File No. 611.627/366.
The American Ambassador to the Secretary of State.
Berlin, February 8, 1911.
Sir: Referring to the memorandum of the German Government dated January, 1911, purporting to give a general review of the history of the Imperial potash law, I have the honor to make the following observations.
In the memorandum stress is laid upon the point that on July 7, 1909, Minister Delbrück publicly announced in the Reichstag the introduction of a potash duty, and that as the potash contracts were signed by the Americans after that date they were in full possession of full knowledge of the intended legislation. It is now contended that the present potash law is the fulfillment of that announcement, and that the American contractors have no reason to complain of it inasmuch as they had full knowledge of it before they signed the contracts.
Without attempting to characterize this form of statement in general terms, I beg to be permitted to point out that according to the official report of the transactions in the Reichstag, the only kind of tax considered on July 7, 1909, in the Reichstag, or referred to by Minister Delbrück, was an “export” tax on potash. Not only is it now contended that the present potash law imposes no export tax, but, on November 23, 1909, according to this memorandum itself, it is explicitly stated that, in reply to the inquiry of the American chargé d’affaires regarding the intention of introducing such an export tax, which he declared might unfavorably influence the negotiations relative to German-American commercial relations in view of the provisions of section 2 of the American tariff act, “there could be no question of an intention to introduce a potash export tax.” It is submitted therefore if the declaration of Minister Delbrück in the Reichstag on July 7, 1909, can be considered as having any relation to the present potash law.
In referring to the attitude and action of the American Embassy regarding the potash law, the memorandum would convey the impression that no very serious objection was at any time made to the proposed law. The archives of the Department of State will show the untenable nature of that assumption. It is true that the embassy’s memorandum of January 10, 1910, referred to the matter unofficially, as the embassy was instructed to do, but the memorandum expressed more than the hope that such a measure as was proposed would not be passed. It stated in terms that the measure if executed would involve “the virtual repudiation of a contract entered into with American citizens by limiting its duration from seven to two years [Page 228] and by taxing the export to a point which substantially destroys the value of the contract,” and the injustice of this was distinctly set forth. In referring to the embassy’s note of February 4, 1910 [in pursuance of instruction of Feb. 3], it is not mentioned that inquiry was made if the proposed measure “contemplates a tax intended to fall upon a foreign purchaser of potash from the German mines, and if in any other manner the validity and value of the American contracts will be affected.”
No notice whatever is taken of the note verbale of April 18, 1910 [in pursuance of instruction of Apr. 17], in which it is distinctly pointed out that disagreement between the American and German Governments would arise in case anything equivalent to an export duty should depreciate the value of the American contracts, at which the proposed legislation appeared to be directly aimed.
No mention whatever is taken of the embassy’s note of May 5, 1910 [in pursuance of instruction of May 4], marked “Immediate,” in which a formal remonstrance, against the proposed legislation as unfriendly to American commerce was made, together with the statement that this legislation appeals to be “specifically directed against the American contracts and designed to place new and unexpected burdens upon the American contractors.” And again in this note it is stated that the American Government stands ready to use all its influence in the direction of harmonizing the interests involved and avoiding a conflict of views which will certainly arise if the American contracts are impaired.
Without further recital of the oral communications made in connection with these official documents, there certainly can be no doubt that the American Embassy repeatedly, during the months preceding the legislation finally passed, clearly and emphatically stated the injustice to American interests that would be effected by it, and as strongly as diplomatic courtesy permits, with due respect to the legislative independence of a country, urged the modification of the proposed measures or the adjustment of the interests involved in such a manner as to prevent injustice being done.
The German memorandum makes no reference to the fact that section 46 of the potash law was introduced at the last moment as a result of the repeated and strenuous efforts of the American Embassy to prevent injustice to the American buyers of potash; yet in the note of the German foreign office of May 11, 1910, it is stated that the concessions contained in that section were made in order as far as possible to do justice to the American contractors.
With regard to the assurance given by Baron von Schoen on May 12, 1910, that the American contracts would not be impaired, the first secretary of the American Embassy, Mr. Laughlin, was present upon the occasion, and although he did not hear the conversation he took down the telegram which embodied the substance of it, at the ambassador’s dictation upon the spot. There is, however, no necessity for any controversy upon this subject, for the note of May 11, 1910, referred to in the memorandum of January 1911, might have proved satisfactory had the Bundesrat been disposed to carry out its terms, which however it afterward failed to do, entirely ignoring the options contained in the contracts, and making other modifications, not referred to in the note of May 11, which were not acceptable.
[Page 229]There are other points in the memorandum which might be corrected in detail, but those which have here been stated seem to me to be important to be considered, for it can not be maintained, on the one hand, that in July, 1909, the American contractors were warned that such legislation as has been passed would be passed, or, on the other, that the American Embassy did not strenuously oppose the legislation that has been passed with as much vigor and constancy as were consistent with diplomatic courtesy.
I have, etc.,