Foreign Relations of the United States, 1952–1954, Germany and Austria, Volume VII, Part 1

662A.00/5–1052: Telegram

No. 33
The United States High Commissioner for Germany (McCloy) to the Department of State¹

secret priority

Bonn, May 10, 1952—8 p.m.

2766. Inform Defense.

1. At mtg High Commissioners/Chancellor on May 9, discussion continued points in conventions requiring Bundesrat approval.² See ourtel to Dept 2749, rptd info London 766, Paris 886.³ Hallstein stated Gers had reconsidered certain important items and now felt equalization of burdens exemption did not require Bundesrat approval.

2. Hallstein also stated necessity Bundesrat approval cld be obviated on two other major points as follows:

(a) On use of Laender property by the forces, Fed Govt cld undertake to furnish such property free of charge, thus assuming responsibility to make arrangements with the Laender and to pay any rent or other charges. Fin Min proposed this provision shld be in separate ltr but after discussion agrmt was reached for inclusion provision in convention.

(b) On tax exemption of forces and their members Fin Min proposed convention provide specific exemption from all taxes of character not in fact requiring Bundesrat approval; agrmt of Fed Govt to introduce special legis exempting from taxes in which Laender or municipalities shared; and agrmt that legis so submitted wld govern certain agreed exemptions etc. Fin Min indicated this method followed in EDC treaty proposal.

Possibility advanced that agrmt might state exemption from income taxes and corporate taxes, in which laender share, on ground such exemption in accordance principals intl law for troops temporarily in foreign territory.

Pressed for coverage for period prior to adoption law granting exemption Chancellor finally agreed undertaking by Fed Govt to reimburse for Laender and municipal taxes exacted during each period.

When pressed Fin Min agreed such tax reimbursement shld not be credited against FedRep def contribution but wld affect its “incapacity to pay” and therefore shld be considered in the future. We pointed out that involved no net payment out of Ger economy and obviously had no effect whatsoever on FedRep capacity.

3. Believe proposals out[lined above?] avoid Bundesrat problem and furnish basis for working out suitable contractual provisions.

4. Regarding contractual provisions affecting “procedure” of laender auths, new proposals were presented on restitution and certain rights and obligations provisions. These under study.

McCloy

1. Repeated to Paris for Harris, Draper, and MacArthur and to London.
2. At their meeting on May 9 the Chancellor and the High Commissioners also discussed guided missiles, the Finance Convention, the preemergency clause, the possibility that the contractuals might take effect before final ratification, and the Acts and Interests Convention. McCloy reported on these discussions in telegrams 2764, 2765, 2767, 2763, and 2770, May 10 and 11, from Bonn. (Telegrams 2764 and 2765, 740.5/5–1052; 762A.00/5–1052, 662A.00/5–1052, and 762A.0221/5–1152)
3. Document 29.