611.6731/420: Telegram
The Secretary of State to the Ambassador in Turkey (MacMurray)
90. Your 49, August 18, 1 p.m.
1. You should make it clear to the Turkish authorities that the proposed trade agreement must stand by itself as a complete and independent agreement; that it could not take the form of a provisional supplement to the existing commercial treaty unless it were submitted to the Senate for advice and consent to ratification. If reference is made to our trade agreement with Belgium, you should point out (1) that it is independent of our existing Treaty of Commerce and Navigation with Belgium;33 (2) that it provides that the Agreement shall be supplemented as soon as possible by more detailed general provisions and that negotiations regarding such provisions have been in progress for some time. Independent and complete trade agreements have been concluded with a number of other countries with which the United States has commercial treaties, for example, Finland and Honduras.
2. Although the Department is willing to accept a simpler formulation of the text of the first paragraph of the Delegation’s proposed exchange article (your despatch no. 764, August 1, 1938, enclosure no. 234), it greatly prefers the substitution, after “payment” in the fourth line, of the following phraseology for that proposed by the Turkish authorities: “it shall, in the administration of all aspects of such control, accord to the nationals and commerce of the other country the most general and complete application of the unconditional most-favored-nation principle”.
3. The Department is not disposed, however, to accept the Turkish proposal to add at the beginning of the second paragraph of the Delegation’s proposed exchange article the clause “Proceeding from the principle” et cetera, for the reason that it would again place the exchange provisions on a strictly bilateralistic basis. You should point out that the agreement could be terminated by the Turkish Government if trade and exchange developments should render the exchange commitment more onerous than can be foreseen at this time.
For your information, we should be willing, if necessary to obtain the assent of the Turkish authorities to the deletion of any such clause, to accept a longer base period, for example, 1934–37.
[Page 1081]4. For technical reasons, the Department would also prefer that in paragraph 1 the words “the Government of” be inserted before the words “United” and “Turkish” in the first and second lines, respectively, and that paragraph 2 be changed to read as follows: “The Government of the Turkish Republic undertakes that, so long as it maintains, directly or indirectly, any form of control of the means of international payment, there will be made available in any calendar year for the payment of merchandise imported into Turkey from the United States of America an amount of exchange which shall not be less in relation to total merchandise imports into the Turkish Republic than that represented by the proportion of the total merchandise imports supplied by the United States in the period from” et cetera.
5. The Department agrees with the Delegation that the Turkish proposal for an exchange of notes relating to the exchange article is unnecessary, since our proposal would not preclude seasonal delays in making transfers within any calendar year. However, an understanding on this point could be included in the final minutes.
6. With reference to the administration of the exchange article, the Department also agrees that payment from Turkey’s general exchange fund would be preferable. In this connection you should endeavor to ascertain whether the Turkish authorities intend to allocate exchange for imports of merchandise from the United States chronologically in the order of application therefor, or upon some other basis. In view of the existing preferential treatment in the allocation of exchange for imports of petroleum, you should point out that our exchange article under reference was drafted with the understanding that the exchange made available for imports from the United States would not be allocated by articles. The Department is particularly concerned that a general provision relating to the allocation of a global amount of exchange shall not be susceptible of enabling the Turkish Government to divert a large part of its orders for ordinary imports to countries from which they can be secured through compensation arrangements, reserving its dollar exchange for the increased purchase of armaments and other supplies of military importance, the exports of which this Government is not anxious to promote at the expense of its more normal trade. Such an understanding might be included in the final minutes. Your comments on this matter would be appreciated.
7. There is also the problem of the liquidation of commercial and other balances blocked in Turkey prior to the effective date of the Agreement. While the Department still does not desire to inject this question directly into the trade-agreement negotiations, you should, at a favorable opportunity and within your discretion, endeavor to ascertain what action the Turkish authorities propose to [Page 1082] take with respect to the liquidation of these blocked balances. If the agreement can be signed and made effective prior to the end of this year, a partial solution may be found by endeavoring to have the proportional exchange formula apply to 1938, which would presumably hasten the liquidation of the blocked commercial balances. However, if necessary, we would accept 1939 as the first year to which the formula will be applied.
8. With respect to the question of consolidation of tariff rates and other supplementary charges on Schedule I items, the Department is unwilling to recede from the substance of Article I as contained in your despatch No. 740, enclosure No. 1, of July 7, 1938,35 except for the change in the period of delay from 1 year to 6 months.
9. Moreover, the Department feels (1) that paragraph 2 requires clarification, since the phrase “la tarification résultant”, et cetera might be interpreted as not to include supplementary charges; (2) that the duties, taxes and charges to be bound should be those imposed on the date of signature rather than the effective date of the Agreement; and (3) that the incorporation of a clause providing for compensatory modifications (as in our agreement with France) would be desirable. Unless you perceive objection, you should therefore inform the Turkish authorities that your Government is willing to accept a 6 months’ notice clause, but that it prefers that the first sentence of the second paragraph of the Article read as follows:
“2. In the event that the Government of the Turkish Republic should find it necessary to increase the rates of duty set forth in Schedule I, or to impose other new or increased duties, taxes or charges of any kind on or in connection with the importation of the articles enumerated and described in the said Schedule, the rates of duty set forth in that Schedule as well as all other duties, taxes or charges of any kind imposed on or in connection with importation on the day of the signature of this Agreement or required to be imposed thereafter under laws of the Turkish Republic in force on that day, shall be maintained without change in respect of such articles until the expiration of 6 months from the date of promulgation of any such new or increased duties, taxes or charges.”
10. For purely technical reasons, the Department also prefers that the opening phrase of paragraph 1 read “Articles the growth, produce or manufacture of the” et cetera.
11. Article 2 of the Turkish counterproposal of July 13 relating to Schedule II items (your despatch No. 764, enclosure 136) is of course also unsatisfactory in that it omits the substance of the second sentence of our standard article, reference No. 3.
[Page 1083]12. At a favorable opportunity you should discuss the foregoing matters with the Turkish authorities. However, you may wish to defer such discussions pending receipt of instructions concerning Turkish Schedule II requests expected to be telegraphed shortly.
- William M. Malloy (ed.) Treaties, Conventions, etc., Between the United States of America and Other Powers, 1776–1909 (Washington, Government Printing Office, 1910), vol. i, p. 90; or 19 Stat. 628.↩
- Despatch not printed; for enclosure here referred to, see draft article on exchange control submitted by the American Trade Delegation on July 28, 1938, p. 1074.↩
- Despatch not printed; for its enclosure, see aide-mémoire, July 1, p. 1069.↩
- Despatch not printed; the enclosure referred to was substantially the same as the Turkish counterproposals handed to the Secretary of State on July 26, p. 1073.↩