462.00 R 294/144: Telegram
The Secretary of State to the Ambassador in France ( Herrick )
118. For Wadsworth. W–12. Your W–9, March 23.
Paragraph 1. The agreement should not be entered into subject to the approval of those governments who do not participate in the conference, but of course it cannot affect their rights unless they assent thereto. Under this procedure the agreement would be effective only as to the portions of German payments attributable to the governments participating in the agreement, namely about ninety-four percent. It should not fail to become effective because other powers refuse their assent. Nevertheless, an effort should be made to obtain their assent; and the Allies participating in the agreement should agree to endeavor to obtain that assent as set forth in the second sentence of the paragraph under consideration.
Section 1. The reservation of our rights seems adequate but it is suggested that the following words be eliminated “an immediate” in both first and second paragraphs so that the text would read “claim payment”.
Section 1, paragraph 3. The phrase “they reserve the right to discuss the juridical bases of the debt itself” is not entirely satisfactory, the following seeming preferable: “they reserve all their rights without prejudice by reason of this agreement”.
Section 2, paragraph 2. Following words should be omitted “et cetera”. If other deductions are contemplated proper descriptions thereof should be made.[Page 146]
Section 2, paragraph 3. Instead of the words “to be fixed by the Reparation Commission in agreement with a representative of the American Government” the following phraseology is preferred “to be fixed by agreement between the Reparation Commission and the American Government”.
Section 2, paragraphs 4 and 5. The statement and reservation seemingly relating to sequestrated property and ships is objected to. The United States will not consent to the application of these items to army costs while the Allies obtain in addition to reparations the costs of their armies. The special Allied reservation raises a question which should not be pressed in the light of the American Government’s generous terms. Furthermore, the general reservation proposed above for the third paragraph of section 1 fully protects the Allies in case of a failure of the present agreement.
Section 3, paragraph 1. The second sentence should read “no interest shall be charged except on same basis as interest may be allowed on army costs to any Allied Governments and also except as hereinafter provided”.
Section 3, paragraph 2. This paragraph should read: “These payments constitute a first charge on the payments of every kind carried to the credit of the Reparation Commission account and made every year by Germany or made for the account of Germany to the Reparation Commission or to any other body which might be appointed in order to receive the moneys paid by the German Government or payments made directly by Germany or on Germany’s behalf to any Allied Government party to this agreement with the exception of.”
Subparagraph (a) of the third section. It is our understanding that the only deliveries in kind in question are those to be made under the annexes of part VIII of the Treaty of Versailles and special agreements made heretofore and that this clause will not permit the negotiation of future agreements for additional deliveries in kind which would be effective at the expense of the payments which we should receive. In order to avoid misunderstanding, however, it would be better if such special agreements should be listed or described in some appropriate schedule and since under these agreements the amounts of deliveries in kind may be increased at the will of the parties thereto there should be an agreement that if deliveries in kind exceed a certain minimum value this Government should share in any excess of that minimum. The percentage of our participation in such cases might be arranged on a sliding scale proportioned on increasing value of such deliveries.
Subparagraph (b) of the third section. We think it most inequitable to except the proceeds of the British Recovery Act with [Page 147] regard to future payments. A provision for our protection would do no harm if this act were repealed but would be important if not repealed. At the present rate the British receipts amount in cash to about seven times their net current army costs and we should have a proper share in these payments. You may point out that under the proposed agreement the United States is not insisting upon payments to which it is equitably entitled at the present time on account of the large cash payments which the British Government has already received. If it is fair that the payment of our claim be postponed because of the financial situation of Great Britain it is no less fair that the British should not continue in the future to take these heavy cash payments through the Recovery Act without permitting the participation of this Government in the benefit thereof.
After subparagraph (c) of the third section another subparagraph (d) could, in view of the proposed amplification of the second paragraph of section 3 as above, be inserted covering the exception of payments under the clearing house system in the following words: “(d) Payments under part 10, section 3, of Peace Treaty”.
Section 3. In the paragraph which begins “if in the course of one year between 1923 and 1926” the word “calendar” should be inserted so that the clause will read “one calendar year between 1923 and 1926” and in the paragraph following the above paragraph in the place of “in the course of any determined year” should be inserted the words “in the course of any calendar year”.
The next to the last paragraph of section three. The suggestion in your W–1097 for maintaining 12 year basis for deficits and interest at 4½ percent is approved.
Final paragraph of section 3. Apart from the fact that the words “through the intervention of” might be taken to include payments obtained in cash and in kind from sources outside of the occupied territory but through the pressure of the occupation this reservation is unsatisfactory as this Government sees no reason why Belgium and France should be permitted to retain reparation payments obtained by means of their intervention or from within the occupied territory without proper provision for American army costs being made any more than that other reparation payments should be so retained by them for the other Allies.
Section 4. The fact that difficult questions may be raised by a German loan is appreciated but we fear it would be impossible to draft at the present time a satisfactory clause which would cover all contingencies. The best solution it is believed would probably be [Page 148] to have a broad reservation as you suggest in the case of a German loan or a bond issue intended to cover reparation payments which reservation should be so phrased as to show clearly that equitable provision is to be made in such case to cover the payment of American army costs. The probable need for floating such bonds in our home market would give the necessary opportunity to secure a satisfactory adjustment in such event.
Section 5. It is not thought that there is great value to us in this. On the contrary it appears to sanction accounting arrangements not yet approved and should therefore be subject to our objections until the complete discharge of our claim. It is suggested that this section be omitted.
Section 6. The draft of this section seems to be mandatory. It should be clearly optional so far as the receipt of dyes is concerned. The following is therefore suggested in place thereof: “6. In case the American Government shall exercise its option to take its appropriate share of German dye stuffs under the provisions of the Peace Treaty or arrangements supplementary thereto, such quantities of dye stuffs as it shall receive at its option from time to time through the Reparation Commission shall be credited, at the value agreed between it and the Commission, upon the annual payment to be made to the American Government hereunder in the calendar year in which such dye stuffs shall be received.”
In reply to your comment number five in your W–10 it is suggested that you cable at once the complete text of the agreement when it is put in satisfactory form. You can then receive final authority to sign. The signing should be done by you and not by the Ambassador. For your confidential information, there may be a delay of two or three days in order that the text of the agreement may be submitted to the President who is now in Florida.
In reply to your W–11,98 the agreement should not be submitted formally or informally to the German Government.