462.11 W 892/302a: Telegram
The Secretary of State to the Ambassador in France (Herrick)
181. L–80, for Logan.
(1) It is the expectation of the United States Government that it shall share in the payments proposed by the experts’ plan. These payments will apparently comprise the total amounts for which Germany may be liable to the Allied and Associated Powers for war costs (see section XI, part I17), and are intended to utilize all resources of Germany which may be available for this purpose. Obviously, therefore, the approval of this Government is essential before the plan can be put into full operation in such a way as to affect the rights of the United States. Expressions in support of the plan which have been made public by this Government, such as in the President’s address of April 22,18 have been based on the assumption that the Allied Governments would willingly agree to a fair participation by the United States. To the end that the plan may become satisfactorily operative, therefore, this Government wishes to reach [Page 19] a satisfactory understanding with the Allied Governments concerning American participation in the contemplated payments.
It is not proposed to discuss, in negotiations concerning American participation, any technical question concerning the rights of the United States, as a power which has not ratified the Treaty of Versailles, vis-à-vis the powers which have ratified that treaty, since it is believed that insistence upon such a technical question would be precluded by the manifest equities of the United States as a cobeL–ligerent which contributed so materially to the defeat of Germany and her Allies. Furthermore, as between the United States and Germany, the rights of the United States to compensation have been accorded as fully as the rights of any of the Allied Powers, and the rights of the United States against Germany cannot be disregarded when Germany is dealt with on the basis of its full capacity of payment. The reference, in section XI of part I of the plan, to “all amounts for which Germany may be liable to the Allied and Associated Powers” manifestly contemplates this.
(2) The American claims include, first, accrued Army costs, and, second, other Government claims and claims and debts of American nationals submitted to the Mixed Claims Commission, United States and Germany, for adjudication. In view of the fact that American Army costs were not covered, as would have been equitable, pari passu with Allies’ costs, priorities in favor of this claim are provided in the Wadsworth Agreement,19 cognizance of which has been taken by the Reparation Commission and which has already been approved by all the interested States except France. This fact should be taken into account in any new arrangement regarding distribution.
The second category covers amounts which rank on an equal footing with Allied claims (viz., reparations, clearing payments, restitution, Alsace-Lorraine payments, etc., see top of page 25, experts’ report), which are expected to be covered out of German payments. Naturally, however, all such claims, both American and Allied, rank after service of proposed loan, costs of control and administration, and accrued as well as necessary current army costs.
Apart from Army costs, claims in a total amount of about $1,225,000,000 have been filed with the Mixed Claims Commission, United States and Germany, which has been established to determine the amount of American claims against Germany and debts due from Germans to Americans. In this total there are not included claims for amounts of the nature of those covered by paragraphs 5, 6 and 7 of annex I to part VIII of the Treaty of Versailles. It is understood, however, that the total of Allied claims against Germany would be greatly reduced if the amount of their claims under these headings [Page 20] were deducted from the 132,000,000,000 gold marks. The United States has substantially reduced the total of its claims against Germany by refraining from presenting claims of these categories. The total amount awarded by the Mixed Claims Commission, United States and Germany, will be materially less than the amount of the claims filed. The United States, of course, will seek payment only of its Army costs and of amounts actually adjudicated. The amount of the American claims against Germany will be reduced to a very much further degree than apparently has been the case in the Allied States, by the awards to be handed down by the Mixed Claims Commission. The expectation of the United States to obtain payment of the amounts awarded is therefore reasonable.
(3) With respect to the accrued American Army costs, which amount to about $255,000,000, provision is made in the Wadsworth Agreement for payment in twelve installments which shall have a certain degree of priority over the current army costs of the Allies from 1927. As yet no payments have been received under this agreement. In case none are received before the priority over current army costs becomes effective in 1927, the agreement obviously contemplates that the total amount shall be paid in the eight remaining installments, thus involving annual payments averaging over $31,500,000. Since the Dawes Plan contemplates that substantially all the sums to be paid by Germany during the first two years after its adoption shall be expended in Germany, it is possible that, if the plan goes into effect, no substantial payments would be made under the Army Costs Agreement until 1927, thus leaving to be made the average annual payment indicated above.
When the Army Costs Agreement was entered into, the reparation situation was much more obscure than it now is, and this Government sees no reason why provision should not be made for the payment to the United States of similar installments from the German payments under the Dawes Plan. In view, however, of the fact that this Government will insist upon a participation in Germany’s payments on behalf of other American claims, this Government is) disposed to extend to 20 (or possibly 24) the number of installments provided by the Wadsworth Agreement for the payment of American Army costs, provided that after the first two years there shall be assigned to this Government, for application to other American claims, an additional amount equal to 2½ percent of the annuities paid by Germany under the Dawes Plan.
It should be understood that beginning with 1927 the American Army cost installments shall have priority just preceding current army costs. Provision should also be made that there shall be no priorities preceding the 2½ percent payments except the service of the 800,000,000 gold marks loan, the costs of the Reparation [Page 21] Commission and other bodies and agencies established under the treaty or the Dawes Plan, and necessary costs of armies of occupation. It is estimated that these priorities will amount to about 359,000,000 gold marks per year, to wit: 82,000,000 gold marks for service of the loan (assuming 7 percent interest and amortization by 20-year sinking fund); 37,000,000 gold marks for costs of Reparation Commission and other agents of control (estimated on the basis of present outlay); and 240,000,000 gold marks current army costs.
(4) It is contemplated by the Dawes Plan that the Reparation Commission may sell the 16,000,000,000 gold marks of railway and industrial bonds to be delivered to the trustee, which are to bear 5 percent interest and 1 percent for sinking fund. It should be stipulated that if the bonds are sold, the interest paid on them shall nevertheless be included in the amount of Germany’s annual payments for the purpose of determining the 2½ percent to be paid to the United States Government.
In any agreement for United States participation in a percentage of current payments, there should be included also provision for similar participation in capital receipts, such as from the flotation of a large international loan or from payments in advance.
(5) It is possible that an attempt may be made by the Allied Governments to bring up some question concerning the disposition of enemy property taken over by the United States Government. As the disposition of this enemy property is a matter to be determined by Congress, this Government holds that any arrangement of the kind indicated above should in no way bind the United States with respect thereto. The Treaty of Versailles clearly left each Allied or Associated Government the option of retaining or returning such property. The Allied Governments have exercised their option of retaining it. The Government of the United States must remain equally free to retain or release the property as it may ultimately see fit in the exercise of its option. If any property is finally appropriated to the payment of American claims, the value thereof will, of course, be credited against these claims against Germany.
(6) The statement in paragraph 5 applies not only to property taken over by the Alien Property Custodian, but to vessels, title to which was taken under the Joint Resolution of Congress of May 12, 1917. Both these cases come under section IV of part X of the Treaty of Versailles.
(7) In respect of cables, however, when they shall be definitely allocated to the United States, this Government is prepared to credit the fair value thereof against its claims.
(8) A definite understanding should be reached on maximum amount of current army costs. Including the costs under articles [Page 22] 8 to 12 of the Rhineland Agreement of June, 1919,20 these costs should not in any event be greater than 240,000,000 gold marks, the amount deemed sufficient under the Wilson-Lloyd George-Clemenceau Agreement of June 16, 1919.21 The maximum amount should if possible be reduced below this figure in order to keep the burden of these costs as light as possible that the remainder of German payments be released for other charges. In like manner the costs of the agencies of control and administration should be reduced to the minimum.
(9) Later on, possibly, some arrangement may be made whereby German nationals might be compensated by their Government in German marks out of the American share of the proposed deposit to the credit of the Agent for reparation payments, this Government in turn to receive compensation therefor by utilization of a similar amount from alien property held in the United States. This would be one way to avoid difficulties in regard to transfers should they arise.
(10) You will bear in mind that the Government of the United States is firmly convinced of the equity of an arrangement along the lines that have been set forth above. This Government desires at the appropriate moment to negotiate an arrangement to cover American participation in these payments. Before arrangements for distribution will have become crystallized it is important, obviously, that the Allied Governments be informed of this Government’s position. The Department desires, therefore, to have from you, as soon as possible, any comments you may wish to make on this telegram, together with your suggestions about time and manner in which it would be advisable to indicate to the Allied Governments the position of the Government of the United States in this matter. It is obvious that the plan cannot become operative except with the accord of the United States, of special importance being the friendly interest of this Government in the proposed loan. The Allied Governments should be glad to have this Government associated with them in cooperation as a creditor of Germany rather than to have any lack of harmony between the action of this Government on the one hand and the Allies on the other in seeking to obtain payment of their just claims.
(11) These present proposals rest on the understanding that the plan will be accepted in its entirety. If it is proposed to modify this plan in any material way, however, the Government of the United States would wish, of course, to consider proposed modification on the withdrawal of these proposals as the changes might warrant.
- See “Report of Committee of Experts to Reparation Commission,” Federal Be-serve Bulletin, May 1924, pp. 351, 365; also Great Britain, Cmd. 2105, p. 33.↩
- See circular telegram of Apr. 23, 3 p.m., p. 13.↩
- Army Costs Agreement, Foreign Relations, 1923, vol. ii, p. 180.↩
- Official Gazette of the Inter-Allied Rhineland High Commission no. 1, part i, Jan. 1920, pp. 4–15.↩
- British and Foreign State Papers, 1919, vol. cxii, p. 978.↩