611.6731/403: Telegram

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

49. From Trade Delegation. Department’s telegram No. 15, June 25, 2 p.m.

1. Referring to last paragraph Department’s telegram, an investigation and analysis of Turkish commodity export statistics to the United States for first 3 months indicates that the sharp decline in exports is accounted for by decreased shipments chiefly of tobacco, and secondarily of skins and furs, sheep casings, walnuts, valonia, valonia extract and emery.

2. In order that the delegation may be in a position to proceed with negotiations on tariff concessions, in accordance with the Department’s instructions, delegation requests that decisions be reached as to reclassification of oriental rugs and as to reduction which may be offered to Turkey.

Delegation suggests that consideration be given to following possible reclassifications: (1) “carpets, rugs and mats of the Turkish type, not made on a power driven loom, et cetera”; (2) substitution of “Anatolian” for “Turkish”; (3) substitution of “Sivas,” Isparta, Smyrna, Kaysereri, Ouschak, Gordes, Bergama” for “Turkish.”

With regard to possible reclassification (1) delegation desires to point out that Turkish is a term generally used in rug trade to designate [Page 1068] a distinctive type of rug, distinct from other types such as Persian, Caucasian, Turcoman, et cetera. It is believed that either (1) or (2) would be satisfactory to Turkey and that (3) would probably be acceptable.

3. Delegation perceives no objection to exploring possibility of a solution of the question of the consolidation of tariff reductions and other similar taxes and charges, et cetera, along lines indicated in your paragraphs 1, 2 (a) and 2 (b). It is of the opinion that the exchange formula proposed by the Department is not feasible because, on account of the impossibility of forecasting with reasonable accuracy Turkey’s total imports from all countries and Turkey’s exports to the United States, it is not possible to fix a percentage for United States share of Turkey’s total imports from all countries which would reasonably assure the fulfillment of both of the conditions laid down by the Department, namely (1) insure Turkey a surplus of dollar exchange over and above amounts required to pay for merchandise imports from the United States and (2) assure for payment of American goods an amount of exchange not less than that which would be available in the absence of a trade agreement. Whatever percentage be selected, any unforeseen increase in Turkey’s total imports or unforeseen decrease in Turkey’s exports to the United States would reduce or eliminate Turkey’s surplus of dollar exchange and might even make it impossible for Turkey to supply the amount of exchange required by the formula; and any unforeseen decrease in Turkey’s total imports or unforeseen increase in Turkey’s exports to the United States would result in the United States obtaining less favorable treatment under Department’s formula than Turkey would contemplate in the absence of a trade agreement.

In view of the foregoing the delegation desires to submit for the Department’s consideration the following alternative suggestions with regard to exchange control provision.

(a)
Standard general provision on exchange control with insertion at the end of subparagraph (a) of a sentence to the following effect “the foregoing however does not preclude such delay as may be incidental to Turkey’s refraining from making available for commercial payments exchange required for essential needs of the State”.
(b)
Provision to the effect that in respect to all aspects of foreign exchange control the United States shall be accorded treatment no less favorable than that which it received in a specified period, say 1935–1937, and in any event no less favorable than that accorded the most favored nation.

It does not seem possible to draft a provision imposing precise obligations on Turkey in respect to making exchange available for payment [Page 1069] of imports from the United States which would fulfill the two requirements set forth by the Department in regard to this matter. A provision based upon either of the above suggestions would afford a base for our obtaining as favorable treatment as is possible under the present circumstances. Such a provision would permit Turkey to reserve a portion of dollar exchange for requirements other than commercial payments, and would not set up a formula under which Turkey would have the right to accord us treatment less favorable than it contemplates in the absence of a trade agreement.

4. As the Prime Minister is leaving Ankara tomorrow and has indicated an interest in the tenor of Department’s latest instructions, Acting Secretary General of Foreign Office was informed today that our Government was prepared to explore every possibility with a view to finding a solution for the difficulties confronting the Turkish Government in connection with our proposals, especially with respect to the questions of the consolidation of tariff rates, et cetera, and exchange control. A solution to question of tariff reductions along the lines outlined in the Department’s paragraphs 1 and 2 was submitted to him.

With regard to question of exchange control, Secretary General was informed that the United States Government recognizes Turkey’s exchange difficulties and is disposed to agree to a limitation of Turkey’s obligation to make exchange available for payment of commercial imports from the United States, but that it could not accept the particular form of limitation contained in the Turkish 80% exchange clause. He was informed that the American delegation was prepared to cooperate with the Turkish delegation in working out a formula which would meet the needs of Turkey’s position and which would not be in conflict with our policy.

Acting Secretary General stated that he would immediately consult with appropriate officials and let us know by the middle of next week Turkish Government’s attitude with regard to our suggestions. [Trade Delegation.]

MacMurray