Statement by the Secretary of State to the Cabinet 1
The Department of State considers that the recommendations with regard to the German reparation and dismantling program should be approved by the Cabinet and supported before the Congress for the following principal reasons.
As I indicated in my letter of February 4 to Senator Vandenberg,2 copies of which have been furnished to the Cabinet, the Department of State believes that the type of reparation settlement which has been negotiated with so much difficulty is the quickest, cleanest and least costly that can be obtained. Apart from the fact that we are morally and legally obligated to comply with the terms of the Paris Reparation Agreement of January 24, 1946, if we abandon this settlement the entire question of reparations will be reopened and we are on notice of the fact that we would be faced with renewed demands for extensive reparation out of current production which would be the subject of long drawn-out negotiation and wrangling. Moreover, not only the Russians but the French and others who have suffered at the hands of the Germans would regard any effort on our part to further increase the German Level of Industry as confirmation of their charges that [Page 729] we are repeating the pattern of the last post-war period in building up Germany’s war potential.
The highest authorities of the Department of the Army, including Secretary Royall and General Clay and the latter’s technical assistants, have certified that it would not be possible under any circumstances to put into effective production the amount of German plant which is in excess of the July 1947 level of industry agreement. These Army officials have testified at great length before the Congress on this subject, and have pointed out that only with the greatest of good luck can the German plant which is scheduled to remain be brought fully into production during the period of ERP; and that German production is held back by a complex of other shortages and bottlenecks, including principally manpower, housing, fuel, transportation, and raw materials. The Army has further testified that the amount of German plant which is scheduled for removal is excess to the German peacetime economy and what is required to enable Germany to make its contribution to the economy of Europe,3 These are the conclusions of the responsible officials, and we believe that they are worthy of credence.
I shall be glad to furnish copies of a new memorandum4 which has just been prepared by the Department of State in a fresh effort to summarize all of the principal points and arguments which are involved in this very complicated matter.
- This statement was read by the Secretary of State to the Cabinet luncheon meeting of February 16, 1948. The statement had been prepared by officers of the Department of State and was presented to the Secretary at the briefing meeting on the morning of February 16 (see the memorandum by Wisner, February 16, infra). The statement was accepted and used by the Secretary with the exception of the deletion shown in footnote 3, below. Regarding the Cabinet meeting of February 16, see the memorandum of conversation by Wisner, February 17, p. 730.↩
- See the editorial note, p. 717.↩
- In the draft of the statement presented to the Secretary of State on the morning of February 16, the following sentence appeared at this point: “The excess which is to be removed represents the portion of the amount which was added for the German war effort and which it was possible to operate only on the basis of a government subsidy.” This sentence was deleted by the Secretary of State.↩
- See the Department of State memorandum of February 17, p. 732.↩