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

611.6731/437: Telegram

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

Washington, October 31, 1938—1 p.m.

101. For Trade Agreements Delegation. Your 69, October 6, 10 a.m. and 74, October 21, 3 p.m.

1. The Committee on Trade Agreements has approved the following general provisions for inclusion in the proposed Turkish Agreement and you are instructed, unless you perceive objection, to propose them to the Turkish authorities.

(1) The articles recommended in your telegram 69 under reference with the following modifications:

Article 1, substitute the following text:

“Articles the growth, produce or manufacture of the United States of America, enumerated and described in Schedule I annexed to this Agreement shall be subject, on their importation into the territory of the Turkish Republic, to the rates of duty provided for in the said Schedule. In the event that the Government of the Turkish Republic should deem it necessary, after this Agreement enters into force, to increase the duties or other charges applicable to the said articles, such new or increased duties or charges shall not be applied to the said articles until 6 months after the date of their promulgation. If, before the expiration of the aforesaid period of 6 months, a satisfactory agreement has not been reached with respect to such compensatory modifications of this Agreement as may be deemed appropriate, the Government of the United States of America shall be free, within 15 days after the date of the application of the new or increased duties or charges, to terminate this Agreement in its entirety on 30 days’ written notice.”

With reference to your telegram 74, paragraph 2, neither (a) nor (b) is satisfactory. Proposal (a) would subject us to severe criticism on the ground that we had failed to obtain in the agreement itself substantial concessions the Turks were apparently willing to give. We would greatly prefer substantial reductions on as long a list as possible, with any unilateral reductions largely confined to non-schedule items. Proposal (b) would give us nothing even resembling a binding of concessions. If, despite your insistence upon 6 months’ delay and a fairly long Schedule I with substantial concessions, the Turks hold firmly to their proposal (a), you should endeavor in the time at your disposal to work out a compromise solution which would give us the best possible Schedule I, both as to items and concessions, on the basis of a shorter period of delay such as 90 or even 60 days. Since such a compromise solution would be beyond the scope of the instructions contained in this telegram, it would have to be clearly understood that it was on an ad referendum basis. You may consider it within the scope of your instructions to agree, if necessary, to the expression of the concessions in two columns in the form of percentage reductions from existing general rates applicable to the items in the schedule.

With reference to your 74, paragraph 3, we regret exceedingly that the Turkish authorities have again refused anything in the nature of a binding of supplementary charges (other than those permitted by Article 3) even for a short period, as we attach great importance to a suitable provision on this point. You should consider carefully whether any further approach on this question would have any chance of success, but, if you are satisfied that it is in fact legally impossible for the Turkish Government to accept the text quoted in full above, you are authorized to propose the foregoing text of Article 1 with the following changes:

(a) Substitute the following text as the second sentence: “In the event that the Government of the Turkish Republic should deem it necessary, after this Agreement enters into force, to increase the duties provided for in the said Schedule, such increased duties shall not be applied to the said articles until six months after the date of their promulgation”; (b) substitute in the last phrase of the last sentence after “application of” the words “such increased duties, to terminate” et cetera.

In proposing this modified text you should inform the Chief of the Turkish Delegation that we prefer to rely on the general safeguards Article (new number 10 below) rather than include a provision along the lines he suggested.

Article 2, delete “and made a part thereof”.

Article 3, see Department’s instruction No. 289, August 11, 1938.⁴⁶

Article 4 (new article 5), paragraph 1, insert “of America” after “United States”; delete “freely” and “or limitation”; insert “any quantitative” before “restriction”. Paragraph 2 substitute “articles” for “products” wherever occurring and add “or tending to increase the labor costs of production of such articles”. The addition of this phrase is necessary for legal reasons.

Articles 5 and 6 combined in one article (new article 6) as follows: numbered paragraph 1 identical with standard article reference number 12 with no additions. Numbered paragraph 2 as follows: “Neither the United States of America nor the Turkish Republic shall establish or maintain any import or export prohibition or restriction on any article originating in or destined for the territory of the other country, which is not applied to the like article originating in or destined for any third country. If imports of any article in which the other country has an interest should be regulated either as regards the total amount permitted to be imported or as regards the amount permitted to be imported at a specified rate of duty, and if shares are allocated to countries of export, the share allocated to the other country shall be based upon the proportion of the total imports of such article from all foreign countries supplied by the other country in a previous representative period.” Numbered paragraph 3: your article 6 combined as one paragraph, with the insertion of the words “of articles” after “Turkey”. Numbered paragraph 4: “It is agreed that the Government of the United States of America and the Government of the Turkish Republic, in the awarding of contracts for public works and generally in the purchase of foreign supplies by the respective Governments or any agency thereof, shall not discriminate against the other country in favor of any third country.”

With reference to the foregoing numbered paragraph 2 covering general quantitative restrictions, the Turkish proposal for provisions stipulating that the importation into Turkey of non-schedule articles shall be subject to the general Turkish import regime and the proposed exchange of notes relating thereto is not acceptable. The foregoing text, while similar to that proposed by you, covers export prohibitions, customs quotas, and makes allocation optional. This last point is very desirable because in general we do not wish to be obliged to allocate quotas.

The inclusion of the words “nationals and” in numbered paragraph 3, which are also contained in earlier agreements, would make the provisions of the first sentence of that paragraph apply generally to non-commercial transactions and their retention is desirable. However, you are authorized to omit them if the Turkish authorities object. With reference to non-military imports into Turkey resulting from British and German loans (your telegram 74, paragraph 1), we assume that they would fall in the category of governmental purchases and hence would be properly deductible from total imports for purposes of the exchange formula. If the Turkish authorities do not wish to publish statistics showing imports of non-military supplies by the Turkish Government or agencies thereof separate from non-governmental (that is, commercial) imports, we would be willing to have them inform us of the amount of total governmental non-military purchases made abroad, including without specification such purchases as may result from the British and German loans, which they may deduct from total imports to arrive at the figure for total commercial imports. On the basis of this understanding, it is assumed that the Turkish authorities will agree to our exchange proposal. The Turkish proposal to make available for imports from the United States a specified amount of exchange rather than a share of whatever the total commercial imports may be is of course not acceptable.

You should endeavor to obtain acceptance of numbered paragraph 4, covering government purchases but if it is objected to, you are authorized to drop it.

Article numbered 7 (new Article 9), paragraph 1: change to read “The provisions of this Agreement shall not apply to:”; in subparagraph (a) substitute “either country” for “each of the two countries”; in sub-paragraph (c) substitute “articles” for “products”; in sub-paragraph (d) insert comma after “Cuba”, add “irrespective of” et cetera and delete intervening text. Numbered paragraph 2: insert “or importation” after “exportation” in third line and substitute semi-colon for comma after “supplies” in seventh line, and delete “it is agreed, further, that” and “be construed to” in the phrase which follows. Numbered paragraph 3: substitute “or” for “and” in fifth line.

For your confidential information the Department is giving serious consideration to the request of the Greek Government for the inclusion in the proposed modus vivendi⁴⁷ with Greece of provisions excepting the advantages which may be accorded by Greece to the members of the Balkan Entente. We would therefore appreciate your comments as to the desirability of including similar provisions in the proposed agreement with Turkey. (Your despatch No. 650, May 18, 1938,⁴⁸ enclosure No. 1, last paragraph.)

Article 8 (new Article 8) substitute the following simplified text which has been proposed in other agreements now being negotiated: “The provisions of this Agreement relating to the treatment to be accorded by the United States of America and the Turkish Republic, respectively, to the commerce of the other country shall apply, on the part of the United States of America, to the continental territory of the United States and such of its territories and possessions as are included in its customs territory on the day of the signature of this Agreement. The provisions of this Agreement relating to most-favored-nation treatment shall apply, however, to all territories under the sovereignty or authority of the United States of America, other than the Panama Canal Zone.” In explanation of this article you may state that the customs territory of the United States includes all its territories and possessions except the following: the Philippine Islands, the Virgin Islands, American Samoa, Wake Island, Midway Islands, Kingman Reef, and the Island of Guam; furthermore, the customs territory of the United States does not include the Panama Canal Zone.

Article 9 (new Article 11), no change.

Article 10 (new article 12). It is suggested that you adapt the text of Article 19 of our Agreement with Czechoslovakia⁴⁹ as required by the Turkish situation. On our part the effective date must be at least 1 month after proclamation by the President. Therefore, only in the event that the Agreement should be proclaimed on day of signature could the provisional effective date be 1 month after signature.

While we would prefer 6 months’ notice after initial period of 1 year, we are prepared, if necessary, to accept 2 months;

(2) Standard articles reference numbers 6⁵⁰ and 18⁵¹ (new Articles numbers 4 and 10), the latter with the 60 day escape clause added in our instruction No. 235, April 19, 1938.⁵² Article standard reference number 6 is considered important for the protection of non-schedule as well as schedule articles;

(3) The Treasury Department prefers that standard article reference number 14⁵³ (new 7) be included in the Agreement.

2. If you should find it necessary to drop any provisions as authorized above, you should not fail to make it clear that we expect to receive in fact the treatment which those provisions would insure, and that if such treatment should not be accorded we would feel free to invoke the general safeguards article.

3. While we do not wish to follow the Belgian precedent of an exchange of specific concessions covered by an exchange of notes so inadequate in substance as to require further supplementary negotiations, we are willing, if necessary to obtain an agreement, to accept general provisions as indicated above in the form of an exchange of notes. In this event the usual form for exchanges of notes would be followed. However, if the Turkish authorities are willing to conclude an agreement in the usual form, containing a Preamble, you are authorized to propose a simplified Preamble similar to that contained in the trade agreement between the United States and Haiti.⁵⁴

4. If there appears to be a reasonable opportunity of reaching an agreement along the lines outlined above, but the Turkish authorities request further concessions on any Schedule II items, you should telegraph such requests for further consideration here.

5. With these instructions, the Department desires that you make every effort to reach a tentative agreement at the earliest possible date. If the Turkish authorities are not willing to accept provisions substantially as outlined herein, you should nevertheless obtain the best possible agreement on both general provisions and schedules, making it clear as regards any provisions not authorized by your instructions that they are tentative and subject to approval. Wadleigh and Burns should leave Istanbul with a draft agreement in both languages if possible, so as to sail from Le Havre not later than on the S. S. Manhattan, leaving December 15th.

Hull

46. Not printed. It stated that the Department would be prepared to accept the text of the article as contained in enclosure No. 2, Despatch No. 651, May 16 (611.6731/386). See footnote 40, p. 1084.
47. See pp. 516 ff.
48. Not printed.
49. Signed at Washington, March 7, 1938; Department of State Executive Agreement Series No. 147, or 53 Stat. 2293.
50. Regarding internal taxation. Text as follows: “Articles the growth, produce or manufacture of the United States of America or . . . . . . . shall, after importation into the other country, he exempt from all internal taxes, fees, charges or exactions other or higher than those payable on like articles of national origin or any other foreign origin.”
51. General provision to safeguard concessions. Text as follows: “In the event that the Government of the United States of America or the Government of . . . . . . . adopts any measure which, even though it does not conflict with the terms of this Agreement, is considered by the Government of the other country to have the effect of nullifying or impairing any object of the Agreement, the Government which has adopted any such measure shall consider such representations and proposals as the other Government may make with a view to effecting a mutually satisfactory adjustment of the matter.”
52. Not printed.
53. Regarding exchange depreciation. Text as follows: “In the event that the rate of exchange between the currencies of the United States of America and . . . . . . . varies considerably from the rate obtaining on the day of the signature of this Agreement, the Government of either country, if it considers the change in rate so substantial as to prejudice the industry or commerce of the country, shall be free to propose negotiations for the modification of this Agreement or to terminate this Agreement in its entirety on thirty days’ written notice.”
54. Signed at Washington, March 28, 1935; Department of State Executive Agreement Series No. 78, or 49 Stat. 3737.