611.6731/593

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

No. 1097

Sir: I have the honor to refer to my despatch No. 1050 of May 17, 1939,29 with regard to the enforcement of the American-Turkish Trade Agreement, and to enclose translations of two decrees and an Announcement of the Ministry of Finance30 relative to the allocation of free exchange for the payment of imports from countries with which trade is conducted on the basis of free exchange.

The first decree is understood to be the decree which was withheld from publication in consequence of the objections made by the American Trade Agreement Delegation in the meeting of May 9, 1938, in the trade agreement negotiations with Turkey (Enclosure No. 2 to despatch No. 650 of May 18, 193829). It was the purpose of this decree (which was to replace Article 1 of Decree No. 2/8273 of March 15, 1938) to place the allocation of exchange for imports from the United States, Syria, Malta and Cyprus on the basis established under Article 1 of the Decree of March 15, 1938 for the allocation of exchange for imports from Egypt and Palestine (the countries with which Turkey had in 1937 an import balance instead of the usual export balance). As the Department is aware, under this decree exchange was to be made available for the payment of imports from the countries with which trade was conducted on the basis of free exchange to the extent of 80 per cent of the exchange derived from exports to the country in question.

It will be observed from Enclosures 2 and 3 that this decree has now been amended so that its provisions apply only to Egypt, Palestine, Syria, Malta and Cyprus, i. e., to all the countries with which trade is conducted on the basis of free exchange, with the exception of the United States. Thus, under the Turkish exchange legislation as now revised, the 80 per cent provision constitutes the basis for the allocation of exchange for imports from these countries while the provisions of the American-Turkish Trade Agreement constitute the basis for the allocation of exchange for imports from the United States.

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It will be noted that Article 2 of Supplementary Decree No. 2/11041 provides that exchange resulting from the sale of goods to the United States shall be sold to the Central Bank and a separate account kept thereof. The Embassy has been given to understand that the purpose of this provision is to facilitate the Turkish Government’s fulfillment of its obligation under the Trade Agreement in respect to the provision of free exchange for the payment of imports from the United States and to preclude the repetition of what took place last Fall when most of the unallocated exchange, including the dollar exchange resulting from the purchase of tobacco for export to the United States, was utilized by the authorities for military and other needs.

Referring to the penultimate paragraph of my despatch No. 1050 of May 17, 1939, I regret to have to report that the Ministry of Finance has not as yet commenced making exchange available currently for the payment of imports from the United States although the Embassy has continued to urge upon the Foreign Office the necessity of speedy action in this matter. Likewise, no further action has been taken with respect to the liquidation of the still outstanding arrears for 1938 imports, which amount to approximately $350,000.00. It is understood, however, that the Controller of Exchange at Istanbul was summoned to Ankara two weeks ago and has been here since that time in consultation with officials in the Ministry of Finance. It is hoped that this consultation will result in steps being taken to liquidate the still outstanding arrears for 1938 imports and to make exchange available currently for the payment of imports from the United States.

Respectfully yours,

J. V. A. MacMurray
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