840.48 Refugees/659: Telegram
The Secretary of State to the Ambassador in France (Bullitt)
592. For Taylor and Rublee. Your telegram 763 of August 15, noon, and the memorandum enclosed with your despatch of August 1320 have been carefully studied. There is no need to emphasize to you the extreme difficulties which will be involved in the negotiations with the German Government and that any plans yet devised to bring about the transfer of Jewish property from Germany are subject to serious objections. I therefore lay before you now certain considerations for such guidance as is possible concerning broad lines of approach. It is hoped to avoid a situation in which the German Government makes proposals which cannot be accepted.
[Page 775]1. In the last analysis, the funds in question can be transferred from Germany only through increased German exports. That is not in itself undesirable, provided that such increased trade is not based on inequitable commercial practices tending to divert the course of trade into artificial bilateral channels. Unfortunately the systems heretofore used, particularly the Haavara system, result not only in increased German exports but in giving them a very great competitive advantage. Transactions of this character, insofar as the transfer of Jewish funds is concerned, have hitherto been of minor importance but if they were to be used for the transfer of even a small percentage of the funds of several hundred thousand refugees the result would have a very considerable effect on the course of international trade.
You are familiar with the fact that the broad trade policies of this Government are fundamental in our entire program. We cannot permit the German Government to use our Government’s interest in the distress of German refugees as a lever to break up this policy or create additional spheres of bilateral trade influence through the medium of specially constructed currency or credit arrangements. In consequence, any bilateral currency or credit proposals cannot even be considered and this should be understood by the Germans at the outset.
2. The German Government is of course aware of the competitive advantage which systems such as the Haavara give its exports and we may assume that this will be a not inconsiderable factor in whatever willingness the Germans may show to enter into negotiations. In this connection an officer of the German Embassy here recently referred in an informal conversation to the Haavara system as “the only practicable method of dealing with the problem”. Incidentally, he apparently took it for granted not only that Rublee would shortly go to Berlin to discuss the problem but that the German authorities would be willing to discuss it with him. We cannot consider the extension of that system to this country or look with favor on its extension to other countries and must be on guard against a German proposal along these lines.
3. The German foreign exchange position appears particularly acute at this time and we seriously doubt that that Government would be willing to permit withdrawals by refugees in free foreign exchange now or at any time in the comparatively near future.
4. Preferably, of course, involuntary emigrants should be permitted to take free foreign exchange out of the country. If, as seems likely, this is an impossibility, conceivably the German Government might assent to permitting such emigrants the use of marks convertible in some degree into free foreign exchange along the lines of the sperrmark, and not limited to a medium for purchases of German products. [Page 776] As a last resort, the German Government might grant such emigrants currency or obligations, not for immediate use, which could be deposited in the Bank for International Settlements, which, in turn, might issue to such emigrants an appropriate receipt. In that case, the currency or credits so deposited would have to lie dormant until circumstances offered possibility of its ultimate conversion into free foreign exchange. In substance, this is merely suggesting that the refugees take what the German Government offers, leaving this with the Bank to act as holding agent in the hope that something may be eventually realized. Conceivably, receipts for these deposits might be used by the emigrants as basis for resettlement loans made by relief organizations or similar bodies, thereby giving such organizations at least a chance of ultimately recouping part of their expenditures. Naturally, this third suggestion is highly unsatisfactory and should be resorted to only if all other means fail.
In giving effect to such a proposal, thought would need to be given to the effect of the Johnson Act,21 which makes it unlawful for any person in the United States to buy or sell obligations of governments in default. In any event the obligations in question could be marketed in foreign centers such as London.
5. The transfer problem, or in other words the working out in agreement with the German Government of a practicable arrangement whereby some percentage of an emigrant’s funds may be made available for his settlement and use elsewhere, is of course the crux of the whole financial problem. If it can be satisfactorily solved we believe that an attempt could be made, with some chance of success, to have the special taxes upon emigrants reduced or abolished. In particular, an attempt might be made to have the flight tax abolished or at least materially reduced and the personal property tax abolished.
6. It should be borne in mind throughout the negotiations that Rublee is negotiating on behalf of the Committee rather than on behalf of this Government, but I need hardly assure you both of our full and entire support.