Turkey: Multilateral Trading System Under Strain: The U.S. And Turkish Measures May Hit Trade Between The Two Countries

Last Updated: 29 August 2018
Article by Ertuğrul Can Canbolat LL.M. and Hasan Güden

Introduction

The recent political tensions between the United States of America ("U.S.") and Turkey have affected in a significant way the trade relations between the two countries in a context of already heated global trade environment (some even describe it as a trade war).

In order to summarize the current state of the trade relations between the two countries, (i) the context in which the debated trade tensions emerged will be identified, (ii) Turkey's retaliatory measures in this context will be described, and (iii) the U.S. response to Turkey's retaliation will be briefly dealt with.

1. The U.S. Context of the Current Trade Tensions

The U.S. Department of Commerce's ("DOC") reports to the U.S. President Donald Trump released during the month of January 2018 may properly be considered as the trigger of the current so-called trade war1. Indeed, the DOC conducted two investigations pursuant to Section 232 of the Trade Expansion Act of 1962 in the effect of imports of, respectively, steel and aluminum2. As far as Turkey is concerned, the report on steel imports recommended an alternative to appropriately satisfy national security requirements:

  • to impose a global quota on all imported steel products at 63% of the 2017 import level, applied on a country and steel product basis or a global duty rate on of 24% all imported steel products (in addition to any trade remedy measure already applicable); or
  • to impose a duty rate of 53% on steel imports from a subset of 12 countries, including Turkey (in addition to any trade remedy measure already application to any steel products from those countries), together with a 100% quota to the imports made from each other country in 20173.

In fact, Donald Trump's proclamations4 of 8 March 2018 establishing global duties on steel and aluminum imports of, respectively, 25% and 10% echoed the recommendations made by those reports. Those proclamations stipulate that, except as otherwise provided, the concerned duties will become applicable as from 23 March 2018, except for countries benefiting from an exemption.

2. Turkey's Retaliatory Response to the U.S. Additional Duties on Steel

In retaliation to the U.S. duties on the imports of steel and aluminum imposed through the presidential proclamations of 8 August 2018, the Turkish Council of Ministers had issued on 11 June 2018 the Decision no 2018/11973 on the Implementation of Additional Financial Charges to the Imports Originating in the United States of America5 (although the duty rates notified by Turkey to the WTO are not consistent with those published in this decision, only those latter are deemed valid). Nevertheless, as Donald Trump took the decision6 to double the additional duties imposed on the imports of steel originating in Turkey – due to the political crisis between the two countries and to the fall of the Turkish Lira against the US Dollar – the Turkish President held with its Decision no 21 Amending the Decision no 2018/11973 on the Implementation of Additional Financial Charges to the Imports Originating in the United States of America7 to almost double all the retaliatory duties previously adopted. In the end, the additional duties introduced by the Turkish government are as follows:

Combined Nomenclature Code Product Additional Duties (%)
08.02 Nuts 20
10.06 Rice 50
2106.90 Food preparations (Others) 20
22.08 Undenatured ethyl alcohol of an alcoholic strength of less than 80%; spirits, liqueurs and other spirituous beverages (excluding compound alcoholic preparations of a kind used for the manufacture of beverages) 140
24.01 Unmanufactured tobacco; tobacco refuse 60
27.01 Coal; briquettes, ovoids and similar solid fuels manufactured from coal 13,7
2704.00 Coke and semi-coke of coal, of lignite or of peat, whether or not agglomerated; retort carbon 10
2713.11 Petroleum coke, non-calcined 4
33.04 Beauty or make-up preparations and preparations for the care of the skin, incl. sunscreen or suntan preparations (excluding medicaments); manicure or pedicure preparations 60
3904.10 Poly (vinyl chloride), in primary forms, not mixed with any other substances 50
3908.10 Polyamides -6, -11, -12, -6,6, -6,9, -6,10 or -6,12, in primary forms 10
39.26 Articles of plastics and articles of other materials of heading 39.01 to 39.14 60
44.01 Fuel wood, in logs, billets, twigs, faggots or similar forms; wood in chips or particles; sawdust and wood waste and scrap, whether or not agglomerated in logs, briquettes, pellets or similar forms 10
48.02 Uncoated paper and paperboard, of a kind used for writing, printing or other graphic purposes, and non-perforated punch-cards and punch-tape paper, in rolls or in square or rectangular sheets, of any size, and handmade paper and paperboard (excluding newsprint of heading 48.01 and paper of heading 48.03) 20
48.04 Uncoated kraft paper and paperboard, in rolls of a width > 36 cm or in square or rectangular sheets with one side > 36 cm and the other side > 15 cm in the unfolded state (excluding goods of heading 48.02 or 48.03) 20
48.11 Paper, paperboard, cellulose wadding and webs of cellulose fibres, coated, impregnated, covered, surface-coloured, surface-decorated or printed, in rolls or in square or rectangular sheets, of any size (excluding goods of heading 48.03, 48.09 and 48.10) 50
5502.10 Artificial filament tow of acetate 60
7308.90 Structures and parts of structures, of iron or steel (excluding bridges and bridge-sections, towers and lattice masts, doors and windows and their frames, thresholds for doors, props and similar equipment for scaffolding, shuttering, propping or pit-propping) 60
8413.70 Centrifugal pumps, power-driven (excluding those of subheading 8413.11 and 8413.19, fuel, lubricating or cooling medium pumps for internal combustion piston engine and concrete pumps) 20
8479.89 Machines and mechanical appliances 20
87.03 Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excluding motor vehicles of heading 87.02) 120
9022.19 Apparatus based on the use of X-rays (other than for medical, surgical, dental or veterinary uses) 10

Furthermore, Turkey lodged a request for consultation before the WTO on 20 August 2018 following the doubling of the additional duties imposed on its exports of steel to the U.S.8. If those consultations (which are mandatory) with the U.S. fail to produce a satisfactory solution within 60 days, Turkey will be entitled to request the establishment of a panel.

3. The USTR's GSP Eligibility Review

Following Turkey's retaliatory additional duties on USD 1.78 billion of U.S. imports9 (before the amendments of 15 August 2018), the Office of the U.S. Trade Representative10 ("USTR") announced on 3 August 2018 that it initiates on its own motion a review of Turkey's eligibility to participate in the Generalized System of Preferences ("GSP") program. The stated objective of this program is the promotion of economic growth in designated developing countries by providing duty‐free entry to the U.S. market for certain products. In this regard, approximately 3,500 different products from Turkey are eligible to enter the U.S. duty‐free under the GSP program.

The allegation underlying this review is that Turkey no longer complies with the "market access criterion"11 requiring Turkey to assure the U.S. reasonable and equitable access to its market.

According to the USTR's press release, the U.S. imported USD1.66 billion in 2017 from Turkey under the GSP program, representing 17.7% of total U.S. imports from Turkey12. The most imported products by the U.S. from Turkey under the said program have been vehicles and vehicle parts, jewellery and precious metals, and stone articles.

The USTR then published on 8 August 2018 a notice on the Federal Register announcing the public hearing and comment period for the concerned review13. This notice provides contact information for those interested to make their comments to the USTR in order for this latter to address them in the context of the review announced. Accordingly, the interested parties will have to respect the following deadlines:

  • 12 September 2018 for submission of comments, pre-hearing briefs, and requests to appear at the public hearing for the GSP country practice review of Turkey that will take place on 26 September 2018 under the auspices of the GSP Subcommittee of the Trade Policy Staff Committee; and
  • 17 October 2018 for submission of post-hearing briefs.

Moreover, in support of its review, the USTR indicates in the concerned notice that Turkey has recently established a series of trade barriers that have a negative bearing on U.S. trade. The notice points out that Turkey has imposed additional duties14 only to products originating in the U.S. and that the additional duties imposed by Turkey exceed the tariff concessions granted by Turkey under WTO rules (the so-called WTO schedule of concessions) in respect of some of the products concerned.

Conclusion

The foregoing demonstrates that import-restrictive policies have lately underpinned the use of trade defence instruments. In this context, nobody knows when and how the current political imbroglio between Turkey and the U.S., two long-standing allies, will end. What is certain at this point is that it contributed to the escalation of the ongoing trade confrontation. What is uncertain is the WTO's capacity to resolve the current tensions affecting global trade given the U.S. blocking of the appointment of the Appellate Body's members. Against the backdrop of a weakened multilateralism, the developments of trade relations will then be dependent on the evolution of the political landscape. In an environment where trade defence instruments are being increasingly used with protectionist purposes, the efficient functioning of the WTO dispute settlement mechanism will prove extremely valuable.

Footnotes

1. See the DOC's following reports that have respectively been submitted to Donald Trump on 11 January 2018 on 17 January 2018: "The Effect of Imports of Steel on the Natıonal Securıty", published on 16 February 2018 (https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_steel_on_the_national_security_-_with_redactions_-_20180111.pdf) (accessed on 28 August 2018); "The Effect of Imports of Aluminum on the Natıonal Securıty", published on 16 February 2018 (https://www.commerce.gov/sites/commerce.gov/files/the_effect_of_imports_of_aluminum_on_the_national_security_-_with_redactions_-_20180117.pdf) (accessed on 28 August 2018).

2. Section 232 lays down rules allowing the establishment of import restrictions for the protection of national security, so that Section 232 investigations "help to determine the effects of imports on U.S. national security and give the President the ability to address any threats to national security by restricting imports through tariffs" (See "What You Need To Know: Section 232 Investigations and Tariffs", published on 8 March 2018) (https://www.whitehouse.gov/briefings-statements/need-know-section-232-investigations-tariffs/) (accessed on 28 August 2018)).

3. According to the report, this second option would enable the domestic industries concerned to reach 80% of their capacity utilization rate at 2017 demand levels (including exports); See Secretary Ross' press release regarding the reports on steel and aluminum in which the concerned capacity utilization rate is considered to be the "minimum rate needed for the long-term viability of the [steel] industry" (https://www.commerce.gov/news/press-releases/2018/02/secretary-ross-releases-steel-and-aluminum-232-reports-coordination) (accessed on 28 August 2018).

4. See the Presidential Proclamation 9705 on Adjusting Imports of Steel into the United States, published on 8 March 2018 (https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/) (accessed on 28 August 2018) and the Presidential Proclamation 9704 on Adjusting Imports of Aluminum into the United States, published on 8 March 2018 (https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-aluminum-united-states/) (accessed on 28 August 2018).

5. See the Turkish Official Gazette dated 25 June 2018 and numbered 30459.

6. See the Presidential Proclamation 9772 Adjusting Imports of Steel Into the United States, published on 10 August 2018 (https://www.whitehouse.gov/presidential-actions/presidential-proclamation-adjusting-imports-steel-united-states-5) (accessed on 28 August 2018), effective as of 13 August 2018.

7. See the Turkish Official Gazette dated and numbered 30510.

8. See file:///C:/Users/hasan.guden/Downloads/564-1%20(2).pdf (accessed on 28 August 2018).

9. See the Council of Ministers' decision dated 11 June 2018 and numbered 2018/11973.

10. The Office of the U.S. Trade Representative is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negociations with other countries.

11. See Trade Act of 1974, Title V, §503 (d)(2)(A) (https://ustr.gov/sites/default/files/files/gsp/GSP%20statute%20updated%20to%202017.pdf) (accessed on 28 August 2018).

12. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/august/ustr-announces-new-gsp-eligibility (accessed on 28 August 2018).

13. See https://www.federalregister.gov/documents/2018/08/16/2018-17712/generalized-system-of-preferences-gsp-notice-regarding-the-initiation-of-country-practice-review-of (accessed on 19 August 2018).

14. See the retaliatory measures imposed on 25 June 2018 through the Turkish Council of Ministers' Decision no 2018/11973, as amended by the Turkish President's Decision no 21.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions