Although the results of the Conference are not those which might have been desired by all of us, nevertheless, its recommendations provided the basis for the final settlement at the last meeting of the Council of Foreign Ministers in New York.1

Out of the 53 Peace Conference recommendations which were adopted by at least a two-thirds majority, 47 were incorporated with little or no change in wording in the final text of the treaties.

Of the 41 recommendations adopted by a majority but by less than a two-thirds majority of the Conference, 24 appear in the final wording. The other recommendations were not ignored. They were carefully considered in connection with the remaining agreements. For example, without the Conference recommendations upon the establishment of the Free Territory of Trieste, no final solution of this difficult question would have been possible. Its eventual solution contains the basic principles of the Conference's recommendations.

Unsatisfactory though the peace treaties may be from many points of view, their coming into force through their early ratification will insure certain positive advantages for all, including the ex-enemy states themselves, which should not be overlooked in any analysis of the situation created by these agreements.

In the first instance they represent an important, although a limited, step in the direction of the restoration of peace, of order, and of stability. Stability and peace can only be achieved as elements of uncertainty are removed. Until the treaties are ratified, the armistice regimes remain in force. As long as they remain in force none of the states subject to them can look forward to a future free from the possibility of interference in every phase of their national life, an interference which by the terms of the armistices 2 other countries are required to recognize and to accept.

It is true that in Italy we have refrained from exercising many of the rights granted us. But the fact that they still existed was a continuing element of instability for the people and for their government.

Only through the conclusion of a definitive peace can the ex-enemy states resume their sovereign rights and thereby accept full responsi bility for their own acts in the future, another important step toward the restoration of stable conditions.

No planning for the future, particularly in respect to economic development, was possible as long as these states were uncertain with respect to their future obligations arising out of the war.

The treaties authorize the ex-enemy states to make application for admission to the United Nations. Once admitted to membership they subscribe to the principles of the Charter and like every other peace-loving state have the right of appeal for the settlement of any

1 i. e., the Third Session of the Council of Foreign Ministers, New York, Nov. 4-Dec. 11, 1946; see ibid., pp. 92-97.

2 Armistice with Italy of Sept. 3, 1943, and related agreements (TIAS 1604); armistice of Oct. 28, 1944, with Bulgaria (A Decade of American Foreign Policy), pp. 482-485; armistice of Jan. 20, 1945, with Hungary (ibid, pp. 494-499); armistice of Sept 12, 1944, with Rumania (ibid., pp. 487-491); and armistice of Sept. 19, 1944, with Finland (Department of State Bulletin, Feb. 18, 1945, pp. 261–268.

problem which might affect their peace and security. They will then have the right to take an equal part in resolving this problem. As a result of such appeals, it is possible that revision of some of the more onerous clauses might be achieved.

Our action in consistently pressing for agreement upon these treaties has been influenced by our conviction that there could be no return to normal conditions in Europe until armies of occupation were withdrawn and our realization that they would not be withdrawn in the absence of treaties.

The withdrawal of Allied forces from Italy, Bulgaria, and Finland and the reduction of the garrisons in Rumania and Hungary to the level required only for the maintenance of lines of communication will remove heavy economic burdens from these countries and release them from pressure in other ways.

The withdrawal of occupation troops from lines of communication will result from the conclusion of the Austrian treaty, to which end every effort is now being made.

The United States and British forces in Italy have already been reduced almost below the effective level. The same cannot be said for the forces of occupation in other countries which must now leave within 90 days after the entry into force of the treaties.

I might recall that the settlement involving Trieste was the most controversial aspect of our long negotiations. Indeed, until this question had been disposed of it seemed likely that no final overall agreement could be achieved. The United States originally proposed that the area west of an ethnic line drawn after careful study by American experts should be the boundary between Italy and Yugoslavia, leaving the Italian populations of Pola and Trieste joined to Italy.1

Other frontiers were proposed by different delegations, but the lack of agreement in the Council of Foreign Ministers rendered our ethnic solution impossible of general adoption.

Yugoslavia, supported by Soviet Russia, urged the establishment of its frontier even to the west of Italy's pre-1918 boundary. For its contribution to Allied victory Yugoslavia asked to be awarded the whole of Venezia Giulia. Its representatives claimed that the western littoral including the city of Trieste should be joined to its Slav hinterland in spite of the fact that this area was predominantly Italian.

Because of the mingling of the two nationalities throughout the Venezia Giulia area, numerous Italian elements of the population will now be placed under Yugoslav sovereignty. However, the new line does establish a certain balance between the two ethnic groups, and the establishment of the Free Territory does insure home rule to the people of the Trieste area under international guaranties.

It should not be overlooked that upon American insistence. guaranties have been inserted to insure the full exercise of fundamental liberties and human rights to any people transferred to alien Sovereignty.

1 For a map illustrative of this boundary problem, see infra, p. 420.

When we agreed to the internationalization of this area we were determined that it should be genuinely international in character and that the Security Council of the United Nations, which was to assume the responsibility for the integrity and the security of the territory and the protection of human rights, must have adequate powers to discharge this responsibility. It is my conviction that the Statute of the Free Territory does provide guaranties in this respect.

We can hope that it will provide the framework for the creation and maintenance of a genuine international regime which, if backed by an honest effort on the part of all states concerned, would bring to an end a source of long-standing friction and disturbance.

In order to insure that the Territory shall have the necessary financial resources to stand by itself it was important to ascertain the form and the extent of financial assistance which might be necessary in the early days. The extent of this support was warmly disputed at the last Council meeting in New York, but all were in agreement that this was an important element of the settlement.

A committee of experts was immediately sent to the Territory to investigate and to report prior to the next meeting of the Council of Foreign Ministers what measures should be adopted during the early days of the new Territory's existence to start it on its independent existence. The committee has not yet submitted its report. I am informed that some measure of agreement has been reached upon the long-term measures required but that it may have to be left to the Ministers in Moscow to determine the extent of the immediate assistance required.

2

It is apparent that the Free Territory will present many serious problems. But it must be remembered that we were compelled to decide between the internationalization of this Territory or having no agreement at all. The Soviets were determined not to leave Trieste as part of Italy. The United States, Great Britain, and France were equally determined that Trieste, with its large Italian population, should not be given to Yugoslavia.

I am reconciled to the compromise for another reason-my fears as to what would have happened had our proposal been agreed to and Trieste given to Italy. Representatives of Yugoslavia had announced their determination to do everything in their power to take over Trieste. Nationals of Yugoslavia were daily moving into the city. After the treaty became effective and the armed forces of the United States and Great Britain returned home, it is probable there would be rioting in Trieste. Yugoslavia would declare it necessary to quell the rioting on its border and troops would be sent into Trieste. A disarmed Italy could not stop them. There probably would be an appeal to the Security Council. We can only speculate as to the result.

1 The report of the Trieste Commission of Inquiry, dated Feb. 27, 1947, was printed as an annex to U.N. doc. S/577, Oct. 9, 1947.

2 i.e., the Fourth Session of the Council of Foreign Ministers, Moscow, Mar. 10-Apr. 24, 1947; see A Decade of American Foreign Policy, pp. 97-106.

It is my opinion that Yugoslavia will hesitate to take such action as to the international territory under the control of the United Nations. She will realize there is a difference between encroaching upon the territory of a defeated enemy state that has been disarmed and encroaching upon the Free Territory of Trieste whose integrity and independence is specifically guaranteed by the Security Council of the United Nations.

Other benefits granted to the people of the ex-enemy states assure the maintenance of their basic human rights and fundamental freedoms. These clauses constitute an international obligation and assure other states the right to see to it that they are maintained. In the preparation of these guaranties we also took precautions to prevent the reemergence of identifiable pre-war and wartime antidemocratic elements and the reemergence of pre-war Fascism. No limitations upon the democratic freedom and development of the people are contained in the treaties.

In the preparation of the economic clauses of the treaties, we addressed ourselves to two main problems. One was the liquidation of questions arising from the participation of these countries in the war on the Axis side. The other was the establishment of a basis for the resumption of economic relations between the former enemy states and the United Nations.

The first problem concerned primarily the liability of the former enemy states for the injuries which they caused to the United Nations and their nationals.

During the course of the negotiations the American Delegation strongly urged the viewpoint that the victors should avoid taking steps which would reduce the ex-enemy states to economic chaos. The economic collapse of any country cannot fail to have the effect of retarding recovery in other countries. It would impede the objective of the United Nations of restoring and improving the standards of living generally and establishing economic conditions conducive to the maintenance of peace.

While the United States did not oppose the requirement that Italy contribute to the rehabilitation of the countries she had invaded, we found difficulty in accepting reparation proposals which were put forward by the various claimant countries. Italy has few raw materials and has relied for her living primarily on the ability of her people to work, that is, by processing goods for export. She has also relied upon her merchant marine, her tourist trade, and her insurance business.

Most of her important sources of income were lost or substantially curtailed as a result of the war. Consequently, the United States found it necessary to extend substantial amounts of financial assistance to Italy after she joined the Allied forces.

After many months of discussion a formula was found for dealing with the Italian reparation problem which appeared to constitute a reasonable compromise between the conflicting viewpoints. To a small extent, Italian reparations will be met out of the Italian factory and tool equipment which was devoted to military purposes,

and which is no longer needed to sustain the small military establishment permitted under the treaty and cannot be converted to peaceful production.

Italian reparation obligations will also be met out of certain Italian investments, notably in the Balkan countries and in some of the ceded territory.

The principal source of Italian reparations, however, will be the delivery of goods from current Italian industrial production. We refused to agree to this source until we devised a program which would avoid having the United States furnish the means of paying reparations.

In the first place, deliveries from current production are not required to begin until two years after the treaty comes into force. In the second place, the reparation-recipient countries are called upon to furnish to Italy those raw materials needed in the production of reparation goods which are normally imported into Italy.

The value of such materials is to be deducted from the value of the goods delivered by Italy.

The period over which reparations are to be paid is seven years, including the initial two years during which deliveries from current production are not mandatory.

Under this system Italy will be given a breathing space during which she can get her economic house in order, and the total volume of deliveries in any year should not be such as to place too heavy a burden on the Italian economy.

In the case of Rumania, the treaty leaves the reparation obligation, which is payable only to the Soviet Union, at the level of $300,000,000 fixed in the armistice agreement. Although Rumania is now suffering economic difficulties as the result of a severe drought, she has basic resources which seemed to us adequate to sustain this reparation obligation.

In the case of Hungary the United States Delegation felt that the reparation of $300,000,000 fixed in the armistice agreement with Hungary should be reviewed. During the period following termination of hostilities, the Hungarian economy suffered a very severe crisis culminating last year in a currency inflation of astronomical proportions. While we were aware of the fact that the cause of this situation lay partly in the disorganization resulting from the war, we felt that a very important contributing factor was the reparation program and the exactions laid upon Hungary under the terms of the armistice to support the Soviet armed forces in that country.

We tried repeatedly to induce the Soviet Union to join with us and the British Government in reviewing the Hungarian situation but they refused to enter into such discussions.

Having failed to obtain agreement on a review of the situation, we proposed during the Peace Conference that the Hungarian reparation obligation be reduced. Our proposal did not obtain a large number of votes, and the alternative proposal to leave the reparations at $300,000,000 was voted by the Peace Conference by a bare majority. Meanwhile, the Soviet Union had entered into direct discussions