811.516 Second Export-Import Bank/38

The Chief of the Division of Near Eastern Affairs ( Murray ) to the Ambassador in Turkey ( Skinner )

Dear Mr. Ambassador: In your letter of December 14, 1934,24 you gave us an account of the trade situation in Turkey in so far as the sale of certain American products is concerned and you raised the question as to whether there might be ways and means of obtaining better results than those you are now obtaining.

We have given your letter considerable thought and have discussed pretty thoroughly the points that you raised. I think I am correct in saying that it is our unanimous conclusion that there remains little that you can do to further American trade with Turkey. You have been most successful in opening the door for the entrance of American products by the various assurances you have received from the Turks that our commerce will receive no less favorable treatment than that accorded to other countries. You will, of course, wish to continue your efforts in this direction. If, in spite of the arrangements you have made, American concerns are still unable to do business either through lack of initiative or because their prices are higher or their credit terms less favorable than their competitors, I do not see that anything remains for the Embassy to do beyond continuing to see that American concerns have an opportunity equal to that of their competitors to sell their products in Turkey.

You mention the disadvantage of our attempting to enter clearing agreements because of our generally favorable export balance. The difficulty to which you refer is a most real one, as we have previously pointed out, and it would obviously be to our disadvantage to try to force countries such as Turkey to balance their trade with us if that would result in similar action being taken against us by those countries with which we have a favorable balance.

Moreover, the dollar balances which Turkey and a few other countries obtain in the United States, because of the export balance in their trade with the United States, perform a distinctly useful function. The fact that the Turks do not use those balances to purchase goods from us does not mean that we have lost in our export trade. On the contrary, those balances must ultimately be expended in the United States and the sales eventually made may be of more assistance to our national economy than the sales we might have made to Turkey. [Page 1044] Let us take a concrete illustration. I think that we can safely assume that many of the dollars, which the Turks acquire through the sale to us of tobacco and other products, ultimately are turned over to Germany for the purchase of machinery and other products. Once German merchants obtain control of this dollar exchange they are enabled to purchase such raw products in this country as cotton, lard and pork. If by a clearing agreement or other device we forced the Turks to purchase goods from us, it follows that the Germans would purchase that much less. And I think you will agree that we face a greater problem in the sale abroad of our agricultural surplus than we do in the sale of automobiles and certain other manufactured products. In other words, the cotton which we sell to Germany is highly important in the general scheme of our national economy and we must necessarily avoid taking any steps which would harm such markets for our raw products.

Of course, the same reasoning applies in respect to other countries and other products. It is the general feeling throughout the Department that we must do all we can to further, rather than to restrict, triangular, or better multilateral, trade. Particularly must we avoid taking any steps toward forcing a balance in our trade with any particular country, for if such a method were generally employed we should undoubtedly end up with a total foreign trade much less than that obtaining under the present not altogether satisfactory conditions.

Sincerely yours,

Wallace Murray
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