Foreign Relations of the United States Diplomatic Papers, 1938, The British Commonwealth, Europe, Near East, and Africa, Volume II

611.6731/439: Telegram

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

Istanbul, October 12, 1938—9 a.m.
[Received 1:40 p.m.]

70. Your personal telegram 93, September 23, 6 p.m.

1. Since my return to my post I have kept in close touch with the trade agreement negotiations although leaving their actual conduct in the hands of Kelley who has been carrying them on very capably. I shall, of course, hold myself ready to intervene with the Prime Minister or Minister for Foreign Affairs at any desirable juncture; but neither he nor I consider that the moment has yet come when it would be helpful to act upon your suggestion. The discouraging delays that have occurred have not been due to any lack of good will but (save as they may have been increased by external and accidental circumstances) have been primarily the result of fundamental difference in the prevalent attitude of the Turks and of ourselves towards the whole question of international trade. While the principles which we advocate appeal to them as doubly desirable their situation and their experience do not qualify them to appreciate the necessity for such elaborations as we have found advisable and they are timid about committing themselves to formulas which are new to them and whose effects they do not feel able to foresee. I therefore consider as does the delegation (see my telegram 69, October 6, 10 a.m.) that we can scarcely hope that the Turks can be pursuaded to conclude with us so comprehensive and precise an agreement as the Department has had in view but must content ourselves with something considerably less detailed. And so far as concerns our trade relations with this country I do not think we could lose anything by foregoing a considerable degree of elaboration and relying upon broad general statements of essential principles.

2. May I submit for your personal consideration the fact that one aspect of the current negotiations which gives me considerable concern is the formulation of the exchange clause proposed by the Department. I cannot but acknowledge that that formulation seems to me to sacrifice substantial trade possibilities in grasping at a mere shadow of multilateralism. The Turks have offered to buy from us 80% of what we buy from them and say they need the 20% margin for exchange requirements that they have very little opportunity to meet otherwise. We have in effect said that we do not mind their getting the benefit of a margin equivalent to 20% or even more if only they will consent to state it in ostensibly multilateralistic terms. Because the formula which we have proposed for that purpose introduces into the situation a further variable the Turks have to assume a greater risk as to the amount of free exchange that may be left available to them under it and they not unnaturally consider that it would entitle them to treat their commitment as a maximum rather than a minimum obligation leaving them a possible surplus which they would feel free to expend elsewhere for such purposes as the purchase of armaments or the repayment of obligations incurred under the recent credit agreement with Great Britain. The probable reduction in the amount of their purchases from us is a price that we might well pay if in exchange for it we were assuring Turkey’s adherence to the principles which we are advocating: but to me it seems that on the contrary our adoption of an exchange formula which is expressed in multilateralistic terms but which is in fact calculated on a base period chosen for the purpose of giving the Turkish Government at least the equivalent of the amount of exchange it would have got under its bilateralistic formula, is not an affirmation but a denial of our principles. I venture to submit my own strong feeling (although I am aware that the Department has already ruled against such a view) that the agreement would be not only more advantageous to our trade but also more consonant with our own principles if the exchange clause were to take some form embodying a mere general undertaking on the part of the Turkish Government to make exchange available for commercial payments to the United States to the fullest extent compatible with its own exchange availabilities. And I believe that our generally satisfactory experience with the Turkish Government in regard to the application of the most-favored-nation clause in our existing commercial treaty justifies the conclusion that under such a general provision with regard to exchange we could obtain for our trade actually better treatment than under the more detailed provisions contemplated by the Department.

3. The negotiations have recently been slowed down by the illness of the Turkish negotiator Numan but we now expect them to be accelerated in consonance with the desire of the Prime Minister and Minister of Economy as expressed to me in the course of a casual conversation last Friday. With that in view it would be particularly helpful if the Department were to give us as early a reply as possible to my telegram 69, October 6, 10 a.m.

MacMurray