611.6731/403: Telegram
The Secretary of State to the Ambassador in Turkey (MacMurray)
16. Your 49, June 30, 7 p.m., paragraph 3. With respect to your alternative suggestion numbered (a) the Department feels that the incorporation in a trade agreement of such an exchange article would not give us adequate assurances, since the Turkish Government could conceivably claim that the “essential needs of the State” required a major portion of the exchange derived from Turkish exports to the United States.
The assurance of “treatment no less favorable than that which it received in a specified period, say 1935–1937,” in suggestion (b) appears to be no less rigid than the Department’s suggested formula. If this assurance is intended to mean that the absolute amount of exchange shall be no less than the average amount of exchange made available for imports from the United States in the 3-year period, [Page 1072] suggestion (b) probably would be more rigid than the Department’s proposal. (Incidentally, the Department has no information as to the amount of free exchange actually allotted during 1935–1937 for imports into Turkey from the United States. If possible, please ascertain from the Turkish authorities this amount and inform the Department by telegraph.)
With reference to “in any event no less favorable than that accorded the most-favored-nation” in suggestion (b), it is not clear to the Department, particularly in view of Turkey’s clearing and compensation agreements, what interpretation would be placed upon this part of the proposal. The Turkish authorities might conceivably interpret this to mean that the amount of free exchange accorded to the United States shall be no less than the amount of free exchange accorded to any third country.
It may be necessary, in the case of Turkey, in order not to depart from our basic principles, to accept exchange provisions assuring us of treatment which under certain conditions might be less favorable for our trade than Turkey contemplates under the 80 percent clause. In this connection any exchange provisions which may be incorporated in a trade agreement would provide of course for minimum and not maximum assurances; in the absence of a trade agreement we have no assurances. The formula proposed by the Department would assure us of free exchange for a minimum proportion of total merchandise imports into Turkey, but would not preclude treatment in good years better than that required by the formula. Although an exceptionally favorable base period and percentage would impose an obligation which Turkey might find it difficult or impossible to fulfill in some years, it appears to the Department that a base period might be found which it would be possible for the Turkish authorities to accept.
It is assumed that the Turkish authorities would not, merely by reason of the conclusion of a trade agreement, treat our trade less favorably than they otherwise would intend, but would allocate exchange on as favorable a basis as their circumstances would permit, even when this might mean more favorable treatment than the minimum guarantee provided in a trade agreement. If this assumption is correct, the evident strong demand for American goods in Turkey would serve as assurance against the minimum guarantee in the trade agreement becoming the maximum limitation upon the treatment of our trade.
The Department’s purpose in suggesting this formula was to endeavor to find a different approach to the exchange problem, and to ascertain the views of the Turkish authorities with reference [Page 1073] thereto. You are therefore requested, unless you still perceive objection, to discuss this formula with the Turkish authorities, and inform the Department by telegraph of their reaction.