611.6731/641: Telegram

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

150. 1. The Minister of Commerce in a radio address Saturday night set forth the measures which the Turkish Government proposed to take to develop trade with the United States. He stated that the clearing and compensation systems applied since 1933 in Turkey’s foreign trade relations had brought about an increase in the domestic prices of Turkish products relative to world market prices and that the difference between the two price levels was constantly increasing. This price differentiation had had a considerable effect on Turkish exports to the United States. Whereas up to 1929 50 percent of Turkish exports to the United States consisted of products other than tobacco, in recent years the share of such products had fallen to 4 percent. On the other hand, Turkish imports from the United States had been increasing and because the present situation made it difficult to pay the counter value of imports from the United States there had accumulated a little amount of blocked arrears which totaled at the present time about $6,500,000. The existence of these arrears made importation from the United States very difficult and had brought about an increase in the prices of American products; for example, the duty on automobiles had been reduced by 400 to 500 pounds but prices on the Turkish market instead of declining by this amount had increased by about 500 pounds which meant that there had been an actual [Page 883] increase of from 800 to 1,000 Turkish pounds. A similar increase in price had taken place in the case of other American products, such as radios and frigidaires.

The Minister declared that the remedy for this situation was to do away with the difference between Turkish domestic prices and world market prices which would permit the increase of Turkish exports to the United States. “We shall apply the compensation system to American imports and exports in order to do away with the difference between prices on the American and Turkish markets and in order to adjust Turkish trade with America to trade with other countries. The American compensation premium will be approximately 25 percent, consequently every exported article will receive a premium in this proportion and every imported article will pay a premium in the same proportion. The application of this system will make possible the cash payment of the counter value of imported goods and thereby blocked funds will be avoided.” The Minister estimated that the application of this system would bring about a reduction of from 25 to 50 percent in the present high prices of imported American goods.

2. This announcement was made without previous consultation with the Embassy and to its complete surprise. Neither the general plan nor the details of its application are understood and it has thus far proved impossible to get into touch with any responsible official of the Ministry of Commerce but an appointment has been made to see the Minister tomorrow.