462.00R296/4275: Telegram
The Ambassador in France (Edge) to the Acting Secretary of State
407. Reference is made to your No. 332 of July 4, 12 p.m. At 2:15 today Mr. Mellon and I called on M. Flandin at his residence and handed him extracts in French and English of the telegram under reference and also a copy in French of telegram 329, July 4, 2 a.m. We had previously given M. Briand a copy of this telegram in translation before the meeting of the Council on Saturday. M. Flandin expressed his hope that an agreement could yet be attained and proposed as a suggestion the modification of the American position on the question of deliveries in kind as set forth in point 5 of telegram No. 329. We have telephoned this counterproposal to you. In translation it is as follows:32
The French Government refers to its previous reservations on the amounts necessary for the execution of the contracts for deliveries in kind and emphasizes that these contracts already entered into between private citizens should not be included in the category of inter-governmental obligations.
The American Government having declared that it could not agree that the amount of the payments in kind should not be included in the sums to be placed at the disposition of the B. I. S. for the benefit of Germany, the French Government makes the following proposal:
That [France?] not being responsible for a possible interruption of deliveries in kind, Germany should not make any claims with respect to the cancellation of any contracts now in force.
The two Governments agree to refer the question for study to a committee of experts of the interested powers.
You will readily understand that, although the language is rather ambiguous, the French Government has at last agreed to return to Germany the total amount of the unconditional payments received during the moratorium year. Thus France will enjoy no advantage over any other nation by retaining deliveries in kind. However, in making this proposal the French insist that it may be necessary to abrogate some current contracts for deliveries in kind with Germany. The French position is that by buying their goods in Germany a premium of 10 to 12 percent is paid by French nationals who would naturally prefer to patronize their own producers. This is done in order to assist in the liquidation of the reparations.
[Page 145]Mr. Mellon and I told M. Flandin that as yet we had not received Washington’s reaction to the completed French proposal which was accepted by the French Cabinet and which we had sent out early this morning. We indicated, however, that we doubted very much that Washington would accept point 8 which deals with the use of the money loaned to Germany. Flandin made the admission that this point had been inserted over his protest by a majority of the Council of Ministers.
Briand and Laval are absent from Paris until tomorrow noon. Flandin also will leave this afternoon but will return before our meeting with the French Ministers which is scheduled for 3 o’clock tomorrow afternoon. We assured Flandin that we would advise him by telephone at his country place after we had submitted his proposal to Washington and received your response. This will be done so that we may carry out your instructions to give the French your final position as clearly outlined in your telegram No. 332, which would be effective unless Flandin’s counterproposal is acceptable to you.
Mr. Mellon has talked with Mills since I dictated the above. He has been told that a counterproposal on this point has been submitted by you to Ambassador Claudel. Until we receive a copy of this new proposal we are pretty much up in the air here. If a revised proposal has been submitted through Claudel, Mr. Mellon and I are at a loss to understand why we are instructed to break off negotiations completely if the Department’s telegram No. 329 is not accepted by the French.