550. S1 Washington/467

Memorandum by the Under Secretary of State (Phillips)

The Turkish Ambassador58 left with the Secretary this morning the accompanying aide-mémoire, which is in reply to our invitation to the Turkish Government to exchange views preparatory to the London Economic Conference. He referred especially to the last paragraph in the aide-mémoire, requesting to be informed of the [Page 568]points of view of the United States on the agenda, etc. etc. and expressed the hope for an early reply thereto.59

The Ambassador talked at some length on general questions; Turkey, he said, was a Democratic country which exercised a stabilizing influence in the Near East. The Secretary said he appreciated this fact and hoped that Turkey would play an even more important role in this respect in the future.

The Ambassador said that in his aide-mémoire he had not raised the question of debts, but his Government believed, nevertheless, that the whole question of external debts lay at the basis of the world wide economic problems and would, therefore, have to be included in the London Conference.

The Ambassador also touched upon the question of the admission of Soviet representatives to a full part of the London discussions. Russia, he said, played such an important part in the economic problems of the world and also, by virtue of its vast population, should not be kept apart in any way during the London discussions. The Secretary replied that he understood that Russia had been invited to the Conference precisely on the same footing as the other nations and, as far as he was concerned, he felt the Soviet delegation in London should be received on equal footing with the other delegations. This he emphasized was his personal view point.

As to disarmament, the Ambassador said that his Government shared the views of this Government in the reduction of arms on a qualitative and quantitative basis. The Secretary said that our delegation to the General Conference on Limitation of Armament60 would gladly work with the Turkish representatives along these lines.

Following an exchange of courtesies the Ambassador thanked the Secretary for his reception.

The Turkish Ambassador (Muhtar) to the Secretary of State


I wish first of all to especially thank the Government of the United States for their thoughtful attention in informing our Embassy of the tenor of the note verbale which they had remitted to it to be communicated to the Government of the Republic.

[Page 569]

While remaining within general principles in the statement which I have the honor to make, my Government believes that the study of this statement would be greatly facilitated by its division into two parts.

The first part contains a brief exposition of the economic and financial relations existing between the United States of America and the Turkish Republic. In this field, it must first be noted that the present situation presents itself in a satisfactory light, and that if, in spite of the wishes mutually entertained, the development of trade does not make more rapid progress, the cause must be sought in the repercussions of the world-wide crisis, for to-day there no longer exists any obstacle which might impede commercial exchanges between the two countries; there do exist, however, the difficulties created both in America and in Turkey by the present economic crisis.

In the second part we shall endeavor to deal concisely and in general terms with the international financial and economic situation which marks the continuation of the world depression, in spite of the fact that from time to time there seem to be moments of respite. The phase which, particularly during the last two years, appears to be predominant in the world economic crisis is especially the financial and political aspect; that is, this crisis manifests itself particularly in the form of a general lack of confidence, engendered by political and financial causes and by the difficulties resulting for international trade from the obstacles put in the way of its normal development by the necessity of defending national currencies. It may be said that during the crisis resulting from the transformation of world economic conditions, national and international economy, which should have adapted themselves to new conditions, have been prevented from effecting this adaptation by the influence exerted upon them by political and financial elements. Lack of confidence in the political domain and the currency problems have thus accentuated the effects and heightened the acuteness of the economic crisis.

The situation, analyzed and studied from this angle, leads us to put forward certain practical considerations gained from experience acquired in the regions where our country is situated as well as from the knowledge gained in the different conferences in which we have participated. Needless to say, a large part of what we shall develop here may contain considerations which will be or already have been set forth by the delegations of other Powers. In replying to the wish expressed at Washington, we shall therefore only set forth these few points in their generality, with the intention of treating them in detail accompanied by explanatory statements at the World Economic Conference in London. However, should the Government of the United States express the wish to receive additional explanations [Page 570]on any item of our statement, we are prepared to comply with that wish.

In the present situation, the ideas which we believe to be practical and feasible may be set forth as follows:

The political atmosphere must be cleared by enabling the Disarmament Conference to reach a practicable method of solution; also the Powers must abstain, inasfar as is possible, from political and economic improvisations. By this we mean that a certain preparation should be made for any international question which might interest, direcly or indirectly, a large number of countries by informing all countries in the world of it and thus inspiring their confidence.
Just as in the political domain and a fortiori, measures of a general character in the economic domain should be adopted only with the cooperation of all countries in the world, the only exceptions being those countries which themselves abstain from such action.
The movement of capital should precede the gradual abolition of restrictive measures impeding international trade, or at least be consequent upon this abolition, for among the provisions which impede trade, more than half have been adopted in order to cope with currency problems; hence the necessity of devising means, at the earliest possible moment, for insuring the movement of capital. The recovery of political confidence and financial stability constitute the very first requirements for the accomplishment of this purpose. On the other hand, it must be admitted that in order to insure harmony between production and consumption, the purchasing power and the standard of living of the peoples of the world must be raised; moreover, the remedy for unemployment itself must not be sought solely in the national domain nor solely in the international domain, but rather in the development which can be achieved only in a spirit capable of taking into account both these elements. In this domain as well, the movement of capital can play a role of primary importance. The cause of the advancement and the independence of the nations are pressing realities. International measures, regulations and relations must all be studied and envisaged from this angle. A broad nationalism, holding that the rights of other peoples are as important as its own aspirations, is as propitious for the development of international trade and relations as a nationalism which subordinates the rights of others to the cause of its own expansion is fatal to the establishments of international harmony.
Currency difficulties, the great evil of the present day and which we have pointed out above, can only be effectively checked by means of the balance of payments, for each country is obliged to increase the volume of its exchanges by taking into account its balance of payments, if not with respect to each nation separately, at least in general. It is undeniable that if creditors should facilitate payments in kind by their debtors on the latter’s debts, the collection of their debts and the guarantee of payment would be found to be assured, thus bringing about greater facility for the movement of capital. To leave the different countries with dislocated balances of payments and not to aid them to right them tends incontestably to diminish the consuming power. Those countries whose accumulated wealth may be used as a reserve fund can withstand the effects [Page 571]of a deficitary balance for a long period of time; but those which are deprived of this means cannot even withstand the consequences for one year and their Governments are forced to adopt immediate measures of conservation.
In order to facilitate the movement of capital, we believe that it would be highly useful to provide for the establishment of an international credit bank, organized with the participation, on an equal footing, of all countries, in order that, even after the revival of a general atmosphere of confidence, mobile capital no longer may be employed only as an instrument of national policy and in order that it may be adapted to international requirements. Needless to say, the bonds of this institution, which would deal solely with banks, would be listed on all exchanges (bourses) and an international regulation would be worked out with a view to giving to the subscribers if possible even greater security than that given by existing national banks, upon condition, however, that equal treatment be accorded to all nations.
Concerning a monetary policy, we believe, in view of present circumstances and in view of the proportion between the existing gold supply and world transactions, that the only practical solution is the universal adoption of a system tending to base international exchange on the convertible gold standard and abolishing convertibility in domestic exchanges and transactions.
With respect to the question of tariffs, we are of the opinion that percentage reductions can be applied to definite articles by means of bilateral commercial treaties with special conditions corresponding to the interests of the signatories. With this end in view, it may be recommended to the different countries to exert the maximum efforts compatible with their national interests.
In commercial treaties the most favored nation clause may be maintained by limited correctives while a more auspicious and more adequate formula for the needs of the moment is sought. In order to facilitate international trade and transactions, the corrective which we believe important to introduce into this clause is the following: The special facilities which each country might deem proper to accord to the countries whose balance is unfavorable with respect to it, should be left without the most favored nation treatment, because, competition on an equal basis in any one country must be limited to those countries alone whose balance is not deficitary with the former, without this regulation being extended to the countries having an unfavorable balance.
We consider that, in order to diminish currency difficulties and to do away with the obstacles which impede trade as a result of these difficulties, a return to the era of long term credits and loans is necessary, following on the revival of political and economic confidence.
With reference to the question of prices, we consider that the establishment of harmony between the prices of raw materials and those of manufactured products and the grant to these latter of a reasonable profit would tend to encourage employment and production, just as low prices tend to increase consumption.
The organization of production and of trade can only be achieved by a group of carefully studied concerted measures. Among these measures, we have believed it necessary to explain above those which seemed to us the most adequate for the necessities of the present [Page 572]situation. We believe that in the future it will be possible for all countries, in the course of readaptation, to acquire useful knowledge from the experience and observations which we shall be able to gain in successive international conferences.

Following the above expose, the request which we wish to make to the Washington Government is that it be kind enough to enlighten us as to its points of view concerning the agenda of the forthcoming London World Economic Conference, the subjects which should and could be added to the agenda, and also with respect to the situation as it appears to-day. If the Government of the United States of America could be good enough to communicate to us also the result of the preliminary conversations held in Washington, we desire to express to it at this time our gratitude.

  1. Ahmet Muhtar.
  2. An exposition of the American point of view was given to the Ambassador in a conversation of May 25, 1933. The explanation was substantially the same as that presented in the memorandum of a conversation of May 15 between American and Polish representatives, p. 553.
  3. For correspondence relating to the Conference for the Reduction and Limitation of Armaments, see pp. 1 ff.