667.003/143

The High Commissioner at Constantinople ( Bristol ) to the Secretary of State

No. 381

Sir: I have the honor to refer to my telegram No. 221 of July 23 [24], regarding the attitude of the Ottoman Government toward a return to the ad valorem system of taxation on imports.

For the information of the Department I am enclosing a translation of the note which I received from the Sublime Porte through the Royal Swedish Legation under date of July 12th, stating in substance that the Ottoman Government would be willing to return to the ad valorem system in case that Government be allowed to increase the rate from eleven to fifteen percent and in case assurances be given that this increase of four percent should be paid directly to the Ottoman Government and not to the Ottoman Public Debt. (It appears that according to the decree of Muharram of 1881 the Ottoman Government agreed that in case the taxes under the ad valorem system should be increased over eight percent the total of such increase should go to liquidate its obligations to bond holders of the Public Debt.)

This note of the Sublime Porte is the result of repeated pressure on my part to induce the Ottoman Government to return to the legal ad valorem system. While I regret that they have not consented to return unqualifiedly to the pre-war eleven percent ad valorem tax, leaving the question of raising the rate to future negotiations, there [Page 903] is no doubt that the deplorable state of Turkish finances in some way justifies their request that the rate be increased to fifteen percent. In this connection please see the Department’s telegram No. 86 of November 15th 1920.16

The Department should note that the proposition of the Ottoman Government for a return to the ad valorem system at a rate of fifteen percent is brought forward as a purely temporary measure to tide over the period until formal peace is established between Turkey and the Allied Powers. It is a measure which I believe we could accept, while at the same time reserving our rights under our treaties and agreements with the Turkish Government. It could be considered as an armistice measure which would not bind the United States or the Allies after the restoration of peace or the resumption of diplomatic relations as the case may be.

I feel that we should keep our hands free so that upon the resumption of diplomatic relations we would be in a position to bring the Ottoman Government to recognize the capitulations, including the tariff provisions in existence in 1914, and to leave the future modifications of this regime (and I think it undoubtedly should be modified in certain parts) to future negotiations. At that time we should be in a position to negotiate with the Turkish Government for such further rights and privileges, as well as assurances for the protection of American lives and property, which the Government might consider it desirable to obtain.

I am also enclosing for the Department’s information a copy of my letter of the 22nd inst. to the Allied High Commissioners informing them of the proposition which the Sublime Porte had made to me, and stating that I had re-referred it to my Government with my full endorsement.

Ever since I have been in Turkey I have been fighting to obtain fair treatment for American trade and commerce and for a tariff regime which I felt would secure American business from discrimination or chicanery on the part of the Allies. I feel that if the Government gives me support in securing the introduction as a temporary measure of the ad valorem system, I will have succeeded in my endeavors. I cannot however do this unless I have the full support of the Department of State, and unless pressure is brought to bear in London, Rome, and Paris to induce the Allies to fall in line with a policy which will put all commerce on the same footing and at the same time benefit the Turkish Government by increasing its revenues.

[Page 904]

For a summary of the previous correspondence in regard to the tariff regime at present in force in the region of Constantinople, please see my unnumbered despatch of October 16th 1920,17 and my despatch No. 341 of July 6th 1921.

I have [etc.]

Mark L. Bristol
[Enclosure 1—Translation]

The Turkish Ministry of Foreign Affairs to the Swedish Legation at Constantinople

The Ministry of Foreign Affairs has had the honor to receive the Note Verbale Number 180 dated June 1921 from the Royal Swedish Legation, transmitting a Note Verbale of the United States High Commissioner dated 23 June 1921, concerning the customs duties.

As the Imperial Government has already stated many times to the Allied Great Powers, the maintenance of the actual tariff quintuplicated answers best in the interest of the Treasury and has the advantage of being easy to apply.

In spite of all the arguments brought forward by the Sublime Porte in favor of such a solution of this question the Powers found needful to insist on the return to the ad valorem system in practice before the War.

Although this antiquated system presents in practice serious inconveniences and difficulties and is able to give a much smaller increase of receipts than that which would follow the quintuplicating of the special tariff, the Imperial Government, forced by the necessity of increasing its financial resources, would be disposed to return to the ad valorem system with the reservation that its application would be temporary until the restoration of peace and that it would not prevent the ulterior return to the specific tariff, and with the condition that an increase of 4% of the duties of 11% ad valorem would be allowed, so that these duties would be changed from 11 to 15%.

This increase of 4% is indispensable to allow the Imperial Government to abolish, as desired by the Government of the United States of America, the consumption tax, which actually represents an essential resource of the Treasury.

The Ministry of Foreign Affairs thinks needful to remind that the foreseen increase from eleven to fifteen percent has already been examined and conceded by the Powers in 1914, so as to permit the Imperial Government to meet its most urgent needs. In view of the considerable augmentation of the expenses of the budget, this increase [Page 905] is now more necessary than in 1914 and must be considered from all points of view as justifiable and indispensable.

It goes without saying that the abolishment of the consumption tax will not be able to take place until the Imperial Government will come to an agreement with the Ottoman Public Debt for the payment in whole of the proceeds of the increase of 4% to the Treasury, without any retentions by the Public Debt.

The Sublime Porte begs the United States High Commission to have the kindness to intercede with the Allied Powers so as to bring them to accept the above-mentioned proposals and to assure their application.

In the meantime, the Sublime Porte allows itself to hope that the Government of the United States of America will consent to the collection of the consumption tax together with the duties of eleven percent, so as to allow from now of the application of the ad valorem system, without depriving the Treasury, until the increase of 4% be obtained, of the revenues which this system must assure it.

The Ministry of Foreign Affairs has the honor to beg the Royal Legation to have the kindness to bring the preceding to the knowledge of the United States High Commission.

[Enclosure 2]

The American High Commissioner at Constantinople to the Allied High Commissioners

To Allied High Commissioners: The Sublime Porte has informed me of its willingness to return to a system of ad valorem taxation on imports in case permission be granted by the Powers to increase the rate from eleven to fifteen percent ad valorem and in case the Ottoman Government be allowed to receive directly the four percent increase. The Ottoman Government suggests that such an arrangement be introduced as a provisional measure, pending the restoration of peace.

The Sublime Porte points out in its note to me that prior to the War in 1914 negotiations were in progress to increase the ad valorem tax from eleven to fifteen per cent and that this increase had been practically conceded by many of the Powers in 1914. Further, it is pointed out that if this increase was necessary in 1914 it is still more necessary at the present time under the conditions as they now exist.

It is my opinion that the proposal of the Sublime Porte could be adopted immediately and would be the surest means of relieving [Page 906] the present financial difficulties of the Ottoman Government. If the Allied and Associated Governments accept this proposition, I believe that steps could be taken to put it into effect as a provisional measure under the conditions which were prescribed for the resumption of trade with Turkey whereby trade was to be regulated by the Allied and Associated Powers, Great Britain, France, Italy and the United States.

In view of the urgent need of taking measures to relieve the financial embarrassment of the Ottoman Government and the necessity of stabilizing business by a definite decision regarding import taxes, I hope Your Excellency will cooperate with me in obtaining the support of our Governments to this proposal of the Ottoman Government, which I have immediately referred to Washington with my full endorsement.

Respectfully

Mark L. Bristol