The Ambassador in France (Wallace) to the Secretary of State
[Received June 11—8:17 p.m.]
1274. Mission. Your 1015, May 26, 7 p.m. Your paragraph 1. Regret wrong impression given by first paragraph my 1148 May 14, 9 p.m. There was no disposition on behalf of Allies to prevent our having opportunity to examine the evidence. Serruys claimed that invitation to first two meetings was sent but never reached Hodge.[Page 284]
Answering paragraph 3. Upon receipt of Department’s 1061 June 3, 5 p.m.,13 requested Huntington14 to examine data. Serruys promptly placed dossier containing some 150 cases at his disposal. Dossier consisted of great mass of papers in French and German. Method of procedure was to select a number of typical cases at random. From these it was clear, first, that there is close government control of foreign commerce, second, that there is a practice of secrecy in carrying out this control, third, sudden chaotic changes in customs regulations without warning to business interests, fourth, price discrepancy in favor of some countries as against others with demand for payment in foreign currency in some cases and, fifth, arbitrary intervention in bona fide private contracts at the last moment.
Huntington also attended meetings of the Commission to prepare draft note to German Government (see point 2 my 1217 May 29, 6 p.m.13). He was thereby enabled in addition to examining evidence to discuss matter and learn views of Commission including those of British representative. Huntington approves the report submitted by the technical committee (see my 1148 May 14, 9 p.m.) and concurs in following draft note which will be submitted to the Ambassadors’ Conference at next meeting:
“Draft of notification to Germany as to her commercial regime.
Certain Allied and Associated Powers have been struck by numerous and constant complaints of their nationals against the commercial regime instituted by the German Government, a regime which permits and in certain cases implies the violation of articles 264–279 of the Treaty of Versailles.
By the provisions of these articles, the Allied and Associated Powers have in nowise sought to prevent Germany from taking the measures appropriate for her economic revival which they, on the contrary, desire to assist. For example, they have not forbidden her to establish import prohibitions in order to reduce her expenditures and protect her exchange abroad, nor to limit her exports in order either to enjoy [utmost] benefit of her production or to enable her to meet the obligations for payment in kind provided by the Treaty of Versailles.
But the organizations and the measures which Germany has the right to institute are limited by her obligation not to practice any discrimination direct or indirect to the detriment of the commerce of any one of the Allied and Associated Powers, either by means of import duties and taxes or export duties and premiums, by the application of prohibitions or restrictions, by the creation of monopolies, by any interference of the German State which might have for its purpose or for its result to differentiate as regards the conditions of commercial transactions. The regime established by Germany would not appear to favor uniform conditions in foreign commerce. The reestablishment by a succession of ordinances ending [Page 285] with that of March 22nd 1920, of the absolute control over imports, instituted by the German State for war purposes in 1917, the establishment of certain monopolies which furnish the state the means not only of concentrating purchases abroad but also of taking summary measures of confiscation and taxation of foreign products already imported into its territory, the granting of individual licenses for export or for import subject to variable conditions which, to say the least, negotiations [sic] are impossible to verify as to rate of exchange, credits and so forth, the direct or indirect intervention of the “Reichscommissar” of the “Preisprüfungstelle” and of the local “[Aussen]handelsstellen” which have the effect [of] modifying or annulling contracts freely entered into,—all these are appropriate instruments thanks to which Germany is in a position to practice a policy of discrimination in opposition to the spirit and to the terms of the obligations which she has assumed.
Desiring to leave to Germany all the initiative necessary for her restoration, the Allied and Associated Powers renounce any claim to raise the objections of principle to her commercial regime which would undoubtedly be justified.
However, it is their duty to point out to her the violations of the Treaty of Versailles which have been ascertained and to which this regime has led.
From the documents which the Allied and Associated Powers have exchanged and have subjected to a common examination it appears:
- Regarding imports. 1. That in certain cases the granting or the refusal of import licenses could have had for its purpose and has had for its effect to prejudice the products of certain Allied and Associated countries in favor of the products of other countries. 2. That in particular the monopoly [of] wines and the spirits monopoly have been exercised to the detriment of the products of certain Allied and Associated Powers and have permitted certain measures of confiscation or of taxation whose retroactive feature still further aggravates the arbitrary character of these monopolies. 3. That Germany is rendering inoperative by measures of prohibition the provisions of article 269 which tend to maintain the German market accessible during a period of three years to certain products which the Allied and Associated countries exported to it before the war. 4. That the products originating in and coming from Alsace Lorraine have been subjected, contrary to the stipulations of articles 68 and 268 of the treaty of peace, to import duties. 5. That products of Alsace Lorraine, which within the limits of the contingents fixed for Germany should be admitted freely on the presentation of certificates attesting their origin, have been prohibited [from] importation and subjected to the granting of a preliminary license. 6. That the application to the products of the Saar obtrudes upon [Soar region off] the rulings of the ordinance of March 22, 1920 is carried on contrary to the stipulations of paragraph 31 in the annex to article 50.
- Regarding exports. 1. That by the intervention of the German authorities or of syndicates established and controlled by the Government, differential export prices have been fixed varying according to reasons of political or economic preference, which are forbidden by articles 265 and 266. 2. That export duties have been collected, the existence of which had not been published and [which] [Page 286] indeed it was forbidden to mention on the contracts or on the bills. 3. That the benefits of exporting certain [products or] raw materials [are reserved] either by contingents or preferential derogations to certain countries to the detriment of others whose industry and supplies are thus menaced. 4. That numerous contracts made by the nationals of the Allied and Associated Powers have been modified or broken on the direct or indirect initiative of the German authorities who have intervened to increase the prices, to demand supertaxes or premiums, to exact the payment in the country of destination or of any other country, or to suspend export according to the fluctuations of the exchange, and [that] deals have been broken up in this way for the benefit of buyers of other countries.
For this reason the Allied and Associated Powers invite the German Government to apply to the commercial regime which it has established such modifications as will achieve the following results: 1. In case the prohibitions of import or of export issued by Germany cannot be applied without making exceptions, the contingents admitted for import or export should not be made the object of arbitrary distribution nor of individual licenses arbitrarily granted. 2. No measure of confiscation or of seizure should be applied as a result of imperial monopolies or of any other administrative organization to goods imported into Germany under a regular license prior to the publication of the prohibition or before the expiration of the time interval provided. 3. No tax on export may be collected if it has not been regularly authorized and published in the Journal of the Laws of the Empire. If the German Government makes [use of] export premiums, these premiums stated in marks or converted into foreign currency must be the same whatever the Allied or Associated country to which they are destined. 4. Without prejudice to the conditions considered in the preceding paragraph, the German authorities will withhold themselves from all interference in probable contracts between German nationals and Allied and Associated nationals. The latter may demand the execution of contracts, modified, suspended or broken as a result of a former interference [of the German authorities] such as is described in paragraph 4 above of the section ‘Regarding export [s]’ It is for the German Government to discern and to take the measures which it considers expedient in order that its economic regime may conform to the considerations set forth above. It would moreover be well that the German Government make known its intentions in this regard before the forthcoming conference at Spa.”
The foregoing is on agenda for next meeting. Please instruct at earliest moment possible.