662.003/11: Telegram

The Ambassador in France ( Wallace ) to the Acting Secretary of State

614. I have received the following note from the Ministry for Foreign Affairs dated March 1.

“By a letter dated December 19 last the German Government was authorized by the Supreme Council to collect customs duties on a gold basis on the entry [of] goods into Germany. This measure was put into force on January 1, 1920 by the German Government.

At the same time the necessary negotiations concerning the question of prohibition of importation into Germany as also the question of exportation was to be opened and discussed [by] the divers interested powers, the question of the valorization of the customs duties was to be examined in full again if, within a time limit of three months, these negotiations had not reached conclusion considered satisfactory by the said powers.

At the moment of entering into these negotiations with the Germans, which negotiations must be concluded in an extremely short time, the Government of the Republic desires to remain in close contact with the Allied and Associated Governments which have to open up the negotiations. This is why it considers that while reserving for each of them the liberty of action necessary for the protection of their particular interests, the negotiations should be made on the following bases which are strictly in conformity with the stipulations of the peace treaty and are of a nature to establish a normal commercial regime with German[y] and one that is equal for all.

1. The German commercial regime comprises, at the present moment, both as regards importation and exportation, quite a serious prohibition or secret discriminations which must disappear because they are distinctly contrary to the clauses of articles 264 to 267 and 269 of the peace treaty.

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2. The valorization given to the customs duties constitute[s] a considerable advantage granted to Germany since she has realized an increase of 900 per cent on the customs duties in paper marks. The valorization at present fixed on the basis of the dollar do[es] not constitute, moreover, merely an advantage for German[y] but also for the Allied and Associated countries which enjoy the most favorable exchange. On this account it is contrary to the spirit and the terms of article 269 since instead of re-establishing exactly the relative situation before the war it consolidates the inequalities which the war has caused. In order to be equitable on all points, the valorization should be established at different rates in accordance with the origin of the imports.

But whatever the rate of the valorization may be, the latter constitutes for Germany an effective protection which must not be aggravated by a too extensive system of prohibition.

3. In case the prohibition of certain articles should be recognized as necessary, this prohibition should be absolute, that is to say without any derogation whatsoever, so as to effect [affect] equally all the Allied and Associated Powers. If derogations are admitted, the latter should be authorized accordingly to a contingent to be established and divided among the divers exporting countries in proportion to their pre-war exportations. The Reparations Commission should intervene in the fixing of contingents.

4. As regards exportation, no discrimination should be made in tariff or otherwise, thus, the special derogation given by the offices of foreign commerce or by the imperial commissioner or by offices for the establishment of prices should disappear. According to the spirit of the treaty, Germany should not promulgate any prohibition unless the prohibition system comprises no option, i.e., no derogation.

5. However, Germany should be asked to prohibit the exportation of products which she has to restore in kind by virtue of the reparation clauses of the peace treaty. Germany should not be allowed to export freely these products until after the obligations laid upon her by the treaty have been completely fulfilled. As regards the other products no export duty can be applied unless it has been legally established and published in the official bulletin of the Empire [Reich?] some time before its putting into force. It goes without saying that such measures should apply to all destinations and that no intervention on the part of the German administration should be tolerated concerning the regime of the prices imposed on such purchases.

As the Government of the Republic has already commenced to neutralize the risk on these bases it would be pleased to know if the American Government adheres thereto.”

A copy of this note has been transmitted to Rathbone9 for comment [there]on. Please instruct.

Wallace
  1. Albert W. Rathbone, Assistant Secretary, U. S. Treasury, in Europe to handle matters relating to reparations; unofficial representative on the Organization Committee of the Reparation Commission, after Jan. 10, 1920, the Reparation Commission; relieved by Roland W. Boyden, April 1920.