V the Industrial Aspects of Reparations

V. THE INDUSTRIAL ASPECTS OF REPARATIONS It has been increasingly realized by the industrialists of the Allied nations that, just as the payment of reparations by Ger many involved the necessity for her to maintain an export sur plus, so the recipient countries may derive all they need of the goods involved by imports from Germany at the expense of the competing industries in the Allied countries, and that even if the surplus of German goods should go to neutral markets they may serve only to displace similar goods hitherto exported from the Allied countries. Hence the anomalous situation has arisen that reparation payments, speaking generally, have been ardently de sired by the creditor Governments, but, speaking particularly, have been feared and resisted by the business men in the same countries.

Balance of Trade Problem.

The Committee on Economic Restoration of the International Chamber of Commerce in Nov. 1924 set up a sub-committee (Sir Josiah Stamp, Dr. Alberto Pirelli and Count Andre De Chalendar) to study the question of international transfers of reparation payment. One report signed by all three, and a supplementary one by the English member, were presented in May 1925, and adopted at the conference in Brussels in June 1925. The chief items and recommendations were : The solution of the "balance of trade" problem:in relation to the liabilities under the Dawes Plan, is to be found in the following order:— I. By a considerable expansion of German exports to general world markets in the ordinary course and under those conditions normal to Germany without any special overhead organization or effort. This carries with itself the possibility of cash payments to the Allied Governments which is, of course, the ideal form for the latter of receiving reparation payments.

2. By arrangements between each Allied creditor country and Ger many with a view of developing, in the widest possible manner compatible with national interests and the obligations of the transfer committee, deliveries in kind or services. This, though possibly in the long run not a major part of the total, is important. Serbia may want

locomotives which she does not produce. Italy may want coal which she may not possess, France or Great Britain may want dyestuffs or potash. These are merely examples of a wide range of goods which Germany can probably deliver without difficulty.

3. By the operation of certain international co-ordination in enter prise and public works, by research and study and practical action, of which we have in this report given an illustration called "Assisted Schemes." 4. Where the three foregoing still leave a gap between the accumu lation of reparation marks and their effective transmutation into external values, it may be possible to gain time and to defer the greater difficulties of forcing the Plan by two methods: (a) The sale of railway, industrial and eventually other German bonds on the international markets and (b) by making permanent investments in Germany which will belong to non-Allied or neutral holders. The method (a) above may play a very important part, either as redemp tion of capital debt or for the balance of the annuities. It must not be forgotten, however, that the extensive use of the plan throws a burden upon the future export surplus in addition to the fixed annu ities. The system under (b) finds certain limitations under the Dawes Plan and in practice, but it may be e.g., that an Argentine resident or a Brazilian will become the owner of property in Germany, or of shares in German companies, by means of the export of food or raw materials to Allied individuals. These sales, as also these loans, are not an immediate method of externalizing German wealth, but they, so to speak, stave off the day of difficulty and gain time. The difficulty of exporting ii,000 outright is transmuted into the smaller difficulty of transferring £50 or i6o interest thereon annually in perpetuity, a difficulty capable of retransmutation into capital at some distant date after the export surplus is no longer monopolized by reparation pay ments, by Germans buying in the investments held by foreigners in their own country.