740.00119 Potsdam/8–245

No. 925
Proposal by the United States Delegation

top secret

U. S. Position on Reparations—Final Pauley Version—Submitted to Economic Sub-Committee of [on?] July 24 [25?], 1945

united states position on reparations1

The United States submits the attached plan for the execution [exaction?] of reparations from Germany, in the belief that it will meet the requirements of the situation in a practical way and commend [Page 868] itself to the governments of the United Kingdom and the Soviet Union.

This program for “removals” would be administered by the established machinery for the government of Germany, and would be carried out in accordance with the applicable political and economic policies which we are adopting. This plan amounts in effect to an interim program and does not preclude a coordinated administration of Germany. It permits immediate removals, and at the same time is not inconsistent with such overall economic policies as the Zone Commanders, working through the Allied Control Council, may determine.

It is proposed that this program be recommended by the Allied Commission on Reparations and adopted by our Governments.2 Implementing this program, industrial equipment, with emphasis on steel capacity, would be made available to the Soviet Union from the Ruhr area at the same time that agricultural products and raw materials, including liquid and solid fuels, timber and potash are made available for western Europe (including the western zones of Germany) from Eastern Europe (including the Eastern zone of pre-war Germany). The basis for such an exchange will be worked out between the governments concerned.

u. s. proposal on reparations and related matters3

In accordance with the recommendations of the Allied Commission on Reparations, the Governments of the United Kingdom, the United States and the Union of Soviet Socialist Republics have agreed on the following program for the exaction from Germany of reparations and other Allied levies:

Available reparations shall be divided among claimant nations to the extent that they have borne the burden of the war, have suffered losses, and organized victory over the enemy.
Except as otherwise directed by the Allied Control Council each of the Four Powers occupying Germany—the United Kingdom, the United States, the U. S. S. R. and France—may remove or permit to be removed from its zone of occupation capital equipment, current production, and stocks of goods either to pay for necessary approved imports not otherwise paid for or after such payment for imports has been effected for its own account or for the reparation account of any other United Nation entitled to reparations. Removals shall not be such as would be incompatible with the production and maintenance of goods and services required to meet the needs of the occupying forces and to maintain in Germany the approved standards of living, including such exports as are required to pay for approved imports for the occupying forces and the population of Germany. Removals should not be such as would be inconsistent with the treatment of Germany as a single economic unit.
In exacting removals for reparation and other Allied levies, the occupying Powers shall be governed by the following principles:
Removals of property shall be primarily such as to assist in bringing to an end the war-making power of Germany by eliminating that part of Germany’s industrial capacity which constitutes war potential.
Removals shall be such as will speed recovery and reconstruction in countries devastated at German hands.
Any program of removals shall be avoided which necessitates external financial assistance or which might, in the opinion of the Government concerned, prejudice the successful execution of the task entrusted to the Armies of Occupation.
To a maximum extent removals shall be taken from the existing national wealth of Germany.
In order to avoid building up German industrial capacity and disturbing the long term stability of the economies of the United Nations, recurrent removals in the form of manufactured products shall be restricted to a minimum.
In justice to the countries occupied by the enemy the amount of removals shall be calculated on the basis that the average living standards in Germany, during the reparations period, shall not exceed the average of the standards of living of all European countries with the exception of the U. K. and U. S. S. R.
After removals are effected enough resources must be left to enable the German people to subsist without external assistance. The necessary means must be set aside for payment for imports approved by the Government concerned before any removals.
Removals of any capital equipment existing on May 10, 1945 shall cease on May 10, 1947.
Removal of stocks of goods and current production shall cease on May 10, 1951.

  1. Another copy of the first section of this paper is dated July 23. Still another (which has the word “exaction” in the first sentence) is dated July 25 and bears the following manuscript notation by Clayton: “Pauley memo, from which he read at meeting of subcommittee 7/25”. See post, p. 944.
  2. A variant of the first section of this paper, dated July 25, found in the Pauley Files, is identical with the proposal here printed down to this point. It concludes, however, as follows:

    “Thereupon a special commission would be set up in Germany to work out, in consultation with the Control Council, the practical problems which will arise in the implementation of its program. In particular, this special commission would determine the extent to which industrial equipment in the Ruhr, the industrial heart of the western zones of Germany, can be made available to the Soviet Union at the same time that agricultural products and raw materials, including liquid and solid fuels, timber and potash, are made available for western Europe (including the western zones of Germany) from Eastern Europe (including the Eastern zone of pre-war Germany).

    “This special commission will take in its initial studies as a basis for discussions the suggestion that 25% of the equipment which is removed from the metallurgical, chemical, and electrical industries in the Ruhr be made available to the Soviet Union in exchange for agricultural and other products for Western Europe.”

  3. Copy in the Pauley Files of the second section of this paper is dated July 26.