Foreign Relations of the United States Diplomatic Papers, 1938, The British Commonwealth, Europe, Near East, and Africa, Volume II

611.6731/356: Telegram

The Secretary of State to the Chargé in Turkey (Kelley)

Washington, April 6, 1938—6 p.m.

41. Your 14, March 28, 4 p.m.⁶ The purpose of the compensating tax article is to permit the imposition or increase of a tax on schedule products equivalent to a bona fide internal tax on like products of domestic origin. From a strictly legal viewpoint, however, the article would not prohibit the imposition or increase of a tax on a schedule article of which there was no substantial domestic production. While such a tax might, in form at least, be within the language of the article, it would be considered by the Department to be a violation of the spirit of the agreement since it would be in effect an additional import duty.

The Department does not consider it feasible to attempt a revision of the compensating tax article in such a manner as to expressly prohibit the imposition on schedule products of additional charges which do not in fact, when there is no substantial domestic production, compensate for internal taxes on like domestic products. Also, in the case of such products, article reference 6 would not from a strictly legal viewpoint prohibit the imposition of new or additional internal taxes having the same economic effect as import duties. However, a binding of internal taxes is not considered feasible because of the fact that this Government would probably not be inclined to reciprocate.

You should make it clear to the Turkish authorities that the duty concessions proposed by your Government are based upon the assumption that there will be no subsequent imposition of new or additional taxes on schedule articles of which there is no substantial production in Turkey, either in the form of compensating taxes or internal taxes, the effect of which would be to impair the concessions granted, and you should state that the imposition of any such taxes would be considered a violation of the spirit of the agreement.

In view of the above, you are also instructed, if you perceive no objection, to add to the standard general provision, reference 18,⁷ the last sentence of Article XV of the Swiss agreement⁸ as an additional safeguard.

Hull

6. Not printed.
7. Corresponding to article XV of standard general provisions for Trade Agreements, Foreign Relations, 1935, vol. i, p. 541.
8. Reciprocal Trade Agreement between the United States and Switzerland, signed at Washington, January 9, 1936; Department of State Executive Agreement Series No. 90, or 49 Stat. 3917.