740.00119 PW/3–846

Memorandum by the Director of the Office of Economic Security Policy (Galbraith) to the Director of the Office of European Affairs (Matthews)

Attached herewith is a series of amendments to SWNCC 236/6 Establishment of an Inter-Allied Reparations Commission for [Page 483] Japan.89 It is recommended that they be submitted to the State–War–Navy Coordinating Committee for consideration “when this paper comes before it for action.

These amendments provide for the establishment of the inter-allied reparations authority as a committee within the framework of the Far Eastern Commission rather than as a separate inter-allied commission, as originally proposed in SWNCC 236/6. The Committee would retain the same functions as the proposed Commission, however, and is given a semi-autonomous position within the F.E.C., subject to the latter’s power to review its decisions to ensure that they are not inconsistent with the general policies and objectives of the occupation.

This proposal for altering the original draft terms of reference contained in SWNCC 236/6 is occasioned by several developments which have occurred since approval of the paper by the Far Eastern Subcommittee:

There is now a clear majority in F.E.C. favoring the handling of reparations by the F.E.C. Committee. Formerly in the F.E.A.C. this did not appear to be the case.
The F.E.C. is already in session, and ready to proceed immediately with consideration of reparations by a committee. This removes one of the chief arguments for the original proposal for a separate Commission, i.e., that the F.E.C. with its varied policy responsibilities might act less expeditiously and efficiently than a separate body.
SCAP has now cabled his strong objection to the creation of a separate Reparations Commission. I am advised that JCS also supports this view.

In order to expedite action by SWNCC, the attached amendments have already been cleared informally by War and Navy Department representatives on JCAC, which objected to the earlier proposal for a separate Commission. The new draft appears to them to meet these objectives satisfactorily.

If the United States can secure agreement to a semi-autonomous Reparations Committee, subordinate to the F.E.C. but able to make binding decisions within its own area of competence, as proposed in these amendments, this should offer reasonable promise of prompt action in reparations matters.90

[Page 484]

It is a matter of urgency to instruct the U.S. representatives on F.E.C. as to U.S. policy in this matter without further delay. For this reason, and after consultation with War and Navy representatives on the Far East Subcommittee and JCAC, this method of proposing amendments for SWNCC consideration is recommended, as opposed to withdrawal of the original paper and reconsideration by the Far East Subcommittee.

  1. For revised version approved on April 11 as SWNCC 236/12, see p. 486, footnote 96.
  2. In a memorandum of March 14, 1946, to Mr. Matthews, Charles E. Bohlen, Special Assistant to the Secretary of State, wrote: “The only question I have in regard to the establishment of the Inter-Allied Commission under the FEC arises out of the possible use by the Soviet Union of its special position on the Far Eastern Commission to veto or block reparation action. As far as I know while the Soviet interest in Far Eastern matters as a whole was recognized in their inclusion on the Allied Council for Japan and the Far Eastern Commission, it is an open question whether this interest is equally legitimate in regard to reparations. I think this aspect of the question should be examined by FE before final approval.”

    In response, the Director of the Office of Far Eastern Affairs, Mr. Vincent, wrote Mr. Matthews on the same day: “I fully sympathize with what Chip is driving at in his memorandum but I don’t think we can do anything about it. After all, the no. 1 function of the Far Eastern Commission is ‘To formulate the policies, principles, and standards in conformity with which the fulfillment by Japan of its obligations under the terms of surrender may be accomplished’; and one of the ‘obligations’ of Japan is to pay reparations. The only way I know to achieve Chip’s ends is to persuade the Russians and all other members of the FEC to agree to the establishment of an independent Reparations Commission in which no member would have a veto power. If you think it would be realistic to attempt this, OK. I don’t think you do and neither do I and therefore I believe we’d better accept the solution in this paper and hope for the best.” (740.00119 PW/3–846)