put in the position of having obligations, bonds outstanding, which might be in excess of what she could reasonably be expected to pay, and we avoid that danger in that way.

Senator JOHNSON of California. With the debt hanging over her? Mr. DAVIS. Yes; it is a book account, that is true; there is that book account.

Senator JOHNSON of California. Is there any mode by which that book account may be collected or enforced?

Mr. DAVIS. No.

Senator JOHNSON of California. To what extent, then, may the reparation commission enforce its collection hereafter?

Mr. DAVIS. My interpretation is that the reparation commission can not enforce the collection of anything beyond the bonds which they have in their possession or that have been delivered to them. Senator JOHNSON of California. Is that your reading of the treaty?

Mr. DAVIS. Yes.

Senator JOHNSON of California. And is that your reading concerning the taxation clause, the industrial clauses, and the like?

Mr. DAVIS. Yes; it is.

Senator JOHNSON of California. And in respect to shipping and the various things that Germany is to deliver, is that your reading of the treaty?

Mr. DAVIS. That will all be credited.

Senator JOHNSON of California. I understand that, that that will all be credited, but the point is, has not the reparation commission the power-whether it will exercise it or not is a different proposition to endeavor to collect this bill that Germany now owes ?

Mr. DAVIS. I do not understand that they can do anything toward collecting anything except the bonds that they have, that have been delivered to them.

Senator JOHNSON of California. Do you interpret the treaty to mean that the reparation commission can do anything concerning the compelling the performance of the terms of the treaty by Germany except the collection of the bonds?

Mr. DAVIS. From a practical standpoint and from a reading of the treaty I do not see how they can do anything else.

Senator JOHNSON of California. I am very glad to have your construction of it because, as I understand the terms, I had quite a different view.

Senator HARDING. Right there, then, what is the object in giving to the reparation commission the power to see that the German rate of taxation is made equivalent to that of any other power engaged in the war?

Mr. DAVIS. Senator, as I stated yesterday, I do not think that was a necessary clause to put in the treaty. Some of the other powers wanted it in the treaty, partly for political reasons, and we could see no objection to it, and we agreed to its going in; but, as I explained yesterday, the German rate of taxation may or may not have any relation to Germany's capacity to pay in foreign currency, because her taxes will be collected in German currency.

Senator HARDING. If you have covered that already, I am sorry to have taken the time to-day.

Senator McCUMBER. Is not the effect of that agreement simply this: That the reparation commission will not release any part of the sum which Germany agrees to pay if the taxation in Germany is not as heavy as it is in the other countries! In other words, if her taxation is less than that of the countries to which she owes the debt, those ecuntries will insist that she shall pay, if it requires a taxation equal to their own, and that they will not release any part of it until her taxation comes up to the taxation of the other countries.

Mr. Davis. That is provided they are of the opinion that an increase in her taxes will increase her power to comply with her obli

Senator McCUMBER. Yes: I understand, but that is the purpose of it! M- DAVIS E

Senator McCUMBER. And f they ind that he can not even pay The TAZAT) ʼn Mnivment to what is paid in France or in Great Britain, ther mat sol relieve her from a portion of the dent promided the feet of creasing her taxation weit be to destroy her abuİST %% 327. M- Dars. Aiscimale. In other worts if they azzøet to enLect Sia Germany they have not to reat that lation in an intelligent madder or they will testry Germany + 'acacity to 187

SLAST JOHNSCs of California. Exactly and yoIL LOOK to me the PACITOR Ymmission Tea In an inteligent manner 20 af they will take in a Germany + tasacity and no more!

put in the position of having obligations, bonds outstanding, which might be in excess of what she could reasonably be expected to pay, and we avoid that danger in that way.

Senator JOHNSON of California. With the debt hanging over her? Mr. DAVIS. Yes; it is a book account, that is true; there is that book account.

Senator JOHNSON of California. Is there any mode by which that book account may be collected or enforced?

. Mr. DAVIS. No.

Senator JOHNSON of California. To what extent, then, may the reparation commission enforce its collection hereafter?

Mr. DAVIS. My interpretation is that the reparation commission can not enforce the collection of anything beyond the bonds which they have in their possession or that have been delivered to them. Senator JOHNSON of California. Is that your reading of the treaty?

Mr. DAVIS. Yes.

Senator JOHNSON of California. And is that your reading concerning the taxation clause, the industrial clauses, and the like?

Mr. DAVIS. Yes; it is.

Senator JOHNSON of California. And in respect to shipping and the various things that Germany is to deliver, is that your reading of the treaty?

Mr. DAVIS. That will all be credited.

Senator JOHNSON of California. I understand that, that that will all be credited, but the point is, has not the reparation commission the power whether it will exercise it or not is a different proposition to endeavor to collect this bill that Germany now owes ?

Mr. DAVIS. I do not understand that they can do anything toward collecting anything except the bonds that they have, that have been delivered to them.

Senator JOHNSON of California. Do you interpret the treaty to mean that the reparation commission can do anything concerning the compelling the performance of the terms of the treaty by Germany except the collection of the bonds?

Mr. DAVIS. From a practical standpoint and from a reading of the treaty I do not see how they can do anything else.

Senator JOHNSON of California. I am very glad to have your construction of it because, as I understand the terms, I had quite a different view.

Senator HARDING. Right there, then, what is the object in giving to the reparation commission the power to see that the German rate of taxation is made equivalent to that of any other power engaged in the war?

Mr. DAVIS. Senator, as I stated yesterday, I do not think that was a necessary clause to put in the treaty. Some of the other powers wanted it in the treaty, partly for political reasons, and we could see no objection to it, and we agreed to its going in; but, as I explained yesterday, the German rate of taxation may or may not have any relation to Germany's capacity to pay in foreign currency, because her taxes will be collected in German currency.

Senator HARDING. If you have covered that already, I am sorry to have taken the time to-day.

Senator McCUMBER. Is not the effect of that agreement simply this: That the reparation commission will not release any part of the sum which Germany agrees to pay if the taxation in Germany is not as heavy as it is in the other countries? In other words, if her taxation. is less than that of the countries to which she owes the debt, those countries will insist that she shall pay, if it requires a taxation. equal to their own, and that they will not release any part of it until her taxation comes up to the taxation of the other countries.

Mr. DAVIS. That is, provided they are of the opinion that an increase in her taxes will increase her power to comply with her obligations.

Senator MCCUMBER. Yes; I understand, but that is the purpose of it? Mr. DAVIS. Yes.

Senator McCUMBER. And if they find that she can not even pay the taxation equivalent to what is paid in France or in Great Britain, they may still relieve her from a portion of the debt, provided the effect of increasing her taxation would be to destroy her ability to pay. Mr. DAVIS. Absolutely. In other words, if they expect to collect from Germany they have got to treat that situation in an intelligent manner, or they will destroy Germany's capacity to pay.

Senator JOHNSON of California. Exactly, and you look to see the reparation commission treat it in an intelligent manner, so that they will take up to Germany's capacity and no more?

Mr. DAVIS. Yes.

Senator JOHNSON of California. But there is the power to do more, is there not?

Mr. DAVIS. Yes; they have the power. That is, they have the power to take measures or fail to take measures which would not be intelligent and constructive.

Senator JOHNSON of California. Exactly; so that with your bill that Germany has signed in blank, your reparation commission have the discretion to do as they see fit. We assume that the reparation commission will act intelligently, of course, and not press the debtor to the wall, but the reparation commission has the power to do otherwise.

Mr. DAVIS. I do not see how the reparation chapter of the treaty can be construed beyond the fact that the reparation commission can only enforce compliance on the part of Germany in respect to the bonds which have been delivered to the reparation commission.

Senator JOHNSON of California. How do you look for the enforcement of the sums that will be fixed otherwise-for reparation in those sums?

Mr. DAVIS. That is left rather vague, and I do not see how it can be enforced.

Senator JOHNSON of California. Do you mean that if the reparation commission, outside of these bonds, determine that Germany shall pay a certain sum, there is no means of enforcement of it?

Mr. DAVIS. No; but I say the reparation commission must first determine that Germany shall deliver additional bonds, and that that requires a unanimous vote.

Senator JOHNSON of California. All right, but under the bill which has been admitted by Germany and is now indefinite in amount, if they require that a certain sum shall be delivered in bonds, Germany must deliver them.

Mr. DAVIS. Oh, decidedly.

Senator JOHNSON of California. Certainly, and the reparation commission has the power to determine the amount of those bonds up to the amount of the bill.

Mr. DAVIS. Absolutely.

Senator JOHNSON of California. And require Germany to pay them?

Mr. DAVIS. Yes, indeed.

Senator JOHNSON of California. Now the reparation commission, if you will recall, has no power of cancellation.

Mr. DAVIS. Except by unanimous vote.

Senator JOHNSON of California. They have even got to go back to their Governments, have they not? Do you not recall that provision? Mr. DAVIS. It does say that the Governments, acting through the reparation commission, as I recall the wording

Senator JOHNSON of California. I am not attempting to state with any degree of accuracy my recollection of the treaty, but as I recall it, before cancellation or modification in reality, the reparation commission must have the consent of the Governments concerned.

Senator FALL. I have the provision here.

Senator JOHNSON of California. Will you read it?
Senator FALL. This is the way it reads:

Annex 2 to article 244, paragraph 13, subsection (a): Questions involving the sovereignty of any of the allied and associated powers, or the cancellation of the whole or any part of the debt or obligations of Germany, shall be by unanimous vote. In case of any difference of opinion among the delegates, which can not be solved by reference to their Governments, upon the question whether a given case is one which requires a unanimous vote for its decision or not, such difference shall be referred to the immediate arbitration of some impartial person to be agreed upon by their Governments, whose award the allied and associated Governments agree to accept.

Senator JOHNSON of California. That is the provision.

Senator MCCUMBER. I think the provision that the Senator from California [Mr. Johnson] refers to is article 234, found on page 251. Senator JOHNSON of California. I recalled the provision, but it was not of sufficient importance to bother with it.

Senator MCCUMBER. Giving the right to cancel or not to cancel any part, except with specific authority of the Governments represented on the commission.

Senator JOHNSON of California. I thank the Senator. That was what I referred to

Except with the specific authority of the several Governments represented upon the commission.

Mr. DAVIS. The last sentence in article 233 also bears on the same question:

If, however, within the period mentioned, Germany fails to discharge her obligations, any balance remaining unpaid may, within the discretion of the commission, he postponed for settlement in subsequent years, or may be handled otherwise in such manner as the allied and associated Governments, acting in accordance with the procedure laid down in this part of the present treaty, shall determine.

Senator JOHNSON of California. I am trying, you know, to form a picture if I can

Mr. DAVIS. Yes, I know. I am interested, because we went through all of that.