allies were to have the option to abrogate it, if the United States obtained payments directly from Germany which were not applicable to the army costs. The Secretary said that this meant the Allies undertook to say that if the United States desired to retain this army costs agreement it must do so at the price of not being able to collect its claims from Germany. This would mean that if any effort was made by the United States to have its claims paid by Germany it would be necessary to add to these claims the amount of the army costs, for the Allies apparently were insisting that the United States should not have the benefit of the agreement with the Allies and the payments for American claims at the same time. The Secretary reiterated his opinion that this was not a just position.

The Secretary pointed out that the United States was not claiming several classes of reparations and was merely seeking to secure the payment of the just claims of its nationals and for damages actually sustained. The Secretary noted that with respect to debts the Allies had the benefit of the clearing house system. This system could not be utilized in the United States, but the nationals of the Allies were receiving payment of their debts in addition to the reparation and army cost payments. Certainly the United States should be able to obtain from Germany, in accordance with its treaty, the payment of the debts due to its nationals. Then, with respect to the damages sustained by submarine attacks, et cetera, there was no reason why the claims of the United States and its nationals should be foregone. [Page 175] Why, asked the Secretary, should the Allies seek to make this a condition for the payment of the army costs when the Allies had already received their army costs substantially and it was a clear equity that the United States should have been paid at the same time and upon the same footing?

The Ambassador repeated that his Government did not find the situation was very difficult, but that the others seemed to and hoped that some formula could be found. It was said that the United States held in the hands of the Alien Property Custodian a large amount of property which was applicable to the claims of which the Secretary had spoken.

The Secretary replied that this was true, but that the property in question was the property of private persons and that while the United States had the right under its treaty to apply it to the payment of claims, yet it was held for this purpose in the event that Germany made no suitable provision for such payment. The Secretary pointed out that perhaps in most cases the property was private property of those who had nothing to do with the instigation or conduct of the war, but simply were private citizens who had investments in this country and happened to be enemy nationals. The Secretary said that it might well be that we should seek an opportunity to have Germany make a payment which would enable us to avoid the confiscation of this private property and there was no reason why we should not do so, but under the proposed provision, if the United States undertook to get merely the equivalent of the property that it held in hand the Allies would have the liberty to abrogate the army costs agreement. The Secretary saw no justification for this. The Secretary also pointed out that so far as a Reparation Recovery Act was concerned, it was extremely unlikely that such an act would be passed by Congress, but there was no reason why the Congress should not have the liberty of passing it if it saw fit without the risk of losing the army costs agreement.

The main question from a practical standpoint was, however, whether the United States would have the liberty to collect from Germany the amount of its claims without being compelled to lose the benefit of the army costs agreement which was intended to pay the United States what it should have received long ago.

The Ambassador said that he understood the Secretary to mean that if the United States only got the equivalent of the property in the hands of the Alien Property Custodian, it would still have to give up the army costs agreement. The Secretary pointed out that it might be possible to make an arrangement by which the [Page 176] private property could be released and a capital tax might be imposed by Germany with the result that there would be a fair arrangement all around, and yet, although the United States would be in no better position and might merely receive from Germany the equivalent of the property in hand, still the Allies, under the proposal, would be privileged to abrogate the army costs agreement.

The Ambassador said he would communicate again with his Government and see if some formula could be devised on the other side which would meet the situation.

Reparations.—The Ambassador referred to the German offer and said it was very vague and indefinite; that the German offers were continuously being reduced in amount; and that his Government would undoubtedly reject it at once. The Secretary pointed out that a settlement could hardly be reached by fulminations in the public square, and that the best thing about the German note was that it indicated a desire to begin negotiations. The Secretary hoped that there would be some opportunity found by which the representatives of the Governments could get together and thresh the matter out and reach a fair solution. The Ambassador agreed.

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