462.00 R 294/133: Telegram

The Secretary of State to the Ambassador in France ( Herrick )


105. For Wadsworth. W–10.

With reference to paragraph 1 of your W–6, March 10, the United States Government is willing that the value of armistice material and requisitioned paper marks be credited. Your previous instructions fully cover these points. The crediting of the value of German ships would not be acceptable for the reasons given in your instruction of February 19. The equity of the position of this Government should be made clear by you.

With reference to your paragraph 2, it is noted that the proposed plan would give no assurance of the final discharge of the claim of the United States even within twelve years. In view of the fact that [Page 139] the other Governments have actually been fully paid, and in view of the obvious justice of its claim, the United States should not be asked to accept a plan under which actual payment is not assured. The United States should certainly not be expected to waive its claim against the Allies by virtue of the receipts they have already obtained at our expense on the basis of any plan providing for payment of our claim from future receipts from Germany. This Government should retain its full claim without prejudice as at present, except to the degree that its claim is discharged by actual payments received, so that if Germany does not make the payments in which the proposed plan provides we shall share, this Government shall at least be none the worse off except as to time of payment. Otherwise the Allies should guarantee future payments on proportionate basis agreeable to them. Question of priorities and means for liquidating deficits in expected receipts from Germany would not be presented if such a guaranty were obtainable, and should an agreement be reached the United States will not demand interest provided the other governments receive no interest.

In connection with your paragraphs 3, 4 and 5, refer to Department’s comment its telegram W–7.94 This Government cannot accept the suggestion that receipts under the Reparation Recovery Act be regarded as deliveries in kind. The receipts are cash and are not kind, which results in the British Government obtaining cash for its Treasury and not property which must be disposed of. The suggestion originates in the second article of the Finance Ministers’ Agreement of March 1922, but the fact that credits there mentioned include receipts does not alter the fact that the receipts are actually in cash. This Government sees no valid reason why the cash realized under legislation of this character, or by means of taxes levied in the occupied region, or otherwise, should be treated separately from other cash receipts. Furthermore, the United States was not a party to this Agreement. It is understood that under the Recovery Act Great Britain realized in November and December last about 12,000,000 gold marks a month.

With reference to your 6th paragraph, the balances alleged to be due on British and French account result from adjustments in accounting procedure, which modified the army cost priorities, and to which we were not a party. Apparently these adjustments were largely effected to show balance due to Great Britain and France. You should note in this connection that, as pointed out before, Great Britain is debited with the cash proceeds of the Reparation [Page 140] Recovery Act as payments in kind in 1922 applicable to British army costs in 1922, but it is not clear whether the surplus proceeds are applicable to the reduction of British army costs as of May 1, 1921. The Finance Ministers’ Agreement of March 1922 postponed the debit of the value of the Saar mines to France until 1922 in view of the fact that an earlier charge to France of this value would mean that French army costs had been fully extinguished as of the 1st of May 1921, and that France would then have been in no position to claim the 140,000,000 gold marks paid over under the arrangement mentioned. The Department adds that the Spa priority on coal advances, which priority the United States Government has never recognized, has resulted in modifications of reparation accounts which, distinct from the foregoing considerations, have resulted in showing credit balances due Great Britain and France that would not otherwise have existed. Boyden can inform you on these points more fully, and it is suggested that you consult him. In the light of the foregoing you may point out to your colleagues that the United States is not a party to any arrangements modifying the original plan of army cost priority, and does not consider that its claim is on the same footing with the British and French claims for unpaid balances. You may also point out that the other governments have all received from Germany more than enough in cash and kind to meet their claims for army costs.

The Department’s comments in its W–4 of March 3, on paragraph 4 of your W–395 cover your paragraph 7.

With reference to your paragraph 8, inasmuch as this Government looks to the Allies for settlement of its claim, it would continue to look to them even though they should instruct the Reparation Commission to carry out the terms of the agreement in whole or in part. If the final settlement should involve the payment of cash immediately, or a guaranty by the Allies, the Reparation Commission would presumably not be involved except perhaps as the agent of the Allies. The questions raised by your comments no. 1 and no. 2 are answered by the foregoing.

With reference to your 3d comment, the Department does not understand that the British Government could not pay out money received by it except by Act of Parliament. This money was received and distributed subject to an express reservation of the United States rights in the matter. The thirteenth article of the March 1922 Finance Ministers’ Agreement provides “the present agreement is made subject to any rights of the United States.” The distribution has, therefore, only been made provisionally.

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Your difficulties in negotiating on this point are fully realized, and if, despite your efforts, you are satisfied that the procurement of an immediate payment on account is impossible, and that further insistence would result in the breaking up of the conference, you may yield on this point, advancing as your reason the financial and economic difficulties of the other governments and, so far as Great Britain is concerned, the recent debt settlement, provided, however, it be understood clearly that a plan be devised affording reasonable probability for definite repayment of the claim of the United States within ten or twelve years, and providing that unless a suitable guaranty is given it be understood expressly that this Government does not in any way release its claim against the Allies on account of payments already received by them from Germany, but merely suspends its claim for the time being in view of the conclusion of an alternative arrangement by means of which the realization of full payment is expected.

The United States is anxious to have it clearly understood in any discussion of these points that it has no desire, in view of all the circumstances, to be harsh or unreasonable, but that it is seeking merely for an equitable adjustment of the question. The dwelling upon technical questions should not be necessary. Inasmuch as the Allies recognized our right to be paid they cannot properly insist that we waive our claim in the event that Germany should not in the future pay enough to discharge it, and in the event that it developed that all the money available was held by the Allies.

It is indicated from press reports from Paris that it has been pointed out in certain quarters that this Government is not assisting in the collecting of money from Germany. This is not relevant to the question under discussion since the question involved is what the Allies have already received, and not what they are trying to collect.

The Department has noted your comments 4, 5, 6 and 7, and has set forth its suggestions on these points above.

With reference to your 8th comment, if a German loan is floated and a large payment results from it, or from other sources, it should at least cover any arrears as may exist.

With reference to your first query the answer is “yes”, if absolutely necessary and without waiver, thus preserving this Government’s claim as stated above. The guaranty should be obtained if possible. The amounts involved would not be large and the respective governments could recoup this through setting off the value of deliveries in kind and receipts in cash classified as such against any payments made by them on this account.

With reference to your second query, the answer is “no”, but you should note the suggestions made above. Certainly there should not be more than twelve installments.

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With reference to your third query, it is believed that the percentage should be bettered, but the matter is left to your judgment. The United States will accept 25 percent for the first four years if in your opinion this is the best obtainable. It is believed that the Allies should provide that any deficiency in cash payments should be compensated by paying us an agreed proportion of the value of receipts in kind obtained by them or should give a guaranty. If, however, you find neither of these courses possible, the claim of this Government should be retained unaffected except as actual payments are received by it. It is presumed by the Department that the 25-percent suggestion grows out of a desire to permit the realization by Belgium on its priority arrangement. Should this question be presented you should note that the priority agreement of June 24, 1919, and its annex make it clear that the Belgians have no priority over “the priority accorded by Article 235, in respect of the expenses of the armies of occupation.” It is possible that British and French Governments may be influenced in willingness to recognize Belgian priority by the foregoing accounting adjustment referred to.

With respect to your fourth query, the answer is “yes”, and the working out of the priority problems referred to under this head is entrusted to your recommendation.

With reference to your fifth query, the answer is “no.”

With reference to your sixth query, the Department believes there is little or no danger from the suggested dependence on payments in cash, but a clause by which, under certain conditions a portion of the value of deliveries in kind should be applied to our army cost claim (provided no guaranty is obtainable) in case deliveries in kind exceed a certain figure or ratio to payments in cash might possibly afford a desirable protection against the eventuality suggested by you.

It is noted that in your opinion there can be an improvement in the suggested terms. You will understand that the working out of details is left to your discretion subject to the foregoing points.

  1. Not printed; the sentence referred to reads (in paraphrase): “The proceeds of reparation recovery acts, customs collections in the occupied zones and similar items should be included in future cash receipts.”
  2. Neither printed.