740.00119 (Potsdam)/5–2446

No. 387
Briefing Book Paper
top secret

German Shipping and Shipbuilding


Questions relating to the treatment of German shipping and shipbuilding need to be considered from two aspects:

The immediate disposition of German resources for utilization in the United Nations war and rehabilitation program;
Long-range policies involving the future of German shipping and shipbuilding.

Both aspects need to be considered in relation to each other, so that decision and action in one phase may avoid so far as possible prejudicing decision and action in the other.

[Page 564]

In general, Soviet accession to the United Maritime Authority (UMA), or at least a benevolent and cooperative Soviet attitude toward that Authority would be a major step toward the satisfactory handling of problems relating to German shipping and shipbuilding. This is discussed in a separate memorandum.1 In addition, it is desirable that Soviet policy and procedure be brought into line with principles agreed between the United States and British Governments relative to the handling of recaptured, captured, and surrendered German vessels; agreement needs to be reached regarding the immediate disposition of German shipbuilding and ship repair resources; and the development of reparations and economic disarmament policies calls for agreement on long-range policies toward German shipping and shipbuilding.

[German Shipping and Shipbuilding]

essential facts

Complete and precise facts regarding the condition of German shipping and shipbuilding at the time of surrender have not yet become available. Presumably amplified information will be available in Berlin. It appears however:

That a substantial volume of merchant shipping has come into Allied possession in the course of events leading up to and including the German surrender. Much of this tonnage is doubtless in a condition requiring substantial repair or reconditioning. It includes a large variety of vessels, from small coasting cargo vessels up to large passenger liners. The greater number of these vessels have evidently fallen into American or British hands; of these, the military authorities retain what they require to fulfill their responsibilities, and all other sea-going tonnage acquired is turned over to the Anglo-American Combined Shipping Adjustment Boards (CSAB) acting on behalf of UMA, for temporary disposition and immediate utilization in United Nations Service. Little if any information has become available as to Soviet acquisitions, either as to their number or character, or as to their disposition.
The interest of the United States is primarily in the acquisition of the larger passenger-carrying vessels for use as troop carriers and possibly hospital ships. United States Army and War Shipping Administration representatives have been dealing with British representatives in connection with the disposition of the vessels acquired.
That much of the German shipbuilding and ship repair capacity has been damaged, but not so completely that a substantial part of it could not be put into condition for utilization without great delay, provided required materials and supplies are made available, [Page 565] if decision to utilize these resources should be reached. The principal resources are in British-occupied territory, but substantial facilities are located in the Soviet-occupied area.

policy considerations

1. Immediate Objective. The essential immediate objective is to make the vessels and other useful shipping industry resources acquired from Germany available to the fullest possible extent, in a fair and orderly manner, to serve the current requirements of the United Nations and other friendly countries. Consideration may here be confined to questions of principle: details involved in the implementation of policy decisions reached may satisfactorily be left to the authorities concerned with shipping operations to work out. As between the United States and British Governments satisfactory progress and results are generally achieved through established procedures and channels; the salient problem is to achieve Soviet concurrence in policies already established and a satisfactory basis for Soviet collaboration (a) in reaching further policy decisions of tripartite importance, and (b) in the implementation of decisions of significance to all three Governments. In this respect the essential problem is similar to that involved in Soviet relationship to UMA, discussed in a separate memorandum; Soviet decision to join UMA would be a major step forward in handling all these problems.

With reference to vessels previously under enemy control which have now come under United Nations control:

The United States and British Governments have reached agreement on principles to be followed in the handling of recaptured vessels, which were of United Nations’ ownership prior to their capture. These are to be returned to the United Nations’ Government under whose flag they were registered, but are to be immediately available for operation for United Nations purposes through UMA. It would be desirable to reach similar agreement with the Soviet authorities.
Similarly, agreement in principle with respect to captured and surrendered vessels is most desirable. These have mostly come into the possession of the United States or the British, but the Soviet authorities have some, and since the surrendered ships have technically been surrendered to all these governments, it is most desirable that there be tripartite agreement as to their use, to facilitate their immediate utilization for United Nations purposes through UMA, without prejudice to and pending determination of their ultimate disposition.
The Allied Control Commission in Berlin is of course concerned in the disposition of vessels surrendered by Germany, but it is the general consensus of United States and British authorities that the Commission be guided by the purposes and objectives of the above-mentioned agreements including the agreement establishing [Page 566] UMA,2 and Soviet concurrence in this is most desirable. The military authorities participating in the Control Commission will presumably retain within their own control such inland and coasting or short sea watercraft as they find necessary for the conduct of operations which are their responsibility as occupational forces, and it is to be assumed that the requirements of tripartite understanding and collaboration in this respect will be effected through the Allied Control Commission itself. It is with respect to sea-going vessels not required to meet the essential inland and local responsibility of the occupying military forces that tripartite understanding and agreement as to policies and as to the continuing handling of problems of tripartite interest is essential.
Somewhat similar considerations may arise in connection with the possible utilization of ship repair and ship building resources of the surrendered enemy. It may be found essential and desirable to make some temporary utilization of these resources for current requirements but in general such utilization should be confined to the minimum for the sake of the longer range considerations relating to reparations and economic disarmament discussed below.

2. Longer Range Objectives: With respect to all of these matters, there are longer range aspects of less immediately pressing character, which fall outside the present purpose. They involve questions of reparations policy, economic and industrial disarmament of the enemy, and long-range commercial and international policy including national shipping policies, and international shipping relations which it is desirable to avoid freezing too quickly before the long-range situation clarifies. In deferring or dealing with these aspects, however, it is most desirable that the more deliberate handling of the longer range questions should not be complicated by, nor in turn complicate the most effective disposition of the resources available for the immediate purposes of the United Nations.

There is enclosed a memorandum on German Ships and Shipbuilding as Reparations Items prepared for the use of the American representatives on the Reparations Commission, in which the essential considerations of a longer range character are set forth from the American point of view. The statements of fact set forth in the first section of this enclosure are of course subject to correction and amplification on the basis of additional information available to the occupying forces following the surrender of Germany, but their general character is believed to be correct or at least not to involve any change in the policy considerations set forth which may be summarized as follows:

The basic principle should be the avoidance of action which would contribute to or stimulate the resumption of German sea-going shipping or shipbuilding. In view of the importance of merchant shipping and shipbuilding in the conduct of oversea military operations, these industries are clearly involved in the problem of economic [Page 567] disarmament. In so far as disarmament and reparations considerations clash, the former should take precedence, so far as possible.
All efforts on the part of our Allies to employ German yards for the construction of new merchant vessels on reparations account should therefore be resisted. In this connection, the possibilities of sale of surplus vessels from our war-time construction program, at low prices for the reestablishment of Allied merchant fleets may provide a useful consideration.
The repair and reconditioning of damaged German merchant vessels should be limited to those required for immediate use and to those of types which war-time (and early post-war) construction will not have supplied in numbers adequate to meet early post-war requirements. The extensive repair and reconditioning of German ships which are comparable to our war-built ships of which we will have a surplus, should be avoided so far as possible consistent with essential immediate requirements, in order to avoid augmenting the problem of post-war surplus of these types of vessels.
The United States should participate actively in the distribution of German merchant vessels on reparations account, on the basis of equitable principles taking into account war losses of allied nations and their post-war requirements. Such participation should include the assertion of claims to a fair share in the ultimate disposition of German merchant shipping acquired as a result of the defeat of Germany.
The assertion of such claims is motivated primarily by general considerations, including:
the interest of the Government of the United States as the World’s largest shipowner, in achieving the most rational possible readjustment of world shipping to peace-time requirements, and
the United States Government’s concurrent interest on security grounds involving the limitation of German war potential, in the restriction of German participation in post-war ocean shipping.
The purpose of maintaining the position of the United States as a claimant is essentially to preserve any means of exercising influence toward the effective and judicious settlement of these issues.
In addition, but as a relatively secondary consideration, the United States is likely to be interested in the ultimate disposal of a few German ships of special types in deficient supply for post-war needs. This is likely to be true chiefly with respect to passenger ships useful for the prompt reestablishment of overseas passenger services, for a temporary period pending the restoration of the American passenger fleet with modern and efficient ships constructed in American yards. In asserting claims on this account, however, it will be necessary to exercise care to avoid:
loading down the American merchant marine with obsolescent white elephants;
confusing immediate short-run objectives (troop transport and hospital ship requirements) with long-range post-war objectives: any grounds for suspicion that the latter are being advanced under cloak of the former will immediately complicate [Page 568] the handling of immediate requirements by introducing considerations relating to the parallel long-range interests of Great Britain, the Netherlands, France and possibly other Allied countries in post-war competition in ocean passenger services.

German Ships and Shipbuilding as Reparations Items
top secret
Presently available information indicates that there are now in German possession around 700 or 800 sea-going merchant ships (this refers to coasting and deep-sea craft of 1,000 gross tons and over, but excludes inland waterway craft, barges, tugs, lighters and other harbor craft). About 400 to 500 of these will be ships of pre-war German ownership, or ships built for German account during the war (of which there is record of some 75). The remainder, 300 or more, are ships acquired by Germany from other flags during the war. It is anticipated that the disposition of many of these ships will be subject to arrangement for handling of recaptured vessels now in process of being worked out by representatives of the United States and British Governments.
All of these ships are of many designs, types and sizes. Among them are ships comparable to the large freighters, fast and slow, and the large ocean-going tankers which have constituted the bulk of British and American war-time shipbuilding. There are, however, also a considerable proportion of small coastwise craft of less than 5,000 deadweight tons and about 30 good-sized passenger carrying vessels of more than 10,000 gross tons. There are, therefore, a substantial proportion of types which are likely to be in demand at the end of the war, as well as of others of which there will be a post-war surplus in the American fleet.
The condition in which these ships will be found at the end of the war in Germany cannot be anticipated. Presumably many of them will require considerable conversion, restoration or repair before they can be usefully employed. It appears evident, however, that unless the Germans carry out a scuttling program of substantial proportions, there will be found in German hands, when the enemy in Europe is defeated, a substantial supply of sea-going ships. It is to be anticipated that some at least of our Allies, whose merchant fleets have been severely diminished by war causes, will consider these ships as proper objects for delivery on reparations account. Moreover, since Germany was an important shipbuilding country in pre-war years, it is [Page 569] not unlikely that some of our Allies may wish to enter claims for postwar construction by Germany of new ships to be delivered to them on reparations account.
The question therefore arises as to the line of policy the Government of the United States should follow with respect to these issues when they arise. The following proposed recommendations are formulated from the point of view of the national interest in merchant shipping, and are therefore subject to such over-riding considerations as to general policy with respect to the reparations issue as may be applicable.
The United States should formulate for presentation and be prepared to present and maintain its claims to an equitable share in any distribution on reparation account, of German shipping in existence at the end of the war, for the following reasons:
As the world’s largest shipowner, the Government of the United States is directly concerned in achieving the most rational possible readjustment of world shipping to peace-time requirements. Among other things, this implies judicious decisions as to the treatment of German shipping. The complete or excessive stripping of German economy of all sea-going ships, entirely disregarding the minimum essential German need, particularly of ships for local and coastwise service, would probably not be a sound or judicious procedure. On the other hand, the extensive repair or reconditioning of German ships which are comparable to our war-built ships, of which we will have a surplus for distribution, would not be to our advantage. This is because such action would tend to augment the post-war surplus. Therefore, the United States should maintain its position as a claimant, as a means of exercising its influence toward a satisfactory and judicious settlement of this question.
It is unlikely that the United States will have much need for German ships, except for war-time and immediate post-war Allied services. It is expected that allocation of German ships for these Allied services will be controlled through the United Maritime Authority established by the international agreement signed in London on August 5, 1944. Allocation and crediting to reparations account of the earnings of German ships in these services will involve questions which those concerned with reparations determination will need to consider. These questions are however not discussed in the present memorandum, which is concerned with questions relating to the more permanent and definitive disposition of German vessels.
It is likely that the United States will have a definite interest in any ultimate disposal on reparations accounts of German ships of certain types which will be in post-war short-supply. This is likely to be especially true of passenger ships. The United States, Great Britain, the Netherlands, France and possibly other Allied countries will each have a post-war interest in the prompt reestablishment of overseas passenger services. Ultimately, there is to be anticipated the restoration of the American passenger fleet with modern and efficient ships constructed in American yards. Uncertainty as to the post-war development of oversea air passenger services may, however, [Page 570] make unwise a hasty rebuilding of our passenger fleet. This is the more likely since it would mean the building in short order of a brand new passenger fleet which, like those built at the end of the last war’s emergency shipbuilding program will all grow old together. Therefore, an equitable participation in the distribution of German passenger ships on reparations account for interim use, pending the deliberate and considered rebuilding of the American passenger fleet, in accordance with post-war requirements, may well prove advantageous. Certainly the United States should be prepared to present and maintain its just claims on this account.
The United States should not only refrain from demanding post-war construction of new ships in German yards to be delivered on reparations account, but should seek diligently to dissuade its Allies, so far as possible, from presenting and maintaining corresponding claims. This for the following reasons:
Fulfillment of such claims would constitute an extraneous non-commercial stimulus to the reestablishment of German shipbuilding. Meanwhile, the American and Canadian shipbuilding industries will be faced with the problem of demobilization of their war-time expansion; the same will ultimately be true of the British shipbuilding industry. Unnecessary stimulus of German shipyard restoration will therefore complicate the problem of post-war shipbuilding readjustment. This problem is the more important since the long-run maintenance of a moderate American peacetime shipbuilding industry is an essential element of national defense.
Post-war construction in German shipyards of vessels for purposes which could be served through the disposition of surplus American war-built tonnage would complicate and intensify the problem of disposition of the American war-built merchant fleet. It would conflict with the principle of making the utmost economic use in post-war years of the ships built to meet war-time necessity.
If German manpower is to be used in the production of articles for delivery on reparations account, there will be many other reconstruction activities aside from shipbuilding on which such manpower will be usefully employable. Obviously, European needs for reconstruction will be immense. Post-war construction of ships in Germany on reparations account, for purposes which could be served by vessels available from the American (or Canadian or British) war-built tonnage, would constitute a diversion of manpower from a more essential to a less essential reconstruction purpose, especially if it would involve substantial reconstruction of German war-damaged shipyards.
The major objective of American participation in this entire question is to influence Allied governments in the direction of rational and judiciously moderate demands. Appropriate sharing in the possible distribution of some German vessels may prove of some advantage to the United States. The greater advantage however will lie in the extent to which successful influence can be asserted to achieve a rational settlement judiciously dovetailed into the general problem of [Page 571] post-war merchant shipping readjustment. This problem is of major importance to the United States for two major reasons: first, because it is the principal shipowner of the world and will have more ships than it can hope to dispose of to citizen and foreign purchasers; secondly, because of the importance of effecting successful readjustment of the American shipping and shipbuilding industry to the long-range peace-time policy and program of national merchant marine development.

The United States cannot of course expect to achieve its own purposes in full measure against what may be contrary or diverging purposes of its allies. It will probably not prove possible, for instance, for the United States to completely dissuade all of its allies from demanding German construction of new merchant vessels on reparations account. Nevertheless, it will be to American interest to do so to the fullest extent possible.

This presents an additional reason for including adequately liberal provision for sale of Government-owned ships to foreign purchasers, in current legislation for post-war disposal of the war-built fleet. Obviously, the United States Government could not very consistently seek to dissuade its allies from demanding German construction of ships on reparations account if at the same time it were, or appeared to be, seeking to withhold its own ships from disposal to Allied purchasers on reasonable terms and conditions. On the other hand, authority for such disposal should facilitate the efforts of this Government in seeking the objectives herein outlined, by providing in some measure at least an alternative source for the acquisition of vessels required to restore the war-depleted ships of our Allies.

  1. See documents Nos. 524 and 525.
  2. Signed at London, August 5, 1944 (Treaties and Other International Acts Series No. 1722; 61 Stat. (4) 3784).