867.50 Five Year Plan/14

The Secretary of State to the Ambassador in Turkey ( Skinner )

My Dear Mr. Ambassador: I want to express my thanks for your letter of June 28, 1934 regarding opportunities for American contracting firms to participate in the industrialization of Turkey. Needless to say, I am greatly interested in your views which have stimulated our thoughts. Some of these thoughts I am setting down in this letter.

First of all, some of us wonder whether the proposed industrialization of Turkey does not consist to a large extent in war preparedness. The nature of the industries which the Turks are fostering would certainly lead one to that conclusion, and some of the statements regarding the five year plan made in Celal Bey’s memorandum addressed to Ismet Pasha, a copy of which Mr. Gillespie64 recently sent in,65 would [Page 955] only confirm that belief. As soon as a question of military supplies is raised we are, of course, squarely up against the Government policy of not encouraging the export trade in arms and munitions of war. (In this connection please refer to the Department’s circular instruction of December 7, 1932,66 regarding the export of such products.) One might say that to assist in the construction of a chemical factory in Turkey is far different from supplying machine guns, rifles and ammunition, but when one knows that the chemical factory is intended to a large extent, if not primarily, for the manufacture of war materials one cannot help querying whether it is in accord with our arms policy to extend the support of our Government to such construction.

Leaving this question aside—and I admit that it is a debatable one—it seems to us that there immediately arises the more troublesome question of credit and finance. I understand from your letter and from previous communications that there is scarcely any hope of American contractors or manufacturers obtaining business in Turkey unless it is on an extended credit basis. In order to extend such credit I quite agree with the Embassy’s view that the interested American firms would probably have to seek government support through some of the newly organized foreign trade organizations such as the Export-Import Bank. In this connection several questions arise. As you point out in your letter, several responsible American concerns seem to be informed of the existing opportunities in Turkey. If after investigation they consider that it would be advantageous for them to develop these opportunities, will they not themselves approach the governmental agencies in Washington which are in a position to assist? The points I am trying to bring out are these: Must we not leave the initiative in such matters to the individual American companies? Is it proper for us to urge such companies to participate in the various Turkish enterprises? Would not such urging on our part place a certain responsibility upon the Government in the event that affairs do not work out as we hope?

Returning to the question of finance, (and if governmental organizations are to extend credit to American concerns in order to enable the latter to obtain business in Turkey, the question of Turkish credit is of the utmost importance) I wonder how sound such credit will be two, three or five years from now. As you point out in your letter, the Turkish Republic has a reasonably good record so far as its credit goes. At the same time one is reminded that after making an agreement with respect to the old Ottoman Public Debt payments in 192867 (an agreement incidentally in which total payments were considerably [Page 956] scaled down) the Turkish Government failed to carry out its obligations in 1930 and insisted upon, and obtained, further concessions from the bondholders.68 One is also impressed with the statements made with respect to Turkish credit by Messrs. Gillespie and Allen69 and by Colonel Crane,70 as set forth on pages two, three and four of the report of the meeting of the American commissioned officers at Istanbul enclosed with your despatch No. 276 of June 8, 1934.71 These statements would appear to indicate that foreign contractors and suppliers have already had a certain amount of difficulty in inducing the Turkish Government to meet its obligations. One wonders whether these troubles will not increase within the next few years when the Government will be forced to meet the heavy expenses involved in its military preparedness campaign and in the five year industrialization plan. We know, of course, that Turkey is a relatively poor country and we naturally wonder where the funds are coming from to meet these proposed expenditures. We are inclined to agree, in this connection, with the view set forth in your despatch No. 286 of June 15, 1934,71 that the Turkish; Government is fast reaching the point where increased taxation will bring forth only meagre returns. After all, there is a decided limit to the ability to meet taxes of a people whose average annual income probably does not exceed $100.

These are some of the thoughts that would occur to us in connection with any proposals to extend Government credit to American contractors and manufacturers to obtain business in Turkey. Any further information you can send us will therefore be helpful to us in arriving at conclusions. We are most anxious to be of assistance to you in your efforts to further American commerce and I can assure you that we shall give the most attentive consideration to any further data you may be able to send us covering the points raised in this letter.

Sincerely yours,

Cordell Hull
  1. Julian E. Gillespie, Commercial Attaché at Istanbul.
  2. Not found in Department files.
  3. Not printed.
  4. See Annual Report of the Council of the Corporation of Foreign Bondholders, 1928, pp. 369 ff.
  5. See Annual Report of the Council of the Corporation of Foreign Bondholders, 1930, pp. 32 ff.
  6. Charles E. Allen, Consul at Istanbul.
  7. Col. John A. Crane, Military Attaché at Sofia and Istanbul.
  8. Not printed.
  9. Not printed.