Belgium, 1938-1941

PSF Belgium 1938-41 Belgium DEPARTMENT OF STATE WASHINGTON January 29, 1938 My dear Mr. President: You will recall that in April 1937 the Governments of France and of the United Kingdom requested Mr. Paul Van Zeeland to undertake a mission of inquiry into the possibility of obtaining a general reduction of quotas and other obstacles to international trade. On January 6, 1938, Mr. Van Zeeland made his report to these Governments and through the Belgian Foreign Office delivered a copy to the Embassy in Brussels with the request that inasmuch as the United States is a party to the Tripartite Declaration of September 26, 1936, it be transmitted to you. In accordance with this request I am enclosing herewith copy of Mr. Van Zeeland's report as it has been received by the Department over the cables. There may be, therefore, slight inadouracies of The President The White House. - 2 - of text therein. I am also enclosing, as of possible in- terest, a summary of the recommendations of the Van Zeeland report which has been made in this Department. Faithfully yours, Enclosures: Mr. Van Zeeland's report. Summary. Department of State BUREAU EA DIVISION } ENCLOSURE TO Letter drafted ADDRESSED TO THE PRESIDENT U.S. GOVERNMENT PRINTING OFFICE 1-1033 CONFIDENTIAL UNTIL PUBLISHED IN THE MORNING NEWSPAPERS OF FRIDAY, JANUARY 28, 1938. CAUTION The following unofficial text of a report made on January 26, 1938, to various European countries by Mr. Paul Van Zeeland of Belgium is made available to the press in Washington. This is not an American Government document and the accuracy of the text 18 not guaranteed. Mr. Van Zeeland is making the document available to the European press on Thursday evening, January 27 for publication in the morning papers of Friday, January 28. I. First part. Introductory. A. Terms of reference. In a communication dated 3 April 1937, the Govern- ments of France and of the United Kingdom did me the honor of entrusting me with a mission consisting, to quote the text, of "an inquiry into the possibility of obtaining a general reduction of quotas and of other obstacles to international trade." In compliance with the terms of this mandate, I have collected the information and suggestions which form the body of this report. B. Preliminary question: International economic collaboration or autarchy? At first sight, it would seem that a task of this kind assumes that one proliminary question is already settled, viz., is it a useful thing to develop interna- tional trade? Or, in other words, "Are the methods, which, taken 8.8 a whole, form the system of international trade, fundamontally proferable to those auterchic tendencies, which, in varying degrees, have inspired either new theories, or a series of practical measures taken in numerous places?" In my opinion, there can be no doubt whatever 88 to the reply. It is the reply which follows from our experi- ence of the crisis as well AS from our experience of the period subsequent to the crisis. The isolated, divorgent and contradictory measures by which the nations, in the first period of the late crisis, attempted to protect themselves against it, and push off the burdon on to their neighbors, have only served to precipitate it and to render it yet more grievous for all. No country was able to escape the crisis, whatsoever may have been its means, its resources, or the dogree of "self support" which it had reached or retained. In -2- In certain large markets, international trade only constitutes P small portion--sometimes less than ton percent--of their total economic activity. Yet these coun- tries were just PB sensitive na any other to the interna- tional movements, both of crisis end of recovery. This does not mean that P. state has only to Allow itself to drift with the general current in order to find prosperity. Here, too, the examples are clear: they show that it is necessary to row and to steer skillfully even to utilize and to follow the line of favorable currents. But it does mean that no country can avoid being influenced by general movements of the international economy, whether for good or for evil. Must we conclude then that autarchy is unattainable? Theoretically, no. It is ovident that autarchy 1s out of the question except in B. large national market, dominated by an exceptionally powerful central authority. If a coun- try, which fulfills these conditions, wished, at any price, to isolate itself from the rest of the vorld--economically, financially, monotarily--it could do so, at any rate to a very large extent, as the existing technique would probably enable it to do 80. But that is not the question. It is rather P. matter of knowing whether such regime--theoretically possible-- would in fact be better then the other; or in other terms, what 18 the price which would have to be paid for its realization? Such n regime involves--as its definition almost implies--an increase in the real cost of living, that is to say, e lowering of the stendard of life of the popula- tion concerned. International economic life is founded on exchanges, which only start or continue 1f the two partics find them to their adventage. Artificially to interrupt those currents is to deprive the country concerned of that advantage. More effort must be made in order to achieve the same result, or rather the result will probably be less, whatever may be the effort. In several old countries with dense populations, it is even doubtful whether under autarchy the present popula- tion could continue to live, to whatsoever level of existence it might resign itself; the regime, if it were pushed to extremes would in the long run be liable to result automatically in a reduction in the number of the population. What has been demonstrated, however, by A whole series of attempts in the direction of greater oconomic independ- enco, 1s the elasticity of the home market. Porhaps the absolute importance of the international market had, in certain cases, boon exaggerated. Whether that be 80 or not, its relative importance appears today to be AS great as ever; its marginal influence 18 real and powerful; what- ever may be the role of the home market, the fostering of international trade must remain an element of capital importance for economic prosperity within the national frontiers. C. -3- C. Results of the first tentative inquiries. We must assume that these views are, in the long run, shared practically unanimously by all statesmen of the present day. In fact, the preliminary consultations which I undertook enabled me to ascertain that everywhere the mission with which I had been entrusted would meet with a most sympathetic reception. As regards the principle of collaboration in order to reduce the obstacles to international economic relations, not a single discordant voice was heard. The attitude adopted in all the capitals has been so sympathetic that it revealed something more than a mere polite, but platonic interest; it took the form of an active interest in an effort the results of which could not fail to be beneficial. But if this first reception was thus far encouraging, the positive reactions, which I was able to record, were loss SO. I was anxious to elicit some concrete suggestions and to collect some practical proposals in order to place them side by side, to compare them, and to evolve from them the rudimonts of a general solution. I could not but note, however, that when once the first and eminently favorable stage had been passed, the attitude, almost everywhere, became qualified by a very marked reserve. It seemed that nobody wanted to commit himself to advance in any direction, before being certain that the path had been taken, or that, at any rate, it had been mapped out by several others. Besides, it must be recognized that the numerous and diverse problems, which a return to better international collaboration is bound to raise, are closely inter-related; in most of these problems, practical solutions can only be conceived in connection with their counterparts in other directions. One can understand that statesmen hositate to take 8 step forward without knowing whether others will make their contribution, and if so, in what form. So, the first conclusion, which immediately emerges, is that we find ourselves confronted with & general problem which equally demands R. general solution. The following, therefore, 18 the general impression, which I gathered in the course of a large number of contacts: On the one hand, every possible interest, evident good will, a definite dosire to collaborate in a general action directed towards the development of international trade; On the other hand, very grent reserve n.B. soon as it comes to the question of actually embarking upon the stage of practical solutions. However, initiatives have been taken which emphasize the general will to ndvance in the direction indicated; and constructive suggestions have been made, for instance, by -4- by the Economic Committee of the League of Nations during its session in June-September, 1937; by the International Chamber of Commerce, in its Congress at Borlin in June- July, 1937; by the committee appointed by the League of Nations to study the problem of raw materials in its report dated September, 1937; et cetera. Besides, a whole scries of suggestions or of interesting and helpful 1deas have been submitted to us in the course of our many conversations both semi-official and private. If one takes account of all the numerous elements, then it seems possible, with some chance of success, to attempt to take action in the direction of international collaboration. I have done my best, therefore, to collect a state- ment of proposals or suggestions which, if applied A8 a whole, would, in my opinion, be of such a nature as to guarantee a fresh impetus to international economic rola- tions, and which, in the long run, would provide indubitable benefits to those national economies which would accept the program. -5- II. Second part. The principal direct obstacles in the way of interna- tional trade and the means for reducing them. The factors which most seriously prejudice interna- tional trade are to be found, some in the economic sphere properly so-called and some in the financial sphere. Among the former, I shall concentrate on three, viz tariffs, methods of indirect protection, quotas. Among the latter, I shall refer to sudden and exces- sive exchange veriations, hindrances to capital movements, and restrictions on payment. I shall examine in turn each of these Doints, and I shall try to find the methods by which it would be possible to reduce the obstacles which they present to international relations. A. Economic sphere. One. Tariffs. (a) The existence of a general tariff is not in it- self to be included in a list of the most serious obstacles to international trade. The average incidence of a tariff taken as a whole has its repercussion on internal prices and especially on the cost of production; little by little, it is absorbed therein. In this way, at the end of a cer- tain time, a sufficient degree of equality of competition is established between home and foreign producers. But there are certain characteristics which produce in the case of customs duties such harmful effects that they constitute a serious, and in some cases an insur- mountable, obstacle to international transactions. We must observe, first of all, that the argument set out above applies only in cases where a tariff has existed long enough for its incidence to have become absorbed in internal prices. During the whole intermediate period, the duties undoubtedly act as a kind of brake, the force of which gradually lessens but which in the meanwhile 18 liable to interrupt or disturb normal or regular commer- cial currents. On the other hand, the diminution of the harmful ef- fects of a tariff taken in its entirety does not extend to the damage caused by duties the amount of which is considerably more than the average incidence of the tar- iff; these, indeed, constitute a real and permanent measure of protection in the degree in which they exceed the average level of the tariff. For example, let us take the instance of a tariff, the average incidence of which 18 ten percent: products, in the case of which there 18 an import duty of one hundred percent, will be effectively and permanently protected to the extent of ninety percent. It 18 clear that duties of this kind must be regarded as real ob- stacles to trade. Finally, -6- Finally, there are tariffs which are applied to such numerous categories of goods, or which have so heavy an effective incidence, or which are 80 complicated that they constitute, by their very nature, a real hindrance to in- ternational transactions. (b) What means are there of improving this state of things? There is no doubt that a general movement for the reduction of teriff duties would acquire a symbolic sig- nificance, and would thus have a powerful moral effect. Unfortunately we are bound to recognize that a gesture of this kind, however desirable it might be, does not at present come within the rango of possibility. But if a policy, consisting from now onward in a progressive reduction of tariff duties, cannot be enter- tained in actual conditions, other measures could be ap- plied which would suffice to achieve the object at which we are aiming within the limits of a more modest but more flexible plan. It would be necessary and it would be sufficient for governments to undertake on the one hand not to raise nor to widen the range of their tariffs and, on the other, to carry out a gradual reduction of such duties as are of an exceptional character and the amount of which 1s notably greater than the average incidence of the tariff. Such transition could moreover be embodied in the most easily adaptable forms, if necessary even in parallel declarations. It would be desirable that another undertaking should be given, of 8. different character, covering the suppres- sion of duties or taxes, prohibitions or restrictions affect- ing the export of raw materials. Such undertakings are not of such a kind 8.8 to revo- lutionize existing situations. Moreover, they could be accompanied by detailed arrangements which would cover the necessary transition stages. The undertaking to file down the sharp points of a teriff could be spread over 8. certain number of years; the level finally reached could be allowed to remain above the average rate of the tariff, provided that the excess over the average did not, in point of fact, retain its prohibitive character. Finally, the suppression of restrictive measures with regard to exports need not imply the complete suppression of duties, so long 88 their effect did not in any way injure the general economic in- terests of importers. But side by side with such untertakings of 8. general character, it aboears that, in the present state of nf- fairs, the negotiation of bilateral commercial agreements, based on the most-favored-nation clause, romains one of the most efficacious methods for reducing tariff berriers. The method has recently been consistently applied by certain countries and it has produced indisputable results. For instance, no one would underestimate the effect which would be produced--cither directly, in its reaction on the two national economies concerned, or indirectly, in its -7- its repercussion on the whole world by the conclusion, in a spirit of international collaboration, of a commercial agreement covering a wide range, between the two great Anglo-Saxon communities. On the other hand, the most-favored-nation clause, in the form in which it has been conceived and applied in the years following the war, has often acted, not as a factor in reducing tariff barriers, but as a supplementary element of rigidity in this sphere. In order that the clause may completely rocover its favorable influence, more respect should be paid to the spirit which originally inspired it. In this connection, among the observations which have been laid before us, there are some which seem to be particularly well founded, and which it would be opportune to adopt in future agreements. These observa- tions can be summed up as follows: The clause should remain, in principle, general and unconditional; Nevertheless, there should be provided an exception, allowing its application to be suspended in the case of countries which employ inadmissible discriminations or which refuse to participate in a general effort aiming at the reduction of obstacles to international trade; Finally, it ought to be drawn in such a way AS not to obstruct the conclusion of group agreements or regional pacts, so long as these do not tend to constitute a dis- criminatory regime, but to lower teriff barriers, and BO long as they are open to the accession of all those who are willing to accept the combined obligations and advan- tages. Two. Indirect protection. Under this general heading, it is usual to set out certain practices which constitute formidable hindrences to international trade. (a) There are a whole series of regulations or of ad- ministrative practices which, by a restrictive interpreta- tion or by an abuse of regulations in force, result in ex- cluding certain foreign products. The best known example is the abuse of sanitary regulations, in order completely to close the home market against verious agricultural products. Another method consists in exaggerating the detail of teriffs and in elaborating specification to such a point that the regulations 80 drawn uo are in fact aimed against some individual producer, while deceptively retain- ing the anpearance of being general regulations. Finally, one must remember how often "dumping" is in- voked as a pretext for measures which prove, in fact, to be fatal not only to unfair competition but to All com- petition from abroad. (b) It 1s, of course, right and proper that each coun- try should defend itself energetically against any "dump- 1ng" methods. It 18 also necessary to apply strict measures -8- measures of safeguard such as sanitary cordons. And there are caser where, failing sufficiently precise specifications, the wisest and most necessary regula- tions would be eluded in an improper way. These reflections serve merely to illustrate the delicate nature of the measures which we are here dis- cussing: but in no degree do they diminish the necessity of removing the hindrances which, in fact, arise from their misuse. (1) Here, too, it seems that the method of bilat- eral agreements would, in the circumstances, be the best fitted to produce rapid results, whether it 1s a question of simplifying and stabilizing customs formali- ties, or of standardizing the criteria applied in deter- mining the origin or place of shipment of goods as well as the value which serves as basis for the payment of ad valorem duties. It would be useful, if, in such cases, the negotiat- ors would base themselves upon the international conven- tions already concluded in this sphere end upon the very detailed studies on these specific points, which have been carried out by the competent organizations and es- pecially by the Economic Committee of the League of Nations and by the International Chamber of Commerce. (11) However, when it comes to applying the stipula- tions of commercial treaties, or when we are confronted by one of those unforeseeable cases such as 80 often arise in business life, then it 1F desirable also to resort to another more elastic procedure, which reserves to the parties concerned all necessary liberty of action, while preventing abuses. For this purpose, it would be wise to have recourse much more widely to the creation of "joint committees", the opinion of which could be invoked by either of the interested parties if he feels that he has cause for complaint against some unfair practice in the nature of indirect protection. Further, in cases where this method of conciliation does not succeed, it would be desirable that interested states should undertake to accent the award of an appro- priate arbitral body. There are already arbitral bodies in existence whose good offices it would be casy to utilize for this purpose. Mention may be made among others of the "procedure for friendly sottlement between states of differences of an economic character" instituted by resolution of the Coun- cil of the League of Nations in 1932 and also the arbitral court of the International Chamber of Commerce. As regards specifications, in the absence of special reasons, it would be highly desirable not to go beyond the limits laid down in the Geneva nomenclature; it ought, if necessary, to be possible to bring any case going beyond those limits before the arbitral body. Three. Quotas. The use of quotas appears from experience to be one of -9- of the most formidable obstacles to the development of in- ternational trade. As the years go by their arbitrary and artificial character becomes more and more evident. Even when they have been fixed according to figures which correspond to the level reached during a period of un- restricted trade, they remain harmful because they hinder desirable developments and prevent indispensable adjust- ments. (a) In the first place I recommend the suppression of industrial quotas. This proposal does not exclude the possibility of spreading out the measures of suppres- sion over & fairly long period, 80 that nobody should be taken by surprise. Neither does it exclude the possibility of replacing the quotas either by tariff duties or if ab- solutely necessary and on a temporary basis by "tariff quotas". This latter method consists of applying to one and the same product a reduced duty for a certain quantity first imported and thereafter a higher rate of duty for quantities imported after the first quote 1s exhausted. Further, the suppression of the quotas would not prevent the state concerned from maintaining or from re- establishing whatever measures it might consider effective in order to resist "dumping" methods. In this connection it is impossible to overlook the serious problem consti- tuted by the competition of countries whose standard of living 18 80 much lower than that of their principal com- petitors that the normal conditions of international com- petition are thereby distorted: it 18 conceivable that measures may be necessary, in strictly defined cases, at least in order to give time for the necessary adjustments to take place without occasioning drastic disturbances. On the other hand, the state which suppresses its quotes appears entitled to demand the reduction or suppres- sion of any duties imposed by other states as a reprisal against such quotas. Finally, the suppression of quotas by no means 1m- plies the suppression of international cartels. Cartel agreements proceed from entirely different conceptions and ought to be treated according to quite different rules. One might if necessary contemplate the maintenance of the cuotas necessary to assure the working of such interna- tional cartels as conform to the general interest. (b) As for agricultural quotas, they have often a special character of their own which distinguishes them from the industrial quotas. First of all, there are numerous cases where the seasonal or perishable nature of these agricultural products constitutes a dominating fac- tor; at a given moment, to import unlimited quantities of, for instance, vegetables or fruits would result in the complete ruin of a whole category of national producers. In such cases, the agricultural quotas can be regarded as aiming not 80 much at a quantitative limitetion as at an orderly regulation of imports throughout the year in such a way AS to make competition normal. Besides, the conditions which prevail in agriculture are beculier. In times of crisis, agricultural produc- tion cennot adant itself to the contraction of demand with the -10- the same elasticity as 1s possible with industrial produc- tion. Often indeed, in order to meet the fall in prices, the agricultural community shows a tendency to increase the volume of its production. A considerable surplus has to find outlets abroad. The number of free markets dimin- ishes. Those which remain then find that they are being swamped because upon them are concentrated all the efforts made to dispose of these products, many of which are perishable and consequently have to be sold quickly and at any price they can fetch. Here, once again, we become aware of the character of reciprocity or of generality, which the solutions contemplated must necessarily present, if we wish them to be practicable or acceptable. In a case of this kind, the abolition of the quotas in question must be undertaken by the states principally interested, practically simultaneously. To put it shortly, in the agricultural as in the in- dustrial sphore, the tendency should be in the direction of suppression or reduction of cuotas. At any rate, agree- ment ought to be reached that no new quotas should be 1m- posed, and that no existing quotas should be tightened up. At the same time certain reservations are required in the case of agricultural quotas;quotas affecting seasonal or perishable products might be retained, but they should be made more flexible with a view to spreading importations over appropriate periods and not to restricting them ab- solutely; further, it might happen that in exceptional circumstances, in order to take account of the conditions peculiar to agricultural production, particularly the dif- ficulty of restricting production at a given moment, transitional measuros might prove necessary and proper, pending a fundamental solution of the problem of production. B. Financial sphere. Of all obstacles to international trade there are none more harmful and more formidable than those which arise either from monetary disturbances or from restric- tions regarding the transfer of capital or of commercial payments. One. The obstacles. (a) Sudden or violent veriations in the mutual rela- tion of currencies run the risk of interrupting the normal currents of trade and causing financial movements along abnormal channels (hot money) at any rate during the period while internal prices are adapting themselves to the new monetary parity. Uncertainty in this sohere is a very grave impediment to the conclusion of business operations over any protracted period, as well as of the credit operations necessary for their normal execution. (b) Restrictions regarding the transfor of funds, even when they are limited to movements of a financial character, deprive international trade of the essential assistance of credit facilities whether on short, middle or long term, without which such trade cannot develop fully and with certainty. But these difficulties, real and serious as they are, annear slight in comparison with those which arise from prohibitions -11- prohibitions and restrictions of commercial payments. These introduce into international economic relations an element of absolute rigidity, which renders impossible most of the spontaneous adjustment which 1s 80 necessary to the normal functioning of the system; in particular they deprive commercial relations of their triangular or multilateral character. In present circumstances, it seems that the continu- ance of exchange control systems and of "cleerings", con- stitutes one of the most serious obstacles to the develop- ment of international trade. Two. How can this situation be remedied? (a) Let us consider first of all what can be done to reduce or to suppress the element of insecurity in monetary matters. Admittedly the best policy would be to reach a defi- nite solution of the problem of the international monetary standard. Such a solution would have to be sought in the reestablishment of the gold standard, though on a con- siderably altered basis. But as yet it 1s probably too early to make any such attempt. It would only succeed if we could find that a whole series of conditions had first been realized such as would permit the return of a suffi- cient degree of international equilibrium both in the economic and financial spheres. Now, this situation can only come about, 80 it seems to me, as the result of a prolonged application of international agreements in both these spheres. The final and definitive solution of the problem must therefore be placed not at the beginning but at the end of the effort of international cooperation towards which we are aiming. However, we must find some interim solutions. There is one which does not appear to raise insurmountable difficulties, and which, while we await the hour for the final solution, should suffice to provide practical as- surance of monetary security for international transac- tions. This would consist in the revision and extension of the agreement reached in the form of a tripartite dec- laration by the United States of America, United Kingdom and France with the adherence of Belgium, the Netherlands and Switzerland. This agreement should be adapted to the new condi- tions and extended in such a way as to embrace all the countries participating in the effort of collaboration. The parties interested would agree to define the re- ciprocal parities of their currencies, in relation to each other, and would pledge themselves to keep any eventual variations within certain limits. The under- taking should extend over a period long enough to free current commercial operations from any monetary risk; it should be for one year or at least for six months--proviso boing made for quite exceptional circumstances, a charac- ter practically equivalent to that of force majeure. The decision to fix the level at which the national currency would be exchanged for foreign monies clearly 1s a -12- a matter involving the sovereign action of each state. But, in a balanced international economy, there are obli- gations and limitations which each state must accept, end duties which each state has towards others. In order to be a fair one, the solution, once again, must be found in a general agreement. As for the form of such an agree- ment, there would be no objection to its retaining the very flexible one of joint declarations. The problem, moreover, has lost much of its extreme difficulty. Most currencies, after the devaluation operations resulting from the crisis, have recovered a relative equilibrium both as regards internal 8.8 well as external factors. Prudence advises us to retain this equilibrium on an empirical footing. On the other hand there remain at present certain countries which have not yet reached this stage; general agreement could be reached as to certain criteria which would enable us to determine, with sufficient accuracy and in an atmosphere of fair play, the level of monetary equilibrium, internal and external factors being alike taken into account. All that 18 required 1s the exist- ence of the will or the desire to arrive at a solution. This will, however, 1s of capital importance. Each coun- try must, above all, rely on itself: it is for each coun- try to take necessary action and pass the necessary meas- ures which will make possible its participation in inter- national action. It has the right to expect of the other states that they will not confront it with artificial ob- stacles, and even that they will await a general attitude in conformity with the requirements of a sincere spirit of international collaboration. But the decisive effort is essentially the responsibility of the individual state and of it alone. Further, as soon 8.8 the international circuit has been reestablished, it 1s probable that n. whole series of our present difficulties, and especially those which have to do with credit, would soon find an easy solution, thanks to the normal intervention of private initiative. (b) Having provisionally dealt with the question of monetary security so far 8.8 foreign trade is concerned, we now come to the disadvantages presented by the vari- ous types of restriction on the transfer of funds from one market to another. (1) As regards movements of a financial naturo, it 18 not only the debtor markets which have edopted such measures but also the creditor markets. The latter by forbidding or restricting foreign lending--and particu- larly loans by means of public issuee-have deprived in- ternational trade of a valuable support. It 1s exceed- ingly desirable that this policy should be altered in con- formity with the other measures of international collabore- tion. (2) But the principal difficulty obviously arises from the imposition of exchange controls and from "clear- ing" systems. In this matter the only attitude which would correspond -13- correspond with the effort of international collaboration at which we are aiming, and which would enable a country to resume its normal place in the framework of the inter- national economy 1s the renunciation of the system in question, that 1s to say, the abolition of exchange con- trols and clearings. Such a measure must of course be introduced by stages; it 1s only possible if 8 certain number of pre- liminary conditions are realized and if precautions are taken to ease the transition. The recourse to clearings 18 a consequence, direct or indirect, of the establishment of exchange controls. The latter are themselves the result of a state of dis- equilibrium between the national economy concerned and the international markets. To attempt to get rid of ex- change controls while allowing this disequilibrium to persist would be a waste of labor. But the measures sug- gested to us, both in the economic and in the monetary sphere, are designed precisely to facilitate e return to equilibrium. To this end measures must be taken, of which many depend solely on the will and the decision of the state concerned, but some are also dependent on the co- operation of other states. It 18 in this atmosphere and these conditions that the freeing of the exchanges might be and should be induced. If the object at which we may aim 1s a return to complete freedom of all movements of funds, it 1s clear that what 1s most urgent and important 1e to free commer- cial transactions themselves and the settlements to which they give rise. It is easily conceivable that, in certain cases, measures of control would have to be maintained, at least temporarily, in order to prevent capital movements which might endanger equilibrium after this had been restored. However that may be, the first and most urgent step 18 to bring about the suppression of all restrictions on payments for merchandise. Whether, however, it is to be carried out in one or in several stages, the suppression of exchange controls requires that the past should first be liquidated. The liquidation of the past implies an agreed adjust- ment of external debts which weigh on the country, as far as may still be necessary and warranted; such adjustment should be carried out on conditions, with regard to inter- est and amortization, which should take into account modi- fications which may have arisen in the respective situa- tions of creditor and debtor; and they must also take into account the general purposes of common interest to all which the measures studied in this report are de- signed to promote. But the liquidation of the past, also and above all, implies the settlement of the clearing arrangement. In this connection we must distinguish between, on the one hand, the arrears which arise out of old credits com- pletely immobilized and regarded as only payable little by little -14- little in the manner of a sinking fund on a long term debt, and on the other hand, the balances on current trade and the current financial debts arising out of recent trans- actions which are due to be paid in full and without any long delay under the operation of the clearing itself. For the arrears of the first category I propose to recognize realities and to have recourse 8.8 far as pos- sible to consolidation. It seems to me that any attempt to take the other course, in DO far as it may succeed in expediting the liquidation of these heavy debts of the past, weighs on the present by reducing the resources which the debtor country could use for imports of goods. In all cases in which such consolidation might prove practicable, it should, however, be carried out in & form which would make it possible to guard, to some extent, against the difficulties which it might otherwise entail for the creditor firms. To this end, it would be desirable in particular that the bonds issued to the creditors by the debtor state should be expressed in the currency of the creditor at the parity fixed in the exchange agreement. In addition, it would be well to envisage some kind of extra facilities for mobilizing the bonds for commer- cial purposes with the help, if necessary, of interna- tional institutions. As regards the other arrears of a current nature, these should be treated in the same way as the new debts, which will be incurred under the restored regime of freedom. The past having been liquidated in this way, it would be desirable to ease the transition. For this purpose it would be necessary to provide those countries which have been freed from restrictions, with appropriate facilities which would remain at their disposal during the period of adjustment. These credits should enable them, on the one hand, to afford the necessary support to their export trade, and on the other to finance a part of their imports--at least at the start. It would seem possible to secure this object to a certain extent by an agreed extension of the method of reciprocal credits recently instituted by the Bank for International Settlements. The banks of issue would open through the Bank for International Settlements credits in favor of one another in the national currency of each of these. These credits would be used to finance the ex- change of merchandise between the countries concerned. The exchange risks entailed by these credits can be set off against one another in 80 far as the trading opera- tions balance. As regards the remainder, the risk might be in part covered by a multilateral clearing carried out by the Bank for International Settlements acting as clear- ing agent. For the balances, that is to say, the amounts which the -15- the Bank for International Settlements could not cover by clearing, it would be advisable to have recourse to the forward exchange markets where these are active and broad. Elsewhere, it would seem advisable to attempt to set up forward exchange markets whose terms would not unduly burden commercial transactions. For the final balances which would not be covered otherwise, it would be necessary to require a special obligation the payment of which would in the last analysis have to be made by the debtor state. This risk would in any case be slight and of a temporary nature. In practice it would be quite a negligible burden. But apart from this system, in consideration of the general advantages which the freeing of commercial set- tlements would bring, and in consideration further of the fact that this freedom would be based on the measures adopted by the interested parties to reestablish the ex- ternal equilibrium of their economy, it would be appro- priate that united effort should be made by all the states prepared to join in a program of international cooperation. Among the suggestions brought forward to give effect to this idea, there is one which appears to me to merit special consideration: this is the possibility of estab- lishing through cooperation of all these states, a common fund, the resources of which might be applied, under ap- propriate conditions, to facilitate the financing of legitimate trade operations during the period of readjust- ment. It seems to me that the international organization designed to assume the direction of such a fund would be the Bank for International Settlements. The activities of the fund should not in any case overlap or compete with those of existing institutions and organizations, whose business in normal times covers the financing of commercial operations. It would come into play only in special cases, to fill permanent or temporary gaps, where normal methods prove insufficient. It may be added that, in this sphere, more than in any other, it 18 highly probable that the necessity for these exceptional methods--useful and, no doubt, indis- pensable during the period of transition--would very soon disappear. If the international economy were to recover its vigor and flexibility, private institutions would quickly respond, in the majority of cases, to the normal needs of business on almost all the international markets. -16- III. Third part General Conditions Necessary For Success I am convinced that the loyal and general applica- tion of a plan composed of suggestions such as have just been outlined might result in giving a new and consider- able impetus to international trade. But if I were to conclude my report at this point I would not have fulfilled the essential part of my mission. Indeed, the important matter is not to provide theoretical definition of the difficulties, nor even to indicate the channel by the application of which they could be solved. The main point is to suggest methods which have some chance of being effectively adopted and of leading to concrete results. We must therefore push our examination rather further, so that we can discover the conditions in which such measures as are recognized as being useful or desirable will have a chance of being effectively applied by the great majority if not by the total number of the interested countries. We must, at this point, admit the considerable diffi- culties which cumber the ground. If we consider the politi- cal plane, reasons to hope for a rapid and cordial rapproche- ment appear slighter than at any moment since 1918. If we place ourselves on economic plane, it seems at first sight as if the most favorable moment for strictly economic collaboration were past. The general check in the recovery movement, and the special economic difficulties of certain great countries, are once again bringing back on to the program schemes of national protection, which bear a remarkable likeness to the efforts of the crisis. In the course of the last few months I have several times had to modify the provisional conclusions which I had reached. I have postponed the submission of this re- port in the hope of collecting fresh indications or of wit- nessing the appearance of more favorable circumstances. At one moment, seeing the obstacles piling up, I asked myself whether it were not preferable to give up attempting at the present moment any major effort of collaboration in the sphere of international economics, and to await & serener atmosphere. But, taking all in all, it scemed to me that such an attitude would have been sterile and even dangerous. One has never the right to renounce action or at any rate to renounce attempted action. No effort is ever completely lost, even if it does not succeed all at once. On the other hand, the persistence of a general situ- ation, which is very confused and bristles with contradic- tions, would incur the risk of very serious consequences, both in the political and in the economic order. More and more numerous are they who take account of this fact and draw the conclusion that a rapid and profound reaction is necessary. In such conditions, the moment 18 perhaps favor- able, in spite of appearances, for & new attemot, based on reason and common interest. Let -17- Let us try, therefore, to find the way for a practi- cal solution, without going beyond the limits of this mission, which is of an economic character, by pretending that it can be artificially isolated from the political factors which surround it and which impose uoon it their conditions. A. The exact position of the problem. The first reflection which occurs in this connection is that the difficulties which we have just been examining all interlock; in the same way the solutions which we have surgested are closely interdependent. Tariff policy, ex- change control, capital movements, stabilization of our- rencies, quotas, clearings, et cetera, are closely con- nected problems. Cne cannot hope really to solve them except by means of & comprehensive solution. On the other hand the attitude of a number of coun- tries is dominated by the policy of certain great powers whose economic influence 18 a determining factor either for the world as a whole, or for certain parts of it. It is necessary then, in order that any solution should achieve its maximum efficacy, not only that it should cover the whole network of interlocking difficulties, but also that it should unite a very large majority, if not practically all of the nations concerned. But international trade is not an end in itself, it is only a means directed towards an end. This end cannot be other than the improvement of the standard of life of the masses, the increase of the well-being of the pooula- tion. Under our present organization this end is pursued by national entities. Here we reach the heart of the problem. In order to diminish the obstacles to international trade and to restore to it a degree of flexibility which will allow of its de- velopment, it 18 necessary in particular to induce many countries to mitigate or to abandon the measures of pro- tective self-sufficiency which they have adopted in differ- ent degrees and at different times, and to return to a more complete system based on the international division of labor. But these measures of national protection were not resorted to lightly or frivolously, and if the countries protected by them still retain today the armor which they felt bound to put on, it is not without serious reasons. We must therefore make our dispositions in such a way that the new system shall offer to all participators ad- vantages greater than those of the position in which they now find themselves; and at the same time that the transi- tion from one system to the other may be brought about with- out danger, and even with immediate advantage. As our task is above all to achieve practical results, it is not necessary to enter into a long analysis of the reasons which have provoked all these measures of national protection. Nevertheless, it is necessary to underline certain characteristics of the present situation. Once more let us emphasize the futility of the arbi- trary distinctions based on views or arguments of an over- simplified -18- simplified nature, in the light of which attempts are made to divide the nations into distinct groups. In fact, we do not find on one side states devoted to a policy of complete authrchy and on the other side faithful to a strict observance of international free trade. If we go beyond appearances and refuse to be satisfied with verbal distinctions, we cannot fail to note that on the one hand all states, one after another, have had recourse to measures of their own, differing widely in conception and effect, but all inspired by the idea of national protection; while on the other hand they have all continued and must continue to submit to a system of international exchange. Movements BO general and BO pronounced must without doubt have a deep-seated cause. Let us recognize that international economic relations are today on a very differ- ent basis from those of the period before the war. Former- ly international exchanges were exchanges effected across frontiers between individuals, private firms or private interests. Today international economic relations are taking on more and more & character of exchanges between economic units constituted by the states themselves. It is true that the part played by the private firms and under- takings which operate on either side as the connecting links in commercial exchanges remains without exception an essen- tial one, but in determining the flow of trade consider- ations of national interest are assuming more and more imoortance; transactions are every day more and more domi- nated by decisions emanating from the constituted authori- ties and inspired by & national economic policy. That is a fact which we must take into account. The tendencies which are driving states towards a grenter degree of economic autonomy are based on widely differing considerations. Some of these tendencies are purely political in their origin; others are bnsed on con- siderations of & social order, such as the problems of em- ployment or of the adaptability of labor; others again are due to ourely economic anxieties. Among the latter there 1s one which is loudly invoked in several countries in which an effort is being made to substitute synthetic raw materials for the corresponding natural products, and which may be summarized as follows: If the countries which are producers and exporters of raw materials refuse to take payment in manufactured goods, or place obstacles in the way of entry of such goods into their own country, the countries which are importers of these materials find themselves obliged to give up buying them, or at least to limit their purchases as much 8.5 pos- sible; they must thus devote themselves to finding other sources of these same products or look for products which may take their place, especially synthetic products. The protectionist policy of the countries which are producers of raw materials thus reacts against themselves as well as being damaging to those who were counted among their tradi- tional customers. At the samo time it must be added that this line of argument, though not rejected in principle, is regarded in other quarters 8.6 outting the problem in an oversimplified form -19- form or even as reversing the true order in the alloca- tion of responsibility; according to this view, we are in the presence of a vicious circle brought about in the first instance by the reduction of the importation of certain staple world products by countries which formerly imported them. However this may be, in spite of the ravages of the last crisis, in spite of the profound modifications which the international economic structure has undergone, in spite of the increasing difficulties of all kinds with which business men are faced, international commercial CX- changes had nevertheless until recently shown signs of re- newed vigor, a striking proof of their inevitable necessity. The volume of international trade had returned during the second three months of 1937 to & level corresponding to that reached in 1929, that is to say, at the height of the period of prosperity. Alas, we are still looking for the means of freeing ourselves from these hindrances; and already we are threatened with & fresh setback! Is it simply a flattening of the curve, is it a minor crisis, or must we fear worse? The economic policy which we now adopt may, if it is good, mark the beginning of a new era of prosperity in the world; it may also, if it is bad, transform the present hesitations of trade into & new and more serious crisis. It therefore becomes more urgent than ever to restore international economic relations to a sound basis. The events of the last few months have served to emohasize another aspect of the problem. International trade may be not only impaired by causes of an economic and financial nature; it may suffer equally severely from political and especially from moral influences. For €00- nomic activity to develop it is not sufficient that a de- mand should exist, that the products should be available and that capital should be abundant; there must also be the will to show enterprise, to act, to run the risks in- herent in the production and exchange of goods. These con- ditions require an atmosphere in which at least a certain degree of confidence, good will, sincerity, order and clarity prevails in international relations. B. Actual hindrances. Let us therefore seek to determine in a spirit of complete objectivity what are the difficulties or obstacles which, without being direct impediments to international trade, nevertheless hinder the smooth flow of commercial relations between nations. (One) Review of the difficulties. There are those who see the origin of their diffi- culties in the unequal distribution of raw materials, or more exactly, in the fact that certain great countries do not possess in the territory under their control the raw materials which they consider themselves to require. At -20- At this point we cannot but record that certain states see no solution to the problem except in the re- distribution of colonies. There are others who attribute their difficulties to the exaggerated protectionism of countries or groups of countries which ought in their view to absorb a larger share of their products. Particularly numerous are those who protest loudly against systems of preference which distort the normal channels of trade. Others again blame the unequal distribution of capi- tal and the lack of adequate understanding on the part of the great markets which dispose of accumulated funds. Certain states insist on the important influence on their economy of demographic problems, particularly those connected with emigration and immigration. Intelligent Judges do not fail to emphasize the de- pressing influence on financial markets--both in the moral and practical sphere--of the absence of a definite settle- ment of international political debts. Many circles out the blame above all on the effects of the widespread policy of intensive rearmament. They express anxiety at the probable reaction which will take place when the orders due to rearmament will have reached saturation point; they emphasize the disastrous effects which the budgetary burden of rearmament imposes, or is liable to impose, on national economies, either directly or through its indirect repercussions. Finally, there are many who maintain that political anxieties are determining factors in the present retard- ing of trade, and that these anxieties are more of an ob- stacle to the development of international commercial re- lations than all other hindrances put together. There 1s no doubt that repeated shocks to the basic principles of international law exercise a pernicious in- fluence on the economic as well as on the political rela- tions between the nations. It is time to bring back to light the sanctity of plighted engagements and the neces- sity for respecting the rules of international law. Whatever may be the degree of truth contained in these various assertions, we are bound to take the asser- tions themselves as facts and to see in them problems which call either directly or indirectly for solution. (Two) Some of the suggestions elicited. Suggestions have indeed already been made in widely varying directions with a view to solving these different points. It would be impossible to enumerate them all and I shall confine myself to reproducing a certain number which seems to me to have aroused interest in many quarters. With a view to assisting the solution of the colonial problem it has been suggested that the regime of mandates should be revised, that the national element should be removed -21- removed and that the system should be made completely international, both from the economic and the political point of view. In the case of colonies properly so called, it would perhaps be opportune to seek for the means of gen- eralizing the system of the open door which obtains in the conventional basin of the Congo, a system the general result of which it 18 imoossible to criticize. In those colonies when such a regime cannot be organized certain circles have recommended that the possi- bility be examined of creating privileged companies, whose activities would be strictly limited to the economic sphere and whose capital would be divided internationally in such a way as to offer real guarantees of impartiality. With regard to raw materials & most interesting pro- posal has been formulated tending to the supply of colonial goods in exchange for industrial products. An agreement would be concluded between a colony and an industrial state, and colonial goods supplied would be carried to an account and paid for by the execution in return of important public works-bridges, railways, ports, et cetera. The intermediate finance would be provided by the motropolitan state. Lastly, the rules of international law might, in the opinion of many, be specified and reenforced in such a way as to secure from seizure or confiscation in every case, even in time of war, private property held in colonial territories, whatever the nationality of the owner. (Three) Guarantees of & political nature. The conclusion which arises to my mind from the multiolicity of problems inherent in these complaints, demands and suggestions is that it 1s time to face them and submit them to a close discussion. This, however, can only be done in an atmosphere of loyal cooperation in which each one concerned would seek in his own interest to render assistance to the others. Docs such a spirit exist? If not, everything possi- ble must be done to create it. If it exists steps must be taken to dissipate the mutual misunderstandings which pre- vent it from coming to light. Surely there is no object in attempting to conceal from oneself the difficulties of such an undertaking. In this report I have deliberately debarred myself from touching on the strictly political aspects presented by a number of questions with which we are faced. It 1s, however, impossible to ignore the fact that we are work- ing in their shadow. There are indeed some which are so intimately bound up with certain of the suggestions which I have made that it is impossible to abstract them. Thus one can understand the preoccupation of those who fear to see the financial assistance, the credit facili- ties, or the facilities for obtaining suoolies which would be -22- be granted in the execution of the remote program of action diverted from their object to serve war-like ends. Guarantees would have to be provided in this respect, and such guarantees are necessarily political in their nature. Again, is it possible to provide an economic solu- tion for the difficulties with which certain national economies will be faced when the point of saturation has been reached in their rearmament policy, without evoking the problem of the limitation of armaments? Conversely, it also appears to be true that any con- certed policy for the limitation of armaments would re- quire, if its application were not to be obstructed, means accompanied by economic measures which would also have to be internationally concerted. C. A pact of international collaboration. Faced with a tack of this complexity, our best course vill be to attempt a new method very general in its nature, which should appeal to mutual good will, but the object of which will be noove all to secure to each participant the tangible advantar es of collective action. The moment has thus perhaps arrived to propose the conclusion of a "pact of economic collaboration" embracing the largest possible number of states, and in any case open to all. This pact might perhaps, drawing inspiration from a precedent which has proved successful, take the form of a collection of joint declarations. The object of the pact would be to assist the participants to raise the standard of living of their nationals by improving the general well being. It would contain two parts, one negative, by which the participating countries would bind themselves to abstain from a certain number of practices contrary to the interests of the com- munity of participants; the other positive, but general in its nature, by which the participating countries would bind themselves one towards the other to take uo and to examine in a spirit of understanding and mutual assistance the problems and difficulties arising in their economic rela- tions. Under the aegis of this general pact, and in accord- ance with its spirit, might be concluded separately other more detailed arrangements incorporating, in 80 far 88 they could be satisfactorily worked out, the numerous sugges- tions which I have mnde or referred to in this report. I have given those suggestions deliberately in a succinct and simplified form; I have intentionally re- frained from entering into details; it has been my object to confine myself to the principal outlines. If the ideas on which these suggestions are based should be accepted, it would be comparatively easy to develop them, to give them precision, and to run them into the appropriate techni- cal moulds. On most of the points which I have mentioned prolonged studies have been undertaken; plans for putting them into effect could be quickly drawn up with the assis- tance of specialized organs such as the Economic and Financial -23- Financial Committees of the League of Nations, the Bank for International Settlements, the International Chamber of Commerce, the International Institute of Agriculture, et cetera. As for the international arrangements for putting them into force, certain of these by their very nature would have to be of general application; others would in- clude only certain countries; others again would have to take the form of bilateral agreements. D. Methods of realization. How are we to assure practically and effectively the success of such a plan? Let us recognize that to obtain the full results it would be desirable that an effort of this kind should receive the support of the great coun- tries which are leaders in economic activities and in the different political tendencies. (1) It is desirable, then, to bring together as soon as possible representatives of the principal economic powers; and at least of France, the United Kingdom, the United States of America, Germany anó Italy. There would be advantages in a method which would ensure that this contact were of a purely preparatory nature. The object would be above all to take soundings and to prepare the ground. The agenda would contain four or five questions drawn up in some such terms 8.8 the following: (One) Are you agreed to take part in an Attemot at international economic collaboration? (Two) Do you, with this object in view, accept as a basis for discussion the main lines of the present re- port? (Three) What are the points in this report, if any, which you would wish to see either omitted or emohasized? (Four) What points not mentioned in this report do you think it desirable to include within the scope of the attempt to be undertaken? The answers given in the course of this preliminary and informatory stage would clearly determine the future course of the whole undertaking. (2) If, as may be hoped, the answers were constructive and such as to encourage a serious hope, it would be ap- propriate to pass to a second stage. This stage would be intrusted to a bureau appointed for the purpose; an invitation would be addressed to all states asking them to acquaint the bureau within the shortest possible time, and following the framework of the present report, with the difficulties which they meet with in their international commercial relations, as well as with the measures of assistance which they feel entitled to expect from other statos and those which they are pre- pared to render. The -24- The answers to this invitation would constitute substantially a review of the complaints brought by the nations against the economic commonwealth, and of the needs for the satisfaction of which outside assistance or collaboration would be more effective than national effort. The bureau would proceed as rapidly as possible to classify and synthetise these answers. It would analyze their contents in an entirely objective manner, extract from them such suggestions as seemed reasonable, and would so draw up, basing its work on the present report, a program of constructive action. (3) It is then that we should pass to the third and final stage of the undertaking. It would be necessary to ensure through the diplomatic channels that there was an agreement of principle among the interested parties on the main lines of the program drawn up. If & sufficient number of states, including the great economic powers, took up a favorable attitude the bureau referred to above would be instructed to draw up the texts for signature. Lastly, & conference would be summoned to put the final touches to the necessary diplomatic instruments and to exchange signatures. As I conceive it the pact BO concluded would be only a portico to the work which it would be necessary to con- tinuo, to build up, to complete end to adapt to changing circumstances in a process of perpetual evolution. Nevertheless, the conclusion of such a pact would be & gesture of capital importance, for it is this pact which would give the initial impulse and would impart to the world the impetus which it is awaiting in order to recover its confidence in the pacific destiny of nations. And this portico might perhaps lead to a new edifice in which, side by side with the halls devoted to economic collaboration, would arise others in which might be worked out the political conditions of a lasting peace. Brussels, January 26, 1938. P. Van Zeeland POSITIVE RECOMMENDATIONS OF THE VAN ZEELAND REPORT SUGGESTION Substance Procedure A. Proposals or suggestions which, if applied as a whole, would, in Mr. Van Zeeland's opinion, be of such a na- ture as to guarantee a fresh impetus to international economic relations, and which, in the long run, would provide indubitable benefits to those national economies which would accept the program. 1. Tariffs (a) Undertakings by Governments To be embodied in the most easily not to raise or to widen the range adaptable forms, if necessary even in of their tariffs. parallel declaration. (b) Gradual reduction of such Side by side with such undertak- duties as are of an exceptional char- ings of a general character, it appears acter and the amount of which is that, in the present state of affairs, notably greater than the average the negotiation of bilateral commer- incidence of the tariff. cial agreements based on the most- (c) Suppression of duties, taxes, favored-nation clause, remains one prohibitions or restrictions on the of the most efficacious methods of re- export of raw materials. ducing tariff barriers. (d) As regards the most-favored- nation clause, it should remain, in principle, general and unconditional. Nevertheless, there should be pro- vided an exception, allowing its ap- plication to be suspended in the case of countries which employ inadmissible discriminations or which refuse to par- ticipate in a general effort aiming at a reduction of obstacles to inter- national trade. It ought to be drawn in such - 2 - SUGGESTION Substance Procedure a way as not to obstruct the conclusion of group agreements or regional pacts, so long as these do not tend to consti- tute a discriminatory regime, but to lower tariff barriers, and 80 long as they are open to the accession of all those who are willing to accept the combined obligations and advantages. 2. Indirect Protection Each country should defend itself en- It seems that the method of bilat- ergetically against "dumping" methods. Each eral agreements would, in the circum- country should also apply strict measures stances, be the best fitted to produce of safeguard, such as sanitary cordons. rapid results. Such bilateral agree- However, all abuses and misuses of in- ments, however, might well be based direct protection, including exaggerations upon international conventions and of tariff classification, should be avoided. special studies already concluded in this sphere. Adjustment of particular cases through "joint committees". Arbitration. 3. Quotas (a) Industrial quotas: Suppression of industrial quotas, by stages where nec- essary. This does not exclude possible replacement either by tariff duties or if absolutely necessary and on a temporary basis by tariff quotas (The analysis here is confused by half-hearted support of the idea that if quotas are suppressed States might have to use means to resist "dumping" methods, especially by countries having low standard of living). - 3 - SUGGESTION Substance Procedure (b) Agricultural quotas: Tendency should be in the direction of suppres- sion or reduction of quotas, or at any rate, agreement ought to be reached that no new quotas should be imposed, and that no existing quotas should be tightened up. But seasonal quotas may be retained and transitional measures (undefined) might be neces- sary and proper. 4. Financial Measures (a) Avoid sudden or violent Revision and extension of the variations in the mutual relations agreement reached in the form of a of currencies. The parties inter- tripartite declaration, which should ested would agree to define the be adapted to the new conditions and reciprocal parities of their curren- extended in such a way as to embrace cies and would pledge themselves all the countries participating in over short periods to keep eventual the effort of collaboration. variations within certain limits - proviso being made for exceptional circumstances, practically equivalent to force majoure. (b) Creditor countries should alter policies of forbidding or restricting foreign lending "in con- formity with other measures of inter- national collaboration". (c) Abolition of exchange controls and clearings by stages, and with necessary precautions to ease the transition. - 4 - SUGGESTION Substance Procedure (d) Agreed upon adjustments of ex- ternal debts which should take into account modifications which may have arisen in the respective situations of debtor and creditor. It is suggested that frozen balances on current trade and current financial debts arising out of recent transactions should be given priority as to time and terms over old credits completely immobilized. (e) Credits. To ease the transi- Exchange risks entailed by these tion it would be necessary to provide credits to be set off against one those countries which have been freed another in so far as the trading op- from restrictions with appropriate erations balance (meaning obscure). facilities which would remain at their The remainder of the risk to be disposal during the period of adjust- covered in part by multilateral ment. clearing carried out by the B.I.S. National central banks appar- acting as clearing agents. ently to offer credits to each other through the B.I.S. both for liquidating These loans to be extended by the past and for financing current opening through the B.I.S. credits transactions. in favor of one another. To an undefined extent, pos- sibly long term loans. (f) Creation of "common fund" to This to be handled under di- facilitate financing of legitimate rection of the B.I.S. trade operations during the period of readjustment. - 5 - SUGGESTION Substance Procedure B. Suggestions put forward by Mr. Van Zeeland, not as direct recom- mendations of his own, but as selec- tions from suggestions which have been put forward and which seem to him to have aroused interest in many quarters. (1) Revision of mandates regime so as to make it completely interna- ti onal both from the economic and po- litical point of view. (2) In colonies, generalization of the open-door system which now ob- tains in the conventional basin of the Congo. (3) Possibility of creating privileged companies with capital divided internationally to engage in colonial exploitation. (4) Special barter arrangements between a colony and an industrial state for the exchange of colonial products for public works. (5) Revision and reinforcement of rules of international law to protect private property in colonial territories against seizure and con- fiscation even in time of war. C. Proposal by Mr. Van Zeeland of a "Pact of International Collaboration". The pact should embrace the largest possible number of States, being in any case open to all. This pact would contain two parts, one negative, by which the participating countries would bind themselves to abstain from a certain number of practices contrary - 6 - SUGGESTION Substance Procedure to the interests of the community of participants; the other positive, but general in its nature, by which the participating countries would bind themselves one towards the other to take up and examine in a spirit of under- standing and mutual assistance the problems and diffi- culties arising in their economic relations. Under the aegis of this general pact, and in accord- ance with its spirit, separate or more detailed arrange- ments might be concluded. Mr. Van Zeeland does not give further details, saying it will be comparatively easy to develop such details, to give them precision and to run into appropriate tech- nical molds. Without tying into any clear pattern of procedure or relationship the many items and elements that he reviews, Mr. Van Zeeland then concludes his report with this pro- posal, which he labels "Methods of Realization": "It is desirable, then, to bring together as soon as possible rep- resentatives of the principal economic powers; and at least of France, the United Kingdom, the United States of Ameri- ca, Germany and Italy". The object would be to take soundings and prepare the ground. The agenda would contain, according to Mr. Van Zeeland, four or five questions drawn up in some such terms as the following: (a) Are you agreed to take part in an attempt at in- ternational economic collaboration? (b) Do you, with this object in view, accept as a basis for discussion the main lines of the present report? (c) What are the points in this report, if any, which you would wish to see omitted or emphasized? (d) What points not mentioned in this report do you - 7 - SUGGESTION Substance Procedure think it desirable to include within the scope of the attempt to be undertaken? If the answers given are such as to encourage a serious hope, Mr. Van Zeeland then states that it would be appropriate to pass to a second stage. This stage would be entrusted to a bureau appointed for the purpose, which would ask all States to inform it as to the difficulties which they are now meeting in their in- ternational commercial relations, as well as the meas- ures of assistance which they feel entitled to expect from other States and those which they are prepared to render. The bureau would then clarify and synthesize these answers and analyze their contents, and then draw up, bas- ing its work on the present report, a program of construc- tive action. It is then that Mr. Van Zeeland contemplates the third and final stage, which would be the ensuring, through diplomatic channels, of an agreement on principle among the interested parties on the main lines of the program drawn up. If a sufficient number of States, in- cluding the great economic powers, took a favorable atti- tude, the bureau referred to would be instructed to draw up the text for signature. Lastly, then a conference would be summoned to put the final touches to the necessary diplomatic instruments and to exchange signatures. Belgum -1938 Palais de Brurelles 30 mai 1938. En ce jour de souvenir, le peuple belge, fidèle à une pieuse tradition qui lui est chère, couvre de fleurs les tombes des vaillants combattants américains qui ont généreusement versé leur sang pour que règnent le droit et la liberté. Je m'associe de tout coeur à ce témoignage de profonde reconnaissance et tiens à Vous exprimer la très sincère gratitude que le peuple belge et moi-même ne cessons d'éprouver pour la grande nation américaine, à laquelle nous adressons l'hommage de notre admiration et de notre inébranlable amitié. lioper 1.2 filite. New York, N.Y., July 5, 1938. STRICTLY CONFIDENTIAL Dear Mr. President: Enclosed herewith is & copy of a memorandum which I have given to Mr. Rosov at his request to send to his principals with his own explanations. It was his idea to leave the situation "blind" as to names because of the possibility that he might transmit it by cable. I think it covered the situation as you outlined it to me. With assurances of my highest regard and respect, I am Yours faithfully, Joseph Joz E. Davies The Honorable Franklin D. Roosevelt, The White House, Washington, D.C. Jhada five Insil with June Are Her plane 1 - The matter was thoroughly discussed at length with the principal and his chief assistant. 2- The principal and his chief assistant have been very much gratified by the gesture of friendship, good faith and good will which the discussions have called forth; and the situation has been productive of much good. 3 - It was, however, considered advisable by the principal and his chief assistant to leave the matter open for the present, to be taken up subsequently if considered desirable. 4 - That the reason for this was because of the particular internal conditions which exist now, particularly because of the proposal now pending. 5 - That after that proposal is disposed of we will all know what is possible. 6 - That when that time comes, if it is desired to take the matter up again, the principals here are most friendly and hopeful that some formula can be worked out that will be helpful to both parties. 7 - That at that time, if desired, the same agents can take the matter up with a view toward trying to arrive at & solution that will be possible of accomplishment and helpful to both parties. 8 - That the matter is understood to be held in the strictest confidence and precautions have been taken that only the immediate principals with their present agents have any knowledge of the facts stalt, New York, N.Y. July 5, 1938. STRICTLY PERSONAL AND CONFIDENTIAL My Dear Miss LeHand: Would you be good enough, please, to see that only the President himself receives the enclosed envelope? Thank you very much. Mrs. Davies and I were both sorry that we did not have the pleasure of seeing you before leaving. With kind regards, I am Sincerely yours June Joseph E. Davies Miss Margaret LeHand, Secretary to the President, The White House, Washington, D.C. Fill Department OF STATE OFFICE OF THE SECRETARY Permal WASHINGTON July 22, 1938. The Secretary of State encloses a copy of a telegram from the Ambassador at Brussels, for the President. (No. 72) JR GRAY Brussels Dated July 22, 1938 Rec'd 7:41 a.m. Secretary of State, Washington. 72, July 22, 11 a.m. PERSONAL FOR THE PRESIDENT. Upon the presentation of my letters of credence to the King I took the opportunity of giving him your personal message. The King asked me to say to you that hE was very deeply touched by your remembrance of him and by your kind references to his father. Referring in terms of specific and highest personal admiration for you, hE referred to the fact that hE had interchanged letters with you and then Expressed the hope strongly that some day hE might meet and know you personally. HE impressed ME particularly by the maturity and dignity of his mind. HE is a strong and able man and if circumstances permit will, in my opinion, make his influence felt with constantly growing force in the future. General pessimism as to European peace has increased during the last two days but the best judgment that I can get from all sides here is that while the situation is serious, -2- #72, July 22, 11 a.m., from Brussels. serious, war will not bE precipitated this year barring some accident. DAVIES GW:HPD may fule Brussels, Belgium, December 1, 1938. Dear Mr. President: The following may be of interest in connection with this icon, which at this Christmas Season I hope you will accept with our affectionate greetings. In the course of an "industry" inspection tour of Southern Russia in the winter of 1937, I was in Inepropetrovsk to see their steel rolling mill (12,000 employes). Inepropetrovsk is a handsome old city with a population of about 600,000. While there, I took occasion to visit a famous old Greek Orthodox cathedral, built in honor of Catherine the Great. It is now being used as an anti- religious museum. It was here that I obtained this icon, with the consent of the Russian authorities. The Soviet art experts advised me that it was probably painted by a then famous Italian artist attached to Catherine's Court in or about the middle of the eighteenth century. This icon is of particular interest in that the lineaments of the St. George are probably those of some member of the royal family of that period. It was customary to canonize Russia's rulers of royal birth in this manner. With assurances of my affectionate regard and great respect, I am Sincerely yours, Joseph J.v. E. Davies The Honorable Franklin D. Roosevelt, The White House, Washington, D.C. Lile Brussels, December 23, 1938 My dear Boss: As a philippic the enclosed is a peach. I thought it would give you a laugh. That was one of your greatest speeches that you made in North Carolina. Marjorie is fine, and joins in affection- ate and devoted greetings to Mrs. Roosevelt and your wonderful self. Faithfully yours, In Joseph E. Davies The Honorable Franklin D. Roosevelt, The White House, Washington, D. C. Excerpt from LONDON TIMES December 20, 1938 House of Commons Debate MR. LLOYD GEORGE POLICY OF GIVING AWAY SURRENDER TO DICTATORS They had been trying to find out beforehand Mr. LLOYD GEORGE (Caernaryon what the Prime Minister was going to say The Prime Minister had had four visits to there. The House was entitled to know. Boroughs, Ind.L.) congratulated Mr. Hogg on the Continent to meet the leading statesmen, We were confronted with a fait accompli not taunting those who disapproved of Govern- but was the outlook for peace any brighter ? before might it not happen again ? Yet the ment policy with wanting war. It was only Germany had indulged in a flood of scurrility Prime Minister thought it enough to say I foozle-brained partisans who made charges of against some of our leading statesmen. Even am out for peace." The Prime Minister had that kind. The only question was, which was the Prime Minister had not escaped, He (Mr. got the idea of Wamba in Ivanhoe that the best method of achieving peace. There Lloyd George) was amazed to see in a speech he could get through anywhere simply by were some who said it could best be achieved of Herr Hitler a reference to the umbrella- shouting pax vobiscum. That might have been by a policy of surrender who were prepared to carrying statesmen of the past, which he all right in dealing with a besotted Norman pay a very high price for II-a price which thanked God were extinct in Germany. It was baron, but the Prime Minister was going to many of them thought involved the question of rather insulting for a man who treated the be confronted with one of the most astute honour, integrity, and right. There were others Prime Minister as a friend and whom the diplomats in the world. What was the Prime who said we could only secure peace with Prime Minister treated in the same way in a Minister going to give him ? It was not as aggressive nations by showing firmness. perfectly candid and courteous manner, and if he was going not knowing what was in The Prime Minister had asked what would went out of his way to meet, to say that. It Signor Musiolini's mind. He had practically they have done, The Prime Minister pre- was mean. (Cheers.) But, apart from told us what he had in mind. sumably referred to the last moment. But that that, the general attitude of the whole of the was not the time to take the necessary steps. German Press was hostile, and the German TROOPS IN SPAIN If Herr Hitler had known before Berchtesgaden Press was essentially official. Now there was that there was a possible combination of the Where did we stand about non-interven- the Italian cry for Tunis, Corsica, and Nice. British Navy and the French and Russian It was a mistake in dealing with men of this tion ? The 10,000 men of the Foreign Legion armties against him he would not have taken kind to surrender to every demand they made. had gone from the Republican side, but there any steps against Czecho-Slovakia. It was Italy had poured reinforcements into Spain were at least scores of thousands of Italians only at Berchtesgaden-after they had received since the agreement made by the Prime in Spain. There were divisions preparing now, the encouragement of The Times, the editor of under German and Italian generals and which had been the Signor Gayda of the Prime Minister, and it was Italian reinforcements of officers, for a fresh offensive. He took that Minister, announcing in advance what the aeroplanes, guns, and bombs which mattered, from The Times. The insurgents had 3 to 1. policy of the Government was going to be- for the gallant fellows on the West Coast of at least, in aeroplanes. That also he took that be committed himself. Mr. Malcolm the Mediterranean could deal with all the men MacDonald had stated that there had been a Mussolini sent. The fact of the matter was from The Times, They had 5-1 in artillery, policy of give and take. It was all give- that the dictators were treating us with inexhaustible ammuniton, and help at sea to sink ships. Lord Halifax had said that we giving away. contempt. There was great anxiety about the Prime Minister's visit to Rome. People must take into account that Mussolini was ASKING FOR MORE " thought that he was no match for these astute, bent upon a victory for Franco. They were crafty, ruthless, unscrupulous dictators. Let entitled to ask whether that meant that if When the Prime Minister gave in at them be quite honest about it-he was not. Mussolini and Hitler went on sending aero- Berchtesgaden there happened what must be Czecho-Slovakia, that barrier of democracy, planes there, and ammunition, up to a point expected if surrender was made to these was given away by the Prime Minister and where Franco secured a complete victory, we aggressive dietators-Hitler asked for more. M. Daladier, leaders of two great democracies, would still enter into a pact of friendship with From Munich the Prime Minister returned with and then they came home so pleased, as if IDAY while that was going on. Would the a scrap of paper, and no sooner had he and they had achieved something, won some great new and revised pact be based on the assump- M. Daladier turned their backs on Hitler than victory for democracy, a real triumph. They tion that that was going on ? Would it also he and Mussolini tore it in pieces and went on met in France the other day, and it was just mean that, while Germany and Italy were with their job, Members of the British Legion, like Wellington meeting Blucher at La Belle allowed to send as much stuff as they con- picked survivors of the Great War, were to go Alliance, shaking hands and congratulating sidered necessary to achieve a Franco victory, to Germany by agreement with Herr Hitler themselves on a historic triumph that would the policy of non-intervention would be im- to occupy territories where there was to be ring through the ages. (Laughter.) posed upon France and ourselves ? a plebiscite. After they were landed on the The Prime Minister began to tell us what a There was an attempt to starve Spain into Continent fine fellow M. Daladier was and how this surrender. Food ships being sent there were Mr. H. G. WILLIAMS (Croydon, S., U.).- tremendous victory could never have been being attacked and sunk, some by aeroplanes They never left Southend. (Laughter.) achieved without him. The French Prime supplied by Mussolini, Some of those aero- Mr. LLOYD GEORGE.-After they had Minister, in the Chamber of Deputies, spoke planes came straight from Italy, landed at of this magnificent old man." Majorca, and after resting there went straight left their homes. The hon. member thinks to attack and then flew back to Italy, He that is a joke. Mr. H. G. WILLIAMS.-No. "PAX VOBISCUM took that from one of the papers supporting the Government-be believed, The Times. If Mr. LLOYD GEORGE-Then do not He agreed that the Prime Minister had a there was a pact of friendship with Italy, was laugh. It is not a joke at all. You go to the right to complain about that appellation. it to be entered into on the assumption that British Legion and laugh. They were sent back There was nothing in his appearance to justify Italian planes could sink British or other food when they had been dragged from their homes. it, and there was certainly nothing in the ships carrying something which was not contra- (Hon, MEMBERS.- They were not dragged." They were invited by the Government to go agility he displayed in tossing away one pro- band and with non-intervention officers on board ? Was not the Prime Minister not only there and occupy these territories, and after vince after another. (Opposition laughter.) going to ask a question about that but make they had been brought up in great pomp and At the same time he saw M. Daladier's point a condition 7 circumstance they were sent back without a of view. They both ran away as hard as they thank you from Herr Hitler for their services, could from their obligations, but our Prime THE CAMPAIGN AGAINST Why ? He went and occupied these territories Minister, in spite of his more advanced years, without A plebiscite, kept well ahead, and M. Daladier said, FRANCE Continuing, Mr. Lloyd George said that What a magnificent old sprinter (Laughter.) There had been a great campaign against he would like to know on what the Prime Minister based his extraordinary complacency. They both ran away and were very pleased France. The unofficial spokesmen of Signor with each other, That was why he felt very Mussolini had declared their intention to (Hear, hear.) It was not shared by anybody outside. He had not met anybody who re- troubled about sending a man in that frame recover Tunis, Corsica, and Nice. Before the of mind to Rome to meet Mussolini. It was Prime Minister entered into a new pact was garded this agreement and the various trans- actions in which the dictators had broken a dangerous state of obsession which he had be going to have a complete understanding that faith with us in agreement after agreement, got into, And the Prime Minister was a very no steps would be taken in any one of these while we still went on making fresh agreements, obstinate and stubborn man. He had said directions ? If so, what was he going to to-day that nothing be had done in the last surrender ? And what was he going to bring with satisfaction. It was not lugubrious, 18 months he would see undone. Who would away 7 Was he going to have an agreement malicious partisans who were distressed. Some say that except a very self-complacent man ? which would give an equal chance to the two of the most experienced and ablest among the Government's supporters in the House had A man with that obsession could not be sent combatants in Spain-the people fighting for broken away. They had felt the force of Mr. to Rome to meet Mussolini, and he (Mr. the independence of Spain, and the people who Eden's view-that the dictators should show Lloyd George) was not comforted in the least were trying to establish a Fascist régime with they intended to keep agreements before fresh by the fact that Lord Halifax was going with the aid of foreign troops Franco knew that agreements were made with them, and that was him. He was not an adequate keeper. he could not conquer Spain without the aid the opinion of the vast multitude of people. (Laughter.) of foreign troops, and that he could not main- Itain his authority without their continued aid. There was great suffering in Spain. It would become worse, and would not be altogether the suffering of the combatants. He saw in the newspapers that day that there was no milk in Barcelona for the children. There would have been plenty had it not been for Italian aeroplanes and submarines, (Opposition cheers.) The battle in Spain was a real epic in the history of democracy. The children, wives, mothers, and fathers of the valiant men who fell in the battle of the Ebro were to be starved out this winter by Italian aeroplanes. Was the Prime Minister going to offer the hand of friendship, in the name of the greatest demo- cracy in the world, to men who were waging that savage warfare against women and children 7 (Opposition cheers.) THE WHITE HOUSE WASHINGTON 1/5/39 MEMO FOR MISSY When you prepare letter to thanks to Joe Davies for the picture, thank him for the interesting letter from Lord Davies. F. D. R. PSF: Belgium Brussels, December 17, 1938 My dear Chief: Here is B. most unusual and able letter which I have just received from Lord Davies, a Member of Parliament and a very great admirer of yours in Eng- land. He makes & very interesting suggestion. It is not new but there is & tremendous lot of yeast in it. I think it will pay you to read the letter. With assurances of my affectionate regard and esteem, I am, Yours very sincerely, Jor Joseph E. Davies The Honorable Franklin D. Roosevelt, The White House, Washington, D. C. COPY Pl&s Dinam Llandinam Montgomeryshire 5th December, 1938. My dear Ambassador, I must apologize for the delay in writing to thank you most cordially and sincerely for your great kindness in sending us B. message from the President on the occasion of the Opening of the Temple of Peace at Cardiff. ..... I can't tell you how grateful we all feel to the President for his inspiring message, which I know is tremendously appreciated by the people of Wales, * * * * I am afraid things seem to be becoming more and more desperate in Europe, with the sword - or rather, the aeroplanes - - of Germany hanging over our heads, ready to strike whenever Hitler, Goebbels and Goering think the opportune moment has arrived. In the meantime our immediate job here is two-fold: (a) to re-arm to the utmost limit, and (b) to replace our existing Government by one which will try and rebuild the shattered fabric of the League and the system of collective security. This may seem to be a counsel of despair - perhaps it is - but the only alternative, which of course would be BL much more excellent way, is to persuade your great and statesmanlike President to summon an International Conference to doal with all outstanding issues, and to give 8. lead to the democra- cies before they are overwhelmed in detail. There appear to be signs that America is waking up to the dangers and perils which beset her, or will beset her, if Europe falls under the domination of Hit- ler and his gangsters. This feeling, I imagine, will H. E. The Hon. Joseph E. Davies, Embassy of the United States of America, Brussels. - 2 - continue to grow, but it will be a tragedy if, follow- ing the course of events in the World War, it fails to assert itself before and not after the catastrophe hap- pens. Now is the time, my dear Sir, by strong and bold action to prevent a war. The British Empire no longer counts as a moral force in the world. France is down and out, Russia is disorganized and disgrum- tled. The small nations are obsessed with fear. No one knows what is going to happen. The Dictators make the pace and hang on to the initiative. Nothing can possibly prevent war except the intervention of your country, backed by all the democratic countries. It isn't simply a case of picking the chestnuts out of the fire to save the British Empire; the whole future of civilization and the world is at stake. Once the Saw- dust Caesars are eliminated in Europe, Japan will col- lapse and China will be saved. We can then repair the mistakes of Versailles, and give Germany and Italy their appropriate places in the scheme of things. Economic recovery in Europe will follow, with all its repercus- sions upon the prosperity of America. Therefore I would beg of you to do your damnedest to persuade the authorities at Washington to act now, be- fore it is too late. Summon an International Conference at Washington. Hitler and Mussolini will, of course, refuse to attend. Their non-participation will condemn them in the eyes of the whole world. But all those coun- tries who are represented will probably be of the same mind. In view of the common dangers which threaten all of them, they will be willing to do almost anything your President asks them. He has the whip hand, provided that at the outset it is made clear that the moral and material resources of the United States will be used to support his plan. "Put Force at the back of Righteous- ness," said Theodore Roosevelt. Without this, I agree, a Conference will be useless. Here, my dear Ambassador, is surely a priceless opportunity which only comes to few men to win immortality, and 8.8 Theodore said, "The ruler or statesman who should bring about such a combination would have earned his place in history for all time, and his title to the gratitude of all mankind." - 3 - Today the democracies are crying aloud for leadership. It is leadership which counts, more in the long run than even guns and aeroplanes. Rally the world as Wilson did. Hoist the flag of Liberty, democracy and the rule of Law. There will be B. mar- vellous response from every country, even in the to- talitarian states, when their peoples understand what is afoot. Appeal once more to those glorious formulas - the rights of man; personal liberty; equity; justice - which have never failed to stir the human conscience and the heart of man. Even Hitler, in his book, ad- mits that. Lot us have an Equity Tribumal and an Inter- national Police Force. Let us prove our sincerity to our ideals by expressing them in terms of institu- tions. Chamberlain and Company are in the hollow of the President's hand. No British Government could now endure for & week which refused to join in an Ameri- can plan, as John Simon did a few years ago when he gave Stimson the cold shoulder. Therefore, now is the Presi- dent's chance; it may not recur again until Europe is soaked in blood and London is a heap of ruins. I must apologize for this long and interminable letter, but I am sure you will forgive me because I feel so deeply that no opportunity should be lost. With renewed and hearty thanks for all your kind- ness and help, and with cordial greetings to you and Mrs. Davies, in which my wife joins, Believe me to be, Yours very sincerely, (Signed) DAVIES (Copy of letter addressed to Ambassador Joseph E. Davies from Lord Davies) ADDRESS OFFICIAL COMMUNICATIONS TO PSF: PSF:Belgium THE SECRETARY OF STATE WASHINGTON, D.C. mal for DEPARTMENT OF STATE WASHINGTON In reply refer to PR 811. 032/330 January 11, 1939 My dear Mr. McIntyre: I am enclosing herewith for the President a paraphrase of a telegram dated January 5, 1939, which was received in confidential code. Sincerely yours, Chief of Protocol. Enclosure: Paraphrase of telegram. The Honorable Marvin H. McIntyre, Secretary to the President, The White House. Department of State PR BUREAU DIVISION } ENCLOSURE TO Letter drafted ADDRESSED TO White House . . - - 1-1033 (Paraphrase of telegram) BRUSSELS Dated January 5, 1939 Rec'd 5:10 p.m. FOR THE PRESIDENT. Today while I was on a tour of inspection of one of Belgium's largest industrial plants in Antwerp, a luncheon was tendered to me which was attended by many prominent officials of the Belgian Government, including the Premier, the Governor, and members of the Cabinet. I am happy to say that the main topic of conversation at the luncheon was your magnificent address to Congress, which made a tremendous and heartening impression here. Because of the high rank of the guests in attendance, this universally favorable comment was all the more impressive. Your peerless leadership of the world's democratic thought is most gratifying to Americans at home and abroad. DAVIES PSF: Belgium Brussels, Belgium, March 23rd, 1939. PERSONAL AND CONFIDENTIAL Dear Colonel: Enclosed herewith is a personal note to the Chief, together with copies of my con- fidential cable to him and of my letter to Senator Pittman. I sent the latter in the hope that it might possibly help some in connection with the amendment of the Neutrality Act, in which the President is interested. I am glad to take this opportunity to forward something to our great Boss through his distinguished new Secretary. With warm congratulations and best regards, I am Sincerely your friend, for Joseph E. Davies Colonel Edwin M. Watson, Military Aide to the President, The White House, Washington, D.C. Enclosure No. 1 to Despatch No. 253 of March 22, 1939, from Embassy, Brussels TELEGRAM SENT MARCH 21, 1939 (No. 32) Please note that this mossage is addressed to the Pres- ident and to the Secretary of State. Embodied in this message is an idea that may already be under consideration. It is my belief that it has substantial potentialities. The President's energetic timely action immediately pre- ceding the Munich Conference is accepted among those here who are well informed as having been the deciding factor in the Fuhrer's decision for peace at that time. The The peace of Europe is now again tottering. And again the President could probably contribute to secur- ing peace in Europe - this time by influencing the decision of the Duce. That Hitler wants war as his only way "out" is a growing conviotion. That theory is supported by cumulative information out of Germany and by my own observations in Germany, where I have been for the past ten days. Unless he can secure Mussolini's cooperation, it is probable that Hitler won't risk war. In other words, as goes the Duce so goes the peace of Europe this year. The Governments of Great Britain and France are now trying desperately to wean Mussolini from the Fuhrer. The Fuhrer's strategy requires that he have the support of the Italians and that he now encourage the Duce to make drastic demands on the French and in such a manner as to make it impossible for the French to accept them. The Duce would then become the spearhead and would be committed definitely to go to war and would be unable to "run out", which is what is feared by the Germans. Then - 2 - Then Hitler would have his war for his own purposes with the assurance of the support of the Italians. It is probable that Mussolini would be influenced greatly if the President were to convey directly to him through Ambassador Phillips or through the Italian Ambassador to Washington: (1) that undoubtedly the Neutrality Act will be amended speedily; this would in itself be a major, helpful factor at this time; (2) that with the public opinion of the world mobilized against the totalitarian states, they would probably lose eventually; (3) that even though they should be successful, Germany would crush Italy next, room for two Caesars in Europe being out of the question; (4) that the present and future interest of Mussolini is clearly with the western democracies as a preserver of the peace of the world and of international law; (5) that it is the hope of the Prosident that Mussolini will proceed slowly and that he will not take an extremo stand on the 26th of March and that he will not precipitate a crisis at this time by making demands which French pride could not accept; (6) that by delaying action, time might be afforded to work out an arrangement which would satisfy the Italians, the French, and the British, and which would tend to insure a permanent peace on the Continent of Europe; (7) that as matters stand, the Duce probably could not get anything from the Berlin axis except through a war; (8) that Mussolini, taking the other position, would be the saviour of world peace, would bring to his country the maximum of benefits at least cost, and would prevent the domination of Europe by a single state. I am on very good personal terms with the Italian Ambassador to Belgium, who is one of the Duce's war buddies and who has the personal confidence of Mussolini. It would be possible for me to sound - 3 - sound him out informally and on purely personal grounds and possibly secure reaction from Rome, provided such action by me were considered desirable. It is my judgment, however, that a mossage should be sent directly by the President to Mussolini. Such a message could do no harm,it seems to mo. It is up the alley of peace. Should it be successful, it would command the world's everlasting gratitude. DAVIES Bruesels, March 21, 1939. STRICTLY COMPIDENTIAL Dear Senator: Supplementary to the information on the European situa- tion which contacts at this "listening post" afford, I have found a great deal of value in a number of books - some of then published over here and which perhaps ordinarily do not reach the American market. It occurred to no that the members of the Foreign Rela- tions Committee might find some of this material of value. So I an sending to you, for your Committee, the following books, which please accept with my compliments: Germany and a Lightning Mar, The War Against the West, Hitler's Drive to the East, The Battle for Peace, Britain Faces Germany, Strategy of Raw Materials, Hitler's Magician: Schacht, Hitler Over Russia, Hitler Over Europe, Inside Europe (latest revision). Events here move with lightning rapidity. Conditions change from day to day. Ten weeks ago, deepest pessimism as to European peace prevailed. Four weeks ago, optimism was equally as marked and quite as extreme. Today, the possimism is the deepest that I have found in Europe since I have come here. Chamberlain's Birmingham speech and complete volteface have changed the entire picture. Heretofore there was an un- derlying belief that como what may, the Chamberlain Government would pursue its policy of appeasement, at least through the year of 1939, and at almost any cost. Now that factor is ab- sent. The action of France in clothing Daladier's Government with supreme war power, not only in its essential facts, but in the manner in which it was done (quietly and speedily within The Honorable Key Pittman, United States Senate, Washington, D.C. - 2 - within seventy-two hours), is moro eloquent of a hardening of purpose than any amount of French speeches. This fact, coupled with Chamberlain's change of policy, has brought the situation down now to bare knuckles. Hitler knows now, for the first time, that Britain and France will fight. He therefore has to make up his mind whether he is going to settle or risk the great adventure of war. The destruction and absorption of Czechoslovakia were a foregone conclusion after Munich. The basic menace in Hitler- 1gm lies in the fact that he has impregnated the German people with the doctrine of their aryan racial superiority and destiny. This, with their capacity for regimentation, makes them thrice armed. In order to demonstrate their superiority, they have to acquire subordinates and that can only be done through conquest. The essential will of Hitler's Germany is not a will for peace, but a will for domination at any price. In Hitler's determina- tion whether it will be peace or war, he is confronted with the fact that if he settles now for permanent peace, he can only do so by agreeing with England and France to disarmament as a con- dition precedent to the discussion of colonics, etc. Chamberlain has made it clear that he will not sit across the table for dis- cussion when one of the parties carries a six-shooter on his hip. That means that Hitler will pay & terrific price for settlement, for to really embark upon a plan of disarmament, it would mean a terrific strain on industrial, economic, and social conditions. Vast mumbers would be thrown out of employment and there is no other line open to absorb them. The Government has no reserves of gold or credits to take care of the unemployed, and no estab- lished foreign trade. Even with enormous financial help, Cer- many would find it a tough, uphill job to prevent most serious discontent on the part of the populace and possible threats of overthrow of the established regime. It is the hard way. There is no doubt but what the temptation of foreign ad- venture is enormous to Hitler. From a military point of view, Germany and Italy are at their peak. To the extent that there is economic, financial, and social distress within, to that degree is it desirable to divert the public through foreign war. Italy and Germany have 120 million non between them, against the approximately 80 million of Prance and England. Today the blockade cannot starve Germany and Italy. The crumbling of the Czechoslovakian bastions has assured that. Hungarian wheat and Rumanian oil are in the hollow of Germany's hand. In 1914, with Italy as an enemy and with the British blockade, Cermany came within an inch of winning the war. Today. Cermany is more self- sufficient - 3 - sufficient from within than she was then and while weaker in many respects, on the face of the record, she is, as a matter of fact, in essentials much stronger. The rewards or spoils which a victory over the western democracies would afford offers a staggering temptation to a man who already has been thrice successful in challenging his fate against what seemed impossible odds. That these considerations are in his mind has been demon- strated by his course of conduct against the Caechs and by the doing of those things which have caused so much uneasiness with reference to Holland and Belgium. The battle that is going on just now in the lull after Prague is a battle of diplomacy be- tween Mitler and the democracies. Hitler is attempting to stimulate Mussolini into making impossible demands and become the spear head, on the one hand, and France is trying to wear Mussolini and buy him off, on the other. I heard many Corman people say that Hitler would require Mussolini to start the war in the West, so that he would be committed positively and could not run out, which they feared he would do if Germany started it. A few days ago, it looked as though Italy might be weakening a bit 80 far as the Derlin axis was concerned. My own judgment is that it would take a Caesarian operation, and a major one at that, to separate the two dictators. It now looks as though we would be in a period of suspend- ed diplomatic representation so far as Berlin, Paris, London, and Washington are concerned. Cermany will probably stand pat and become increasingly hostile and belligerent against the United States and the western democracies, as she feels the effect of an economic boycott. Hitler will subside for a time and Mussolini will take the center of the stage, with Hitler's backing. There will be "alarums" of war and much thumping of the war tom-toms. Mussolini can make extravagant demands right up to the verge of war, and Hitler can always come in as friendly negotiator and induce his friend Mussolini to moderate his terms for the sake of preserving peace. That, however, is on the supposition that Hitler wants to do that. If he wants war, he has the situation in the hollow of his hand by refusing to do it. Just what will happen no one can tell. Bitler is unpro- dictable. Of course, it is possible that he might turn his out- side adventure to the East, and to the Ukraine. He cannot do that, however, unless he has closed his back door with the Moditerranean settled. That is going to be a pretty hard door to get closed. Mussolini has to got something to take home in his basket. - 4 - basket. There is grave doubt that he would be contented with Djibouti, the Addis-Abeba railroad, and some arrangment on the Sues Canal. It has been reported that the French offered him that a few weeks ago, but he would have none of it. To get more than that, when the French would have to do it at the cost of their umbrella, is rather improbable. The next few weeks will disclose which door Hitler will attempt to get closed first: the door on the East, or the door on the West. That he will not be content to remain passive long is a foregone conclusion. The reports which have been published by the Corman general staff describing the power and might and effectiveness of the Russian army, seen to have dulled Hitler's taste for the "Drang nach Osten". The net of it all that I get out of the mess is that prospects of peace in Europe for this year look worse to me than at any time since I was appointed in 1936. The paradox of it is that no people want war and yet forces seem to be irresistably throwing them into just that. The tragedy will noan possibly the annihilation of what we call civilization for the large part of Europe. If the dictators should win, liberty in the western hemisphere and our forms of government would be in the most serious jeopardy. From all I got among the diplomatic corps and particularly from the ministers of smaller countries in Europe, there is no doubt but what President Roosevelt's utterances and your own, and the realization of the rising hostile public opinion in the United States have been among the most effective factors in de- terring the aggressors. One of the most prominent European diplomate here said to me yesterday: "If the United States would amend the Neutrality Act tomorrow, peace would be assured in Europe for this year." That is probably an extreme statement, but it is illustrative of how conscious, not only the dictators, but all Europe is of what the attitude of the United States might mean and does mean in this situation. This letter has reached out into lengths that I had not intended it should. However, it is written to you and to the members of your Committee and is, of course, "off the record". Please remember me cordially to my friends on the Committee. With assurance of my great respect and esteem, I am, Very sincerely yours, Enclosures, under Joseph E. Davies separate cover: Ton books JED:VG PSF: Belgium get April 19, 1939. cots Dear Joe:- Many thanks for your wire and also for your note of April fifth. It must have been good to see old L. G. again. I wish that I, too, could get a glimpse of him. The years certainly sit lightly on him. These are indeed heotic days and I need a little sleep but otherwise all is well. My best wishes to you and Marjorie. I rather envy you both being in the thick of things. As ever yours, Honorable Joseph E. Davies, American Embassy, Brussels, Belgium. of Brussels, Belgium, April 5th, 1939. PERSONAL AND CONFIDENTIAL RE Lloyd George. Dear Boss: I had a long visit with our old friend, Lloyd George, in London last Sunday. He wanted to know all about you. The old man is in wonderful form -- physically fit and as alert as ever. He is keenly interest- ed in the political situation in the United States. He thought that the United States was at the crossroads in its struggle to save democracy. He discussed all the leading candi- dates of the Democratic and Republican Parties and said that he couldn't see anyone of suffic- ient stature to lead the country except your- self. He hoped that you would run again. There is no reason, he said, behind our "third term" precedent and he felt that it was time it was smashed on the ground that the people had a right to declare for whom they wanted. He add- ed that the situation in the United States and, in fact, the world needed the greatest leader- ship that could be afforded and he knew of no one adequate for such leadership, not only for the United States but for the world, but your- self. The old boy is 8. really very great man. He wished particularly to be remembered to you personally and asked that I express to you his high admiration for the great service you are rendering to democracy. I have reported to the Department a complete account of this interview and also of one I had with my old friend, Winston Churchill. On a separate sheet I enclose the gist of it. Marjorie is fine. We often think of you and talk of you, always in terms of affect- ionate devotion and real appreciation. Jon Faithfully yours, Joseph E. Davies The Honorable, Franklin D. Roosevelt, Washington, D.C. Following is the gist of views expressed to Ambassador Joseph E. Davies by David Lloyd George (Liberal) on the International Situa- tion, at London, on April 2, 1939. That up to the last two weeks, he had been very confident that the hostilities would not break in Europe this summer; but That now he was not sure and was definitely uneasy and fearful, for "Hitler was going on"; That "the country" and all parties were behind the Government to a man; That personally he was much concerned lest this new policy might not be implemented into effective and vigorous action; That Hitler would doubtless press to re-nationalize Danzig and secure a concession of a military highway across the corridor to East Prussia; that he was set on getting Silesia; That Britain would not ordinarily fight for Danzig, which after all was & German city; That if Poland fought, however, Britain would now have to fight; That unless vigorous and definite military arrangements were made with great initiative and speed, both England and France would be rendered ineffective, and it would result in a declaration of war "without fighting & battle"; That it was vitally necessary that England should, whole- heartedly and immediately, aggressively bring Russia into close cooperation with definite and specific mutual military arrangements; That he had talked with "Neville" (Chamberlain) about Italy and that he (George) believed that Mussolini was simply waiting for Hitler to absorb the attention of France, when he would make a military drive in Africa. This would probably result in the Mediterranean being closed to troop ships, and with Franco in Spain, the lines of communication for naval and troop ships, to get troops into the Soudan around South Africa, would be menaced by German submarines from & Spanish base on the Atlantic; That there was no immediate prospect of a coalition govern- ment in England because Labor would not cooperate; That if hostilities broke, there was danger that it would be & long war, with the possibility that Hitler would ultimately fight B. defensive campaign within the Siegfried lines and, if finally necessary, try to make a peace, retaining what he held; That - 2 - That public opinion of England, however, had now definitely hardened into a resolution to fight it out if necessary; That the desperate internal situation which Hitler and Mussolini faced, politically, industrially, and eco- nomically, coupled with the fact that the democracies were making rapid strides in preparedness, were factors which were driving Hitler ahead. Following is the gist of views expressed to Ambassador Joseph E. Davies by Winston Churchill (Conservative) on the International Situation, at London, on April 1, 1939 That war was bound to come, if it were now not already upon us; That the last two weeks had shown B. new England - morally aroused, mad clear through, and definitely committed to stopping Hitler and his attempted world domination; That the idea of unilateral protection of Poland and other European states was England's own - not that of France, nor of Poland. So far as the latter was concerned, it was un- solicited, surprising, and perhaps even embarrassing. That Mussolini faced a desperate situation which was driving him on to hostilities. It was his (Churchill's) opinion, however, that the British and French navies could overwhelm and demolish Mussolini's naval forces. Their dominance was 4 to 1. That he was positive that there was now no opposition to bringing in the Soviet Union because of ideological differences; it was simply a question of what would be the wisest method of projecting joint defense against aggression. Russia, in his opinion, would have to fight anyway, but nevertheless she should be brought in. That Belgium would have to make up her mind to take sides, or England would have to abandon her to shift for herself. They did not need Belgium 6.8 the Maginot line would "do the necessary". That the country and all parties would be back of Chamber- lain to a man; That enormous strides had been made in the last few months in protection against air raids and that with an additional six months time, England would be secure against bombing attacks in the day, and this "horrible menace of blackmail" would be relieved; That war, if it came, would undoubtedly be characterized by early German successes, but that ultimately the aggressors would be smashed, That Hitler's speech in reply to Chamberlain could not be taken as reassuring in any way; that Hitler was unpredictable and that he, Churchill, was fearfully concerned. Fed May 31, 1939 CAN The Dear Joe: 5 body Thank you for your letter of May eleventh onclosing resolutions from various organizations in Belgium and communications from Belgium citizens expressing gratitude for my note to the heads of the governments of Germany and Italy. I was, of course, pleased to see them. I have not soon Jimmy since his roturn from Europe, but expect to shortly and know that he will bring the latest tidings of you and Mrs. Davios. Very sincerely yours, F. D. R. Honorable Joseph 2. Davies Ambassador Extraordinary and JHR:G Plenipotentiary Brussels Belgium P. Brussels, May 11, 1939. PERSONAL My dear Chief: The spontaneous expressions of gratitude to you in connection with your note to Hitler and Mussolini, which have come to me from all classes of people, are extraordinary in their warmth and depth of feeling. I have, of course, forwarded them to the State Department. They should be, however, in your own personal archives, 80 I am sending along the enclosed. They have been supplemented with inmumerable oral ex- pressions of members of the diplomatic corps, business and professional communities, and also from people that I did not even know, who would accost me, explaining their wish to express "gratitude and thanksgiving for the noble action of the greatest President of the United States", and similar expressions. With affectionate regards from us both, I am, Hastily yours, Enclosures. Jr oseph E. Davies The Honorable Franklin D. Roosevelt, The White House, Washington, D.C. INTERNATIONAL LEAGUE FOR JUSTICE & PEACE TRANSLATION or League of Peoples for Peace Brussels, April 24, 1939. At the meeting held this day, presided over by its founder, Professor N. Robiette, the International League for Justice and Peace adopted the following resolution: This League, created in order to safeguard the peace of peoples by justice, protests solemnly and energetically against the cruel and arbitrary actions involved in the annexation of Czechoslovakia and Albania, which were brutally invaded and violated against the will of their peoples and contrary to the sacred law of nations and of treaties signed freely and without restraint. The League appeals to the common sense, to the sense of justice and to the love of peace of peoples - including the Italian and German peoples - in order that they may bring pressure to bear upon their rulers to the end that they may work toward the restoration of the independence of these two unfortunate countries - victims of crim- inal greed - and may enforce peace in their own countries, by declaring: 1.- that war is a crime against humanity; 2.- that it is the duty of all to avoid it by active and effective coopera- tion in sincere ideas and sentiments. The League calls on all men of good will, without distinc- tion of nation or race, in order that its appeal may be heard by all and spread abroad everywhere. The League pays a tribute of respect and admiration to courageous President Roosevelt - a defender of the right, of de- mocracy and of peace - for the noble and fearless statement which he has addressed to the totalitarian States and which has had a considerable repercussion throughout the world and has had a deep and salutary effect even upon the aggressors. The - 2 - The League begs Your Excellency to believe that he has won the esteem and gratitude of the civilized world, in placing the peoples face to face with the real problem, that of the conception of genuine peace through the proposal for an international economic plan which would serve 6.8 a brake to unjust and dangerous greed. There is, in truth, we are convinced, an altruistic, generous, fruitful plan to be presented to the peoples, in order that an equitable share of activity and of production, in common, may be distributed to each one of them. The dance (fluctuations) of currencies, commercial chaos, will then cease to exist, and the peoples will be able to live no longer by theft, banditry and crime, but in integrity and uprightness, by work duly and justly remunerated. President Roosevelt names the way: AN ECONOMIC PLAN. It exists! The President of this League has advocated the plan for years, but this plan must be in a large measure international, constructive, practical, concrete, capable of being put into effect immediately, and of extending to all fields of human activity. The possibilities of this plan when applied will be unlimited. This conception is not a dream on too large 8. scale. It is real- istic and could be applied without further delay. The world possesses sufficient riches and land, affords sufficient work with enough manpower to accomplish it, 80 that all peoples may find their share of happiness and affluence, without being obliged to have re- course any longer to pillage and crime. The members of the International League for Justice and Peace, assembled at this meeting, present to President Roosevelt their sentiments of satisfaction and profound gratitude for the splendid gesture which he has made by sending his historic message, and they hope, for the good of humanity, that a long life is still ahead for him and his family. INTERNATIONAL LEAGUE FOR JUSTICE & PEACE (26 signatures) & TRANSLATION MOTION A part of the population of Ans assembled today, April 22, at Ans, by the Associations, THE FAR-SIGHTED WOMAN (La Ferme Prévoyante) and the SOCIALIST WAR VETERANS OF ANS-ALLEUR-LONCIN and vicinity: After having bowed to the memory of the ten million war veterans sacrificed from 1914-1918; Having heard the wonderful statements of Miss Lucie Dejardin, member of the Committee of WOMEN FOR PEACE, and of Mr. Louis Pierard, member of the Chamber of Representatives of Belgium, on PEACE and DEMOCRACY; RESOLVES to request Mr. Davies, Ambassador of the United States at Brussels, to transmit to Mr. Roosevelt, President of the United States, their feeling of profound gratitude for the humanitarian action which he dared to take in sending to the totalitarian States a clear appeal for PEACE; EXPRESSES the most sincere wish that this courageous policy of President Roosevelt may continue in favor of PEACE, which must spare from so much suffering, old men, women, children, husbands and wives, in one word, the whole UNIVERSE. AND PROCEEDS WITH THE BUSINESS OF THE DAY. FOR THE COMMITTEE: The Assistant Secretary, The President, (s) H. WARNANT (s) C. WERY 23 rue de Bolzée 305 rue de l'Yser Lonoin Ans TRANSLATION RESOLUTION The Bureau of the C.C.S. (Confederation of Christian Syndicates of Belgium), meeting at Brussels on April 18, 1939, Having taken note of the message sent on April 15 to Germany and Italy by Mr. Roosevelt, Is deeply grateful to the President of the United States for his effort to avert war which would be & terrific disaster for all of humanity; Hopes that the Governments will find a solution likely to assure & durable Peace, to which the enormous majority of men aspire and which, brushing aside the spectre of war and re-establishing confidence among peoples, and ensuring economic revival, will favor a policy of social progress inspired by the respect due to the human being. TRANSLATION MINISTER OF STATE Brussels, April 19, 1939. Mr. Ambassador, I have the honor to inform you that the Right Wing of the Chamber of Representatives, in its session yesterday, acting upon my proposal, rendered unanimous hormage to the initiative which has just been taken by President Roosevelt with a view to preserving peace. I avail myself of this opportunity, etc (s) H. CARTON DE WIART TRANSLATION NATIONAL FEDERATION OF VETERANS Brussels Section Brussels, April 20, 1939. Mr. Ambassador: Our committee, which met on April 19, 1939, having taken note of the message transmitted to the Powers by the President of the United States of America, resolved, with the unanimous vote of all its members, to transmit to you the following motion which we would ask you to kindly bring totthe attention of the President. "The fighting generation, represented by us, Belgian war veterans of the N.F.V., Brussels Section, 24 rue Auguste Orts, who have suffered in body and property, the horrors of modern warfare, beg Your Excellency to transmit to His Excellency Mr. Roosevelt, President of the United States, the expression of their deepest sympathy and their most sincere and respectful the thanks for the really touching appeal to/wisdon and reason of the rulers, which, we are certain, will have tremendous influence on the course of events." May he be convinced that his happy gesture will have rendered incalculable service to humanity and to the cause of civilization. Renewing our entire approval, we remain, etc.... For the Committee: The Secretary, The President, (s) M. Géva (s) F. Boumont TRANSLATION Telegram of April 17, 1939. Audenaerde His Excellency Davies American Ambassador, Brussels The Society of trade and crafts, representing the middle classes of Audenaerde and surroundings, in a general meet- ing present warmest homage and deepest thanks to President Roosevelt for his noble peace efforts. Are still thankful for invaluable aid and heavy sacrifices of life during last war in favor of Belgian nation. Pray God bless President Roosevelt and his people. Verschraeghe, President. TRANSLATION Telegram of April 17, 1939. Courcelles Ambassador of the United States 33 rue de la Science, Brussels A group of Belgians asks you to convey to President Roosevelt sentiments of admiration and gratitude. Buchet, Lawyer, Courcelles COPY Telegram of April 16, 1939. London The Honorable Joseph Davies American Embassy, Brussels New Commonwealth Society congratulates you most cordially on President's magnificent message opening up new era of hope to stricken world Rousevelt am byth writing. (Lord) Davies COPY Excerpt from Personal Letter from Brazilian Ambassador, dated April 17, 1939. May I congratulate you upon the magnificent action taken by your great President and aiming at the peaceful solution of the world crisis? (s) Mario de Pimentel Brandao TRANSLATION YOUNG PEOPLE'S BLUE CROSS Kindness to Animals Brussels, April 17, 1939. His Excellency the Ambassador of the United States of America, Brussels. Excellency: I have the honor to send you, for transmission to him, an expression of gratitude for the noble President F. Roosevelt. This message, coming from the hearts of thousands of children, will be such as to move Him who took this splendid initiative to try to save the Peace of the World. I remain, etc. (s) L. Eymael President-Founder of the Young People's Blue Cross COPY TELEGRAM OF APRIL 15, 1939 to the White House, Washington THE PRESIDENT. Allow me to congratulate you for the message you had the courage to send. It creates great enthusiasm and engenders a ray of hope for the restoration of peace. At the charming reception given tonight by Ambassador and Mrs. Davies where we met your son everyone highly praised your initiative. Paul Grosjean COPY TELEGRAM OF APRIL 17, 1939, to Washington. The President, The White House The Belgian Labor Party assembled in Congress at Brussels on this 17th day of April is greatly desirous success for your efforts on behalf of peace. (s) Jauniaux, President Deblock Piot, Secretary TRANSLATION Anderlecht, April 15, 1939. Mr. President, All peoples, no doubt, desire peace, and the touching message of Your High Personage will considerably increase today the hope of all those who hope, in spite of everything, to know better days. Millions of human beings will bless, in their hearts, your generous gesture. Although I am only a humble intellectual, I nevertheless dare to be among those who give you evidence of their grate- fulness by a positive action, by expressing it to you in writing. I should like, Mr. President, to be able to do so in a more eloquent manner. But I am not able. I implore the Heavens to bless your noble initiative in order that it may be crowned with the greatest success. Condescend to forgive the liberty I have taken to approve your attitude, but as I took part in the world war, and am still suffering from it, I am one of that innumerable host who appreciate at their just value, the blessings of Peace, of which you are one of the most powerful supporters. I remain, etc. (s) Fr. Spinnoy, 1433 Chaussée de Mons, Anderlecht Very humbly and very respectfully To Mr. Roosevelt, President of the United States, New York. * * - FOR PEACE, HOW MANY ARMSI When every country arms to defend itself, Who can reproach such precautions? And yet, if endlessly, arming must spread, What is to happen, o poor nations? Submitting - 2 - Submitting to the attraction of vicious circles, Any State may be caught in the wheels; Everyone is aware of it, everyone is anxious, And the human mind wants to divert the storm. Ahl If the heart spoke, all might be solved, For, we feel it clearly, it is the heart which must act; Justice, Humanity, stop the thunderbolt Which is about to fall; to annihilate us! We have lived through more than one striking example Of human passion, desperate and gone beyond bounds. Fulfil, 0 Lord, our suppliant wish: Restore to all hearts, the Peace so desired: August 1936 Fr. Spinnoy, Anderlecht. THE BARTER PROPOSALS WITH U.S. Mr. SHINWELL (Seaham, Lab.) asked the President of the Board of Trade whether he was in a position.ito shake a statement on the exchange of goods by barter between the United Kingdom and the United States of America. Mr. GARROJONES (Aberdeen, N. Lab.) asked a similar question. Mr. OLIVER STANLEY (Westmorland, U.) referred them to the reply which he gave to questions on May 23. Mr. G. GRIFFITHS (Hemsworth, Lab.).- Would it be possible to exchange Mr. Cham- berlain for Mr. Roosevelt ? (Laughter.) Mr. OLIVER STANLEY.-I am always ready to consider any exchange that is to the mutual advantage of both countries. (Renewed laughter.) Mr. R. MORRISON (Tottenham, N., Lab.). -Is the right hon. gentleman aware that there is an impression in business circles that the Government do not intend to go on with this proposal ? Mr. OLIVER STANLEY.-11 that is the 1 impression it is entirely unfounded. Belgium - 1939 James June 2, 1939 MEMORANDUM FOR MR. SUMMERLIN: The President has signed the letter to His Majesty Leopold III, King of the Belginns, and I am returning it herewith, as suggested in your letter of June first. M. A. LeHand PRIVATE SECRETARY hm Letter signed by the President to King Leopold, III, dated 5/30/39 thanking for message on Memorial Day. May 30, 1939 Your Majesty: The American people join with me in deep appreciation and thanks for Your Majesty's thoughtful and gracious Memorial Day message. As we gather today to honor our dead we will be keenly mindful of Belgium's great sacrifice and her heroic dead. Your Good Friend, His Majesty Leopold III, King of the Belgians. ADDRESS OFFICIAL COMMUNICATIONS TO THE SECRETARY OF STATE WASHINGTON, D.C. DEPARTMENT OF STATE WASHINGTON In reply refer to PR 811.458 Belgium/85 June 1, 1939 My dear Miss LeHand: I am enclosing herewith a Memorial Day message addressed to the President by the King of the Belgians, together with a translation thereof. As this has been received through the Belgian Ambassador at Washington, it will be appropriate for the President's reply to be sent through the American Embassy at Brussels. Accord- ingly, I am enclosing a reply to His Majesty's message for the President's signature. Should the President approve the text of this reply I will, upon its return, have it sent to the American Embassy at Brussels for delivery to His Majesty. Sincerely yours, Chief of Protocol Enclosures: From the King of the Belgians, May 30, 1939, with translation; Draft reply to above. Miss Marguerite A. LeHand, Personal Secretary to the President, The White House. Department of State PR BUREAU DIVISION } ENCLOSURE TO Letter drafted 5/31/39 ADDRESSED TO Miss LeHand # . DISTRYMENT PRIVIDE OFFICE 1-1000 Palais be Brurelles 30 mai I939. DECORATION DAY. Le 30 mai de chaque année, la Belgique toujours reconnaissante fleurit les tombes des héros américains qui ont courageusement combattu sur son sol pour la défense du droit et de la liberté. En ce jour consacré à un pieux souvenir, le peuple belge et moi-même, unis dans une même pensée émue de profonde gratitude, nous adressons à la Grande Nation Américaine l'expression de nos sentiments de vive admiration et de très sincère amitié. leoped [Translation] Brussels Palace May 30, 1939. DECORATION DAY On May 30 every year, Belgium, ever grateful, decorates with flowers the graves of the American heroes who bravely fought on her soil for the defense of law and liberty. On this day consecrated to a holy memory, the Belgian people and I, united in a single emotion of pro- found gratitude, send to the Great American Nation the expression of our feelings of warm admiration and very sincere friendship. LEOPOLD. TR:AVA:IML fed woy Brussels, Belgium June 8, 1939. Dear Boss: Marjorie and I have been wondering whether you wouldn't like to get a sail on a real sailing ship and take the SEA CLOUD for a bit this summer. It will be back home about the first of August. There is pretty good fishing off Blook Island and Montauk even during the warm weather, I am told. There is an elevator that can be used from the deck down to the stateroom quarters, and I think you could be made comfortable. You could have some fun sailing the ship yourself. Of course we'd want you to make up your own party, stag or other- wise, as you might wish. Everyone over here is optimistic, but I have my fingers crossed all over the place. The Soviet-British agreement does not look too good just now. Chamberlain will soon have to make up his mind or the old Bear will get tired of being cuffed around and make peace on his own terms pos- sibly with Germany. If that happens, Europe will be in the hollow of Hitler's hand. The only pre- ventative against a peace imposed by the diotators is a strong London-Paris-Moscow axis to offset Ber- lin and Rome. No doubt Rome and Berlin are making heroulean efforts to hold Russia benevolently neut- ral. The Vatioan is making a big effort to settle the Dantzig question and assuage Mussolini. Chamber- lain wants to but France is getting her baok up and the British Ambassador here tells me that Britain is The Honorable Franklin D. Roosevelt, The White House, Washington, D. C. - 2 - having much difficulty with France as France is "very difficult." In the meantime, the Soviet negotiations are dawdling along and the Soviets are getting sore. To my surprise, the attitude of the Polish Minister here has completely changed on the desirability of having Russia come in. He is hostile to the settle- ment of Dantzig because he says that after Dantzig it is only a postponement to some other issue. If the Soviet negotiations fall through, the prospect for hostilities this summer is imminent via Dantzig. Otherwise, it'll be postponed until the fall, until the harvests and until the weather is cooler for the African campaign. Conditions inside Germany and Italy are desperate, economically, industrially, finan- cially and politically. The real menace to peace is the desperation of the rógimes. Standing in the dio- tators' shoes, it might appear that their easiest way out is through a foreign war, on the theory that they can hold out and then make a peace with the "decadent" democracies, hold what they have and be no worse off than they are now. Germany almost did it in '14 and '17, when the blookade existed and when Italy was an enemy. They now have food, the Czech armament and Rumanian and Arabian oil, with the eastern part of the Mediterranean protty well bottled up. That, in brief, is the way it looks to me. Unless Chamber- lain makes his mind up P. D. Q. and brings Russia in, the outlook is very bad. I recall our talks of two years ago when it seemed so perfectly clear that the only real assur- ance for peace was a realistic London-Paris-Moscow axis, now that the League of Nations is destroyed. It is perfectly amazing to me that the power and strength of the Soviet Government and Army is not accepted in spite of the overwhelming evidence that is at hand. When the house is burning, it seems so silly to be fearful of bringing in the Fire De- partment because the water might get your feet wet. I have followed the situation at home with the keenest interest, and champ at the bit a little when I smell the smoke of battle. You have been - 3 - batting 1000%. Your speech to the Retailers was per- fectly grand. Attached hereto is an amusing excerpt from the debates in the House of Commons. I do not much blame this man Griffiths for wanting to make an exchange of leaders as well as commodities. Marjorie joins in devoted affection to you and to Mrs. Roosevelt and to all. we had a grand visit with Jimmy. Faithfully yours, for Joseph E. Davies PSF: Belgium July 7, 1939. Dear Joe:- It 1s good to have your letters -- and I read that Marjorie arrived in New York last Saturday. Since you wrote the general situation seems to have changed little for the good, though there is no actual crisis as yet. I take it you will be back in a few weeks If the dam does not break, and it will be grand to see you again. I will remember Orme Wilson. I have known him well since he was a small boy. As ever yours, Honorable Joseph E. Davies, American Embassy, Brussels, Belgium. Brussels, Belgium, June 21st, 1939. PERSONAL AND CONFIDENTIAL My dear Boss: Knowing of your keen interest in the personnel of the Diplomatic Service and in the merit system, I venture to call to your attention a situation with which I have como in contact in the event that you should be considering the appointment of any career men to the posts of minister. The best man that I have met in the field in the career service is Orme Wilson, our counselor here. He does not know that I am writing this letter. He is remarkable for his good judgment, loyalty, capacity to make con- tacts and procure information, diligence and indefatiguable work. He has impressed me tremendously. I would be glad to have him in my own organization in private life at any time. He is an exceptionally valuable man. He is handicapped somewhat by his in- nate modesty and his rather retiring person- ality. In spite of that, however, he makes e. strong impression upon men with whom he comes in contact within a very short time. I have made it a point to inquire into his past service. He has served well and ably for many years and, in my opinion, is thoroughly deserving (far more than some I know) of promotion at your hands. Forgive me for intruding this upon you in the midst of a busy life, but I felt sure that you would want to know the facts. The Honorable Franklin D. Roosevelt, The White House, Washington, D.C. - 2 - Marjorie and I will be home this summer --- 1f the international situation permits --- as it has been more than a year now that we have been away. We will be mighty glad to get home and hope to see you. Always with our devoted affection, I am Faithfully yours, Jn Joseph E. Davies N.B. - I don't think I have made it strong enough here that, in my opinion, Wilson, by reason of his abilities and stature, is eminently fitted for a ministerial post. J.E.D. J.E.D. THE WHITE HOUSE WASHINGTON husmal (1) file Belgium July 19, 1939. MEMORANDUM FOR THE PRESIDENT: Dear Boss: I did not want to bother you to report on yesterday's conferences -- but I was on the job. Apparently events are marching inexorably. You have made the record. Your judgment, in my opinion, will be justified. Take care of yourself. God bless you. If there is any hole that I can stop or any service that I can perform, I am at your command. Attached hereto is a rather in- teresting map and memorandum of the strengths and resources of the European powers issued by the London Chronicle. I brought it over as I thought it would be interesting to you as a reference. for Faithfully yours, Joseph E. Davies ROORES OFFICIAL COMMUNICATIONS TO THE SECRETARY OF STATE WASHINGTON, D.C. DEPARTMENT OF STATE WASHINGTON August 30, 1939 My dear Mr. President: I am enclosing for your information a translation of the note received this morning from the Belgian Am- bassador expressing the thanks of the King of the Bel- gians for the message you sent him. Believe me Faithfully S yours, Enc. The President, The White House. EMBASSY OF BELGIUM Washington, August 28, 1939 D. 7442 - 4923 No. 3243 Mr. Secretary of State: By order of my Government, I have the honor to advise Your Excellency that I have been instructed to communicate to the President of the United States that His Majesty the King, My August Sovereign, highly an- preciated his communication of August 25, 1939 and expresses his thanks for it. The Belgian Government has advised of this reply the Governments of the States of the Oslo group. I take the liberty of having recourse to Your Ex- cellency's habitual courtesy to the end of transmitting this message to its high destination. I avail myself of this opportunity, Mr. Secretary of State, to renew to Your Excellency the assurance of my highest consideration. R. V. STRATEN To the Secretary of State, Department of State, Washington. En Rouli Bundli PSF: Belgium I Jiliers persona EMBASSY OF THE UNITED STATES OF AMERICA Dear Chief: Sift. - 5. 39- Im ff. Inll h on the job in Bmoselle in a wrek. all I n autid to say nn the phone was- - Wo Like care of your meng iss. Do spare yourself In the Heavy Days ahrad. sor only me crenting hot Colyalian needs y net Abou. ag am, I wait you to know old Insud that to the End of the road. I shall always S he graleful to ym for your impeduce and and breat. Bith My Margine I will remember it alway. God Bless. you! The Hars are marching! alm all Else can guarself as much as you Can In the Great Tasks that are ahead Z you.- My affidement remkmbravces to all the family - my deep grablude d affection to you. 7 moself.- Joe (Dhes) PSF: Belgium EMBASSY OF THE UNITED STATES OF AMERICA Jillsond FDR Dine Gmunal :- - Incl you h good unuff 20 band this Zo the Bns. Thanks a In. old fellow, In 78 - Please mumber me condually 4 your landy lady. they hel always 6 your In smokerful salf TELEGRAM SENT Pamphace To: Secstate, Washington Date: October 7, 1939, 5 p.m. No.: 152 Code: Charged to: ... 1-1148 The following message is for the President and the Secretary of State: Here in Belgium there is great fear that possibly there is imminent some move on the part of one or the other of the belligerent countries that will harden the existing situation into an irrevocable, real, bitter, long and terrible conflict. This fear is not directed only to the possibility of an immediate assault on the Wester Front by the Germans, but to the fact that the Allies might do something precipitately that would bring total destruction to the unstable "Bridge of Peace, If which delay might yet afford. They are still desperately clinging to the hope that time and the development of some possibly unforeseen occurence might obviate the catastrophe before it is hardened into finality. In this, their darkest hour, a high source has requested me to say to you that the only one in the world who can do something that might possibly avert the holocaust is President Roosevelt, and to express their hope that the President might find some way of once again making some effort similar to those noble ones that commanded in previous crises the admiration of the liberty-loving world. A despatch is following by special messenger, who will embark on the Clipper scheduled to leave Lisbon on October 11. DAVIES GENERAL SERVE ADM. STRATION The National Archives or R THE FRANKLIN D. ROOSEVELT Papers of President Franklin D. Roosevelt UNITED LIBRARY Program President's Secretary's File Hyde Park, N. Y. Box 43 (Belgium, 1939) E SEAL Three Cent imeters SUGGESTED DRAFT OF IDEA TO BE CONTAINED IN MESSAGE TO HITIER FROM THE PRESIDENT OF THE UNITED STATES. At this eleventh hour, after hostilities have already begun and before war of unprecedented violence and horror shall have become irrevocably cast and fixed through the hardening processes of suffering and passion, I make this appeal to you in a last minute effort to Save the Peace. Can not you and the great and fine German people renounce those conquests by force of arms which have demonstrated your purposes and your strength and, on 8. basis of the status quo ante, propose a conference at which you will submit your case, for which you have so eloquently and ably pleaded, to the fairness and justice of other nations, your peers who are equally desirous of establishing permanent peace for the security Am of Europe and thereby reaffirm confidence in the God that has implanted justice and right in the hearts of mankind? As you have said, such a conference must ultimately be held. It would be an inestimably greater achievement and more durable in character if this could be done by processes of conciliation and mutual concession through conference of minds rather than through the arbitrament of the sword. Countless millions in the world, if such pro- ject could succeed, would bless your name. I ask this in the name of humanity. GENERAL SERVICES ADMINISTRATION The NELIGNI archives STATEMENT a, 1 UNITED THE FRANKLIN D. ROOSEVELT Papers of President Franklin D. Roosevelt LIBRARY President's Secretary's File Hyde Park, N. Y. THE 1934 STATE Box 43 (Belgium, 1939) Three Centimeters ? THE WHITE HOUSE WASHINGTON October 13, 1939. MEMORANDUM FOR THE SECRETARY OF STATE To read and return. I do not think this requires any action at the present time. F. D. R. Cable from Ambassador Davies to the President and Secretary Hull in re request from high source to state that the President of the United States is the only person in the world who can possibly aver the holocaus etc. 0t8th TELEGRAM The White House file ate. Mashington 530 am Oct 8 1939 The following is a paraphrased code cablegram received at the State Department: Brussells, Oct 7, 1939, 5:00 p.m. from Mr. Davies. For the President and Mr. Hull Here the fear is great that either one or the other of the belligerents may possibly undertake imminently some action that will harden the situation, as it now stands, into a bitter, irrevocable, horrible and really long war. The possibility of an immediate assault by Germany on the Western front is not the only cause of this anxiety, but there is also the fear that the other side might destroy by some precipitous action, the trembling bridge of peace which might yet be afforded by delay. Here people continue to cling desperately to the hope that time, together with the development of some possibly unforeseen events, might cause the catastrophe to be averted before it is definitely and finally established. I have been requested, in this, their darkest hour, by a high source to state that the President of the United States is the only person in the world who can possibly avert the holocaust. I have likewise been asked to say that they hope that somehow he might find a way of making again an effort of some sort similar to those noble ones which he has made in previous crises and which have so evoked the admiration of all the lovers of liberty throughout the world A special messenger bearing a dispatch in regard to this is following on the clipper. (from the Secretary of State's office) PSF: Belgium THE WHITE HOUSE WASHINGTON October 19, 1939 MEMO: The original copy of this letter, signed by the President, today, and addressed to Ambassador Davies in Brussels was given by me to Mr. Stanley Richardson to be taken by him personally to the Ambassador. Mr. Richardson advised me that he would go to Brussels via Pan American Airways Clipper, leaving Long Island, New York Sunday morning, October twenty-second. & S.T.E. Got 19th Belguim Dear Joe: I am more than appreciative of the trouble you took to see that your letter of October 7th was placed in my hands with the least possible delay. I have read it with the utmost care, and I hope that you will tell the King that I have given real study to his analysis of the situation 8.8 it exists today, and to his suggestion that I make some new move with a view to bringing about peace. Not a day passes without my trying to see 1f a favorable opportunity existe for some move that would lead to peace. But now that hostilities are already under way I feel that any endeavor on the part of the United States to bring an end to this war should only be taken after it has become abundantly clear that the path towards which we may point does in fact lie in the direction of peace. I hope you will tell the King that I shall continue to watch the situation day by day, to study - as he does, though in my case from a greater distance - developments as they occur, and if the time should come when I felt that some action on our part would have a good chance of turning the world back towards peace, I could seize it with the firm conviction that I had the support of the united country. Let me add a line of thanks for your excellent and objective reporting. I follow news from Belgium with PSF: Belgium. letter has been put in the open An electrostatic copy of this vol 1, pp. 517-18. 4-7-65 RHP in Foreign Relations U. S., 1939, FDR to Davies, 10-19-39, published with personal interest, and I was particularly happy to note the King's statement to you that he looked upon me as the friend of his late father, of himself, and of Belgium. Very sincerely yours, The Honorable Joseph E. Davies, American Ambassador, Brussels, Belgium. Eu: PM: CMS 10/19/39 DEPARTMENT OF STATE THE SECRETARY October 19, 1939. MEMORANDUM FOR THE PRESIDENT In accordance with your re- quest, I am enclosing a draft of a letter to Ambassador Davies in reply to his letter of Oc- tober seventeenth. CH Dear Joe: I am more than appreciative of the trouble you took to see that your letter of October 7th was placed in my hands with the least possible delay. I have read it with the utmost care, and I hope that you will tell the King that I have given real study to his analysis of the situation as it exists today, and to his suggestion that I make some new move with a view to bringing about peace. Not a day passes without my trying to see if & favorable opportunity exists for some move that would lead to peace. But now that hostilities are already under way I feel that any endeavor on the part of the United States to bring an end to this war should only be taken after it has become abundantly clear that the path towards which we may point does in fact lie in the direction of peace. I hope you will tell the King that I shall continue to watch the situation day by day, to study - as he does, though in my case from a greater distance - developments ae they occur, and if the time should come when I felt that some action on our part would have a good chance of turning the world back towards peace, I could seize it with the firm conviction that I had the support of the united country. Let me add a line of thanks for your excellent and objective reporting. I follow news from Belgium with with personal interest, and I was particularly happy to note the King 6 statement to you that he looked upon me as the friend of his late father, of himself, and of Belgium. Very sincerely yours, The Honorable Joseph E, Davies, American Ambassador, Brussels, Belgium. Eu: PM: CMS to S 10/19/39 Brussels, Belgium, October 7th, 1939. STRICTLY PERSONAL AND CONFIDENTIAL My dear Boss: This is dictated in great haste to catch the Clipper. It involves such a delicate situation and so urgent a matter that I am anxious for you to have it at the earliest moment. I have decid- ed to have Stanley Richardson, at my personal ex- pense, take it to you by the Clipper flying Wednes- day. On Friday morning, our mutual friend, Mr. Dannie Heineman, came in to see me. The King, he said, had been with his troops all week, was tired and terribly worried over what appeared to him to be the inevitability of a war of the greatest vio- lence and bitterness which would destroy millions of people in Europe. The King asked Heineman to see me and ascertain whether I could come out to see him unofficially at the Palace that evening. I spent three hours with king Leopold. The gist of the matter, as stated, was that: The King is greatly concerned with the extreme delicacy of his position as be- tween Hitler and Britain and France and is desperately trying honorably to conserve the strictest neutrality which his Government has pledged. In personal feeling he, along with his people, is definitely not neutral but anti-Hitler. He looks upon you as the friend of his late father, of himself and of Belgium and feels confident that whatever you might be able to do, if you thought favorably of doing anything, would be done in such man- ner as would protect his situation so far as The Honorable Franklin D. Roosevelt, The White House, Washington, D.C. - 2 - Britain, France and Germany are concerned. It was his desire that not even his minis- ters should know of our discussion. It is the King's opinion that the British Government has been stupid in the extreme; that their diplomacy during the past three years has constituted the dark- est page in British diplomatic history; that they have been weak when they should have been decisive, bold when they should have been cautious; that when they should have been preparing they were not, with the terrible result that even now they are "like children" ruthlessly rushing into a war that will involve the destruction of millions of men and possibly of Europe when they are not ready for it and when the issue may be in the gravest doubt. He feels that something must be done to stop this catastrophe or at least make for delay. Prior to Hitler's speech on Friday he feared that Hitler would precipitate a vio- lent attack upon the western front, and then irrevocably a long and bitter war would ensue. He does not now exclude that possibility en- tirely. His fears now, after Hitler's speech, are that even though Hitler were to remain passive for the winter, Britain and France through their obduracy will, on the other hand, precipitate a condition that will hard- en the situation into irrevocable finality. There is still a slender hope for peace but he fears that the "Bridge to Peace," fragile and trembling as it is, might be de- stroyed in the immediate future and that the die may be cast. War, long, horrible and un- certain in outcome, would be irrevocable. The outcome, even if the democracies were success- ful, would probably bring the destruction of our form of life and the domination of Europe by unexhausted, fresh Russian troops and com- munism. The only hope that he can see in the world today, that this imminent tragedy may be averted, is you. He has been importuned by many French - 3 - sources to engage in activities which would destroy his neutrality and which, if he ac- ceded to them, would undoubtedly precipitate violent war by Hitler. He has been compelled to refuse them. (This was also stated to me by Prime Minister Pierlot yesterday, although he knew nothing of the conference I had with the King). In view of your great noble efforts in previous times of crisis, the King hopes that your genius may find some means of pre- serving the "Bridge to Peace, at least for the winter. Something might happen in the interim; Hitler, he says, "cannot live for- ever," and anything might happen in Germany. He made it clear that he fully appre- ciates that the overwhelming opinion not only of his own people but of the European demo- cracies 1s "no peace with Hitler:" and that no trust can be placed in his word when (yesterday) he openly justified the break- ing of innumerable promises by the fact that it was for the "success" of Germany. He fully appreciates, of course, that if Hitler wins, it is the end of Belgium. Peace now with Hitler, he also recognizes, will not be a conclusive peace; but he clings to the belief that while there is still life in peace there is still hope that something might be worked out during the winter months. He fears that the democracies are not adequately prepared now but that if time per- mits, Hitler and his regime may disappear. His thought is: "don't precipitate irrevoca- ble fighting now," even thought peace with Hitler is not peace. After this conference, I decided to send you a cable, a paraphrase of which is attached. It necess- arily had to be "blind" to protect the King against a possible breakdown of our code. I had to assume that you would understand where the suggestion came from. There is no doubt this morning that the slogan now is: "no peace with Hitler." There is no doubt, also, that that is the underlying belief of the people - 4 - here. Among objective minded persons, however, there is a begrudging recognition that Hitler's speech was more moderate in tone than heretofore, exceedingly plausible and able and especially made for home con- sumption. It was an adriot attempt, through obvious ex parte statement, to affect world public opinion, particularly among the advocates of peace. Whether you could, one more, publicly urge that every possible avenue of preventing war should be ex- plored and considered and urge upon the belligerants on both sides to modify their claims so as to bring about a possible meeting of minds, your judgment could best determine. My conviction is that if you did, it would still be to no avail for, as I have expressed to you hereto- fore, I am certain that Hitler's will is not for peace but for war. It is his only way out. Regardless of what you might do, in my opinion, he will still per- sist. Such an appeal, if you considered it wise, even if it failed, would have been worthwhile. It would be another great and noble effort to save the peace, even up to the eleventh hour, and it would, in any event, again be of great value as "putting the bee on the b" and place the responsibility where it belongs. I en- close a short, hurried memorandum of suggestions as it makes my thought concrete. Of course, your judgment as to this would be bet- ter than mine, and in addition thereto you have wider perspective and a broader knowledge of the facts. I am sorry that this letter is not as compact as I might desire, but I am dictating against time. Faithfully and hastily yours, for Joseph E. Davies Brussels, Belgium. PERSONAL AND CONFIDENTIAL The Honorable Franklin D. Roosevelt, The White House, Washington, D.C. (BY SPECIAL COURIER) Stunday Will 10m/mm Filly DTrki priply. Brussels, Belgium November 8, 1939. Personal and Confidential fele = My dear Boss: Stanley Richardson brought back your letter and I immediately saw His Majesty the King. Upon his request, I read to him both my letter to you and your reply. He stated that he was greatly impressed by your letter and that he was deeply grateful. He asked me whether he could not have copies of the letters. I replied that I was sure there could be no objection to this. Unless I hear from you to the contrary, I will give him a copy of each. As I reported to you by cable, I also had a long visit with him immediately after he and the Queen of Holland issued their mediation proposal to the belligerents. I enclose herewith copy of re- port which I sent to the Department. The gist of it is that at the end of last week, insistent rumors reached both the Holland and the Belgian Governments, of German storm troops be- ing assembled on the Dutch and Belgian borders; also that there was great activity in the preparation of pontoon bridges, etc., and that these troops were allocated along the borders in a manner identical with that which preceded the attack on Poland. These reports induced the gravest fears on the part of the Dutch Government that an invasion was impending. The Honorable Franklin D. Roosevelt, The White House, Washington, D. C. - 2 - On Sunday these were also communicated to the King by the Queen of Holland. Late Monday night, accom- panied by his confidential military aide and the Minister for Foreign Affairs, he motored to The Hague. The offer of mediation by the two monarchs was the immediate result. The first reaction in Germany was one of violent attack on Belgium and Holland. Bel- gian protest on Tuesday night resulted in the assur- ance that these press attacks would stop. The King himself is of the opinion that it is too late in the season to project an offensive, and intimated that he considered it was more or less an effort at intimida- tion. However, as stated in my letter to you of October the 7th, he is deeply concerned with trying to exhaust any possibility of preserving a. "bridge to peace" and joined the Queen in this effort. He hopes that something may come of it, but does not, I believe, have very much hope. He stated that while Hitler appears at times to be unbalanced, he has in- dicated great caution and shrewdness on many occasions. But because Hitler is unpredictable, every contingency had to be guarded against. At the conclusion of an extended visit at the Palace, he again impressed upon me that I tell you how deeply he appreciated your message to him, and that he was particularly touched by the references which you made to his father, to himself and to the Belgian people. Faithfully yours, In Joseph E. Davies TELEGRAM SENT Priphase To: Secstate, Washington Date: October 7, 1939, 5 p.m. No.: 152 Code: Charged to: ... 1-1142 The following message is for the President and the Secretary of State: Here in Belgium there is great fear that possibly there is imminent some move on the part of one or the other of the belligerent countries that will harden the existing situation into an irrevocable, real, bitter, long and terrible conflict. This fear is not directed only to the possibility of an immediate assault on the Wester Front by the Germans, but to the fact that the Allies might do something precipitately that would bring total destruction to the unstable "Bridge of Peace," which delay might yet afford. They are still desperately clinging to the hope that time and the development of some possibly unforeseen occurence might obviate the catastrophe before it is hardened into finality. In this, their darkest hour, a high source has requested me to say to you that the only one in the world who can do something that might possibly avert the holocaust is President Roosevelt, and to express their hope that the President might find some way of once again making some effort similar to those noble ones that commanded in previous crises the admiration of the liberty-loving world. A despatch is following by special messenger, who will embark on the Clipper scheduled to leave Lisbon on October 11. DAVIES SUGGESTED DRAFT OF IDEA TO BE CONTAINED IN MESSAGE TO HITIER FROM THE PRESIDENT OF THE UNITED STATES. - At this eleventh hour, after hostilities have already begun and before war of unprecedented violence and horror shall have become irrevocably cast and fixed through the hardening processes of suffering and passion, I make this appeal to you in a last minute effort to Save the Peace. Can not you and the great and fine German people renounce those conquests by force of arms which have demonstrated your purposes and your strength and, on a basis of the status quo ante, propose a conference at which you will submit your case, for which you have 30 eloquently and ably pleaded, to the fairness and justice of other nations, your peers who are equally desirous of establishing permanent peace for the security of Europe and thereby reaffirm confidence in the God that has implanted justice and right in the hearts of mankind? As you have said, such a conference must ultimately be held. It would be an inestimably greater achievement and more durable in character if this could be done by processes of conciliation and mutual concession through conference of minds rather than through the arbitrament of the sword. Countless millions in the world, if such pro- ject could succeed, would bless your name. I ask this in the name of humanity. - - - THIS OVERSIZE ITEM HAS BEEN MICROFILMED IN SECTIONS. SECRET BELGIAN ARMY DEPLOYMENT M.I.D., Initial NOVEMBER-16-1939 16-1939 Frank.10 6. Library DECLASSIFIED DAD Villa 1000.9 (9/27/58) has 5/26/69 I group ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION TWO CAV DIVISIONS ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION ONE INF DIVISION FOUR INF DIVISIONS NORTH THE SEA. BRUSSELS FRANCE LIGHT SCREEN t /- Date BRUSSELS Initial M.I.D., SECRET ONE INF DIVISION T LIGHT SCREEN ONE INF DWISION E Date PRINT CRAND LIGHT SCREEN. GERMANY n PSF: Belgium Copy for the President Brussels, November 8, 1939. No. 511 Subject: Conference with King Leopold III at the Palace at Laeken on November 8, 1939. Confidential. The Honorable The Secretary of State, Washington. Sir: Supplementing my cables of November 7 (Nos. 166, 1 p.m.; 167, 5 p.m., 168, 6 p.m.s 169, 9 p.m.1 and 170, 10 p.m.) with reference to the hurried trip of His Majesty King Leopold III to Holland on Monday night, November 6, and the offer of medi- ation by the King of the Belgians and the Queen of Holland to Germany, France and England, I beg leave to advise that I had an extended conference with King Leopold today at 2:30 at the Laeken Palace, with the understanding that the information which he gave me was to be employed solely for the use of the Presi- dent and the Secretary of State and the Government of the United States. - 2 - States. He outlined to 399 very frankly what has occurred, as follows: That it was quite clear that the belligerents on both sides were relustant to precipitate the full violense of unrestricted war; That one of the difficulties of the situation was that there were no contacts of approach as between the belliger- ents with a view to securing a possible meeting of minds, looking to a composition of the matters in difference; That it would be inconceivable to him that Germany would wish to pursue the war if peace were possible, be- cause the situation in Eastern Europe had been "rectified" from the German viewpoint; That Germany has brought great pressure to bear upon the smaller neutral countries to emphasise what was termed their obligation to furnish such contacts of approach and try to establish some means of composing differences between the belligerents, as otherwise they would not escape, themselves, the horror of possibly unlimited warfare; That Hitler recently sont for the dean of the Military Attachés in Berlin, a Swede, and had told him specifically that the neutrals would have to do something about this or war in its most horrible form would result; That for some days last past, the German press had as- sumed a most violent attitude toward the neutral countries, particularly Holland and Belgium, in connection with their alleged inability to protect their sovereignty and neutrality; That many rumors had reached the Government of Holland and the Government of Belgium of the massing of German shook troops on their borders and the preparation of pontoon bridges and ... - 3 - and the like - all pointing to a possible imminent invasion of Holland and possibly Belgium; That on Sunday and Monday the Queen of Holland became seriously alarmed and took the matter up with him, with the result: That he motored over to see Queen Wilholmina on Monday night and took with him not only the Foreign Minister, Mr. Spaak, but also one of his Generals, Major General Van Over- stracten (his personal military aide and his liaison officer with the General Staff). The joint proffer of mediation by the two rulers sent to the three belligerents was the result of their conference; That the two Sovereigns were hopeful that this offer might possibly load to a discussion of peace terms, which at least would serve to delay the outbreak of ultimately disas- trous warfare; That, prompted possibly by the presence of one of King Leopold's Generals with him in Holland, the German press had attacked both Holland and Bolgium very violently; That yesterday a protest was filed by the Belgian Foreign Office against these press attacks, with the result that Bel- give was assured that they would stop. ...... His Majosty went on to say that he could not conocive how the German High Command could possibly rationally decide upon a violent offensive at this time. He pointed out that mechan- ised and motorized warfare was peculiarly dependent upon weather conditions and that any big offensive required long hours of day- light, which does not provail here at this time of year. More- over, there was very little that the Germans could gain at best. Even ... - 4 - Even though successful, he said, the Germans could only push forward their lines into Belgium, to be stopped there or cer- tainly at the Maginot Line in France, and be then confronted with another stalemate. This would be very costly in every respect and particularly because it would completely alienate world public opinion. For these reasons he could not believe that it would be possible for the German High Command to embark upon such a plan. He gave the impression to no that in spite of this, he was impressed by the attitude and fears of Holland, partiou- larly because the decision resided within the mind of one man - Hitler - the quality of whose judgment one could not roly upon. In that connection he stated that he had been recently informed by certain Germans within the past three weeks that there was some question as to whether the German High Command would go along with Hitler unless its judgment was in accordance with the wisdom of his plan. His Majesty stressed the advantage which would accrus to the democracies to explore the possibilities of securing peace through the mediators, because, he said, at least it would con- sume time, even though it did not result in an agreement. It was the King's opinion that Mtler definitely desires peace now. King Leopold left here for Holland at eight o'clook Monday night by motor, dressed in the uniform of the Commander-in-Chiof of the Belgian Army. At the palace in The Hague he conferred with the Queen until the early hours of the morning. The dis- cussions were resumed the following day. The offer of mediation by the Sovereigns was prompted by a mixture of notives: one, of possibly affording a means of averting ... - 5- - averting a terrible, intense war; end the other, to impross Germany with the fact that the neutrals were attempting to do their share to preserve pease, in the hope of at least stalling off the fateful hour of invasion. I asked His Majesty whether it were possible that Bel- gium could remain neutral in the event of an invasion of Holland. To this he did not reply directly. He stated, however, that perhaps the Germans would consider his trip into Holland, accompanied by his confidential military aide, as indicative of a very close relationship between the two countries, in which they would find themselves standing to- gether. As was stated in my cable No. 172 of November 8, 4 p.m., the King and his Government are taking no chances but are making every preparation to be in readiness, should the worst happen. The tension here is everywhere apparent. Respectfully yours, Joseph E. Davies qn. File No. 710 JEDIAFH Belguion November 9, 1939. Memo for the President from Cordell Hull Attaches map and memo by Moffat on situation relating to Belgium and Holland in event of possible German invasion. See: Cordell Hull folder-Drawer 1-1939 neth the PSF: Belguin 1039 this teme time Car 9 Charl Brussels, November 17, 1939 My dear Chief: Attached hereto, by way of the pouch, I am send- ing you a sketch showing the deployment of the Belgian army as of November 16, 1939, and marked "Secret, M.I.D." which has been prepared by Colonel Brown, the Military Attaché here. It occurred to me that it would interest you particularly as it shows exactly where Belgium antici- pates attack, and it also shows specifically the manner in which they are prepared to meet it. You will note that there are practically no armed forces on the south- ern boundary. This report of Colonel Brown can be relied on. He is accurate and energetic, and has also excellent judgment. This has come to me in the course of the weekly reports which each member of the staff submits to me on the outstanding developments of the week, for consider- ation in connection with my weekly cable to the Depart- ment. The tension here has definitely relaxed. Appre- hension, however, is still high and vigilance is not re- laxed, although it is generally considered that the attack has been postponed until next year. With assurances of my great respect and also my affectionate regards, I am, Hastily yours, Jr Joseph E. Davies The Honorable Franklin D. Roosevelt, The White House, Washington, D. C. EMBASSY OF THE UNITED STATES OF AMERICA OFFICE OF THE MILITARY ATTACHE BRUSSELS, BELGIUM November 17, 1939 MEMORANDUM: For the Ambassador. I think that the outstanding events of the past week were the following : 1. The high tension of the past week-end, which has since slightly subsided, but which has certainly not disappeared. The Holland Government's attitude of assurance to the people looks to me like an effort to win the good graces of Germany. German troop masses still conserve the strategical possibility of a mass attack on Holland, and although the German Press campaign has subsided, the troop concentrations exist. There has been some slight German retrograde movement of course. 2. The rather stiff attitude of the Belgian Government in relation to the press. This and other measures of course are designed to thwart action that might bring down German protest as a result of anti- German articles and items, but the result is a muzzled press. 3. Full maintenance of defense measures in Belgium. 4. Increased tax measures in Belgium. I recommend for inclusion in cablegram the following : no - BELGIAN DEFENSE MEASURES UNRELAXED". ROBERT DUNCAN BROWN, Lt. Colonel, General Staff, Military Attache PSF: Belgium Cháfeau be Tacken Re 29 novembe 1939. My dear President and Friend, A l'ocrasim de sen Dipart fair his Etats. Unis, j'ai uge a matin mr. Davies pour lequel j'ai tant de sympathic an crurs de noter entretien, votre ambassadeur in n remis votre aimable letter born laquelle je m impusse De vous remercies condialment. X'accueil que mes aves accorde' is mm message me touche viviment it j'apprice hautement touth he facilites dont Mr. Thennis est entoure bnu l'accomplisse- ment de sa mission. H m 'est infiniment pricieus situ assuri gue mm Pays barra compter sur note aide daus les circoustances qu'il traverse ih gui chaque jour persont devenir plus difficiles. Je saisis citte occasion four vins dire income, ainsi gu in masame Roosealt, combin ji suis sensible a l'offre si aimable gue vous in any faile de recerrie ésentrullement mes infants ches veres. cell intiret personnel gun veres party a ma famille me va noit an cour, it c'est une satisfaction morale pour moi que de senter you jai in vous un veritable ami. En formant Des reup pow que longtemps Incore view prisidies aur destinus de vote grand Pays, jr vous prie de croire, mou ches President, a mes sentiments de cordiale affection. teoper fm Excellence mr. Franklin Roosevelh President Des Etats-Unis amirique. 1934 Château de Tacken a for Excellence mr. Franklin Roosevelt, President des Etats-Unis s'amirique Washington DC DEPARTMENT OF STATE ASSISTANT SECRETARY THE WHITE HOUSE Returned to the White House for The President's files. The letter has been transmitted to Brussels for presentation to the King. November 3, 1939. My dear King Leopold: Your Majesty's letter of September 26, 1939 has been handed to me by Monsieur Theunis in fulfillment of the special mission with which you entrusted him. It was a great pleasure to receive Monsieur Theunis, who is well known to me; and I have seen to it that he will be accorded every facility. I am especially glad to have the benefit of your personal views on the particular position of Belgium. This is in part due to the very close and intimate affection which the American people have for the memory of your Father, King Albert, whose stand for the independence of the Belgian nation won for him in this country the highest admiration and respect. But it 18 also due to the fact that the Government of the United States, and I personally, have followed with very deep sympathy Your Majesty's recent inspiring efforts to preserve peace in Europe. Certainly you personally have the satisfaction of knowing that you did His Majesty Leopold III, King of the Belgians. - 2 - did everything within your power to avert the calamity which has come to pass. I am in entire agreement with your belief that peace- loving nations, like your own, cannot be satisfied that their mission ended with the outbreak of war. The search for a lasting peace based on justice must 80 on; indeed, the neutral nations are charged with a greater responsibility before the human race than previously, since they, more than any others, can express the desire for & world in which order in law has once more been restored. We cordially agree that while the conflict continues, those nations still at peace must attempt to minimize the effects of economic warfare, to keep commerce flowing where possible, and to insist that the earrying on of war does not set up any right in belligerents to deprive neutral nations of the necessary economic basis for the continuance of their normal existence. The Government of the United States is ready to discuss measures with Monsieur Theunis to achieve this end, and to examine with great care any suggestions he may have to offer. The economic position of Belgium is well understood; it 1s fundamentally unjust that any nation should be forced into idleness and famine because it refuses to make war; the humanitarian grounds which Your Majesty asserts are of the highest; - 3 - highest; and you may be assured that this Government will not be indifferent to the appeal which you have made. The Government of the United States will, therefore, take great pleasure in actively searching for ways and means by which the end you seek may be brought about. Please be assured of my warm personal regard and friendship for Your Majesty, and my cordial good wishes for your success in seeking a just solution of the grave problems confronting you. Yours very sincerely, (Signed) Franklin D. Roosevelt N true of the signe for Inal