205. PROBLEMS RELATING TO REPARATIONS FROM GERMANY

Statements by Secretary Marshall, March 17 and 18, 1947 1 STATUS OF WAR PLANTS IN UNITED STATES ZONE

The United States holds that the provisions of the Potsdam protocol for the delivery of plants for reparations and for the economic unification of Germany to include a common export-import plan must be carried out concurrently. In order that sufficient resources may be retained, as required by the Potsdam protocol, to enable Germany to become self-supporting without external assistance, the economic resources which will be available to Germany after reparations have been removed must be known. The United States has consistently sought an agreement for the establishment of central German administrative agencies to carry out administratively the principles of economic unification. It has also sought the adoption of a common export-import plan: an interim Allied Control Council agreement was secured which called for the formation of such a plan by October 31, 1945. However, this agreement has not been fulfilled.

When persistent efforts to secure economic unification failed, the United States Representative on the Allied Control Council announced the suspension of further dismantling of plants for reparations purposes. This action was required as a protective measure as the United States could not permit the further removal of industrial equipment from the United States zone of Germany in the face of a recurring financial deficit unless it could be assured that the United States zone of Germany would share in the resources of all Germany. In order that the resumption of reparations may take place promptly when the other provisions of the Potsdam protocol are met, the United States has supported a vigorous program to determine the plants to be made available for reparations and for their prompt valuation. It has continued to dismantle and deliver at the request of the countries to which these plants were assigned 24 major plants included in the program for advance reparations deliveries. It has also dismantled completely 80 of the 117 war plants in its zone and has made the general-purpose equipment in these plants available for allocation and delivery. It will complete the liquidation of the remaining war plants during the present calendar year.

In addition to the 117 war plants and the 24 plants approved for advance delivery, there are 251 plants in the United States zone approved for valuation under the presently agreed level of industry; 1,593 plants remaining to be valuated were approved only in October and November 1946, and their valuation will be completed on schedule.

The current status of reparations from the three western zones is: 174 plants allocated.

524 additional plants approved by the Coordinating Committee for valuation.

808 plants in the machinery and optic industries approved for valuation, with reservation.

1 Department of State Bulletin of March 30, 1947, pp. 563-564.

Several hundred additional plants are at various stages of approval in the Allied Control Authority.

A total of 2,000 plants, more or less, have been selected for reparations by the Allied Control Authority.

However, the United States considers that these figures should be regarded as tentative. Specific determination should be made of the plants to be left in Germany to enable it to be self-supporting. This determination should give consideration to population density and to final fixing of boundaries. Experience during the past 20 months has indicated that the redevelopment of a self-supporting Germany is not an easy task. However, the occupying powers cannot be expected to support the German economy indefinitely. While the basic principle to leave a self-supporting economy in Germany established in the Potsdam protocol is sound, the Allied Control Council should reexamine the presently calculated level of industry without delay to determine its adequacy for the purpose. This can be done successfully only if full information is made available in each zone of occupation. The United States Delegation hopes that agreement may be reached here on the provisions of the Potsdam protocol which have not been carried out, so that reparation deliveries may be resumed.

UNITED STATES POSITION ON THE POTSDAM AGREEMENT 1

I wish to make completely clear the position that the United States has consistently taken with regard to the relation of the Potsdam agreement on reparations to the Yalta protocol.

Immediately upon his return from Potsdam, before any question was raised as to the scope or meaning of the Potsdam agreement or its relation to the Yalta agreement, President Truman in a public address on August 9, 1945 clearly stated his understanding of the Potsdam agreement. I will read to you exactly what he said: "At the Crimea Conference a basis for fixing reparations had been proposed for initial discussion and study by the Reparations Commission. That basis was a total amount of reparations of 20 billion dollars. Of this sum, one half was to go to Russia, which had suffered more heavily in the loss of life and property than any other country. But at Berlin the idea of attempting to fix a dollar value on the property to be removed from Germany was dropped. To fix a dollar value on the share of each nation would be a sort of guaranty of the amount each nation would get a guaranty which might not be fulfilled. This formula of taking reparations by zones will lead to less friction among the Allies than the tentative basis originally proposed for study at Yalta." 2

In July 1946 at Paris the question of German reparations was discussed in the Council of Foreign Ministers. At that time Mr. Molotov presented the same arguments regarding the Yalta agreement which he has put forth here.

Secretary Byrnes, who was present at the Yalta Conference and who, as Secretary of State, took an active part in working out the Potsdam Agreement on reparations, stated the view and position

1 Made on March 18, 1947, and released to the press in Moscow on that date and in Washington on March 19.

2 Department of State Bulletin of August 12, 1945, p. 210.

of the United States Government that the Potsdam agreement took the place of the preliminary agreement reached at Yalta. Secretary Byrnes pointed out the irrefutable fact and I quote from his statement: "The language read by Mr. Molotov showed what Mr. Roosevelt agreed to was only to study as a basis for discussion the suggestion of the Soviet Government. The language of the protocol shows that the Soviet proposal was passed to the Moscow Reparations Commission as one of the proposals to be considered by the commission." 1 The position of the United States Government regarding reparations is that the agreements at Potsdam supersede the preliminary agreements previously reached at Yalta. We will not follow Mr. Molotov in a retreat from Potsdam to Yalta.

206. PROCEEDS FROM GERMAN BUSINESS PROPERTY 2

3

U. S. Reply to Soviet Inquiry, December 14, 1947 3 The United States delegation submits the following reply to questions addressed to it by the U. S. S. R. delegation on December 12, concerning the acquisition of German business properties by United States interests in the United States zone of Germany and concerning profits made by the United States on exports of coal and timber from the United States zone in Germany.

The United States long ago proposed a moratorium on the acquisition of foreign ownership or control of property in Germany except to replace property destroyed or transferred since September 1, 1939, with property similar in character and value. It also proposed a report in the Control Council on:

(A) The policies followed by each of the occupying powers in this respect;

(B) A factual statement of the changes in foreign ownership or control of property in each of the zones since the occupation.

This proposal has not been accepted. The United States, however, has scrupulously carried out, in its own zone, the principle of the moratorium that it proposed.

There is not one single case of German business property that has been acquired by United States interests during the entire occupation. All goods shipped out of the United States and United Kingdom zones and all services provided for foreigners out of German resources have been sold at world market prices. Not one penny of these proceeds is diverted to the use or advantage of the occupying powers. This includes both coal and timber. The United States invites the assistance of the Germans and of the other occupying powers in obtaining favorable terms of trade for German exports. All the proceeds from such exports are used to buy essential imports for the German economy. Total exports from the bi-zonal area from January 1 to November 1, 1947, total 165 million dollars.

1 Made on July 11, 1946, at a meeting of the Council of Foreign Ministers in Paris. Department of State Bulletin of December 21, 1947, p. 1205.

'Concerning acquisition of German business properties by United States interests and profits of United States on exports of coal and lumber in Germany. This reply was released to the press in London on December 14, 1947.

207. STATUS OF GERMAN REPARATION AND DISMANTLING PROGRAM1

Memorandum on the German Reparations Problem From Secretary Marshall, to Chairman Vandenberg of the Senate Foreign Relations Committee, February 4, 1948

February 2, 1948

In recent weeks, while the major proposals of the European Recovery Program have been under continuous Congressional and public discussion, there has been wide-spread criticism directed to the question of the compatibility with that Program of the present German reparation settlement. It has been argued that the dismantling and transfer of German plants blocks the industrial recovery of Germany ard is the major factor preventing the great industries of the Ruhr from contributing to European reconstruction. The conclusion is drawn that the dismantling program increases the burden on the United States, and the costs which must be borne by the American taxpayer. It is asserted that the transferred plants are of small value to the recipient countries and that, in any case, the major beneficiaries are countries which are unfriendly to the United States.

A more limited opposition is addressed to the question of certain plants on the dismantling lists which appear to be technically capable of producing items, such as sheet and strip steel and large diameter pipe, which are in short supply throughout the world because of lack of producing capacity. It is argued that it would be to the advantage of all nations concerned to keep such plants in Germany and to assign them top priorities in supplies of coal, manpower, and other scarce factors of production, rather than to undergo the loss of production time involved in their dismantling and transfer.

In response to these criticisms a fundamental reexamination of all the considerations involved, both economic and political, has been undertaken by the Department of State. The conclusion has been reached that the German reparation program should be continued in its present form, and that such continuance will aid, not hamper, the economic recovery of Europe. Such continuance will, furthermore, leave to the German people adequate resources to enable them to develop a decent standard of life and to contribute through industrial exports to European recovery. The major considerations which led the Department to adopt this conclusion are summarized in the following paragraphs. The question of whether certain of the plants on the dismantling list would be better able to contribute to the world supply of critically short items if retained in Germany is now being investigated.

POLITICAL CONSIDERATIONS

The Need for a Final Settlement of the German Reparation Question

The obligation of the aggressor to pay the maximum reparation compatible with economic and political realities is incontestable. The failure after the first World War to arrive at a realistic solution

■ Department of State Bulletin of February 22, 1948, pp. 238-244. Released to the press February 9, 1948.

of this problem cost American taxpayers and private investors hundreds of millions of dollars, seriously disrupted European and world trade throughout the interwar period, and gave rise to constant frictions in international political relations.

From this unhappy experience it could be concluded that any reparation settlement, to be satisfactory, should be realistically based on capacity to pay, should be carried to final completion within a relatively short period, and yet should be accepted as equitable by all concerned. It was such a settlement that the United States Government consistently sought from the time when planning for the postsurrender treatment of Germany was begun. Without such a settlement, it was certain that the time when Germany could enter into normal economic and political relations with the rest of the European community would be seriously delayed, and it was probable that American taxpayers and investors would once again find that they had paid the German reparation bill.

The Character of Existing Reparation Agreements

The Potsdam agreement embodies the basic features of a reparation settlement satisfactory to the United States. It very specifically lays down the principle that the German reparation bill must be kept within the bounds of Germany's capacity to pay, and recognizes the necessity for a definitive settlement to be carried through within a few years. It takes into account the fears of European countries. of a resurgence of German aggression and yet has the ground for the establishment of a unified, peaceful, and economically viable Germany capable of self-support.

Providing all parties hereto undertook its implementation in a sincere spirit of cooperation, the Potsdam agreement provided the basis for a definitive settlement of the reparation shares of the Soviet Union and Poland on the one hand, and of all other countries entitled to reparation from Germany on the other. The Paris agreement on reparation, which was negotiated in Paris during the last two months of 1945, represented the practical acceptance by these other countries of the Potsdam reparation settlement. These 18 countries in effect accepted the principle of Germany's capacity to pay and agreed among themselves as to their relative shares in a total volume of German reparation assets which at that time was unknown. Such a reparation settlement is unprecedented in history; and in view of the greatly reduced volume of capital equipment being made available under the revised levels of industry, its continued acceptance is even more remarkable.

The Degree to Which the United States Government Is Committed Under Present Reparation Agreements

There can be no doubt that the signatories of the Paris reparation agreement regard the United States as being fully committed thereby to carry out the reparation provisions of Potsdam. There are no legal grounds in international law to justify the conclusion that the Paris agreement is no longer internationally binding.

It is, of course, true that in cases where circumstances have substantially changed since the date of signature of an international

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