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Cablegate: Turkey Agr Policy - Two Steps Back

This record is a partial extract of the original cable. The full text of the original cable is not available.

101605Z Jun 04

UNCLAS SECTION 01 OF 02 ANKARA 003251

SIPDIS


SENSITIVE


STATE FOR EUR/SE, EB/EPD, AND EB/TPP/ABT
DEPT PLEASE PASS USTR FOR NOVELLI, LERRION
USDA FOR FAS FOR ITP/POMEROY, HANSEN;
CMP FOR ALL COMMODITY DIVISIONS
USDOC FOR DEFALCO


E.O. 12958: N/A
TAGS: ETRD EAGR KPAO TU
SUBJECT: Turkey Agr Policy - Two Steps Back
Ref: Ankara 2686

Sensitive but Unclassified. Not for Internet Distribution.


1. (SBU) Summary. Over the past two years, Turkey has
implemented regulations that have increasingly restricted
imports of agricultural products. Turkey's recent
imposition of a new quota system for corn is the latest in a
series of moves that have restricted trade. Moreover,
Turkish officials have indicated their desire to expand
these restrictive practices to other commodities. Turkish
parastatals that seemed to be withering on the vine several
years ago, have a more active role on the trade side at the
expense of the private sector. These actions could mean
less than enthusiastic support by Turkey in future WTO
discussions on reforming agriculture. End summery.


----------------------
A Change for the Worse
----------------------


2. (SBU) Recently, importers and Turkish food and feed
processors have increasingly become discouraged by the
direction Turkish agriculture policy has taken, particularly
in regard to import policy. Turkey is a net importer of
agricultural commodities producing less than 50% of its
consumption needs for a variety of crops like corn, soybean
and cotton. In May, Turkey introduced a new quota system
for corn (reftel) which has dismayed many companies. They
view the quota as the government attempt to restrict imports
and raise domestic commodity prices.


3. (SBU) At a recent meeting, one U.S. business
representative stated that over the past two years, trade
restrictions have increased dramatically. He had been
hopeful when Turkey phased in an IMF/World Bank initiative
to eliminate agriculture subsidies and replace them with
direct payments to Turkish farmers. For a while, the
agriculture sector seemed to be progressing. However,
Turkey began using phyto-sanitary, import licenses, import
quotas and high tariffs to limit imports. These
restrictions have, as a result, artificially increased
domestic commodity prices.


--------------------
First - High Tariffs
--------------------


4. (SBU) Turkey negotiated fairly high bound rates for
agricultural imports that it utilizes to limit imports.
Turkey has periodically imposed higher tariffs on rice and
corn during the growing seasons in order to protect domestic
production. In January 2004, the government raised corn
tariffs, which normally ranged from 20 - 35 percent, to 80
percent. Tariffs seem to serve two functions: As a way of
increasing domestic prices for commodities and second, as a
good source of revenue for the government. Turkish
officials note that tariffs are the only means to protect
Turkish agriculture against EU and US domestic support
programs. In fact, Turkey has made very good use of a
number of tools to hinder trade besides tariffs including
the use of quotas and import licenses.


---------------------------------------
Turkish Parastatals - Bigger and Better
---------------------------------------


5. (SBU) One of the more disturbing developments recently
has been the revitalization of Turkish agriculture
parastatals. In the recent past, it appeared that these
organizations would eventually disappear, replaced by
private sector entities and subject to market forces.
Unfortunately, organizations like TMO, the Turkish Grain
Marketing Organization, and Trakyabirlik, the Sunflowerseed
Agricultural Cooperative, are becoming more active in grain
and oilseed markets in Turkey. We recently reported on the
rice import problems caused in no small part by TMO's
purchase of domestic rice at exorbitant prices as well as
the recent corn import quotas. According to trade sources,
Turkish Foreign Trade Representatives stated their intention
to "remake the corn market" in Turkey. Moreover, the
government is considering the imposition of a similar system
for soybeans. This despite that fact that Turkey grows less
than 50 TMT of soy and imports over 1 MMT for its livestock
sector.
6. (SBU) These parastatals often take advantage of their
position to reap windfall profits by importing duty free but
selling at inflated market prices. For example, during the
last 2 years, TMO imported corn without paying the 35
percent import duty which private importers paid. TMO then
sold the corn on the market for market prices that included
the duty. We have been told that Trakyabirlik was given an
import license to use a duty-free quota to buy
sunflowerseeds from Bulgaria. The sunseeds are in short
supply and TrakyaBirlik will sell the sunflowerseed at a
premium.


--------------------------------
Finding a Way to Protect Farmers
--------------------------------


7. (SBU) It is not difficult to understand the motivation
behind these moves. Having agreed to eliminate direct
subsidies the GOT needed to find a way to support Turkish
farmers who are a big political base. In additional to high
tariffs and parastatals, no wheat is imported to Turkey
unless an equivalent amount of wheat, wheat flour or bread
products are exported. Turkey does not issue import
licenses for beef or poultry despite the inclusion of these
products in bilateral agreements. Wheat prices topped $300
a ton for poor quality wheat while beef prices are said to
exceed those in Geneva. Finally, the government is looking
to curb imports in order to reduce an increasing trade
imbalance.


--------------------------------------------- -
Comment - WTO Discussion to Reform Agriculture
--------------------------------------------- -


8. (SBU) Given the government actions, it would appear that
Turkey will be very reluctant to support most of the major
WTO reform proposals on agriculture currently being
discussed. On market access, Turkish officials have
repeatedly noted that higher tariffs are necessary to
protect Turkish farmers against EU and U.S. farm subsidies.
Import quotas and import licenses are also useful tools to
slow, if not stop, imports. Turkey will probably not
support a phase out of parastatals involved in agriculture
trade given the lucrative profits these organizations have
reaped in recent years or their contribution to higher
prices. On the bright side, Turkish officials have stated
that they would support the elimination of export subsidies.
However, this is something of a hollow victory, since, as
one Turkish official noted, they support their elimination
because they don't have the money to subsidize their own
exports. If the money were available, this issue too would
most likely be off the table.


Edelman

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