462.00 R 294/176: Telegram

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

151. For Wadsworth. W–23.

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1. Proposal to subordinate American share of cash payments to payment of European current army costs is not acceptable.

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2. … It is not sufficient to say that the United States will get its annuities when military expenses decrease and Germany makes payments adequate to meet both European army costs and these annuities, for in that case there will be no question of priority, as there will be enough for both. The question is important now because of the military outlays which may remain the same for an indefinite time. [Page 161] Under the proposed arrangement we would take the chance of whatever military expenses the European Powers see fit to incur and get nothing until they are paid.

3. It is important that this Government, in agreeing to postpone its claim by distributing it over twelve years, without interest, in further agreeing that the Allies should retain their deliveries in kind and the British the proceeds of their Recovery Act and thus limiting the share of this Government to payments in cash, should be assured some definite and reasonable proportion of such cash payments and not consent to a prior lien which might for an indefinite time exhaust them.

This position is believed to be entirely fair. No one can question that this Government, under the Armistice Agreement and in view of the circumstances in which it retained its troops in Europe, was justly entitled to be paid for the upkeep of its army pari passu with the other armies of occupation. Putting all legal questions aside, our equity is clear and has been admitted by the Allies. But they disregarded it and took payments for their own army costs without giving us a share. In justice they should now give us a share of what they have already received. This Government, however, desirous of being not only fair but generous, indeed most indulgent, in view of the economic conditions abroad, is willing to postpone payment of its claim and to receive payment out of what will be paid by Germany hereafter. Here it was manifestly fair that we should have recourse to payments in kind no less than payments in cash, but in deference to the situation in the Allied countries this point also has been yielded, and we have been willing to be content with a share of the cash payments. Now, to assert that the Allies intend to take not only all the payments in kind, but whatever may be necessary of future cash payments to pay for their current army costs, whatever these may be, and to allow our claim for the past upkeep of our army, which should have been paid equally with theirs to remain undischarged, is as it seems to this Government going entirely beyond the bounds of reasonable and just treatment. If this position results in no agreement that will be regretted but it will none the less be adhered to.

It would be entirely equitable that as the Allies are to take all the deliveries in kind we should have a first charge on all the payments in cash for our annual installment, but we have been willing to go beyond this and take only 25 percent of the cash payments for the first four years. Certainly we should have that 25 percent without its being burdened by any other charge.

The point is that there should be no provision in the agreement subordinating the American annual installment to the payment of [Page 162] the European army costs. This Government should have a definite percentage of the cash payments which it should receive up to the amount of its annuity regardless of what the European army costs may be. The amount of that percentage should be fixed equitably, but it should be fixed so that if Germany makes cash payments this Government will know exactly what it is to receive.

4. What has been said with respect to army costs applies also to Belgian priority. It may also be noted that this Government has never agreed to the giving of a Belgian priority over American army costs. Moreover the Belgian Government has refrained from complying with its clear agreement8 that advances made by the United States for relief and reconstruction should constitute a first charge on reparation receipts from Germany, and has received more or less one billion gold marks in cash without allocating any portion thereof to the United States, although at the time the cash was being distributed this Government made successive inquiries9 as to what steps were being taken by Belgium to comply with the terms of the agreement. This Government could not be expected to admit that Belgium’s priority be extended so as to take precedence over any part of these proposed annuities to pay the American claim for army costs while Belgium disregards its undertakings as set forth in the obligations held by the United States Treasury.

The question of Belgian priority may be disposed of and all embarrassment avoided by the simple arrangement of a definite share to the United States of the cash payments, the rest of the cash payments not included in this share being divided among the Allies as they choose.

[Paraphrase.] 5. It may be a matter of negotiation to determine the amount of the fixed percentage which the United States is to have, but for the first four years I assume it would not be less than 25 percent. In the subsequent eight years it has been assumed that it should be 100 percent of the cash received or as much as was necessary in each year to meet the amount payable to the United States. In order to reach a definite percentage which the United States would receive free from any prior liens, some concession might possibly be made with respect to these years.

6. I am most desirous to reach an agreement as you will understand, but there are limits to the concessions we can make and in view of the justice of our claims the American public would not be impressed with the reasonableness of a settlement by which we agreed to permit the Allies not only to keep all they have received [Page 163] previously at our expense, but also future deliveries in kind and the entire amount of their future military expenditures.

Far better would it be not to settle the claim at all than to settle it in a manner which promises nothing.

The Department has spoken of a fixed percentage. However we do not desire to exclude an arrangement in the way of a guaranty of installments if the Powers should desire to give it.

Leaving aside the equities of the case the United States cannot assent to a priority of European army costs from the point of view that the present armies were engaged as a collection agency for their benefit. Our Government’s claim is for past army costs. These were incurred at a time when they could easily have been defrayed if it had not been for the reparation demands of the Allies. The present military operations of the Allies are not for our benefit. This Government has no desire to enter into any arrangement whereby it shall sponsor such operations or approve or disapprove of them. Still less does this Government desire any arrangement which might be interpreted as implying a commitment with regard to future military operations of the payment of costs to which our claim would be subordinated. [End paraphrase.]

7. If it should be found possible to reach a settlement on the basis outlined above, there remain, in addition to the modifications that would thereby be rendered necessary, three points for discussion:

Adherence of other Powers. On this point you have my views.
Wording for interest clause, on which you have yet to report.
Question of reservation. I cannot accept suggestion for Paragraph 2, Section 6 proposing to give Allies right to abrogate in ease United States adopts Reparation Recovery Act or receives payment in kind.10 With this exception I am prepared to accept wording proposed. …

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  1. Agreement between the Belgian Government and the Treasury Department in 1919, effected by exchanges of notes.
  2. Notes not printed; no replies were received from the Belgian Government.
  3. See telegram no. 156, W–15, Mar. 29, from the Ambassador in France, p. 149.