Simms: What do Reds want in China and Far East?
Discussion is certain at Big Three session
By William Philip Simms, Scripps-Howard foreign editor
…
U.S. State Department (July 19, 1945)
740.00119 Control (Italy)/7-1745: Telegram
The Acting Secretary of State to the Ambassador in Italy
Washington, July 19, 1945 — 4 p.m.
Secret
1205
Dept has not yet received British concurrence (urtel 2010, July 17) in appointment of Douglas as Chief Commissioner of AC.
GREW
S[AMUEL] R[EBER]
740.00119 PW/7-1945 Telegram
The Acting Secretary of State to the Secretary of State
[Washington,] July 19, 1945
Top secret
69
Rumors are increasingly current in the press and on the air that we propose to issue a statement elucidating unconditional surrender for Japan. Most prevalent rumor is that formulation of our position was taken by President to Berlin for discussion with Stalin and Churchill and that statement will issue as result of meeting. Another rumor has it that our “terms” to Japan will include agreement not to invade. Question submitted to the Department today by the Associated Press and the International News Services reads as follows: “Is it true that plans for the handling of Japan’s unconditional surrender have been fully formulated and that President Truman has taken them to the Potsdam Conference?” A second question asks whether the United States has “any unilateral definition of unconditional surrender for Japan.”
Seems to us desirable, for reasons affecting domestic situation as well as situation in Japan, to quiet these rumors insofar as possible. Would you approve a reply to the questions in following terms:
The policy of this Government on unconditional surrender by Japan has been repeatedly stated. Elucidations of this policy were issued by the President on May 8 and on June 1. Papers on this subject as well as on a number of other matters of present importance have been supplied to the President, but no plan altering the policy already announced has been formulated by this Government. The implementation of the announced policy will depend, of course, on the situation as it develops. The treatment to be accorded the Japanese under the unconditional surrender terms as defined by the President will depend upon the circumstances under which the surrender occurs. If the Japanese surrender now, before we invade their main islands on our inevitable march to Tokyo, it is logical that the situation thus created should call for treatment which would be different in character and degree from the treatment that would be required if the Japanese delay surrender or if they fail to surrender. The longer the period of the fighting, and the greater the loss of American lives and of the lives of the fighting men of other United Nations, the more severe must be the treatment accorded the Japanese under the announced terms. The reason for this is clear: the longer Japan resists the more certainly shall we know that the military war lords are still in firm control and the more drastic will be the measures required to rout them out and to insure their complete permanent downfall and elimination. We have declared our firm purpose to eliminate the forces in Japan which have made it a threat to the peace of the world, and that purpose we mean to carry out. In order to carry it out, we shall unquestionably be obliged to occupy Japan and to occupy it by an effective, not by mere token force. In the light of the sacrifices already made by the United Nations, it is unthinkable that we should pause or be deflected from the full attainment of our objectives.
In reply to the second question whether the United States has any unilateral definitions of unconditional surrender for Japan, I would say this.
The United States has never considered the possibility of unilateral action against Japan in fighting the war. Neither has it considered, nor will it consider, unilateral action in deciding upon the future of Japan following the war. It will continue in the future, as in the past, to act jointly with other nations concerned.
It will be necessary to reply in the near future to these questions posed by the Associated Press and the International News Services. Failing satisfactory answers I fear that the steadily mounting public clamor for a statement of our proposed terms for Japan will be harmful to the Administration and will create in Japan the impression that we are weakening in our determination to see the war through to unconditional surrender and final victory. This can only retard any movement in Japan to force the leaders to accept unconditional surrender before our invasion. Hope for your instructions as soon as possible.
[GREW]
Log of the President’s Trip to the Berlin Conference
Thursday, July 19:
1000: [Assistant] Secretary McCloy and Lieutenant General Lucius D. Clay (Staff of General Eisenhower) called at the Little White House and conferred with the President.
1300: Lunch at the Little White House. First Lieutenant James M. Vardaman, AUS (Captain Vardaman’s nephew), Colonel Howard A. Rusk, Medical Corps, AUS, and Sergeant Truman were guests.
The President and party left the Little White House at 1545 for Cecilienhof. The third session of the conference was called to order by the President at 1605. The meeting adjourned at 1655 when the President and party left for the Little White House. Mr. Stalin invited the President to stay for a buffet lunch, but the President declined. We reached the Little White House at 1710.
At 2030 the President entertained at a State Dinner at the Little White House in honor of Generalissimo Stalin and Mr. Churchill. Present were: The President, Prime Minister Churchill, Generalissimo Stalin, Mr. Byrnes, Mr. Attlee, Mr. Molotov, Admiral Leahy, Mr. Vyshinski, Sir Alexander Cadogan, Mr. Harriman, Mr. Gromyko, Lord Cherwell, Mr. Pauley, Mr. Davies, Mr. Sobolev, Mr. Bohlen, Mr. Pavlov, and Major Birse.
Mosely-Vyshinsky conversation
| Present | ||
|---|---|---|
| United States | Soviet Union | |
| Mr. Mosely | Mr. Vyshinsky |
740.00119 Control (Germany)/7-2045: Telegram
The Political Adviser to the Representative on the European Advisory Commission to the Ambassador in the United Kingdom
Babelsberg, July 20, 1945
[Extract]
Secret
Victory 115
From Mosely at Babelsberg to London for Winant and State Department at Washington for Grew.
Vyshinsky informed Mosely today Soviet Government has approved agreement on additional requirements except new title and new first paragraph; he expects latter will be cleared shortly.
. . . . . . . . . . . . . .
The Syonan Shimbun (July 20, 1945)
Potsdam talks enter second phase
LISBON (Domei, July 19) – American President Harry Truman, British Prime Minister Winston Churchill and Soviet Premier Josef Stalin have now entered the second phase of their momentous talks at Potsdam, Denis Martin, Reuters correspondent, reported in a dispatch today from Potsdam.
He said it appears now that important preliminary objectives of the “three power” conference have been achieved.
The correspondent reported that main attention in Berlin is still focused on German problems, which cannot be lightly shelved as they affected Europe as a whole.
Salzburger Nachrichten (July 20, 1945)
Japans Flotte aufgestöbert
Japanische Presse diskutiert Potsdamer Konferenz
WASHINGTON, 19. Juli (OWI) – Trägerflugzeuge des britisch-amerikanischen Pazifikgeschwaders haben größere Teile der japanischen Flotte, die sich in der Bucht von Tokio versteckt hielt, erkundet und angegriffen. Es ist dies die erste Begegnung der beiden Flotten seit der Niederlage Japans in der Seeschlacht bei den Philippinen im Oktober 1944. Am fünften Tag richteten sich die amerikanischen Großangriffe der Flotten- und Luftstreitkräfte gegen Industrieziele südlich von Tokio. An diesen Angriffen nahmen zum ersten Male aus Europa nach Ostasien verlegte Bomberstaffeln teil.
Bei den zurzeit in den burmesischen Dschungeln tobenden Kämpfen haben die sogenannten patriotischen Streitkräfte Burmas einen bedeutenden Anteil an den Erfolgen errungen. Diese Guerillakrieger sind ursprünglich aus einer antifaschistischen Organisation, die sich während der japanischen Besetzung illegal gebildet hatte, hervorgegangen. Erfahrene britische Offiziere hatten sie unterstützt und ihnen Anweisungen gegeben. Die eingeschlossenen japanischen Einheiten in Burma wehren sich verzweifelt und wüten in den von ihnen noch besetzten Dörfern. Es wurden Fälle von Massen-Exekutionen bekannt. Auf Borneo ließ die Kampftätigkeit nach. Die siebente australische Division konnte trotz heftigsten feindlichen Widerstandes auf der Hauptstraße nach Samarinda vorstoßen.
Auf Neu-Guinea kämpften sich die australischen Truppen über die Hänge des Prinz-Alexander-Gebirges abwärts und nähern sich den äußeren Verteidigungslinien der japanischen Hauptbefestigungen. Hunderte von Granaten wurden auf die japanischen Stellungen im Südteil der Insel Bougainville abgefeuert. Heftige Regengüsse erschweren hier die Operationen.
Nicht zuletzt wird die Stimmung im japanischen Mutter1and durch die Potsdamer Konferenz bestimmt, die japanischen Zeitungsmeldungen zufolge auf die Ereignisse um Japan eine stärkere Wirkung als je zuvor haben Wird. Man erwartet nach Abschluss der Konferenz ein gemeinsames Kommuniqué zum Problem des Japankrieges und nimmt an, dass die, Vereinigten Staaten alle außenpolitischen Instrumente zur Vorbereitung einer Invasion der Mutterinseln spielen lassen werden. Die japanische Presse diskutiert auch lebhaft die im Zusammenhang mit dem Besuch des chinesischen Ministerpräsidenten bei Stalin eingetretene Lage. Da Stalin ein sehr realistischer Staatsmann ist, erhebt sich selbstverständlich die Frage, welche Konzessionen Tschungking in Erwiderung einer Verständigung mit Moskau eingegangen ist.
Potsdamer Konferenz tagt
BERLIN, 19. Juli (MCC) – Unter Vorsitz von Präsident Truman fand am Mittwochnachmittag die zweite Sitzung der Potsdamer, Dreimächte-Konferenz statt. Alliierte Korrespondenten melden in ihren Berichten, dass die Ergebnisse der Besprechungen bis zum Schlusskommuniqué der Konferenz Wahrscheinlich geheim gehalten werden. Wichtige politische Entscheidungen werden von den führenden Staatsmännern persönlich getroffen. Die Ausarbeitung der Einzelheiten wird den alliierten Fachausschüssen überlassen.
Offiziell wird heute bekanntgegeben, dass sich die „großen Drei“ regelmäßig treffen. Auch die drei Außenminister – Byrnes, Eden, und Molotow – halten regelmäßige Zusammenkünfte ab und arbeiten nun Tagesordnungen für neue Besprechungen aus.
Präsident Truman gibt heute Abend im „Weißen Haus“ ein offizielles Festessen für Stalin und Churchill. Die einzelnen Regierungen werden von je fünf Personen vertreten sein.
Präsident Truman hat General Omar Bradley nach Potsdam berufen, um dessen Ernennung zum Chef der Verwaltung für Veteranenangelegenheiten zu besprechen.
Die Alliierte Kommandantur in Berlin hielt heute erneut eine Sitzung ab. Der russische Vertreter führte den Vorsitz. Zur Beratung dürfte die endgültige Ausarbeitung von Plänen über die ersten interalliierten Treibstoff- und Lebensmittellieferungen nach Berlin gestanden haben Gegenstand der Beratungen war vermutlich auch die Einsetzung von Unterausschüssen zur Behandlung weiterer Verwaltungsfragen.
L’Aube (July 20, 1945)
Élaborées à Potsdam et transmises par l’URSS –
Des conditions de paix seraient fixées au Japon
…
U.S. State Department (July 20, 1945)
Meeting of the Joint Chiefs of Staff, 10 a.m.
JCS 199th Meeting
| Present | ||
|---|---|---|
| Fleet Admiral Leahy | Brigadier General Jamison | |
| General of the Army Marshall | Brigadier General Lincoln | |
| Fleet Admiral King | Brigadier General Esposito | |
| General of the Army Arnold | Captain McDill | |
| General Somervell | Captain Stroop | |
| Lieutenant General Hull. | Captain Oster | |
| Vice Admiral Cooke | Colonel Peck | |
| Rear Admiral Flanigan | Colonel Dean | |
| Rear Admiral Gardner | Colonel Donnelly | |
| Major General Gross | Colonel Stone | |
| Major General Deane | Colonel Riggs | |
| Major General Norstad | Colonel Cary | |
| Brigadier General Cabell | Lieutenant Colonel Woodward | |
| Secretariat | ||
| Brigadier General McFarland | Captain Moore |
JCS Minutes
Potsdam, July 20, 1945, 10 a.m.
[Extracts]
Top secret
. . . . . . . . . . . . . .
Basic Objectives, Strategy and Policies
GENERAL MARSHALL presented to the Joint Chiefs of Staff certain proposals by Lord Leathers for amending CCS 877, the United States Chiefs of Staff paper on this subject.
ADMIRAL LEAHY read out the proposed changes and these were compared with CCS 877.
ADMIRAL LEAHY read a paragraph in regard to shipping which General Somervell proposed for inclusion in CCS 877.
GENERAL MARSHALL said that Lord Leathers would probably accept as a part of the basic objectives the proposal made by General Somervell but he thought that it might better appear as a commentary on the basic objectives rather than as an integral part thereof.
ADMIRAL KING pointed out that Lord Leathers’ paper in fact involved a change in national policy, and therefore, in his opinion the Joint Chiefs of Staff could not consider it.
GENERAL SOMERVELL asked if his paragraph would be accepted by the Joint Chiefs of Staff in the final report by the Combined Chiefs of Staff to the President and Prime Minister.
ADMIRAL LEAHY said that the Joint Chiefs of Staff could not approve the paragraph outright at the present time but he was sure they viewed it in a favorable light. The other Chiefs of Staff concurred.
The Joint Chiefs of Staff:
a. Authorized General Somervell to inform the British Minister of War Transport that the proposed amendments to the basic objectives were not acceptable to the United States Chiefs of Staff.
b. Informed General Somervell that they viewed in a favorable light his memorandum of comment on the basic objectives.
. . . . . . . . . . . . . .
Air Transport Route Between the United States and Moscow
GENERAL ARNOLD recalled that it had taken one year to get air transport operations established with Russia via Teheran. Attempts had been made to shorten the route via Turkey, and although Turkish acquiescence had been obtained, the Russians had not agreed to the adoption of this shorter route to Moscow.
Mr. Harriman had informed General Arnold that since the capture of Berlin he had endeavored to arrange with Mr. Molotov for an air route to Moscow through Berlin but he had found it impossible to complete such arrangements. Mr. Harriman had asked General Arnold to submit two memoranda for consideration by the Joint Chiefs of Staff in this connection.
The Joint Chiefs of Staff: Approved the memorandum to the President enclosing the message to Generalissimo Stalin as presented by General Arnold.
. . . . . . . . . . . . . .
The Commanding General, Army Service Forces to the British Minister of War Transport
Potsdam, 20 July 1945
Secret
Dear Fred: In accord with your request, the U.S. Chiefs were shown a copy of the amendments to basic undertakings informally submitted by you and the substitute dictated during our conversation.
They state they cannot accept your proposal. Though also unwilling to accept the substitute as a part of basic undertakings, their reaction now is to view in a favorable light, its inclusion in the final report of the Combined Chiefs of Staff to the President and Prime Minister with the words “Isles” for “Commonwealth of Nations,” and “civil requirements” in lieu of British “rehabilitation and reconstruction plans.”
Cordially,
BREHON SOMERVELL
Memorandum by the British Chiefs of Staff
[Babelsberg,] 20 July 1945
Top secret
CCS 877/4
Basic Objectives, Strategy, and Policies
-
We have considered the latest proposals of the United States Chiefs of Staff in CCS 877/2. In the attached schedule we have set out in one column the document as proposed by the United States Chiefs of Staff, together with the amendments which we should like to see introduced. In the right-hand column we set out our comments.
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The document, as far as paragraph 6, covers presently known military requirements. Against the possibility that additional military requirements may emerge which might conflict with presently accepted civil shipping programmes, it is considered desirable to add a further paragraph in the terms set out in paragraph 7.
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We recommend that the Combined Chiefs of Staff adopt the basic objectives, strategy, and policies as amended in the attached, and incorporate them in the final report of the TERMINAL Conference.
[Enclosure]
Top secret
| Memorandum by U.S. Chiefs of Staff with Proposed Amendments by British Chiefs of Staff | Comments by British Chiefs of Staff |
|---|---|
| I. Over-all objective | |
| 1. In conjunction with other Allies to bring about at the earliest possible date the unconditional surrender of Japan. | |
| II. Over-all strategic concept for the prosecution of the war | |
| 2. In cooperation with other Allies to establish and maintain, as necessary, military control of Germany and Austria. | We fully agree that the first priority should be given to the main operations against the Japanese Islands. We trust, however, that other operations in the Outer Zone, which will achieve the secondary object of evicting the Japanese from all occupied territories, will receive the fullest possible consideration. |
| 3. In cooperation with other Allies to bring about at the earliest possible date the defeat of Japan by: lowering Japanese ability and will to resist by establishing sea and air blockades, conducting intensive air bombardment, and destroying Japanese air and naval strength; invading and seizing objectives in the Japanese home islands as the main effort; conducting such operations against objectives in other than the Japanese home islands as will contribute to the main effort; establishing absolute military control of Japan; and liberating Japanese occupied territory if required. | |
| III. Basic undertakings and policies for the prosecution of the war | |
| 4. The following basic undertakings are considered fundamental to the prosecution of the war: | The wording of paragraph 4b. as proposed by the United States Chiefs of Staff does not allow for the maintenance of the war-making capacity of such countries as Canada, India or Australia, all of which are making an important contribution towards the prosecution of the war. War-making capacity cannot be confined solely to that required for the defeat of Japan since it is also necessary to meet the requirements for military control of Germany and Austria as stated in the overall strategic concept for the prosecution of the war. If first priority is given only to the support of the war-making capacity of forces in the combat areas, this might lead to the withholding of priority from the forces destined to relieve or support them. For example, the forces in India are required for maintaining the forces in active operations and providing reinforcements. As is known many installations supporting the operations in Southeast Asia Command are outside those areas which can strictly be termed combat areas. Unless these requirements are recognized, the war-making capacity of forces in combat areas will be jeopardised. |
| a. Maintain the security of the Western Hemisphere and the British Commonwealth. | |
| b. Maintain the war-making capacity of the United States and the British Isles insofar as it is connected with the prosecution of this war. | The present wording would appear to limit this assistance strictly to those forces which can take part in the war against Japan. We feel, however, that the necessity for the maintenance of world order, particularly in Europe, must be recognised. Having brought about the liberation of Europe, it would be illogical to allow unrest to occur owing to lack of forces in the liberated areas to keep order. The last sentence of paragraph 6c. is unnecessary as it is now dealt with in paragraph 7 below. |
| a. Maintain the security and war-making capacity of the Western Hemisphere and the British Commonwealth as necessary for the fulfillment of the strategic concept. | |
| b. c. Support the war-making capacity of our forces, in all areas, with first priority given to those forces in or destined for combat areas. | |
| c. d. Maintain vital overseas lines of communication. | |
| 5. In order to attain the overall objective, first priority in the provision of forces and resources of the United States and Great Britain, including reorientation from the European Theater to the Pacific and Far East, will be given to meeting requirements of tasks necessary to the execution of the over-all strategic concept and to the basic undertakings fundamental to the prosecution of the war. | |
| The invasion of Japan and operations directly connected therewith are the supreme operations in the war against Japan; forces and resources will be allocated on the required scale to assure that invasion can be accomplished at the earliest practicable date. No other operations will be undertaken which hazard the success of, or delay, these main operations. | |
| 6. The following additional tasks will be undertaken in order to assist in the execution of the over-all strategic concept: | |
| a. Encourage Russian entry into the war against Japan. Provide such aid to her war-making capacity as may be necessary and practicable in connection therewith. | |
| b. Undertake such measures as may be necessary and practicable in order to aid the war effort of China as an effective ally against Japan. | |
| c. Provide assistance to such of the forces of liberated areas as can fulfill an active and effective role in the present war. or are required to maintain world order in the interests of the war effort. Within the limits of our available resources assist co-belligerents to the extent they are able to employ this assistance in the present war. Having regard to the successful accomplishment of basic undertakings, to provide such supplies to the liberated areas as will effectively contribute to the capacity of the United Nations to prosecute the present war. | |
| d. In cooperation with other Allies conduct operations, if required, to liberate enemy-occupied areas. | |
| 7. Cargo Shipping | |
| Present estimates of the requirements for cargo shipping indicate the position to be sufficiently manageable to provide for the maximum effort in the prosecution of the war against Japan, for the maintenance of the war-making capacity of the British Commonwealth of Nations and the Western Hemisphere, for an additional amount for the reconstruction and rehabilitation of the United Kingdom, and for supplies to liberated areas. Should further military demands arise for maintaining the maximum war effort which would bring about a substantial conflict with British rehabilitation and reconstruction plans, and supplies to liberated areas, the shipping situation will be examined by the two Governments at time in the light of changed conditions. |
The Joint Chiefs of Staff to the President
Washington [Babelsberg], 20 July 1945
Top secret
Memorandum for the President
In the past we have experienced considerable delay in travel of individuals and important official mail between the United States and Moscow. This situation is now susceptible to considerable improvement if the air connection point were shifted from Tehran to Berlin.
Experience has shown that the Russians are extremely hesitant in coming to any agreements with foreign countries regarding air travel for fear of establishing precEdents that might carry over into the postwar period. Efforts to obtain Soviet agreement to a Berlin connecting point have been made without success by both our military and diplomatic representatives.
There is a good likelihood that Marshal Stalin would accede to a personal request made by you, and it is recommended that you either send the attached letter to Mr. Stalin or discuss the matter with him along the lines indicated.
For the Joint Chiefs of Staff:
WILLIAM D LEAHY
Fleet Admiral, U.S. Navy, Chief of Staff to the Commander in Chief of the Army and Navy
President Truman to Generalissimo Stalin
[Babelsberg,] 20 July 1945
Top secret
My Dear Generalissimo: At the present time American air traffic between the U.S. and the USSR is accomplished via Teheran. From the United States point of view this is an extremely wasteful use of critically needed air transport, in addition to the time lost in travel.
The U.S. has now established a military transport service into Berlin for handling official U.S. traffic which could be made available for official Soviet traffic as well. I therefore seek your approval to diverting American and Soviet traffic now carried through Teheran to a route through Berlin.
HARRY S. TRUMAN
Meeting of the Economic Subcommittee, 10:30 a.m.
| Present | ||
|---|---|---|
| United States | United Kingdom | Soviet Union |
| Mr. Clayton | Sir Walter Monckton | Mr. Maisky |
| Mr. Pauley | Sir David Waley | Mr. Sobolev |
| Mr. Murphy |
Memorandum by the Political Adviser in Germany
[Babelsberg,] July 20, 1945
The following is an exposition of ideas submitted by Messrs. Maisky and Sobelev:
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The main task of the Control Council is the elimination of the German war potential.
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For purpose of [blank] war potential in the future, the general policy which will be carried out uniformly in all zones of occupation will be in preventing recovery of those parts of the economy which are the basis of the heavy industry and at the same time giving Germany a free hand in agriculture and in light industry.
-
Guiding ideas for the Control Council and for the German administration: (1) Reparation obligation according to plan which will be established, and (2) Meeting needs of occupying armies. (Russians try to establish that “first” general principle governing the Control Council will be reparations).
(MAISKY) It would be undesirable politically to say that imports have priority over reparations. Everybody would say that reparations come first and imports after because we have suffered so much – capitalists want to have profits from foreign trade and don’t care about reparations for those who suffered. Also when Germans know about it they will try to prove that without very considerable imports they can’t live and can’t export. Same as after last war and there is no reason to believe they won’t repeat same joke again as after last war.
German economy after this war will be a very strictly regulated economy, otherwise she couldn’t pay reparations etc. This regulated economy should provide the necessary means. It should be quite feasible to guarantee reparations and necessary imports. On (?) of principle we have a conviction that if there is a conflict between reparations and imports, then imports must give way. Political repercussions.
MONCKTON says political objectives are met by
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Imports approved by Government’s consent[.]
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Pauley said we are not going to consider that this will be a charge against once for all deliveries (capital assets, etc.).
CLAYTON – American people will not again, as they did after last war, finance Germany. That was President Roosevelt’s position. Germany has very little in way of natural resources except coal, potash, and some poor quality iron ore.
MAISKY suggests also that question of economic regime in Germany and machinery which will regulate this economy – proposes that in postwar period economic life of Germany should be regulated by comprehensive program on annual basis by Control Council and reparations authorities which we should have soon --(?) by Control Council and German authorities. Naturally supervisory power lies – with Control Council to approve and German authorities to execute.
This program should include (1) production, (2) distribution of goods, including unified system of rationing taking into account local conditions, and (3) program of exports and imports, (4) currency, (5) railroad communications and water transport. These are main items.
MAISKY also pointed out that pre-war Germany lived on a very high scale as compared with other European countries. Now he said we must visualize quite another Germany whose level will be that of “Middle” Europe which is very much lower. Therefore imports will be much lower and we will be able to use German iron ore and not Swedish.
CLAYTON said he was thinking of principle of minimum standards of living only and Reparations. Bankers will not finance.
MAISKY said question is theoretical.
WALEY – This is not a school debating society. This is practical.
CLAYTON suggests that we report this as one principle on which we cannot agree.
No – Approval of new paragraph 12.
No – Approval of new paragraph 13.
U.S. Delegation Working Paper
[Babelsberg,] July 20, 1945
Proposed Text
- A primary purpose of occupation is to obtain reparation for the damage and injury caused Allied countries by German aggression. To accomplish this purpose some importation of raw materials and other items will be necessary. The Control Council shall formulate as soon as possible a program of minimum required imports for Germany as a whole. Such a program shall include provision for equitable inter-zonal distribution of supplies available within Germany, so as to minimize the net deficit for, and imports into, Germany as a whole. With full recognition of the principle that the cost of imports must be met from the proceeds of exports from current production or stocks responsibility for the procurement and financing of approved imports for Germany as a whole shall be shared on a basis to be negotiated in the Control Council. Reimbursement for any initial net outlays made in connection with the provision of supplies for Germany shall be a first charge against the German economy.
U.S. Delegation Working Paper
[Babelsberg,] July 20, 1945
Proposed Text
- One of the primary purposes of occupation is to obtain reparation for the damage and injury caused Allied countries by German aggression. To accomplish this purpose some importation of raw materials and other items will be necessary. The Control Council shall formulate as soon as possible a program of minimum required imports for Germany as a whole. Such a program shall include provision for equitable inter-zonal distribution of supplies available within Germany, so as to minimize the net deficit for, and imports into, Germany as a whole. Responsibility for the procurement and financing of approved imports for Germany as a whole shall be shared on a basis to be negotiated in the Control Council. Reimbursement for all net advances made for approved imports into Germany shall be a first charge against the proceeds of any exports from Germany of current production and stocks of goods.
U.S. Delegation Working Paper
[Undated]
Memorandum
With reference to the “Proposed Agreement on the Political and Economic Principles To Govern the Treatment of Germany in the Initial Control Period, Text as Submitted to the Foreign Secretaries by Economic Sub-Committee,” the following recommendations are made:
Economic Principles
Paragraph 13: Proposed alternative substitute for first sentence:
During the period of occupation, Germany shall be treated as a single economic unit and the Allied Control Council shall have authority to issue directives to insure the consistent application of this principle in all zones of occupation.
During the period of occupation, Germany shall be treated as a single economic unit except in those instances as the Allied Control Council shall otherwise determine.
Paragraph 13: There shall be added a further sub-section upon which common policies shall be established in Germany during the period of occupation, as follows:
(g) finance, transportation, and communications.
Paragraph 14(d) on page 3, should either be stricken or amended to read as follows:
Except with the approval of the Control Council or except where determined by the Government concerned to be required for the payments of necessary imports, no grant or credit to Germany or Germans by any foreign persons or Governments shall be permitted.
740.00119 (Potsdam)/7-3145
Report of the Economic Sub-Committee to the Foreign Secretaries
[Babelsberg, July 20, 1945]
Top secret
We have considered the proposals in a memorandum by the United States Delegation on the Economic Principles to govern the treatment of Germany in the initial control period, together with the Annex dealing with reparations.
We have unanimously agreed to recommend the adoption of the Economic Principles set out in the attached clauses for incorporation in the proposed Agreement.
On one matter, which relates both to the Economic Principles and to Reparations, we have to report that agreement has not been reached.
The U.K. and U.S. representatives consider that it is essential that such necessary imports into Germany as are approved by the Governments controlling Germany shall constitute a first charge against exports from Germany whether of capital equipment or current production and stocks of goods. They therefore recommend the adoption of the text attached hereto as Annex II for incorporation in the Agreement on Economic Principles. The Soviet Representatives do not accept this principle and express the view that reparation deliveries should have priority and that imports into Germany, should, if necessary, be confined to the amount that can be paid for by exports from Germany after reparation schedules have been met.
The U.K. and U.S. representatives point out that the provisions of paragraph 18 (to the effect that it shall be the general principle, that in the absence of special reasons to the contrary, each of the zones of occupation, including the Greater Berlin area, will draw its supplies, so far as practicable, from the areas in Germany on which it had drawn before the war) apply to the territory of Germany as it existed on December 31, 1937 whether or not any part of such territory is administered by or ceded to another State.
The Soviet representatives think that any decision on this point at the present time is premature, pending a decision by the Conference on the future boundaries of Germany.
The U.K. and U.S. representatives point out that there are two matters in addition to those mentioned in paragraph 13 on which a common policy is essential in the treatment of Germany as a single economic unit:
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Uniform method of treatment of the German civilian population;
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Subject to normal regulations, free circulation of nationals of U.K., U.S., USSR and France in all zones by land and air.
The Soviet representatives take the position that these two points, while having economic significance, have a wider political application, and that they should therefore not be considered by the Economic Sub-Committee.
The Allied Commission on Reparations has agreed on seven basic principles. The Sub-Committee recommend that these principles (Annex 1) should be accepted.
The Allied Commission on Reparations failed to reach agreement on the underscored last clause of an eighth principle:
After payment of reparations, enough resources must be left to enable the German people to subsist without external assistance. In working out the economic balance of Germany, the necessary means must be provided for payment of imports approved by the Governments concerned before reparation deliveries are made.
As stated above, the Sub-Committee have been unable to reach agreement on this point.
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[Attachment]
Proposed Agreement on the Political and Economic Principles to Govern the Treatment of Germany in the Initial Control Period
Text as Submitted to the Foreign Secretaries by Economic Subcommittee
Economic Principles
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In order to eliminate Germany’s war potential, the production of arms, ammunition and implements of war as well as all types of aircraft and sea-going ships shall be prohibited and prevented. Production of metals, chemicals, machinery and other items that are directly necessary to a war economy shall be rigidly controlled and restricted to Germany’s approved post-war peacetime needs to meet the objectives stated in Paragraph 14. Productive capacity not needed for permitted production shall be destroyed, or shall be removed in accordance with the reparations plan recommended by the Allied Commission on Reparations and approved by the Governments concerned.
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At the earliest practicable date, the German economy shall be decentralized for the purpose of eliminating the present excessive concentration of economic power as exemplified in particular by cartels, syndicates, trusts and other monopolistic arrangements. Notwithstanding this, however, and for the purpose of achieving the objectives set forth herein, certain forms of central administrative machinery, particularly in the fields of Finance, Transportation and Communications, shall be maintained or restored.
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In organizing the German economy, primary emphasis shall be given to the development of agriculture and peaceful domestic industries.
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During the period of occupation Germany shall be treated as a single economic unit. To this end common policies shall be established in regard to:
(a) mining and industrial production and allocation;
(b) agriculture, forestry and fishing;
(c) wages, prices and rationing;
(d) import and export programs for Germany as a whole;
(e) currency, central taxation and customs;
(f) reparation and removal of industrial war potential.
In applying these policies account shall be taken, where appropriate, of varying local conditions. -
Allied controls shall be imposed upon the German economy but only to the extent necessary:
(a) to carry out programs of industrial disarmament and demilitarization, of reparations, and of approved exports and imports.(b) to assure the production and maintenance of goods and services required to meet the needs of the occupying forces and displaced persons in Germany and essential to maintain in Germany average living standards not exceeding the average of the standards of living of European countries. (European countries means all European countries excluding U.K. and USSR).
(c) to ensure in the manner determined by the Control Council the equitable distribution of essential commodities between the several zones so as to produce a balanced economy throughout Germany and reduce the need for imports.
(d) to control German industry and all economic and financial international transactions, including exports and imports, with the aim of preventing Germany from developing a war potential and of achieving the other objectives named herein. For the same purpose no grant of credit to Germany or Germans by any foreign persons or Governments shall be permitted except with the approval of the Control Council.
(e) to control all German public or private scientific bodies, research and experimental institutions, laboratories, et cetera connected with economic activities.
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In the imposition and maintenance of economic controls established by the Control Council, German administrative machinery shall be created and the German authorities shall be required to the fullest extent practicable to proclaim and assume administration of such controls. Thus it should be brought home to the German people that the responsibility for the administration of such controls and any breakdown in these controls will rest with themselves. Any German controls which may run counter to the objectives of occupation will be prohibited.
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The principles and conditions governing the exaction of reparations from Germany are set forth in Annex I to this agreement.
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Measures shall be promptly taken:
(a) to effect essential repair of transport;
(b) to enlarge coal production;
(c) to maximize agriculture output; and
(d) to effect emergency repair of housing and essential utilities. -
In securing the objective mentioned in paragraph 14(c) it shall be the general principle that, in the absence of special reasons to the contrary, each of the zones of occupation, including the Greater Berlin Area, will draw its supplies so far as practicable from the areas in Germany on which it had drawn before the war.
[Annex I]
Agreed Principles of Reparations
I. Removals of property for reparations shall be primarily such as to assist in bringing to an end the war-making power of Germany by eliminating that part of Germany’s industrial capacity which constitutes war potential.
II. Reparations shall be such as will speed recovery and reconstruction in countries devastated at German hands.
III. For the purposes of making a reparations plan, Germany will be treated as a single economic unit.
IV. Any plan of reparations shall be avoided which necessitates external financial assistance either to enable reparations deliveries to be made or to facilitate economic reconstruction required for reparation purposes, or which might, in the opinion of the Governments concerned, prejudice the successful execution of the task entrusted to the Armies of Occupation.
V. To a maximum extent reparations shall be taken from existing national wealth of Germany. While for convenience claims may be stated in money, it is necessary to bear in mind that in contrast to reparations after World War I which were assessed and exacted in money, this time reparations will be assessed and exacted in kind in the form of things, such as plants, machines, equipment, stocks, foreign investments, etc.
VI. In order to avoid building up German industrial capacity and disturbing the long term stability of the economies of the United Nations, long run payment of reparations in the form of manufactured products shall be restricted to a minimum.
VII. In justice to those countries occupied by the enemy, reparations shall be calculated upon the basis that the average living standards in Germany during the reparation period shall not exceed the average of the standards of living of European countries. European countries means all European countries excluding U.K. and USSR.
[Annex II]
- The Control Council shall formulate as soon as possible a program of minimum required imports for Germany as a whole. Such a program shall include provision for equitable inter-zonal distribution of supplies available within Germany, so as to minimize the net deficit for, and imports into, Germany as a whole. Responsibility for the procurement and financing of approved imports for Germany as a whole shall be shared on a basis to be negotiated in the Control Council. Reimbursement for all net advanced [advances?] made for approved imports into Germany shall be a first charge against the proceeds of both exports of capital equipment and of current production and stocks of goods from Germany.