611.6731/444: Telegram
The Ambassador in Turkey ( MacMurray ) to the Secretary of State
[Received 6:55 p.m.]
74. From Trade Agreement Delegation. Department’s 90, September 17, 3 p.m.
1. Your numbered paragraph 3. Turkey is willing to accept our exchange article without clause proposed by it, provided we are willing to exclude from the total of Turkish imports to be used as a basis of calculation under exchange provision, goods imported into Turkey under the recently arranged British and German Government credits beyond the amount of payments made on those credits during the year in question. Chief of Turkish delegation states that he is willing to try out our exchange provision, although it involves some risk for Turkey but he points out that during the next few years Turkish total imports will be abnormally large as a result of imports under the above-mentioned credits; goods will be imported in a few years which will be paid for only over 10 years; 10 million pounds sterling of the British credit and more than 100 million marks of the German credit will be used for non-military purchases and the resulting imports will therefore be included in the Turkish import statistics. In consequence of this situation, he believes that Turkish exchange availabilities will probably be insufficient to pay for 10.9 percent of Turkish total imports during next few years. It is the opinion of the delegation that the Turkish request deserves serious consideration since it is important that under the operation of these credits Turkish total imports may be increased to such an extent during the next few years that Turkey [Page 1090] would not have available for imports from the United States (after meeting other essential needs) the amount of exchange required by our formula.
Chief of Turkish delegation proposes as an alternative to our formula that Turkey undertake to make available for imports from the United States in any year, a specified amount of exchange rather than, as we have proposed, exchange for a fixed percentage of Turkish total imports. He has in mind as specified amount the sum corresponding to 10.9 percent of average annual Turkish total imports in 1935–37. He would give us a letter to the effect that if commercial exchanges between the two countries developed favorably the amount specified would be increased by mutual agreement. He explained that Turkey would make available to us any difference between the specified amount and 80 percent of the proceeds from Turkish exports to the United States. He said that this alternative proposed was merely a suggestion on which he would not insist in any way.
2. With respect to Schedule I concessions, Turkish Government takes position that, since the Turkish Parliament is so strongly opposed to any restriction on its powers in regard to customs matters, such as would result from the provision requiring a 6 months’ delay in application of increased rates to schedule articles, it can include in an agreement containing that provision only small tariff reductions on a small number of articles as contained in its offer of August 30 (see despatch No. 818, September 16, 1938 enclosure 245). While the Turkish Government desires to lower its tariff rates on many American specialties for internal reasons, it does not desire to be bound to reduced rates under an international agreement. Accordingly, Chief of Turkish Delegation has proposed the following alternatives:
- (a)
- If the United States insists on the 6 months’ clause, the Turkish Government will grant in the agreement only small percentage reductions on a small list of articles (list of August 30 may be slightly enlarged), and then by unilateral action (outside of the agreement itself but in consultation with the United States) it will make substantial further tariff reductions on the same schedule articles and on other American specialties. This procedure, he said, would give us the substance of what we desire and at the same time would enable him to defend the agreement in Parliament by pointing out that the Government had consolidated only a small part of the reductions made.
- (b)
- If the United States were willing to give up the 6 months’ clause, the Turkish Government would write into the agreement substantial percentage reductions on a wide range of American specialties. Under this procedure, the agreement itself would contain the [Page 1091] tariff reductions which under alternative (a) would be made outside of the agreement. The Chief of the Turkish delegation declared that he could guarantee 100 percent that there would be no increase in the duties on schedule articles during the term of the agreement. He said that the practical result would be the same, whichever alternative we selected.
Although there may be objections from the point of view of general commercial policy we consider that alternative (b) would be satisfactory in practice from the point of view of Turkish-American trade. In the first place, the agreement may be terminated at the end of a year; secondly, the general trend of Turkish policy is to decrease, rather than to increase rates for reasons of internal policy; thirdly, we believe, specially on the basis of past practice, that the Turkish Government considers it a moral obligation not to increase tariff duties on articles upon which percentage reductions have been made in international agreements.
It should be noted that while the executive authorities have under the Turkish system large powers to make reductions of tariff duties they are not empowered to assure the maintenance of such rates as against the rather jealously guarded right of the Parliament to determine at will the basic rates. The Cabinet is, therefore, not in a position to undertake to bind any given rate. If Schedule I were to contain only percentage reductions, it would be necessary that the binding of those items for which we have requested such treatment should take the form of a nominal reduction of duties.
3. Your numbered paragraphs 8 and 9. Chief of the Turkish delegation states that the consolidation of supplementary taxes and other charges on schedule articles is constitutionally impossible for the Turkish Government. He says that Parliament has not given the Government power to consolidate such charges and Parliament would not approve any provision to this effect. He proposes instead a clause specifying that, in the event of an increase of the supplementary taxes and charges on schedule articles of such nature as to impair the value of concessions granted in the agreement, the United States would be free to terminate the agreement.
4. In view of Turkish desire to conclude the negotiations as soon as possible and of the unfavorable effect on our commercial interests of continued uncertainty with regard to the conclusion of the agreement and in view of the fact that the great bulk of the tobacco purchasing which constitute the principal source of Turkey’s dollar exchange will start November 14 and be completed in a few days, the delegation hopes that it will receive promptly Department’s instructions with regard to questions presented in this telegram. [Trade Agreement Delegation.]
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