740.00119 (Potsdam)/7–3145

No. 909
The Political Adviser to the Representative on the European Advisory Commission (Mosely) to the Assistant Secretary of State (Clayton)1

Memorandum for Mr. Clayton

Subject: Present Stage of Reparation Negotiations.

1. Need for a comprehensive program in the present stage of reparation negotiations.

We are now engaged in arguing abstract definitions and principles with the Soviet representatives. There is no prospect that the Soviet Government will accept our set of definitions2 and we cannot accept theirs.3 To argue indefinitely abstract principles and to argue each principle in isolation from the practical effects of its application will get nowhere. The only way out seems to be to discuss the concrete applications of the principles. At this level of discussion it may be found that the respective approaches are not so far apart as they are at the theoretical or academic level.

2. Factors of disagreement.

If war booty can be defined in terms of quantity and a time-limit, the booty factor may be fitted into a general reparation settlement. For example, an agreed time-limit could be set, beyond which German [Page 851] property not yet removed or ticketed for removal would cease to be classified as war booty and would revert to the German economy. If a time-limit is placed on its application, the abstract definition would not loom as large in practical importance as it does now. A second step would be to agree on a global estimate of war booty removed by each of the occupying armies. This estimate would have to be bargained over but could eventually be arrived at. A third step would be to determine the relation of war booty to once-and-for-all removals of capital goods on reparation account.

The definition of restitution presents fewer obstacles. The United States proposal is soundly based on considerations of equity and administrative convenience. The Soviet and British approaches, which are shared by the lesser Allies, have strong legal, psychological and political arguments in their favor. The Governments of the devastated countries cannot tell their own peoples that they have renounced the right to restitution. Agreement can be reached on restitution through broadening the American conception somewhat and limiting the British definition.4 While considerations of equity would be well served by deducting from the reparation total of the separate countries the amount of restitution received, the United States Government can agree to a separate accounting for restitution if the countries directly concerned prefer to see restitution handled in this way.

The extent of reparation derived from once-and-for-all deliveries of available goods and equipment will be greatly narrowed if removal of war booty can in practice be considered a charge against such removals.

One difficulty in arriving at an agreement on reparation out of current production lies in the form in which we have pressed the “first charge” principle in advance of discussing the total of reparation. It would be easier to arrive at an agreement that both commercial exports and deliveries on reparation should be based on an agreed plan covering exports and imports of all kinds. Soviet public opinion would receive with hostility a statement of reparation policy which in its form gave exports a primacy over reparations.

3. Economic Adjustments in Regard to the Polish-German Frontier.

If a definite sum can be stated as equivalent to the loss which will be imposed upon Germany’s reparation-paying capacity by transfer of territory to Poland, the Russians would bargain hard but would probably end by accepting such a settlement. They would be suspicious of a percentage formula defining this loss as long as the total of reparation has not been agreed. They would probably approve [Page 852] a special commercial treaty between Poland and Germany by which certain supplies would flow to Germany from the ceded areas in return for industrial commodities which those areas and, to a large extent, Poland itself formerly received from Germany. Here again a definite and quantitative approach in terms of balanced exchanges would be more readily negotiable than to seek agreement on an abstract principle.

4. A New Approach.

It is not feasible to make progress in the reparation negotiations by arguing each part of the problem in isolation and in abstract terms. The Russians have their own set of principles, based on intense popular feeling and fresh experience. They define war booty widely because their own country has only recently been plundered almost to the last nail and thread and they interpret American and British reluctance to see the same treatment meted out to Germany as evidence of greater sympathy for the German people than for the Soviet people. It is not wise to justify failure to agree on reparation mainly on grounds of Soviet rejection of our definition of war booty. If we fail to agree on the relation of war booty to reparation, it is better to be able to report that failure came over the practical applications of the principle.

In order to negotiate a comprehensive reparation settlement it is necessary to negotiate simultaneously on all factors involved rather than to proceed by a step-by-step approach. Neither we nor the Russians can agree on abstract statements of principle until we have seen where the practical applications of the principles will lead us. Among the factors which need to be reviewed simultaneously are the following:

What is the time-limit beyond which unclaimed war booty reverts to German economy?

What evaluation should be placed on war booty removed from Germany, apart from commodities used by the armies in Germany?

What is the relation between war booty removals and once-and-for-all removals of German equipment in the first phase of the reparations plan?

What categories of looted property are particularly important in applying the concept of restitution?

What forms of current reparations should be encouraged?

What share of Germany’s reparation capacity will be lost through cession of territory to Poland?

What should be the agreed total of reparations, and what deductions should be made from it in order to take into account (a) war booty removals; (b) detachment of reparation capacity through cession of territory; and (c) removals on account of restitution?

P[hilip] E. M[osely]
  1. Printed from a copy on which there are uncertified typed initials.
  2. See document No. 894, attachment 2.
  3. See documents Nos. 904 and 905.
  4. See document No. 906.