Report by the Economic
Report of the Economic Sub-Committee to the Foreign Secretaries
We have considered the proposals in a memorandum by the United States Delegation on the Economic Principles to govern the treatment of Germany in the initial control period,2 together with the Annex dealing with reparations.3
We have unanimously agreed to recommend the adoption of the Economic Principles set out in the attached clauses for incorporation in the proposed Agreement.4
On one matter, which relates both to the Economic Principles and to Reparations, we have to report that agreement has not been reached.
The U. K. and U. S. representatives consider that it is essential that such necessary imports into Germany as are approved by the Governments controlling Germany shall constitute a first charge against exports from Germany whether of capital equipment or current production and stocks of goods. They therefore recommend the adoption of the text attached hereto as Annex II for incorporation in the Agreement on Economic Principles. The Soviet Representatives do not accept this principle and express the view that reparation deliveries should have priority and that imports into Germany, should, if necessary, be confined to the amount that can be paid for by exports from Germany after reparation schedules have been met.
The U. K. and U. S. representatives point out that the provisions of paragraph 18 (to the effect that it shall be the general principle, that in the absence of special reasons to the contrary, each of the zones of occupation, including the Greater Berlin area, will draw its supplies, so far as practicable, from the areas in Germany on which it had drawn before the war) apply to the territory of Germany as it existed on December 31, 1937 whether or not any part of such territory is administered by or ceded to another State.
The Soviet representatives think that any decision on this point at the present time is premature, pending a decision by the Conference on the future boundaries of Germany.[Page 796]
The U. K. and U. S. representatives point out that5 there are two matters in addition to those mentioned in paragraph 13 on which a common policy is essential in the treatment of Germany as a single economic unit:
- Uniform method of treatment6 of the German civilian population;
- Subject to normal regulations, free circulation of nationals of U. K., U. S., U. S. S. R. and France in all zones by land and air.
The Soviet representatives take the position that these two points, while having economic significance, have a wider political application, and that they should therefore not be considered by the Economic Sub-Committee.7
The Allied Commission on Reparations has agreed on seven basic principles. The Sub-Committee recommend that these principles (Annex 18) should be accepted.
The Allied Commission on Reparations failed to reach agreement9 on the underscored last clause of an eighth principle:
“After payment of reparations, enough resources must be left to enable the German people to subsist without external assistance. In working out the economic balance of Germany, the necessary means must be provided for payment of imports approved by the Governments concerned before reparation deliveries are made.”10
As stated above, the Sub-Committee have been unable to reach agreement on this point.11
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- So dated in an “Index of Attachments to Summary of the Negotiations in the Economic Sub-Committee” (file No. 740.00119 (Potsdam)/7–3145), but not considered by the Foreign Ministers until July 21 (see ante, p. 187).↩
- document No. 852.↩
- document No. 894.↩
- In a draft of this report found in the Frankfurt USPolAd Files, this paragraph has the following additional words: “On Economic Principles”.↩
- The first ten words of this sentence do not appear in the draft referred to in footnote 4, supra.↩
- The draft referred to in footnote 4, ante, reads: “Uniform treatment”.↩
In the draft referred to in footnote 4, ante, this paragraph reads as follows:
“The Sub-Committee consider that these points, while having economic significance, have a wider political application. They therefore refer these points for consideration by the Foreign Secretaries.”
- Annex i is identical with attachment 1 to document No. 894.↩
- See documents Nos. 375 and 376, printed in vol. i, and document No. 894, post.↩
- The passage here printed in italics was underscored in the original.↩
- For the paragraphs omitted here, see document No. 902.↩
- The copy of this document in the Pauley Files has the following interpolation at this point: “(g) finance, transportation, & communications.” This copy also has the following marginal note opposite paragraph 13: “Molotov amendment”.↩
- The copy of this document in the Pauley Files has the following marginal note at this point: “If Plan II [is adopted], Rewrite last sentence of 14 d) to read: ‘Except with the approval of the Control Council or except when determined by the Government concerned to be required for the payment of necessary imports, no grant of credit to Germany or Germans by any foreign persons or governments shall be permitted.’ “The same revision is recommended in a separate paper in the Pauley Files entitled “U. S. Proposal”, dated July 25, and in document No. 864.↩