Mr. DAVIS. Oh, decidedly. Senator JOHNSON of California. Certainly, and and the reparation commission has the power to determine the amount of those bonds up to the amount of the bill. Mr. DAVIS. Absolutely. Senator JOHNSON of California. And require Germany to pay them? Mr. DAVIS. Yes, indeed. Senator JOHNSON of California. Now the reparation commission, if you will recall, has no power of cancellation. Mr. DAVIS. Except by unanimous vote. Senator JOHNSON of California. They have even got to go back to their Governments, have they not? Do you not recall that provision? Mr. DAVIS. It does say that the Governments, acting through the reparation commission, as I recall the wording Senator JOHNSON of California. I am not attempting to state with any degree of accuracy my recollection of the treaty, but as I recall it, before cancellation or modification in reality, the reparation commission must have the consent of the Governments concerned. Senator FALL. I have the provision here. Senator JOHNSON of California. Will you read it? Annex 2 to article 244, paragraph 13, sul section (a): Questions involving the sovereignty of any of the allied and associated powers, or the cancellation of the whole or any part of the debt or obligations of Gemany, shall be by unanimous vote, In case of any difference of opinion among the delegates, which can not be solved by reference to their Governments, upon the question whether a given case is one which requires a unanimous vote for its decision or not, such difference shall be referred to the immediate arbitration of some impartial person to be agreed upon by their Governments, whose award the allied and associated Governments agree to accept. Senator JOHNSON of California. That is the provision. Senator MCCUMBER. I think the provision that the Senator from California [Mr. Johnson] refers to is article 234, found on page 251. Senator JOHNSON of California. I recalled the provision, but it was not of sufficient importance to bother with it. Senator MCCUMBER. Giving the right to cancel or not to cancel any part, except with specific authority of the Governments represented on the commission. Senator JOHNSON of California. I thank the Senator. That was what I referred to Except with the specific authority of the several Governments represented upon the commission. Mr. DAVIS. The last sentence in article 233 also bears on the same question: If, however, within the period mentioned, Germany fails to discharge her obligations, any balance remaining unpaid may, within the discretion of the commission, be postponed for settlement in subsequent years, or may be handled otherwise in such manner as the allied and associated Governments, acting in accordance with the procedure laid down in this part of the present treaty, shall determine. Senator JOHNSON of California. I am trying, you know, to form a picture if I can Mr. DAVIS. Yes, I know. I am interested, because we went through all of that. Senator JOHNSON of California. I think I understand now much more clearly than I did before, that we have a bill against Germany that from the the standpoint of the American delegation is greater than Germany can pay; that it is now within the jurisdiction of the reparation commission, that that reparation commission has the power to do as it sees fit, but we will rely on its intelligence and its wise discretion to see that it will take from Germany only such sums as Germany is able to pay. Mr. DAVIS. Yes. Senator HITCHCOCK. Not simply our judgment, but it is stated in article 232, if Germany is incapable of paying the whole amount. Senator JOHNSON of California. But in speaking to Mr. Davis concerning that particular provision he said that did not really have reference to the total bill that we are now speaking of, Senator. Mr. DAVIS. Article 231 refers more to the moral responsibility. Senator JOHNSON of California. That was the distinction he was drawing, I think, probably before the Senator from Nebraska came in; but I quite agree with you. As I said to Mr. Davis in the beginning of the examination to-day, I thought that provision of the treaty showed that the treaty itself recognized the very fact of which we are speaking. Senator HITCHCOCK. I think it does. Mr. DAVIS. It does.' Senator JOHNSON of California. Yes. Mr. DAVIS. But it is not only a question of Germany's capacity to pay. It is also a question of how much the principal interested allied powers can afford to have Germany pay. Assuming that Germany could pay the total amount of her damage that will be assessed in the various categories, let us assume that that would be $40,000,000,000. Germany certainly could only pay that by developing a higher state of efficiency than they have ever had anywhere in the world before, and by restricting her imports to absolute essentials, which would exclude importations from France, especially, and would exclude many importations from England; and she would have to increase her exports very much to France and England and would have to find markets in other parts of the world; and in my judgment, if Germany could pay $40,000,000,000, by the time she has paid $10,000,000,000 or $15,000,000,000 of it those Governments will be wanting her to quit. Senator HITCHCOCK. Is there some restriction placed on Germany in this treaty as to her legislating against imports? Mr. DAVIS. For the first five years there is a clause against the restriction of imports from Alsace-Lorraine and from those segregated portions of Germany; and then for a certain period she shall not pass discriminatory legislation against imports from the allied powers. Senator MCCUMBER. In other words, that she shall give each power the rights of the other powers? Mr. DAVIS. Yes. Senator McCUMBER. The most favored-nation treatment? Mr. DAVIS. Yes. Senator HITCHCOCK. But if Germany is to make a very serious and radical effort to pay her debts rapidly she must in some way restric her imports? Mr. DAVIS. Absolutely. She must go on a war basis and stay there. Senator HITCHCOCK. And that will hurt her neighboring countries? Mr. DAVIS. Decidedly. It is bound to, because the consumption power of the world is not going to increase so rapidly that Germany could do this without taking trade away from the other countries. Even before the war, in the height of her prosperity, Germany's actual commercial trade balance, that is her exports, amounted to $300,000,000 less than her imports. She covered that deficit by profits and other incomes, from her insurance companies and her mercantile marine, and from her investments abroad, and from remittances of Germans living abroad, which were estimated to run up to about $800,000,000 a year, which left Germany with a surplus of about $500,000,000 a year, most of which they invested in foreign countries. Senator JOHNSON of California. I think, perhaps, you misstated that. You mean that her imports were greater than her exports? Mr. DAVIS. That is right. I thought I said that. I said that her exports were $300,000,000 less than her imports. Senator JOHNSON of California. Unless the reparation commission should agree on the amount due, it is a workable treaty? Mr. DAVIS. You can not answer that yes or no, Senator. That goes back to the same point. Once that it was impossible to agree upon a fixed and a reasonable amount which Germany shall be compelled to pay, it became necessary to give more elasticity, more power, to the reparation commission to regulate the amount that would be collected in accordnace with Germany's capacity to pay and in accordance with what they could afford to have Germany pay. But in order to avoid any abuse, or forcing a large country of that kind to practically repudiate or forego the payment of obligations outstanding, we limited the amount which Germany should be actually called upon to take care of at present to 15,000,000,000 in bonds which are to be delivered, and that she shall never be called upon to deliver any more bonds until the reparation commission are unanimously of the opinion that she can take care of them. Now, I can not conceive of an American representative on that reparation commission agreeing to have Germany deliver more bonds unless she is in a position to take care of them, because that is a matter that would concern the United States very much. Senator JOHNSON of California. Is that not a matter that would concern Great Britain and France also? Mr. DAVIS. I think so; very decidedly. Senator McCUMBER. Therefore, would not the same rules and reasons govern them that would govern the American delegates? Mr. DAVIS. Absolutely. Suppose they threw this large country into international bankruptcy. The financial situation that would result would cost the world more, really, than what they expect to collect from Germany, and it would cost them more than anyone else. Senator JOHNSON of California. Was there a specific sum fixed, I mean not definitely, but agreed upon as the amount that Germany ought to pay? Mr. DAVIS. No; we could not agree upon that, Senator. Senator JOHNSON of California. In round numbers, what did your experts agree upon? Mr. DAVIS. Do you think it is advisable to state that? We have got to have negotiations afterwards with the Germans. I have no objection to it, but I am thinking about the advisability of stating it publicly, because they are to Senator MOSES. Is that contained in the memoranda to which you referred yesterday? Mr. DAVIS. I am not positive. Senator JOHNSON of California. I do not want to ask anything that ought not to be asked in that regard. Senator MOSES. Is there any way we could get that-in executive session? Mr. DAVIS. Yes. Senator MOSES. I do not want to ask for it publicly, if you think it ought not to be so stated. Mr. DAVIS. I would be glad to go into details with you. Senator MOSES. Will you state that in executive session before the committee? Mr. DAVIS. Yes; I will be glad to. Senator JOHNSON of California. You drew a distinction between the fixed amount and a reasonable amount, did you not? Mr. DAVIS. What I meant by that was that the amount should be a reasonable amount, that is an amount which Germany could be reasonably expected to pay. No one can tell, of course, just what they could pay within one generation. Senator JOHNSON of California. What do you estimate the wealth. of Germany to be? I understood you yesterday to say about 100 billions. Mr. DAVIS. NO; before the war I estimated Germany's national wealth at $75,000,000,000. Senator JOHNSON of California. When you say $75,000,000,000, what do you put in that? Do you mean within the confines of the European Empire? Mr. DAVIS. Yes; that means her colonies, too. Senator JOHNSON of California. Her colonies, too? Mr. DAVIS. Yes. Senator JOHNSON of California. Her wealth now you estimate to be what? Mr. DAVIS. That depends upon whether you estimate it upon the inflated currency or on the gold basis. Values have increased so that probably Germany's national wealth, according to the present prices, might probably be, I should say would be, $100,000,000,000, less the value of such deductions as may be made, and her colonies less the value of such deductions as Alsace-Lorraine and her colonies. Her colonies were not worth much. Senator JOHNSON of California. The reason of my question was to begin after your deductions. The Saar Valley you estimated at what? Mr. DAVIS. We estimated it at about $200,000,000. Senator JOHNSON of California. And Alsace-Lorraine ? Mr. DAVIS. It is rather difficult. We did not get a specific estimate of Alsace-Lorraine, but the principal values, of course, are the ores there. Senator JOHNSON of California. Yes. Mr. DAVIS. But it was estimated at between 5 and 10 billions. Senator JOHNSON of California. The amount that was taken from her in territory or in value would be about what? Mr. DAVIS. My guess would be $15,000,000,000. Senator JOHNSON of California. What would be the effect upon her of what has been taken from her, on her industries? Mr. DAVIS. It will hamper her industries to a certain extent. Senator JOHNSON of California. To a large or a small extent, or are you unable to estimate? Mr. DAVIS. I am unable to estimate that; but she will still have access to the ores from Alsace-Lorraine, because France is dependent on Germany for certain ores, and they will have to have an interchange of ores. They will not be deprived of that. Senator KNOX. If she gives 15 billions in bonds and 15 billions of territory, then she is giving 30 billions as the result of the war, is she not? Mr. DAVIS. Practically; yes, sir. Senator KNOX. She is getting no credit for the value of her colonies or for Alsace-Lorraine-those are taken from her-plus this 15 billions of bonds? Mr. DAVIS. Practically so. There are some credits. Senator HITCHCOCK. How do you estimate her colonies as being of so little value? Mr. DAVIS. I say I judged-my estimate was made that the territory taken from her would be about $15,000,000,000. Senator HITCHCOCK. Were not her colonies worth anything? Senator JOHNSON of California. When you speak of the Saar Valley, do you mean all the uses of the Saar Valley for 15 years? Was that it? Mr. DAVIS. That is what it was estimated at. Senator JOHNSON of California. Not the actual capital value? Mr. DAVIS. The actual mines and the properties that were taken over. Senator JOHNSON of California. They came to what? Mr. DAVIS. $200,000,000 at an estimate. That has not been fixed yet. The reparation commission is to fix that finally, but that is the estimate that was fixed at the time, approximately $200,000,000. Senator HARDING. The use of that valley enters into the reparation payment? Mr. DAVIS. That is credited to Germany's bill. Senator HITCHCOCK. Did you make any estimate of what the German Government would save on account of the reduction of the army and navy expenditures as compared with prior to the war? Mr. DAVIS. Yes; from $400,000,000 to $500,000,000 a year. Senator HITCHCOCK. Are you estimating her prewar expenditures in that? Mr. DAVIS. Her prewar expense was about $400,000,000 a year; and of course, theoretically, those materials and the labor would be devoted to industries, which would also increase her industrial output. Senator JOHNSON of California. Did the American delegation take any particular position concerning the Saar Valley? |