462.00R296/4272: Telegram
The Acting Secretary of State to the Ambassador in France (Edge)
332. We understand from Mr. Mellon’s telephonic communication27 that the position of the French Government which they propose to embody in a formal memorandum is as follows:
“1. The French Government recalls its previous reservation conditioning final agreement on the execution of existing contracts for deliveries in kind and it emphasizes that these contracts pass between private persons and do not come within the scope of inter-governmental obligations.
The American Government declares that it cannot commit itself on this point. It maintains that the study and solution of this question shall be referred to a council of experts representing the interested powers.”
It appears to us that this memorandum states definitely and affirmatively that the French Government believes that deliveries in kind, in so far as they are covered by existing contracts are to be considered as obligations between private individuals and do not fall within the President’s proposal relating to the suspension of payments of inter-governmental debts. And in the second place that in so far as the American Government declares that it cannot commit itself on this point it is assumed that we adopt a neutral attitude. Both of these propositions are entirely inconsistent with the position which has been consistently held by our government. We have stated repeatedly that we recognize that deliveries in kind, in so far as they were covered by existing contracts, might require special treatment and that a solution of this problem could be best arrived at by referring it to a committee of experts providing that any solution arrived at should be in the spirit of the President’s original proposal. That proposal contemplated a complete suspension for 1 year on payments of all inter-governmental debts. While, therefore, in one aspect deliveries in kind under existing contracts constitute obligations between private parties they are, nevertheless, a device for the transferring of funds from one government to another. To the extent, therefore that they constitute a burden on the budget of the debtor government and a corresponding benefit to the budget of the creditor government they clearly fall within the provisions of the President’s proposal relating to the complete suspension of all inter-governmental payments.
You should therefore, if possible, get in touch with the French Foreign Minister, Prime Minister or Finance Minister, tomorrow, [Page 141] Sunday, and inform him that the formula submitted by telephone tonight, if accurately understood is unacceptable to this government.
While we are quite willing to leave the working out of the necessary adjustments of contracts relating to deliveries in kind to the body of experts, you should state very definitely that we cannot accept any proposal that contemplates benefiting the budget of one country at the expense of the budget of another. To state it even more clearly we cannot consent to the transfer of payments from the German Government to the French Government by means of deliveries in kind during the period of suspension any more than we can consent to the transfer of cash payments.
We propose to advise you further, after we have had the opportunity of reading the text of the French memorandum which we understand you are cabling, but in the meanwhile we think it is only fair for you to state to the representatives of the French Government that on the question of payments in kind our position is final and unless acceptable to the French Government we propose to break off negotiations Monday morning. In this connection as furnishing in part some of the reasons which have led us to this definite and final conclusion we refer you to our cable number 330, July 4, 2 p.m.
Please show the entire memorandum including the texts you telephoned us to Tyrrell with a view to obtaining reaction of British Government.
- No record of telephone conversation found in Department files.↩