667.003/143
The High Commissioner at Constantinople
(Bristol)
to the Secretary of
State
Constantinople, July 26,
1921.
[Received August 27.]
No. 381Sir: 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
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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.]
[Enclosure
1—Translation]
The Turkish Ministry of
Foreign Affairs to the Swedish
Legation at Constantinople
[Constantinople, July 11, 1921.]
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
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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
[Constantinople,] July 22, 1921.
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
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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
