462.00 R 294/560
The Agent General for Reparation Payments (Gilbert) to the Secretary of State
[Received December 8.]
My Dear Mr. Secretary: I have the honour to acknowledge the receipt of your letter of October 15, 1926, with reference to the decision taken by the Transfer Committee at its meeting on September 18, 1926, on the subject of the priority granted by the Finance Ministers’ Agreement to the United States of America on account of Army Costs in Arrears. I note from your letter that according to your understanding the decision of the Transfer Committee “does not in any way prejudice the priority rights of the United States in the event that additional cash transfers should be authorized”, and, further, “that the United States, of course, in no way waives its rights under the Agreement of January 14, 1925”.
I had previously received from Mr. Hill, of the United States Unofficial Delegation on the Reparation Commission, a letter dated October 1, 1926, referring also to the Transfer Committee’s decision, and stating that he had been instructed to inform me that the United States Government “understands that the decision does not in any way prejudice the priority rights of the United States in the event that any additional cash transfers should be authorized, and that the United States in no way waives its rights under the Agreement of January 14, 1925.” I am informed that at the meeting of the Reparation Commission on October 2, 1926, Mr. Hill made a reservation as to the Transfer Committee’s decision in substantially the same terms, and that the Reparation Commission in authorizing the payments contemplated by the decision took note of the reservation formulated by Mr. Hill.
I am writing to advise you that the Transfer Committee at its meeting on October 12, 1926, took note of the Reparation Commission’s decision in the matter and of the reservation about the Transfer Committee’s decision that had been made in behalf of the United States Government. The Transfer Committee offered no objection whatever to the reservation made by the United States, and desired me to point out to you that the decision taken by the Transfer Committee was not, of course, intended to prejudice the priority rights of the United States. The decision, in fact, recognized by its own terms “the priority granted by the Finance Ministers’ Agreement to the United States of America on account of Army Costs in Arrears up to the amount of 55,000,000 gold marks for the third [Page 164] Annuity year”, and endeavoured to provide a method of discharging the priority that would be “most conducive to the orderly administration of the Annuity, and least likely to cause disturbance to the German exchange”. I should point out at the same time that the Transfer Committee’s decision was taken “subject to the reservation of its general powers under the Plan”, and that the Committee itself has thus reserved entire freedom of action to alter the proposed method of payments if for any reason it should seem desirable in the interests of the orderly administration of the Annuity or the stability of the German exchange.
In dealing with the priority of the United States in the third Annuity, the Transfer Committee up to this time has followed the plan of payments indicated in its resolution of September 18, 1926, and monthly payments approximately in proportion to the monthly income available in the Annuity have already been made in the months of September and October, 1926. The Transfer Committee believes that this method of payment is best calculated to discharge the priority of the United States, and hopes that it will be possible to continue the monthly instalments on this basis throughout the third Annuity year.
The Transfer Committee understands from the reservation which has been made by the United States that in case there should be additional cash transfers the United States desires to have the balance of its priority for the year discharged at once out of the additional cash transfers, instead of waiting for the balance to be covered by succeeding monthly instalments under the plan of payments proposed by the Transfer Committee’s decision. The Transfer Committee is naturally unable to make any engagements whatever as to the cash transfers that may be made during the year, and it is impossible at this time to state whether or not any additional cash transfers will be authorized. The Committee makes no objection, however, to the reservation formulated by the United States, understanding, in fact, that it rests upon the terms of Article 3 of the Finance Ministers’ Agreement of January 14, 1925, which reads, in part, as follows:
“These annual payments constitute a first charge on cash made available for transfer by the Transfer Committee out of the Dawes Annuities, after the provision of the sums necessary for the service of the 800 million gold mark German external loan, 1924, and for the costs of the Reparation Commission, the organisations established pursuant to the Dawes Plan, the Interallied Rhineland High Commission, the Military Control Commissions, and the payment to the Danube Commission provided for in Article 9 below, and for any other prior charges which may hereafter with the assent of the United States of America be admitted.”
The Transfer Committee desires to point out, nevertheless, that in order to carry into effect the reservation made by the United States it would be necessary, in the event that additional cash transfers should be made before the end of the year, for the United States Government in cooperation with the Reparation Commission to make appropriate arrangements with the other creditor Powers for a sufficient redistribution of the shares of the Powers in the regular monthly programmes to cover the balance proposed to be paid to the United States on account of its priority. The payment of the balance before the end of the year would, in other words, involve an anticipation, pro tanto, of the income available to the Annuity, and it would be necessary, accordingly, to make provision for it by appropriate adjustments in the monthly shares of the other Powers, thus necessitating a revision of the monthly programmes of payments and deliveries that would otherwise be in course of execution at the time. This necessity, of course, arises from the fact that the reparation payments due from Germany during the third Annuity year are not payable in one lump sum but are received instead from month to month in the form of payments, first, from the German budget, on account of the normal and the supplemental budgetary contributions; second, from the German Railway Company, for the service of its reparation bonds; third, from the Industrial Charge, for the service of the German Industrial Debentures; and, fourth, from the yield of the Transport tax. The arrangements governing the receipt of these various payments, and the schedule of the payments themselves, have already been communicated to the Reparation Commission, and the amount of income available from month to month necessarily determines the monthly programmes of deliveries and payments, which, in turn, are customarily communicated to the Reparation Commission every three months.
The distribution among the Powers of the amounts available for the successive monthly programmes raises a question not for the Transfer Committee but for the Reparation Commission, and in case it should become necessary, in order to satisfy the priority of the United States, to make a redistribution of any of the monthly programmes for the third Annuity year, the Transfer Committee assumes that the necessary arrangements for the purpose will be made in due time as between the United States Government and the Reparation Commission.
I am transmitting a copy of this letter to the Reparation Commission for its information and attention, together with a copy of your letter under acknowledgment.
I am [etc.]