611.6731/396: Telegram
The Secretary of State to the Ambassador in Turkey (MacMurray)
15. Your 46, June 8, 7 p.m. and 47, June 17, 6 p.m. Department’s 12, June 15, 6 p.m. We have received your despatches numbered 660 and 672.19
It is suggested that you explore the possibility of solutions along the following lines:
The essential points of difference appear to be
- (1)
- setting forth of actual rates versus percentage reductions of general rates;
- (2)
- consolidation of (a) other similar taxes and charges, and (b) bases and methods of determining dutiable value;
- (3)
- assurances with respect to exchange control, to which questions of 80 percent clause and quotas on schedule articles are related;
- (4)
- the escape clauses.
As to (1) your telegrams and despatches suggest practical solution whereby the actual tariff rates would be stated in Schedule I combined with an escape clause permitting Turkey to increase the rates at any time, but with a safeguard of a suitable period of notice (possibly 1 year) before increases in rates became effective, and with provision for optional termination of agreement by the United States upon 30 days’ notice within 15 days after such increases become effective. A year’s notice and optional termination by the United States [Page 1065] rather than automatic termination should meet the objections of the Turkish authorities regarding fragility and onus for termination reported in your despatch no. 672, Enclosure 5, first paragraph. In addition to the reasons stated by you to the Turkish authorities (Enclosure 1, same despatch) the Department is unwilling to agree to accept percentage reductions because concessions in that form would imply a desire to be assured of preferential tariff treatment. It is suggested that discussion of this matter be postponed until after other points regarding general provisions have been discussed.
(2) (a) It would not, of course, be possible to accept mere most-favored-nation treatment in respect of supplementary charges, but a solution may be found in a commitment with escape clause along the lines suggested in (1) above. Since the Turkish counter-proposal is apparently taken from Article I, section 3, paragraph 1, of our agreement with France (your despatch no. 628,20 enclosure 1) it may be desirable to make it clear to the Turkish authorities that Article I, section 6, of the French agreement in effect consolidates French supplementary duties on schedule items. This matter is of course closely related to that discussed in the preceding paragraph.
(2) (b) A solution of this question might be found in the acceptance of specific rates on all Schedule I items and drop Article V (your Despatch No. 622, enclosure 1020).
(3) While obviously the Department cannot subscribe to the bilateral principle involved in the 80 percent clause, it recognizes Turkey’s exchange difficulties. The solution may be found in an agreement which would assure us of payment for a share of Turkey’s total imports somewhat below that attained during 1937 and recent months. The Department does not wish to press Turkey for assurances which may subsequently be found in excess of her capacity to fulfill. It may be necessary to have fewer items in Schedule I or smaller reductions which would not increase Turkey’s imports beyond her expected exchange availabilities. While we are reluctant to see a large increase in the number of tariff quotas by which concessions scheduled in our trade agreements are limited, their acceptability on selected items would depend upon the individual circumstances including the reasonableness of the amounts.
A solution may be found therefore in a restricted Schedule I and in exchange provisions whereby Turkey would assure that there would be made available for the payment of merchandise imported into Turkey from the United States in any calendar year free exchange (at the most favorable rate as compared with all other currencies) [Page 1066] in an amount which shall not be less in relation to total merchandise imports into Turkey than that represented by the proportion of Turkey’s total merchandise imports supplied by the United States in a previous representative period. The representative period chosen might well be such that Turkey might reasonably expect to have a surplus of dollar exchange over and above the amounts required to pay for merchandise imports. Care would be necessary to see that this would mean no less favorable treatment for our trade than Turkey would contemplate in absence of a trade agreement. If such a proportion were based upon the percentage of the value of total Turkish imports supplied by the United States during the three calendar years 1935–37, it would be 10.6 percent. (For your information this figure is slightly less than that represented by 80 percent of the value of Turkish exports to the United States in the same 3-year period, namely, 11.2 percent. Moreover, an analysis made in the Department shows that 80 percent of the value of Turkish exports to the United States during the 10-year period 1928–37 averaged 9.75 percent, and for the 6-year period 1932–37 averaged 10.74 percent, of Turkey’s total imports.)
(4) Although it may be possible to eliminate several of the escape clauses, possibly those in Articles IX, X, and XIV of your Despatch No. 622, enclosure No. 10, the Department prefers to defer decision pending the outcome of discussions concerning major points.
In order that the Department may concurrently reply to the questions raised by the Turkish Ambassador here, please notify Department by telegraph when you resume your negotiations, unless you perceive objection to proceeding along the lines above indicated, in which case you should telegraph your comments and recommendations.
The Department feels that a stage has been reached in the negotiations where it may be desirable to proceed with schedule negotiations in order that the Turkish authorities may be informed of the general nature of the concessions we are prepared to grant and those we wish to obtain. Unless you perceive objection, you are instructed therefore to proceed with such negotiations.
Please endeavor to ascertain and report by telegraph, from an inspection of Turkish commodity export statistics to the United States, the nature of the changes which account for the sharp decline in the first 4 months of 1938 as compared with 1937. United States figures for general imports from Turkey, which of course are not closely comparable with Turkish export figures, are 6,446 thousand dollars for the first 4 months 1938, compared with 6,634 thousand dollars in corresponding period 1937.