US embassy cable - 04ANKARA3251

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. 
 
 
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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