Lot 60 D 137 Box 1 (18358)
Minutes of the Twenty-ninth Meeting of the National Advisory Council on International Monetary and Financial Problems, Washington, May 24, 194667
| Present: | Secretary Fred M. Vinson (Chairman), Treasury Department |
| Mr. W. L. Clayton, State Department | |
| Mr. George Luthringer, State Department | |
| Mr. Henry R. Labouisse, State Department | |
| Mr. Hubert Havlik, State Department | |
| Mr. Clifford Matlock, State Department | |
| Mr. Thomas B. McCabe, Foreign Liquidation Commissioner, State Department | |
| Lt. Col. C. J. Shields, Office of Foreign Liquidation Commissioner, State Department | |
| Mr. James Cooley, Office of Foreign Liquidation Commissioner, State Department | |
| Mr. Arthur Paul, Commerce Department | |
| Mr. Marriner S. Eccles, Board of Governors, Federal Reserve System | |
| Mr. J. Burke Knapp, Board of Governors, Federal Reserve System | |
| Mr. Wm. McC. Martin, Jr., Export-Import Bank | |
| Mr. Herbert Gaston, Export-Import Bank | |
| Mr. August Maffry, Export-Import Bank | |
| Mr. Rifat Tirana, Export-Import Bank | |
| Mr. Hawthorne Arey, Export-Import Bank | |
| Mr. H. D. White, International Monetary Fund | |
| Mr. E. G. Collado, International Bank for Reconstruction and Development | |
| Mr. E. M. Bernstein, Treasury Department | |
| Mr. Harold Glasser, Treasury Department | |
| Mr. James Brooks, Treasury Department | |
| Mr. P. P. Schaffner, Treasury Department | |
| Mr. Frank Coe (Secretary), Treasury Department | |
| Mr. Andrew Kamarck (Assistant Secretary), Treasury Department |
1. French Financial Negotiations
(a) War Settlement.
Secretary Vinson pointed out that the U.S. figure for the balance due from France on war accounts is $455 million whereas the French [Page 454] figure is $410 million. Mr. Labouisse explained that the U.S. Army valued the supplies furnished by the U.S. armed forces to the French military after V–J Bay at $25 million although the French have carried a figure of $70 million. The French want to fix this item at $25 million and their figure of $410 million reflects this proposal; whereas the U.S. figure of $455 million is based on a value of $70 million for this item. The question before the Council was whether to settle this item now at a definite amount or to adopt the figure of $455 million and leave it open to later accounting adjustment for the post V–J Day Army–Navy transfer item. Secretary Vinson did not believe a figure of less than $70 million should be used since the French themselves carried this figure and since it might turn out to be considerably higher. It was pointed out that the unbilled balance of post V–J Day transfers under the 3(c) agreement was also subject to later accounting adjustment.
The Council agreed that the figure of $455 million should be regarded as the settlement balance subject to accounting adjustments for the two items in question.
Action.
The following action was taken:
The National Advisory Council accepts the amount of $455 million as the balance due the United States from the Provisional Government of the French Republic in settlement of the war accounts described in Annex 2 of U.S. Top Committee–French Negotiations Document No. 6, subject to accounting adjustments (a) for post V–J Day Army–Navy transfers of supplies to the French military, and (b) for the unbilled balance of post V–J Day transfers under the 3(c) agreement with the Provisional Government of the French Republic.
(b) Surplus Property.
Mr. McCabe explained that the $1.5 billion inventory figure for surplus property, declared and undeclared, in France and French North and West Africa had been reduced to $1.4 billion to cover sales to other foreign governments and to UNRRA. The French are being offered this inventory, including all surplus property already sold or committed for sale to the French but not yet paid for by them and a base in Noumea, for $300 million, 21 percent of original cost. The French wanted the inventory to include railway rolling stock when such stock was declared surplus, but were refused this request. The French also wanted a guarantee that deficiencies in the Levy List of urgent requirements would be supplied from surpluses in other areas, priced at the same ratio to original cost as surpluses in France. Mr. McCabe offered to use his best efforts to [Page 455] supply these deficiencies. Finally, the French claimed they understood the inventory would include surpluses in all French possessions. The larger part of these surpluses is in New Caledonia. A concession was made to them only on the base in Noumea.
Mr. Clayton moved that the $300 million offer covering surpluses in France and French North and West Africa be made final with the provision that the F.L.C. will attempt to supply deficiencies in the Levy List at 21 percent of cost. If the French were unwilling to accept this offer, negotiations should be called off.
Mr. McCabe stated that at the beginning of the negotiations major emphasis was attached to the Levy List which he thought could be substantially filled. However, during the negotiations, the amount and nature of the items included in the inventory changed, so that it was no longer possible to supply as large a percentage of the critical items as was originally contemplated. He felt that the French should be so informed and that he should be permitted to supply railway rolling stock to make up any ultimate deficiency in the list of critical items. He asked for a reconsideration of Mr. Clayton’s motion in order to include the following provision: If railway rolling stock in Europe is declared surplus, the amount allocated as French surplus will be included in the $300 million offer to the extent necessary to make up deficiencies in the list of critical items.
The Council agreed that the French should be advised of any changes in the original estimates of the availability of critical items; but it decided that, in view of the low price at which the surplus was offered, no provisions for including rolling stock should be made. Mr. McCabe acquiesced in this decision.
The motion proposed by Mr. Clayton was passed. Secretary Vinson remarked that he would rely on the State Department for handling any developments arising from the above settlement.
Action.
The following action was taken:
The National Advisory Council approves the offer, described in Annex 5 of U.S. Top Committee–French Negotiations Document No. 6, made by the Foreign Liquidation Commissioner to the Provisional Government of France for the disposition of surplus property.
(c) Credit Terms.
Mr. Labouisse reported that the French want terms of 2 percent for 50 years with a waiver clause in the war settlement credits. Mr. McCabe said he had offered terms of 2⅜ percent for 30 years with a [Page 456] deferment of principal repayment for 5 years, but without any waiver clause on interest payments. Secretary Vinson remarked that the French want the same terms as were given the British so as to avoid an unfavorable public reaction in France. Mr. Eccles believed there was no reason for giving the French specially favorable terms, such as 2 percent, particularly since they were probably getting a better overall deal at 2⅜ percent than the British were at 2 percent. The British case, moreover, was unique in many respects.
Mr. McCabe reviewed the unsatisfactory history of collections on World War I settlements. He thought some distinction was reasonable between countries where large overall settlements were involved and those where the settlement amounts were relatively small. Mr. Clayton said that the main consideration was collection of the principal; that the interest rate was not too important. He suggested that the interest rate be set at 2 percent for all countries with which overall war settlements were made. Mr. Eccles maintained that if any revision of policy were made, it should be consistent with respect to all countries involved. He proposed a 2⅜ percent rate for France unless terms for all other countries were reduced to 2 percent. He thought the easier terms could be justified before Congress on the grounds that it was necessary to give the French such terms, and, therefore, it was also necessary to give them to other countries. Mr. Martin emphasized that the problem should be considered in more detail before any action was taken. Mr. Gaston asked how the proposed reduction would affect Export-Import Bank’s loans on 3(c) terms to France, Belgium and the Netherlands. Mr. McCabe thought that credits for goods under requisition were in a different category from credits on surplus already in France. Mr. Eccles added that the proposed reduction in interest was not intended to refer to the Export-Import Bank’s loans on 3(c) terms.
After further discussion, the Council agreed that in countries with which overall war settlements were made, any credits granted in connection with these settlements would be at 2 percent for 35 years with a five year period of grace on repayments of principal, but with no waiver of interest. Such terms would not apply to isolated surplus sales; nor would they apply to the Russian pipeline case unless an overall war settlement was made with Russia. Mr. Clayton pointed out that the French Lend-Lease agreement contains a provision for postponement of installments due, upon mutual agreement by the two governments. It was decided that this provision did not interfere with the Council’s action and that it should also be included in the war settlement agreement.
[Page 457]Action.
The following action was taken:
The National Advisory Council approves the following terms for the extension of credit by the United States Government to the Provisional Government of the French Republic in the overall settlement of war accounts: Interest at 2 percent per annum; period of repayment, 35 years, with an initial 5 year period of grace on repayments of principal; no provision similar to that in the financial agreement between the governments of the United States and the United Kingdom for waiver of interest payments. Terms should also include the provision contained in paragraph C(3) of Schedule 1 and paragraph 5 of Schedule 2 of the “Agreement between the United States of America and the Provisional Government of France,” dated February 28, 1945.68
Credit Terms in Overall Settlements of War Accounts
Action.
The following action was taken:
The National Advisory Council approves the following terms for the extension of credit by the United States Government in connection with, and only in connection with, overall settlements of war accounts with foreign countries: Interest at 2 percent per annum; period of repayment, 35 years, with an initial 5 year period of grace on repayments of principal; no provision for waiver of interest payments. These terms are specifically not to be regarded as applicable to credits involved in separate sales of U.S. surplus property to foreign countries.
(d) French Tort and Patent Claims, and Claims for Requisitioned French Goods in the U.S.
Mr. Labouisse explained that the French have agreed to settle at their own expense, as a reciprocal aid benefit, all tort claims against the U.S. arising out of acts or omissions of U.S. military and civilian personnel up to V–J Day; but that they refuse to accept this liability for acts after V–J Day unless compensated by an allowance of up to $10 million in the claim settlement. The Army regards this proposed allowance as quite high. With regard to patent claims of French nationals against the U.S., the French are willing to assume a liability, as a matter of reciprocal aid, up to $5 million. With regard to French material and equipment in the U.S. requisitioned by this government for war use, he said that the U.S. Settlement Committee believed that at least the claims of the French Government should be waived.
Secretary Vinson wanted a final settlement to be reached on all these claims and the Council approved that an amount of up to $15 millon be proposed to the French in settlement of the claims.
[Page 458]Action.
The following action was taken:
In the overall settlement of war accounts with the Provisional Government of the French Republic, an amount of up to $15 million is approved by the National Advisory Council to settle (a) all tort and patent claims of the French against the U.S. Government and (b) all claims with respect to French material and equipment located in the U.S. and requisitioned by the U.S. Government for war uses after U.S. entry into the war.
(e) Press Release and Joint Declaration on Settlement of French War Accounts
The Council reviewed a draft press release and joint declaration and made several revisions. In connection with the statement concerning the Export-Import Bank’s $650 million credit to France, Mr. Gaston said the French want the credit to cover a $150 million revolving fund and a $150 million expenditure already made by the French for North African supplies. The Bank analyzed a list of French requirements totaling $864 million and found that 67 percent represents current supplies; 21 percent, equipment; and 12 percent, freight and services. The Bank felt the percent of current supplies was entirely too high to finance under a reconstruction and development loan. The French were really asking for an open loan although the Bank is restricted to loans for specific projects, and thus far the French had been unwilling to change the nature of their credit request. The Bank offered the French terms of 3 percent for 25 years with a 5 year period of grace on repayments of principal. In view of the unsettled state of the loan negotiations, the Council decided to use the following statement: “The other provisions of the loan contract are now being worked out between the Provisional Government of France and the Export-Import Bank.”
The Council agreed to dispense with the press release and approved the revised joint declaration.
Action of the Council.
The Council approved a joint declaration of the President of the United States and the President of the Provisional Government of the French Republic. The final text of this declaration is contained in Attachment (B) to the minutes of the meeting of May 28, 1946.