Memorandum of Conversation, by the Assistant Secretary of State (Berle)

The Counselor of the British Embassy came in to see me today, at my request. Mr. Dunn and I stated that we had been turning over in our minds the suggestion made by Mr. Mallet in his recent conversation with Mr. Dunn. That suggestion, we reminded him, contemplated that we use our influence at Panama to restrain movements which might be going forward there under which Latin American governments, in whose harbors German ships were blockaded, should take over those ships.

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I pointed out that the only discussions we knew of were bilateral, proceeding between the German government and the governments of the countries involved. If we were concerned at all, it could only be as a result of some cooperative arrangement between the Latin American governments. I pointed out that we expected the Neutrality Act to pass in a form which released ample American shipping to take care of the inter-American trade, so that these ships would not be needed for that purpose.

Nevertheless, I said, it was entirely conceivable that the effect of continued submarine warfare might result in a shortage of ships in the Atlantic trade. In such case, neutrals would naturally wish to have ships available for their needs. This would, presumably, be greatest on the trans-Atlantic runs. In such case we here were exploring the possibilities of a take-over of these ships, possibly by expropriation under an arrangement by which the price of the ships would be held in escrow for Germany or for their owners, to be paid at the close of the war. It was generally agreed, I said, that operation of these ships by German crews and German agents would not be desirable; the actual tonnage, however, under some such arrangement as that under exploration, would become available to keep the commerce lanes open.

Mr. Mallet indicated that their principal preoccupation was the fear lest the German government, through sale of these ships, acquire credits here which they might use. He suggested that he would put the matter up to London. I pointed out that this was merely tentative and unofficial; that we were exploring the possibilities of the situation, rather than suggesting a definite plan, but that the attitude of the British government would be of interest. Mr. Mallet agreed that he fully understood this and would endeavor to find out what views his government might have in the premises.

A. A. Berle, Jr.