740.00119 PW/9–1548
Memorandum by the Assistant Secretary of State for Occupied Areas (Saltzman) to the Secretary of State
Subject: Proposals Designed To Facilitate Army Acceptance of the State Department’s Reparations Proposals
- 1.
- Secretary Royall found particular difficulty yesterday in accepting the Department of State’s proposal that all primary war facilities should be made available for reparations claim.
- 2.
- We believe that the following suggestion may facilitate Army acceptance of the State Department’s reparations proposals as a whole.
- 3.
- Secretary Royall expressed serious apprehensions regarding the disruptive economic effects which would be produced by making available for reparations removal all machine tools included among Japanese [Page 1016] primary war facilities. It is true that SCAP has put some of these facilities to use. To remove such facilities would create obvious inconvenience. We believe, however, that Secretary Royall exaggerates that inconvenience because, on SCAP authority, we know that not more than 15% of the machine tools in primary war plants are now being employed in Japan and because the FEC has already authorized SCAP to retain temporarily such plants for purposes of the occupation on notification of his needs to the Allied Council in Japan. We have recognized that the dismantling of such operating plants and facilities at any time would present SCAP and the Japanese with administrative difficulties. We know that the USSR might make propaganda capital out of each use General MacArthur made of his recognized authority to retain them. However, we have felt that these difficulties and dangers were more than outweighed by the certainty that any substantial compromise of the general principles that primary war facilities should be made available for reparations would be exploited throughout the Far East as being an unfair and dangerous repudiation by the U.S. Government of its commitments in the Far Eastern Commission.
Nevertheless, we believe, now, in the light of your talk with Secretary Royall, that the following amendment in our proposal dealing with primary war facilities might satisfy the Army Department without unnecessarily exciting the fears of and provoking anti-American propaganda reaction within the Far Eastern countries.
The suggested re-wording follows:
primary war facilities
All machinery and equipment (including thermal power units) in primary war facilities (army and navy arsenals, privately-owned munitions plants and aircraft plants), should be made available for reparations claim excepting that such of this machinery and equipment as has been authorized by SCAP, prior to 1 October 1948, to produce items necessary for the purposes of the occupation may, at the discretion of SCAP, be retained within Japan providing he makes available for reparations claim machinery and equipment of similar quantity, kind, and quality from the general inventory of Japanese industrial facilities which otherwise would be retained in Japan.1
- Notation by the Secretary: “This appears to be a good proposal. GCM”.↩