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No. 1 of  2016

MONDAY, JANUARY 4, 2016

Filed from Portland, Oregon

A TRADE THREAT FROM TURKEY

"The Minister of Economy was quoted in [the] Turkish press as saying Turkey would launch three [unfair trade] investigations for every one the U.S. aimed at Turkish products."

Shane Stephens
National Cotton Council
December 9, 2015
CONTEXT
Mr. Stephens is a Vice President of the National Cotton Council, and on December 9 he was one of several witnesses who talked about the current state of the U.S. cotton industry at a hearing convened by the Subcommittee on General Farm Commodities and Risk Management of the House Agriculture Committee.   Turkey's current challenge to U.S. cotton exporters was just a small part of what Mr. Stephens had to say.  The issue he flagged, however, is a big one and well worth a moment's reflection.
 
Here are the two key paragraphs on this topic from Mr. Stephen's written testimony:
 
"In recent years,
Turkey has been the second largest export customer for U.S. cotton. For the past year, Turkish authorities have been investigating U.S. cotton exporting companies to determine if U.S. cotton is being dumped into the Turkish market. An affirmative finding by Turkish officials would mean that an anti-dumping duty would be applied to U.S. cotton imports, while imports from other countries would remain duty free. A duty would undermine the competitiveness of U.S. cotton and directly impact prices received by U.S. cotton farmers. The uncertainty of the ongoing investigation is already dampening interest in U.S. cotton by Turkish mills, as current sales for this marketing year are just one-third of year-ago levels.

"The Turkish government self-initiated the investigation shortly after the U.S. announced antidumping/countervailing duty (AD/CVD) investigations of Turkish steel pipe. The Minister of Economy was quoted in Turkish press as saying Turkey would launch three investigations for every one the US aimed at Turkish products. The document produced to support the initiation of the investigation is largely redacted, so the information upon which the allegation of dumping is based is not available for parties to rebut.  Many observers believe that Turkey seeks to damage the U.S. cotton industry by using AD investigations not to benefit their domestic industry but out of retribution for the U.S. steel cases.  This is just as much a contravention of the WTO as using trade barriers out of protectionist intent."

COMMENT
Yes, a country's trade policy is a subset of its foreign policy, and yet it is different, especially in these two respects.  First, for every country, trade policy is fundamentally about the operation and opportunities of its domestic economy.  That means that, at least in peacetime, it is more intimately involved with domestic stakeholders - producers, buyers, and sellers - than other elements of foreign policy.  Second, for WTO members, the tools available are limited to actions allowed by the General Agreement on Tariffs and Trade and related understandings.

That said, Turkey today is a country that is having a hard time separating trade policy from the rest if its diplomacy.  There is the issue of whether ISIS oil from Iraq and Syria is surreptiously being sold in Turkey.  We are not going to touch that. Then there is the more public set of issues associated with Russia's new sanctions against Turkey. 

In November the Turkish air force shot down a Russian bomber in Turkish airspace, and the Russians are now responding with trade sanctions.  For starters, they affect tourism (Turkey is a popular destination for Russian tourists); Turkey's exports to Russia of fruits, vegetables, poultry, and salt; and a ban "on employment of Turkish citizens by Russian employers."  Reportedly Turkey is preparing a WTO case against these sanctions.

Time will tell and the lawyers will decide just how good a case the Turkish government will be able to put together.  If it is a credible one and a panel is formed, presumably the panelists will render a fair judgment.  

To that we say, too bad.  Of course, one would always wish to see fair judgments from WTO panels, but you have to ask: How does the system, the WTO system of jurisprudence, defend itself against those who openly flout it?  If Turkey's Minister of Economy did indeed threaten retaliatory, government initiated trade actions against U.S. commerce, he has struck a severe blow against the very institution, the WTO, to which his government now seems eager to appeal.  That government officials around the world often think in terms of retribution is hardly news.  To threaten it openly, however, is a very different matter, especially against the backdrop of such a threat being carried out.  In short, there is something jarringly wrong with this picture, and if there is no corrective, in time, the system itself will unravel.
SOURCES & LINKS
From the National Cotton Council takes to the December 9 testimony of Shane Stephens that was the source for today's quote.

Ankara to Appeal is an article from Sputnik News on Turkey's Russia new sanctions against Turkey and the latter intention to file a WTO case in response.

Sanctions Seriously Affecting Turkey is an Iran Daily story on the same set of sanctions.

Welded Line Pipe from Korea and Turkey is a press release from the U.S. International Trade Commission on the case which may have prompted the Government of Turkey to self-initiate an anti-dumping case against U.S. cotton.

Preparing to File is an article on Turkey's planned WTO case against Russia.  According to this Trend News report, "Turkish companies [in Russia] are being pressured to transfer their shares to Russian partners."   

 

 

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