Foreign Relations of the United States: Diplomatic Papers, 1945, European Advisory Commission, Austria, Germany, Volume III

740.00119 EW/11–2345: Telegram

The Ambassador in France (Caffery) to the Secretary of State

Paris, November 23, 1945—3 p.m.
[Received November 26—2:20 p.m.]

6758. From Angell No. 77. November 19 meeting resumed discussion (my Angell No. 65⁴⁶ and 67⁴⁷) of memorandum on IARA. Paragraphs 9 and 10 adopted, leaving unsettled three major questions:

(a) IARA restitution function (paragraph 2), (b) Committee of Five (paragraph 4), and (c) entry into Western Zones of IARA staff and of national delegations (paragraph 8). Subcommittee appointed to draft IARA charter subject to later resolution of above questions.

Comparative tables and explanatory footnotes prepared by statisticians from submitted data (see mytel No. 20⁴⁸) were basis of subsequent discussion. Belgian delegate proposed (1) recalculation of data on standard basis; (2) selection of categories for use in comparing claims and making final allocation (3) elimination of overlapping, and common procedure for conversion of values into 1938 dollars.

Waley and I stated scientific recalculation of data would take months and proposed instead statisticians be instructed to expand footnotes explaining methods used by each country in computing various data already submitted. Waley emphasized difficulty of revising downward any claims published. I stressed doubts that conference could develop any scientific formula equitable to all, necessity of examining formula on bases of common sense and equity, and advantage of sacrificing some accuracy in figures to greater speed.

Meeting unanimously approved procedure suggested with understanding (a) that subcommittee statisticians also standardize conversion of values in 1938 dollars and (b) that each delegation submit report on steps taken to avoid overlapping especially as between occupation costs and material damage.

Meeting then undertook examination, continued on November 20, of table I of categories of claims measured in monetary term, to assess importance to be given each in determination of shares.

I. Damage to and loss of property.

1. Direct damage

a. Own territory. All agreed on importance.

b. Territory of other claimants, and

c. Other locations. Some delegates stated inability to enter enemy territory and ascertain true facts. In view of guess work involved in estimates, generally agreed that great weight could not be attached to categories (b) and (c).

2. Undermaintenance. With exception of Dutch, French and Czech delegates, generally agreed that this category important but very difficult to estimate. Waley said British figure if inserted would be four billion dollars. I stated US figure would be many billions if included, abnormal depletion of US natural resources would have to be included, and suggested in view of difficulty of evaluation small weight should be given this category. Dutch delegate stressed accuracy of his country’s figure, and real damage caused by exploitation of equipment by Germans in occupied countries in contrast to addition of new equipment in non-occupied countries. Czech stress[ed] close relation to direct damage in his country. Rueff likened undermaintenance to domestic disinvestment on same footing as British foreign disinvestment, and proposed inclusion as additional item in weighting of direct damage for occupied countries. Indian [delegate] and Waley opposed distinction between occupied and unoccupied countries. Finally meeting agreed “to bear in mind” in allocation of shares.

II. Cost of occupation by Germany. New Zealand delegate inquired whether correct to interpret category as monetary evaluation of decline in standard of living resulting from diversion to Germans of current production. Rueff confirmed this interpretation. Waley stated that to this extent occupation costs should not be [basis] for reparation claim since closely parallel to decline in standard of living sustained by fighting powers not appearing in data submitted except indirectly in bugetary war costs. Waley, however, admitted real cost to occupied countries. Rueff adroitly thanked Waley for apt statement on delicate question and expressed agreement with Waley’s statement that category represented important cost to occupied countries.

New Zealand delegate on November 20 referred back to this category and expressed disagreement with suggestion that cost of occupation be given weight comparable with war damage and expenditures. Cost of occupation called negative factor in winning war as it represented supplies furnished enemy. Rueff stated reasoning sound if purpose of reparation to reward war effort but disputable if purpose to provide reparation. Rueff stated Waley’s views reflected faithfully opinion of majority of delegates.

III. Budgetary war costs. Rueff, speaking as French delegate expressed gratitude of occupied countries to big powers whose tremendous war expenditures helped in liberation. He stated relative weight for direct or indirect war damage and war expenditures would have great effect in determining reparation shares. War expenditures ought to have large weight but Potsdam Agreement concerning reparation in kind meant repair of damage. Whereas, damage leaves lasting traces, war expenditures may increase productive facilities. Should take into consideration only such consequences of war expenditures as drop in standard of living and domestic or foreign capital disinvestment. Potsdam also emphasized reconstruction of countries devastated and real meaning of reparation is to repair such damage. Should therefore give less weight to budgetary expenditures than damage. Rueff apologized for what might be construed as attack on US position and repeated gratitude for US war effort.

Waley read from memorandum of Crimea Conference to effect that reparations should be received in first instance by those countries which had borne main burden of war, suffered heaviest losses and organized victory over enemy. These principles underlay Potsdam Agreement and represented view of British Government. Both war effort and losses should be given full weight.

On November 201 stated US position on budgetary war expenditures as follows:

(1) allocation of reparation should be guided by principles determined at Crimea and underlying Potsdam;

(2) US subjected itself to tremendous economic and financial dislocations, mobilized large part of population in direct war effort, used up enormous reserves of natural resources, and incurred gigantic public debt burdening taxpayers for decades;

(3) budgetary war cost is rough but simple measure of material, economic, and financial burdens assumed by US and likewise by other countries, notably Great Britain and British Empire countries;

(4) US prepared to consider very seriously in distribution of reparation reconstruction needs of occupied countries and direct damage and other losses suffered by all countries.

Rueff replied in conciliatory vein and stated that within framework of Crimea and Potsdam, Conference should retain war damage which has permanent effect on a country’s economy. Waley stated that budgetary expenditures are rough and ready measure to which great weight should be attached. Rueff agreed. Belgian delegate, emphasizing reluctance to take position between powers suffering from German occupation and powers who fought and liberated occupied countries, made strong plea that if reparation is to rebuild European civilization, which might otherwise disappear, first task of reparation is to make good loss of productive capacity in occupied countries.

Opinion of US Delegation is that my speech had effect of restoring balance between war damage overemphasized by Rueff and budgetary war costs, without prejudicing ultimate allocation of shares, including portion of US theoretical share, with great weight on reconstruction need.

Indian delegate inquired concerning 5 billion dollars entered by France for prewar budgetary expenditures. Rueff stated figure included exception war expenditures after Hitler’s accesses to power and represents effort to prepare for brunt of first German offensive. Yugoslav stated figure included by Yugoslavia represented only prewar expenditures for equipment surrendered to or seized by Germans.

Waley suggested omission of pre-war expenditures in view of difficulty of obtaining comparable figures. Rueff said if majority of delegates supported Waley on pre-war expenditures, should also omit post-war expenditures as even more difficult to defend. I pointed out that US war expenditures continued at high rate even after end of hostilities, but proposed, in view of reasons given by other delegates, that pre- and post-war expenditures should be given substantially lesser weight than expenditures during hostilities. Proposal accepted by Conference, Rueff stating that he concurred with reservation that proposal was unfavorable to countries which made exception defense effort before hostilities.

IV. Pensions. Waley gave number of reasons for rejecting this category as one of worst items for achieving comparability in view of variation from country to country depending on rate of interest, pension laws, etc. Conference agreed to rejection subject to Yugoslav transfer to budgetary war costs of dollars 1.8 billion representing salaries paid or to be paid to Yugoslav officers and soldiers and not properly placed under pensions.

V. Other claims. Conference agreed to eliminate this item in view of impossibility of statistical measurement, with Greek, Dutch and Yugoslav reservation that appropriate items included would be transferred to other categories.

Foreign disinvestment. Waley emphasized that UK sustained unique and serious loss in huge overseas debt incurred in war effort and urged that factor be given great weight in consideration of budgetary war expenditures of which it is a part. Indian delegate repeated argument made in opening speech at Plenary Session to effect that a given amount of war expenditure in India with its low pre-war standard of living had much greater impact on economy than same war expenditure in Europe, and especially US which had higher standards of living. In asking that Conference take this factor into account he stated that he would not press his argument on statistical basis as previously proposed but would leave matter to good sense of Conference. [Angell.]

Caffery

46. See telegram 6677, November 18, 2 p.m., from Paris, p. 1394.
47. See telegram 6680, November 19, 10 a.m., from Paris, p. 1397.
48. Reference is to telegram 6397, November 4, 7 p.m., from Paris, in which Mr. Angell reported on a tentative agreement reached with Messrs. Waley and Rueff on basic categories of monetary and non-monetary claims to be exacted against Germany (740.00119 EW/11–445).