Memorandum by the Assistant Chief of the Division of Near Eastern Affairs (Alling) of a Conversation With the Turkish Ambassador (Ertegün)

The Ambassador stated that he had received instructions from Ankara to take up with the Department the effect which the American-Turkish Trade Agreement had had upon trade between the two countries. The Ambassador said that his Government had observed with considerable concern that following the entrance into force of the agreement Turkish exports to the United States had practically ceased. The Ambassador added that this seemed to be due to several reasons. In the first place Germany was offering higher prices for Turkish raw products and increasing the internal price level up to such a point that American buyers were forced out of the market. Thus dollar exchange had become more and more difficult to obtain, and at the present time Turkey had practically no dollar exchange. Furthermore, the reductions which had been made in the Turkish duties on a long list of products had been generalized to other countries and German exporters were able to sell many more goods in Turkey because of these reduced duties. In addition, Turkish merchants who desired to purchase American goods found that they had to pay a premium of as much as forty percent above the official rate [Page 873] in order to obtain dollar exchange. All of these factors were most disturbing to the Turkish Government which sincerely desired to increase not only its exports to the United States but its imports from this country. In the circumstances the Turkish Government had raised the question whether we would be agreeable to a system by which exports from Turkey to the United States, with the exception of tobacco, would be allotted amounts in Turkish lire per dollar above the official rate. The Ambassador stated that his Government felt that such an arrangement would give American merchants more Turkish lire per dollar and that these merchants would therefore be able to purchase Turkish goods, with the exception of tobacco, at a lower dollar price. The Ambassador concluded that this was all the information he had on the subject; that he was not particularly competent to discuss it, but that he would appreciate receiving a reply as soon as possible whether such an arrangement as was proposed would be agreeable to this Government.

I told the Ambassador that the proposal obviously raised many technical questions, but that I would pass it on to the competent persons in the Department and that we would endeavor to give him some informal views on the matter some time next week.