Foreign Relations of the United States Diplomatic Papers, 1938, General, Volume I

840.48 Refugees/853: Telegram

The Ambassador in the United Kingdom (Kennedy) to the Secretary of State

London, October 27, 1938—7 p.m.
[Received October 27—5:50 p.m.]

1253. From Rublee. Tour 643, October 20, 7 p.m.⁴⁶

1. I have worked out a plan to effect transfer from Germany of property of involuntary emigrants, the broad outlines of which are set forth below. I propose to discuss this plan as soon as possible with British Treasury officials who are independently engaged in a study of the problem with a view to preparation of a plan of their own. Accordingly, and in view of the fact that I may go to Berlin in the near future should the reply from the German Government be favorable, I would appreciate your views as to the plan. You will note that the plan assumes that its adoption will strongly tend to remove the existing boycott of German goods and resistance to their purchase by the public.

2. The central idea of the plan is that Germany and the involuntary emigrant should share the proceeds derived from an increase in German exports consequent upon the reversal of the boycott and political appeasement resulting from the settlement of the non-Aryan question in Germany. The emigrant’s share will be used, first, to meet his immediate cash needs for emigration, and, secondly, to secure the service of dollar bonds of the German exchange issued to him in exchange for his wealth in Germany.

3. Specifically it is proposed that there be made available for involuntary emigration one-half of the proceeds derived from all German exports in excess of a “base figure” representing the current level of German exports now prevailing. Provision will have to be made in the definition of the “base figure” to take into account seasonal factors of German export trade on the basis of past experience, to offset fluctuations in the price level and also possibly to take into account fluctuations in the volume of world international trade. Likewise in the case where the increase in German exports yields not foreign exchange but offsetting merchandise imports, arrangements will have to be made for realizing the emigrant’s share in foreign exchange by sale of such merchandise in world markets.

[4] (a) Preferably the Aryanization of non-Aryan property of potential emigrants would cease. Businesses and other property would be Aryanized only coincidently with the individual holder’s emigration. It is recognized, however, that German authorities may not agree to such procedure, and in that case it is suggested that the German Government issue its bonds against transfer of all non-Aryan property other than personal belongings. To the extent that bonds are owned by individuals within the Reich interest charges will be met in marks. They will be a direct obligation of the German Government and will be exchangeable for dollar bonds upon emigration of the owner. All bonds issued will be deposited with the Bank of International Settlements or other suitable international trustee.

5 (b) An initial contribution by Germany to the extent of 50 million pounds out of its present holdings of foreign exchange would be requested to facilitate the rapid emigration of 50,000 people. At the time of emigration the emigrant would receive compensation for his property in German Government bonds payable in dollars. At the same time an amount of bonds sufficient to meet the immediate requirements of emigration (limited to $1000 per individual or $5000 per family) would be retired by the German Government. While the German Government would receive an average of 5 reichsmarks for each dollar of bonds issued or exchanged for reichsmark bonds, the number of reichsmarks paid by an individual emigrant would vary depending upon his wealth, to the end that the less favorable rate obtained by the wealthy would provide funds to make possible the emigration of the poor. The German Government would thus realize a profit of 100% at an average conversion rate of 20 cents per reichsmark. However, it would be required at the same time to commit itself not to use such profit for the purpose of subsidizing exports.

6 (c) The dollar bonds will be a direct obligation of the German Government maturing in ten equal annual installments from the date of issue. Foreign exchange derived from 50% of the exports in excess of the “base figure” will be deposited with the trustee and used first, to provide the minimum requirement necessary (as indicated above) to facilitate emigration, and, secondly, to secure the obligation of the German Government on its dollar bonds. An additional advantage to the German Government will lie in the provision that the bonds shall be non-negotiable. However, should an emigrant desire to realize upon his holdings he will be obligated to offer them first to the German Government, and only if unable to make an agreement for sale to them would he be permitted to sell his bonds to a buyer of his own selection.

7 (d) It would be desirable to form a consortium of bankers to discount short term paper secured by bonds payable out of foreign exchange derived from exports for the immediate requirements of emigration in order to enable emigration to flow evenly despite seasonal fluctuations in export business.

8. Consideration might be given, should Germany refuse to cooperate, to enforcing a plan by unified action on the part of (a) standstill creditors, by insisting that the 25% of foreign exchange derived from sale of tourist marks and only recently released to Germany again be withheld for emigration purposes, and (b) those countries which have an unfavorable trade balance with Germany by affording the emigrant the same protection as they have given their national and resident holders of German securities; i. e. insistence that a portion of the foreign exchange realized by the sale of German merchandise in their countries be held back to provide funds necessary for emigration.

• First. You will note that the plan is based upon the premise that substantial amounts of emigrant wealth can only be transferred from Germany by an increase in its exports, the proceeds of which are to be shared by Germany and the emigrant.
• Second. It is fundamental, if the plan is to have sufficient scope, that the “additional exports,” the proceeds of which are to be shared, should include all exports in excess of a base figure defined with reference to the current volume of German exports. Other suggested methods for making the proceeds of additional exports available to emigrants, by permitting importers of German merchandise to pay partly in foreign exchange and partly in bonds purchased by the emigrant with his blocked marks and sold to the importer, could not produce sufficiently substantial results. Moreover additional exports of this sort would probably involve a special export sufficient to element [sic] which is objectionable. You will note that under the plan the German Government will be asked to agree not to use any of the mark profit which it realizes by the sale of bonds to the emigrant to subsidize exports.
• Third. I feel that the increase in German exports upon which the plan is predicated will be a normal increase as stated in paragraph 1 of your No. 592 of August 27th to Paris. The plan contemplates an increase in exports within the framework of and without substantial modification of existing clearing and other agreements which now govern Germany’s trade relations with other countries. It seems to me that such an increase will not in itself tend to divert the course of trade into artificial bilateral channels and in fact, might tend in the opposite direction. The increase in German exports to be anticipated, if a satisfactory solution of the problem of involuntary emigration can be reached, would be in trade with countries which formerly absorbed Germany’s traditional exports specialties in large volume and might lead in the end to a resumption of more normal trade relations with such countries.
• Fourth. I wish to emphasize moreover, that I do not contemplate, and that no one whom I have consulted in the preparation of the transfer plan which I am submitting to you contemplates, the extension of the Haavara principle to Germany’s trade relations with other countries in connection with the transfer of emigrant wealth. Any such idea would be not only undesirable but impracticable.
• Fifth. As you point out in your cables No. 592 of August 27 to Paris and No. 540 of September 19 it is to be anticipated that Germany will attempt to secure trade concessions from various countries participating in the work of the Evian Committee in connection with any arrangements made for transferring the wealth of involuntary emirgrants from Germany via an increase in German exports. My position with respect to demands for such concessions will, in the first instance, be that the plan proposed by me will substantially benefit Germany as well as the involuntary emigrant and that I am not authorized to negotiate on a basis which would involve such concessions without further consultation with the various governments concerned. You have made it quite clear to me that any such concessions are completely out of the question in the case of the United States. It is, however, possible that other countries may be prepared to grant trade concessions to Germany in order to contribute to the success of a transfer plan for the benefit of involuntary emigrants which, in a measure, would tend to perpetuate and intensify the bilateral export character of the trade relations between Germany and such countries. In that event you may be assured that I will bear in mind the possible effect of such arrangements on the American trade agreement programme and will naturally keep you completely informed as to any developments in this connection.
• Sixth. I note reports in the press that Germany is making an intensive drive for increased foreign trade and that Brinkmann⁴⁷ is shortly to proceed to the United States to discuss trade relations between Germany and the United States. If there is any truth in these reports I should appreciate confirmation and your views as to what the scope of the discussions might be. I have been advised that Brinkmann would be sympathetic to negotiations with respect to involuntary emigration and through his knowledge of the subject and his relations to Goering would be specially helpful to us.
• Seventh. It is of importance to me to have some general understanding of the nature and volume of Germany’s export and import relations with the various countries with whom such relations are of importance to Germany and of the substance of the agreements under which such trade takes place. Through the courtesy of the Embassy here I have sufficient information as to Anglo-German trade relations and agreements. I should appreciate such material and advice as you can send me in this connection. [Rublee.]

Kennedy

46. Not printed.
47. Rudolf Brinkmann, State Secretary in the German Ministry of National Economy.