Memorandum by the Economic Adviser (Feis) to the Chief of the Division of Trade Agreements (Hawkins)

Mr. Hawkins: I think the Committee will find that the Turkish-German clearing and compensation arrangements will be a definite factor in determining the outcome of any trade agreement between the United States and Turkey. To cite a concrete example: German purchases of Turkish tobacco and Turkish mohair at a price well [Page 945] above the world price has meant that this trade relative to the Turkish-American trade in mohair has greatly increased. The Turks became possessors of a large volume of blocked marks. The result has been to foster Turkish purchases of German commodities well in excess of the previous purchases and in many instances competitive with American products. The transaction was made possible by the lowered valuation put upon the blocked mark and presumably also by export subsidy in Germany.

A glance at the Turkish trade statistics proves the continual increase and the relative importance of German trade since the inauguration of the clearing and compensation arrangement. In view of these considerations it seems to me that it is highly important to make a study of the clearing and compensation arrangements to which Turkey is a party, to do so urgently, and in any agreement we make with Turkey to consider what safeguards may be necessary.

H[erbert] F[eis]