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population are not prosperous? Can you imagine prosperity without the financial prosperity of the Central Powers, with the finances of Italy, France and of Belgium and their industrial life, and to a large extent England's, depending on what they are going to receive from those people? In that way this reflects upon us. It is a great big partnership. We can not separate ourselves from it. It is of vast consequence to America.

The CHAIRMAN. Mr. Baruch, I just want to ask a question about your figures. Are you quite correct about the population of Austria ? Mr. BARUCH. I think it is something like 70,000,000.

The CHAIRMAN. At the beginning of the war it was said to be about 52,000,000—9,000,000 Austrians, 14,000,000 Hungarians and 26,000,000 Slavs. Those were the figures given at that time, with Germany about 70,000,000. That made about 120,000,000 altogether.

Mr. BARUCH. I thought Austria-Hungary was larger; 130,000,000 was the figure I had in mind. It may be 120,000,000. Bulgaria is in there. That is another 15,000,000.

Senator HITCHCOCK. Our interest in the welfare of Europe, Mr. Baruch, you estimate is because our chief exports go to Europe? Europe is our large customer ?

Mr. BARUCH. She is our large customer.

Senator HITCHCOCK. We have therefore that interest in the restoration of order and of normal conditions in those countries because our export trade depends to a large extent upon it?

Mr. BARUCH. Quite correct.

Senator HARDING. Do I understand you, Senator, that you have got away from your devotion to humanity and are now merely a selfish commercialist ?

Senator HITCHCOCK. I mix the two together.
Mr. BARUCH. I think the Senator will admit that himself.

The CHAIRMAN. I must be on the floor when the Senate opens, I do not want to interfere with the hearing, and I will ask Senator McCumber now to take the chair. I ask the committee to meet in executive session in the committee room in the Capitol at 3 o'clock so that we may dispose of the resolution of Senator Kenyon. I do not want to stop the bearing now to take that up.

Senator Moses. There are others of us who have to be on the floor, Mr. Chairman, and I move that the committee stand in recess until 3 o'clock, then to meet in executive session.

Senator McCUMBER. There have been quite a number of questions asked, but I think we are not quite through with the witnesses. I want to ask a few questions, perhaps three or four, of Mr. Baruch..

The CHAIRMAN. I see no reason why those Senators who care to stay should not continue the hearing.

Senator Knox. I have to be on the floor, and I have a few questions that I want to ask Mr. Baruch.

Senator WILLIAMS. I move that we take a recess.

Senator POMERENE. It is quite apparent that we can not finish to-day with Mr. Baruch and with the other witnesses who are here. A number of Senators want to be on the floor, and I think we ought to adopt the motion made by the Senator from New Hampshire to take a recess at this time.


The CHAIRMAN. I only want it remembered that we are to meet at 3 o'clock this afternoon. These hearings will be continued to-morrow morning at 10.30 o'clock.

Now, will the committee give me their attention for one minute Mr. Taussig is here in regard to the customs provisions of the treaty. I am not aware that any Senator has expressed a desire to ask questions on that subject, and it would be convenient to Prof. Taussig to know whether the committee desire to question him about the customs provisions. I have heard nothing said about it.

Senator MOSES. Upon the examination of these witnesses on this section may depend what we may wish to inquire about further. I think it advisable to request Prof. Taussig to come again.

The CHAIRMAN. Then the committee stands adjourned to meet at 3 o'clock, in the room of the Committee on Foreign Relations in the Capitol, and to continue the hearing here to-morrow at 10.30.

(Thereupon, at 12 o'clock, noon, the committee adjourned until to-morrow, Saturday, August 2, 1919, at 10.30 o'clock a. m.)



Washington, D. C. The committee met at 10 o'clock a. m., pursuant to adjournment, in room 426, Senate Office Building, Senator Henry Cabot Lodge presiding.

Present: Senators Lodge (chairman), McCumber, Brandegee, Knox, Johnson of California, New, Moses, Swanson, Pomerene, Smith of Arizona, and Pittman.

The CHAIRMAX. Prof. Taussig is anxious to go away, and Senator McCumber desires to ask him some questions. We will allow Prof. Taussig to take the stand first this morning.


Senator McCUMBER. Prof. Taussig, there was, in some of the questions asked yesterday, an assumption that the financial clauses were the work rather of British delegates. I want to ask you whether or not, under the terms of the treaty, there are not considerable portions of the treaty that relate to matters that are of peculiar interest and particular interest to Great Britain and France only, in which the United States has very slight, if any, direct interests, and to ask you also to what extent the American delegates took part in the matter of formulating the financial provisions, and to what extent the British delegates took part, and so forth.

Mr. Taussig. You have in mind, Senator, the economic clauses as well as the financial clauses ?

Senator McCUMBER. The economic clauses equally with the financial clauses. I should include them.

Mr. Taussig. Of course, there were some of the economic questions with which the British and French were peculiarly concerned. The arrangement in regard to prewar duties, for example, was one which the British and the French put together and which the United States from the start said that they would not enter into. Naturally the drafting of the details of that was something in which the American delegates took no part, since we would not enter into it anyhow. Those clauses in their details occupy a considerable number of pages in the treaty.

When it comes to the clauses in which the United States entered, all nations took their part, and we took our hand in the drafting, as other nations did, and I do not think it can be said that there was a predominance of any country.

Senator McCUMBER. There were certain interests, especially prewar interests, that were applicable only to Great Britain and France, were there not?

Mr. Taussig. The clearing-house system was peculiarly applicable to Great Britain and France, and, as was explained by Mr. Palmer yesterday, from the first we did not expect to enter that.

Senator McCUMBER. Can you say that the financial or economic provisions were peculiarly the presentation of any one nation

Mr. TAUSSIG. It can not be so said.

Senator McCUMBER (continuing). Outside of those in which Great Britain and France alone were interested ?

Mr. Taussig. It can not be so said. Drafts were received from all the countries—from the United States, from Great Britain, from Italy, from Belgium, from the Slavs-and they were all considered in formulating the clauses as finally presented to the supreme council.

Senator McCUMBER. And you did not follow one recommendation, or the recommendation of one nation or its delegates, any more than that of others ? Mr. TaussiG. No, sir.

Senator McCUMBER. Those are all the questions that I wanted to ask.

Senator POMERENE. Prof. Taussig, you have spoken of the clearing house as applying to Great Britain, France, and Belgium, etc., and I have in mind what Mr. Palmer said bearing upon that subject, which in substance was that that was a matter in which the United States had no particular interest. Do you desire in any way to qualify the statement of Mr. Palmer or to add anything to it?

Mr. Taussit. No, sir; not in the least. I only wanted to point out that when it came to the drafting of the clauses of the treaty we allowed-I will not say we allowed—we naturally accepted a situation in which Great Britain and France, who wished to put that arrangement into effect, undertook the drafting of the clauses; and it could be said in regard to those that the drafting was British and French.

Senator POMERENE. Then, if I understand you correctly, any statement to the effect that the British representatives dominated the framing of these economic and financial provisions is purely voluntary and without any foundation in fact ?

Mr. Taussig. I saw no indications of that of any dominance of any one country.

Senator POMERENE. Yes. Mr. Taussig. I think it may be said that the United States in some respects exercised a greater influence than other countries, in that on occasions we were asked to act as arbitrators when there were disputed questions.

Senator POMERENE. Do you care to suggest what those subjects were?

Mr. Taussir. Yes. For example, there was a question as to certain remissions of duties by Germany, or retentions by Germany; that Germany should not change her duties on certain products. You will find that in the treaty in regard to Italian products. Other countries wished the same advantages from Germany-France, Belgium, Japan, Jugo-Slavia—and it was difficult to settle it; and finally it was left to the American representative, and the subcommittee said, “Whatever the American representative decides we will accept”; and the matter was settled in that way.

The CHAIRMAN. If there are no further questions to ask Prof. Taussig, we are very much obliged to him.

Senator POMERENE. Mr. Chairman, I understood that Prof. Taussig was to be called upon to explain the customs features.

The CHAIRMAN. No; he was kept here because Senator McCumber wanted to ask him some questions. I do not know of any questions on customs that are to be asked him.

Senator POMERENE. I do not know of any, but while the professor is here I should like to ask him if there is any explanation of these customs provisions which he would like to make to the committee.

Mr. TAUSSIG. There is one point to which I think attention may be drawn. Under the customs provisions Germany gives to the Allies most-favored-nation treatment for a period, and the Allies do not give Germany most-favored-nation treatment, and the unilateral character of the arrangement has sometimes been criticized. That provision was made in order' to make the competition between the devastated regions, France and Belgium, for example, on even terms with Germany during the five-year period. The French and Belgians feared that during this period, while their industries were devastated and broken down so that they could not compete with the Germans, the Germans might make special arrangements with neutral countries or with allied countries such as they have made in the past, by which the Germans would give favors, we will say to Sweden, and Sweden would in return give favors to Germany, and that consequently Germany would be enabled to get in her goods and get her trade established during the period when the French and the Belgians were incapacitated from carrying on their businesses; and in order to prevent Germany from making special arrangements for getting in her trade, this stipulation was put in, that during five years Germany should follow the most-favored-nation policy as to the Allies, which would prevent her from making special arrangements for getting her goods into these other countries while France and Belgium were devastated. That is the explanation of this most favored nation arrangement for five years, and for the obligation imposed upon Germany. That is not always understood, why it was that Germany was to give most favored nation treatment to the Allies, and the Allies were not during this five-year period to give it to Germany.

The CHAIRMAN. If there are no further questions to be asked of Prof. Taussig, we will excuse him, and we are much obliged to him.


The CHAIRMAN. Several members of the committee have expressed a desire to ask Mr. Barueh certain questions.

Senator Moses. Mr. Baruch, are you familiar with the operations of the central Rhine commission mentioned in the treaty in article 65 ?


Senator Moses. Then you can not shed any light upon the question asked yesterday with reference to the appointment of an American member on that commission ?

Senator POMERENE. On what page is that?


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