The Ambassador in France ( Wallace ) to the Secretary of State
[Received May 15—12:44 a.m.]
1148. Mission. Technical Committee, appointed to study German commercial regime, presented its report at fortieth meeting of the Conference of Ambassadors held May 12 (see my 1147, May 14, 3 p.m.11). Committee had held three meetings. We had only been notified of the holding of third meeting, Hodge12 attended but deemed it wiser not to take part in drawing up a report based on taking of testimony and examination documents in which he had not participated and therefore withdrew from meeting.
Report starts off by admitting German right to place restrictions on imports and exports and to fix a higher price for merchandise exported than that for which it is sold for home consumption. These restrictions and differential prices, however, must not result in discrimination against the commerce of one or more of the Principal Allied and Associated Powers and the report finds that German Government’s present system of control over imports and exports is such [as] to permit that Government to constantly violate the provisions of article 264 and following articles of German treaty. The Technical Committee, however, feeling that the German Government should be given all the initiative necessary to its commercial rehabilitation, thought that it should base its study of German commercial regime less on the objections of principle which have been raised against system of commercial control set up by German Government than on the violations of article 264 and following articles which were disclosed by Committee’s examination of the facts. The findings of the report on this latter phase of the question consist mainly of form of law with scarcely any findings of fact to support them and in fact the report, which is a brief one, does not attempt to give specific instances as basis for all its conclusions. Since, as indicated above, we had no representatives at first two meetings of Committee, even assuming that Committee had before it the necessary evidence to support its conclusions, we cannot tell whether the Committee was justified in its findings. So far as the report shows it is possible that the evidence may have consisted of only one or two small matters in support of each simultaneously, which would be insufficient evidence on which to condemn whole [Page 280] German system or to make representations to German Government that treaty is being violated. I thought that Hodge might ascertain through British representative on Committee whether satisfactory evidence was, in fact, submitted in support of Committee’s findings. As, however, British representative is in London, it was impossible to approach him on this question but as report was unanimous it may be assumed that he was of the opinion that findings were supported by satisfactory evidence.
Report concluded by submitting following propositions for consideration Conference.
“The findings of the Technical Commission, both on the basis of confidential documents and of original evidence, have brought the Committee to the conclusion that, although it is expedient to allow Germany in as full a measure as is compatible with the treaty of peace all liberty in forming its system of commercial control, this system must, nevertheless, undergo some changes in order to procure [prevent] the practices pointed out above.
The Technical Commission considers, however, that these changes should be as limited as possible, and that the following suggestions would be sufficient:
- Germany to remain free to issue general or limited prohibitions in conformity with the demands of her economic stituation, but she is to give up the abuses of which she has been guilty hitherto in the issuing of individual licenses. In case it is impossible to make the prohibitions absolute, the system which without doubt would best prevent all discrimination would be that of fixing the allotments of imports which the German dealers might buy freely in any country they like up to the amount of the allotment fixed; the German States to cease all interference for the purpose of making or influencing a distribution of these purchases.
- Germany to be able to subject the purchase of imports thus allotted to conditions of credit, exchange, etc., provided that these conditions, which must be published in the journal of the laws of the Empire, be uniform for all countries of export or origin.
- Germany’s power to establish differential prices for export to be recognized, provided that the rulings be published and equally applied, whatever the country of destination.
- Germany may not apply duties or taxes on exports unless these duties or taxes, which will embrace all the products of a similar nature without regard to their destination, have been previously announced and published in the journal of the laws of the Empire.
- Germany to be able to issue a general prohibition of export for any article whenever she shall consider it expedient to do so, having in mind the obligations imposed upon her by the treaty of peace. She, on the contrary, to forbid all exceptions to the export prohibitions. In case the prohibition of exports cannot be absolute, the system which without doubt would best prevent discrimination [Page 281] would be that of fixed export allotments bearing the same guarantees as are provided for the allotments of imports.
- Without detriment to the condescension [conditions] fixed in the preceding paragraphs, Germany would abstain from all interference in private contracts entered into between German subjects and subjects of foreign countries.”
In submitting the report, Serruys12 made a thorough and lucid presentation which created a very favorable impression. Going into considerable detail, he stated that committee had examined some 150 cases of alleged violations of article 264 and following articles. He admitted that matters of this nature were scarcely susceptible of complete and definite proof. For instance, it might be established that an import license had been denied a Belgian and that the motives therefor were none too valid but if the import license for same article had been granted to a Swiss, extent of discriminate[on] could only properly be shown if papers of said Swiss in this respect were obtainable which they are not. As to differential export prices, while recognizing that Germany has a perfect right to fix one price for domestic consumption and another export price for same article, Serruys gave following typical example of proven discrimination export. Price of German machinery is 200 per cent of manufacturing price if bought by citizen of a friendly state, 500 per cent of manufacturing price if bought by citizen of neutral state and 800 per cent of manufacturing price if bought by citizen of ex-enemy state. German Government can make internal and external prices differ as much as it pleases but latter must be uniform. Another typical case of proven discrimination is that Germany will not export [to] Alsace Lorraine, which needs the German article, a commodity which it will export to Switzerland. Alsace Lorraine then, to meet its demands, must buy from Switzerland at an increased price, Serruys also said that Committee had verified various instances of German Government’s substituting itself as party to a contract originally between individuals, thereby, of course, varying the terms of the contract in the sense of increasing the obligation to the foreign party.
Referring to plan submitted by the Committee to the Conference, in particular the recommendation as to allotments of imports and exports, Serruys made following comment: Germany, as pointed out, has absolute right to issue general or limited prohibitions, for instance she is free to say that only a certain amount of wine shall be imported; but this wine should be importable from any country able to supply the demands of German merchants and Germany should not be free to say that said importable amount of wine can only consist of French wines to exclusion of Italian, Greek or other [Page 282] wines. Furthermore the committee felt that in decree [decreeing] such allotments Germany can subject them to certain conditions such as conditions of credit, price, etc. This latter opinion, said Serruys, went further than certain interests would have desired but Committee had realized that it was trying to establish a peace time commercial regime and had therefore tried to approach its task in a spirit of entire broad mindedness and to reach its conclusions accordingly. Amplifying my 1147, Bonin10 thought proposed notification from Conference to German Government might well omit this last point. He thought that though it was open to German Government to impose such conditions and that Conference would not protest if it did so, it was not necessary to specifically call German Government’s attention to this privilege. Derby,11 however, who had already said that he hoped to receive favorable instructions from his Government, thereupon answered that unless Conference’s notification to German Government contained this specific permission, he felt sure his Government would not be prepared to accept report and concur in proposed procedure (see my 1147). Bonin then said that in that case he, likewise, would have to refer the whole matter to his Government for instructions.
Since the question will again come before the Conference as soon as Bonin and Derby have received their instructions, French, Japanese and Belgian delegates being ready to accept report and proposed procedure, I should greatly appreciate instructions at earliest possible moment.