611.6731/420: Telegram
The Ambassador in Turkey (MacMurray) to the Secretary of State
[Received 4:50 p.m.]
49. From Trade Agreement Delegation. Department’s 16, July 25 [15], 3 p.m. Turkish Government accepts Department’s exchange formula and as base period the 3-year period 1935 to 1937 proposed by delegation (Embassy’s despatch No. 764, August 1, 1938, enclosure No. 230). It desires however that following clause be placed at the beginning of second paragraph.
“Proceeding from the principle that Turkish exports to the United States during the period of the present agreement (Turkey has had in mind a 1-year agreement) will not be less in value than the average of such exportations during the years 1935, 36, and 37”.
Presumably this provision contemplates the use of Turkish export statistics as evidence of Turkish exportations to the United States. In connection with the Department’s consideration of the use of Turkish statistics it may be noted that the Turkish statistics of exportation to the United States agree closely with the United States statistics of general imports from Turkey for the average of the 3-year period 1935–37.
The purpose of the proposed clause is apparently to protect Turkey against any unforeseen drop in Turkish exports to the United States which would of course seriously affect Turkey’s exchange availabilities. Since Turkey’s availing itself of this clause, which is in effect a proviso, would suspend Turkey’s most important obligation to the United States in the agreement our Government may wish to because [be?] in a position to be released from its obligations under the agreement. The delegation suggests for the consideration of the Department in the event that it is desired to include a safeguarding clause the following alternative counter proposals.
- (a)
- A provision giving Turkey the option of terminating the agreement in the event that Turkish exports to the United States [Page 1077] (or American imports from Turkey) should fall below the stated amount or;
- (b)
- a proviso similar to that proposed by Turkey with option by the United States to terminate agreement if Turkey avails itself of this proviso.
Delegation desires to point out however that it may be difficult to obtain the acceptance of either of these provisions in view of the Secretary General’s pronounced dislike of escape clauses.
Turkish delegation also suggested desirability of an exchange of notes with reference to this article in which Turkish Government would state “the transfer of sums resulting from the application of article X having to be effected during a period extending to the end of the validity of the present agreement, the successive transfers will be effected by the Turkish Government in accordance with the possibilities of its means of payment in free exchange”. It was pointed out that such a statement seemed unnecessary since article in question did not obligate Turkey to make available exchange immediately and did not preclude delays in making transfers when Turkey had no foreign exchange available. It was indicated that if Turkey were given assurances that such is our understanding of the provision the Turkish Government would not insist on the proposed exchange of notes.
The Turkish Government proposes that paragraph 1 be changed to read as follows after “payment” in fourth line: “it shall in respect to everything concerning the application of this control grant to the other party most-favored-nation treatment”. In explanation of the change it was stated that our proposal was too complicated and involved and that a simpler formulation of the matter would be more effective.
Impression was gained from discussions concerning the exchange article that the Turkish Government does not intend to allocate for commercial imports from the United States exchange on the 80 percent basis regardless of whether the amount may be required under the terms of the article. It would appear that this article will be administered in such a way as normally to make available to the United States only the amount of exchange required under the article. This of course would not preclude the allocation of more exchange if it was considered desirable to do so.
In answer to a question as to how the provisions of the exchange article would be administered Secretary General of Foreign Office said the required amount might be paid either out of the general exchange fund or out of a special fund set up for deposit of exchange from Turkish exports to the United States. He added that his Government would be glad to entertain any suggestions as to the method [Page 1078] of administration of the exchange control article. Delegation presumes Department would prefer the general fund as being more in line with our policy but wishes to point out to the Department that the adoption of this method would not mean that Turkey was likely to allocate more exchange than is required by the article.
2. With respect to Turkish counter proposal concerning the question of consolidation of tariff rates, et cetera—article 131—(despatch under reference enclosure number 1) Turkish Government has now agreed to a 6 months delay in the application of increased tariff duties instead of 3 months as proposed by it.
Department will note that Turkish Government also desire 3 months’ notice by the United States instead of 30 days as suggested by Department.
Turkish Government has refused to agree to any consolidation of “other duties, taxes or charges”. Secretary General insists that Turkish Government never has agreed and cannot agree to restrict in any way power of Grand National Assembly to impose charges of this character.
3. Secretary General has emphasized again at great length that Turkish Government does not desire to conclude at this time a comprehensive trade agreement along the lines originally proposed by delegation. It does not wish to add any more articles to those contained in the last Turkish draft (despatch under reference enclosure number 1). (In an earlier conversation Secretary General listed the most-favored-nation clause as one of the articles to be contained in the Turkish project). The proposed agreement is looked upon as a sort of provisional supplement to the existing commercial treaty pending the conclusion of a comprehensive trade agreement. When it was pointed out that, while the delegation had no instructions on this point, it was felt that the Department would insist on the inclusion of other provisions reference being made to the provisions with regard to territorial application, Secretary General argued that such an involved article would be quite out of place in the agreement and finally said that if we had to have it he might be willing to include it in a separate exchange of notes. He urged very strongly the signing of the agreement as soon as possible with a view to dispelling existing uncertainty hanging over American-Turkish trade.
With regard to duration of the agreement he finally agreed to the automatic extension of the agreement beyond the 1-year period, contained in Turkish proposal, if it was not denounced within a specified period.
[Page 1079]With regard to article 3 of Turkish proposal, when asked whether Turkey would be willing to undertake to place no restrictions on the importation from the United States of articles other than those on the schedule, he said that he had no objection to stipulating that the importation of such articles was subject to the general Turkish import regime and to stating in an exchange of notes that the general Turkish import regime places no restriction or limitation on the importation of goods from the United States. While such a statement would not constitute a promise by Turkey not to impose any restrictions, it would carry a strong implication that Turkey would not impose any restrictions on American imports under its present foreign trade system. Turkey would probably desire a similar statement by the United States.
4. Turkish delegation has promised to submit within a few days Schedule I concessions and its observations on Schedule II concessions.
5. Department’s instructions are requested with regard to the various points mentioned above. [Trade Agreement Delegation.]