462.00 R 294/156: Telegram
The Secretary of State to the Ambassador in France (Herrick)
129. For Wadsworth. W–14. This telegram is in reply to your W–16, March 29, 1 p.m.
It cannot be admitted by this Government that the present agreement which is made between powers which have already received large amounts for army costs in which amounts we were equitably and admittedly entitled to share and which represent 92% of reparation payments, should be affected by possible objection by the other [Page 153] powers mentioned. In no way has this Government ever assented to the modification of the original agreement providing for priority of army costs and it sees no reason why a veto power should be given to Japan, Portugal, Greece, Rumania or Serbia in any arrangement made with the governments which have been paid at its expense. There should be a clear understanding that in entering into the present negotiations this Government did so with the understanding that the other parties to the negotiations were disposed to make an equitable settlement. It had no idea that any such settlement should be subject to delay or final disapproval and nullification by the attitude of any one of the powers mentioned. No such position will be admitted by this Government nor will it be agreed to.
The other powers mentioned should have been invited to take part in the negotiations if there had been any intention to make the settlement depend upon their action. They are placed in a position of superior advantage to which their interest in no way entitles them if they are given a veto power after a settlement has been reached. You should strongly impress upon the delegates the fact that this Government has not entered into negotiations for the purpose of reaching an arrangement which other powers might destroy but rather to effect a settlement.
It should be particularly noted that in the March 11, 1922 agreement of the Finance Ministers, the signatory powers merely made provision in article 14 for seeking the early adherence of other Allied and Associated Powers. The arrangement was not made subject to the approval of such powers. Whether all these powers have adhered to that agreement the Department is not informed, but that agreement is regarded by the parties to these negotiations as inviolable quite apart from such adherence. Subject to the clear understanding that the agreement is to be effective at least in respect of payments attributable to the governments participating in the present conference, I am prepared to accept a wording similar to that of article 14 in the Finance Ministers’ agreement.
I have noted your comments on section 1, paragraph 3, and will await the receipt of the text of the clause proposed.
In the matter of your comment on section 2, paragraph 3, great difficulty should not be presented thereby.
With reference to section 3, paragraph 1, on the subject of interest I would be prepared, provided suitable provision is made as to deficits, to accept the suggested reading (but see the comments below on the proposed amendment to section 3 next to the last paragraph).
With reference to section 3, paragraph 2, now that the question has been raised, your suggested amendment is desirable but it is essential that there be a clear understanding that the proposed priority of the [Page 154] United States shall apply in respect of all payments by Germany with the single exception of those enumerated specifically in the agreement.
The suggested new formula regarding the acceptance by the Allies of payments in kind for their army costs is approved by the Department. You may call attention to the fact that the accumulated costs of the American Army are not paid, that the accumulated Allied costs have been paid substantially even on the basis of their own accounting adjustments and that their current costs should be amply covered by deliveries in kind.
With reference to your section 3, subparagraph (a). The difficulty of converting deliveries in kind into dollars is appreciated as is that of the practicability of reaching an agreement for sharing in deliveries in kind when such deliveries exceed a certain percentage. The point remains, however, that this Government should not be limited for the first four years to 25% of the cash payments if the amount of such cash payments proves to be small in proportion to payments in kind. On the assumption that the United States does not share in the deliveries in kind received by the Allies there should be an increase in our percentage of cash payments if the greater part of the entire reparation payments consists of deliveries in kind. It is suggested that the provision for 25% for the first four years be limited to the case where reparation payments in kind in any year do not exceed 50% of the total. If they do exceed 50%, then our percentage of cash payments should be proportionately increased as total cash payments are diminished. No fixed schedule is proposed by the Department as this is left to you to negotiate on the best obtainable basis. The force of the argument against our sharing in deliveries in kind seems clearly to apply most during the first four years when we would have only 25% of priority and when, as compared with payments in kind, the cash payments may be very small. The situation is different when our priority on cash payments after four years amounts to 100% and probably there is reason to expect that the amount of our annual installments will be at least equalled by the cash payments.
With reference to your comment on section 3, subparagraph (b). The British position still seems most inequitable in view of their cash receipts under the Reparation Recovery Act, but if they insist upon this position it would seem that they were clearly obligated to support our suggestion as to increasing the United States share in cash receipts outlined above. You should also make it clearly understood that this point is yielded only because of the British debt settlement.
With reference to your comments on section 3 on the subject of interest on the deficits. It is noted that the right to interest is [Page 155] recognized on the eight-year basis. I am not clear that the amendment suggested to the next to the last paragraph of section 3 quoted in your W–15 March 29, noon, recognizes our right to interest under the contingency specified. It is important that the meaning of the proposed amendment be clarified. In the event of deficits interest should be allowed.
With respect to your comment on the last paragraph of section 3. The elimination of this clause is not regarded as essential if you find it impossible to do so. But it should be made perfectly clear that the reservation applies only to actual collections in the occupied area and not to any general reparation settlement that might be reached.
With respect to your comment on section 4. It is still felt that the suggestion indicated in Department’s W–12, March 26, on this point is the best solution. While it is most probable that in order to be successful any general loan must be largely subscribed in the United States, nevertheless the formal connection of this matter with efforts to meet American army costs is not deemed advisable, as this would give the appearance that there was an expectation that the citizens of the United States would indirectly provide funds for the payment of the army costs claim. Such a provision would produce an unfavorable impression if contained in the agreement, but it is quite fair to arrange as proposed by us, that the equities of the case should be taken into consideration in the event of a large loan.
With reference to your W–15 and the proposed section 6. The Department stands by its suggestion as to section 6 in its W–12 and does not agree to this proposal. The deduction of proceeds of a Reparation Recovery Act cannot be consented to while the British insist on retaining, not simply for their army costs but for reparations ahead of our army costs, the proceeds of their Recovery Act. In considering our position what they insist to be fair for themselves should not be disregarded. It should also be remembered that for the purpose of meeting the claims of our nationals against Germany, which may far exceed the value of the property in hand, this Government may find it advisable to adopt some such measures. We should not be limited in this respect as we are not seeking general reparations.
The suggested insert after the last paragraph of section 4 is not clear to me. I do not, however, perceive any objection. The following words, however, should be omitted: “floated either in America or elsewhere”.
With respect to your letters of March 12 and March 192 on the subject of seized ships. It should be made clear in any discussion [Page 156] that title to these ships was taken by the United States through Act of Congress prior to the signature of the treaty, that in no way do they come within the jurisdiction of the Allied Governments or the Reparation Commission, that the Reparation Commission decisions regarding ships taken by Brazil and Peru may be cited as admission of the principle underlying this Government’s position and that it would be most inequitable, quite apart from legal and technical considerations, for the United States to be asked to make any reduction of its claim in the manner suggested, in view of the fact that it is not seeking general reparations to which it is as fully entitled as any of the Allied Governments. From the notes on the meetings I do not find that the equity of our position has been sufficiently made clear and if a further statement on this point has not already been made by you, I suggest that you do so.
- Neither printed.↩