US embassy cable - 05ANKARA1079

UNCLAS SECTION 01 OF 02 ANKARA 001079 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EUR/SE, EB/EPD, AND EB/TPP/ABT 
DEPT PLEASE PASS USTR FOR NOVELLI, LERRION 
USDA FOR FAS FOR ITP/Bertsch, Henke, Shwartz, LEIER 
USDOC FOR DEFALCO 
GENEVA FOR AGR/Young 
 
E.O. 12958: N/A 
TAGS: ETRD, EAGR, PGOV, TU 
SUBJECT: Turkish Rice Quota Restrains Imports 
 
Ref: (A)2004 State 180202 (B)2004 Ankara 005376 (C)2004 
 
Ankara 002686 
 
Sensitive but Unclassified.  Not for Internet Distribution. 
 
1.  (SBU) Summary.  In February 2005, the Turkish government 
issued import licenses for rice under its new import regime 
announce in August 2004.  However, because of the costly 
procedure and high tariffs no significant rice has been 
imported into the country.  Traders estimate that import 
demand could be as high as 350,000 tons (milled equivalent) 
in CY 2005 however, under the current regime imports will be 
less than half that amount.  Despite concerns raised by the 
USG in Geneva and in Ankara (Ref A), Turkish officials see 
no need to change the current procedures and may apply the 
same system to other commodities.  It is believed that the 
GOT will again stop issuing licenses in July 2005.  End 
Summary. 
 
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High Cost to Importers and Turkish Consumers 
-------------------------------------------- 
 
2.  (SBU) Turkey began imposing an unofficial ban on rice 
imports about 4 years ago.  Initially, the Ministry of 
Agriculture and Rural Affairs (MARA) stopped issuing 
licenses during the Turkish harvest (usually for 3 months) 
in order to raise domestic prices.  However, demand for rice 
including imported rice increased.  As a result, in 2003, 
MARA stopped issuing licenses for close to 2 years.  In 
2004, MARA issued new regulations.  According to these 
regulations, anyone wishing to obtain an import license must 
purchase a similar amount of domestic rice.  In the past, 
the GOT purchased domestic wheat at inflated prices in order 
to support Turkish farmers.  Because of the high prices and 
cheaper imports, much of the domestic rice was stored in 
government warehouses.  With this new system, the private 
sector must purchase all the domestically-produced rice 
saving the government millions of dollars.  Despite a large 
harvest, restrictions on imports have forced rice prices 
even higher.  Producers are enjoying windfall profits, 
knowing that importers will be forced to purchase all 
domestic rice.  However, the financial cost of purchasing 
the domestic rice is highly prohibitive even for larger 
companies and has resulted in smaller companies being 
excluded from the market.  Some larger Turkish rice traders 
have indicated that they will not purchase any domestic rice 
next year, in order to force the government to procure it. 
 
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Major Impact on Imports 
----------------------- 
 
3.  (SBU) According to trade sources, Turkey had between 70 
- 130 TMT of rice (milled equivalent) in bonded warehouses 
in 2004.  The first import licenses issued were used to 
release about 70 TMT from these warehouses.  One trader 
indicated plans to purchase 40 TMT of U.S. rice recently and 
expects to make a similar purchase later in the spring. 
There have also been some small sales of milled rice 
(approximately 4000 tons).  However, because of attractive 
prices and quality of rice in the United States, traders 
believe that imports have the potential to reach 300 - 350 
TMT in 2005.  However, because of the current quota system 
imports will be less than 150 TMT. 
 
4.  (SBU) Turkish officials continue to claim that the quota 
does not discriminate against U.S. suppliers and that high 
freight costs are the only reason, the United States is 
having a difficult time in the Turkish market. The price for 
U.S. rice imported to Turkey currently averages about USD 
500/ton (paddy rice) - USD 825/ton for milled rice.  This 
includes a USD 120/ton tariff for paddy rice and USD 175/ton 
tariff for milled rice.  The price for domestic rice can 
reach $750/ton.  However, the availability of import 
licenses is as much of a problem as prices.  Most companies 
simply do not have the financial means to purchase domestic 
rice in order to receive an import license.  The new import 
regime, as a result, has limited the number of firms, which 
can import and in the end the amount of imported rice. 
 
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Constraining Trade 
------------------ 
 
5.  (SBU) Between 1995 and 2003, U.S. rice exports alone to 
Turkey averaged over 150 TMT a year.  This included several 
years where exports were over 200 TMT a year.  In 2004, U.S. 
exports dropped to 58 TMT, with most of this held in bonded 
warehouses or as transshipments to Iraq.  Nevertheless, the 
Turkish import regime has accomplished what it set out to 
do, constrain trade and force domestic prices higher. 
 
----------------------- 
Comment:  More to Come? 
----------------------- 
 
6.  (SBU) In response to concerns that the import regime is 
constraining trade, GOT officials adamantly maintain that 
high freight prices are the real reason U.S. export have 
decreased this year and so far, have been unmoved by any 
arguments from Post or Washington.  Turkish officials and 
private traders have indicated that the government will 
again stop issuing import licenses beginning in July 2005 
just at the new domestic crop is being harvested. Moreover, 
Turkish officials like the program so much that they plan to 
apply the same procedures to other commodities like corn, 
wheat and soy.  This could have a major impact on U.S. sales 
of products to Turkey. 
 
Edelman