Ambassador Raises Rice Demarche and AgTrade Issues

UNCLAS SECTION 01 OF 02 ANKARA 005376

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STATE FOR EUR/SE, EB/EPD, AND EB/TPP/ABT
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E.O. 12958: N/A
TAGS: ETRD EAGR PGOV PREL CY GR TU
SUBJECT: Ambassador Raises Rice Demarche and AgTrade Issues

Ref: State 180202

Sensitive but Unclassified. Not for Internet Distribution.


1. (SBU) Summary. In separate meetings, the Ambassador
delivered a demarche on the Turkish rice import regime
(reftel) to the Ministers of Foreign Trade and Agriculture.
Both Ministers noted that the decision to impose quotas and
seasonal bans was an effort to protect a politically
sensitive sector of the Turkish economy. The Ambassador
noted that their policy has led to almost 60 percent drop in
U.S. exports from the previous year. The Ambassador stated
that the issue would be raised at the WTO Committee on
Import Licensing scheduled for the end of September in
Geneva. End Summary.

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State Minister for Foreign Trade
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2. (SBU) On September 17, the Ambassador met with Kursad
Tuzmen, the State Minister of Foreign Trade to deliver the
rice demarche (reftel). The Minister responded that Turkey
is a net importer of many agriculture products including
rice and corn. He stated that Turkey only produces about 40
percent of its rice needs and will for the foreseeable
future need to import rice. Tuzmen claimed that that the
GOT's rice policy is aimed at discouraging speculators and
preventing shortages, and that imports are permitted at the
bound rate. He added that the rice sector was politically
sensitive in Turkey and that the quota was imposed to
stabilize the market and help Turkish producers. Comment:
Minister Tuzmen seemed to ignore or not comprehend the
negative effect the Turkish import regime had had on trade
or that Turkey's practices might in any way not be in
compliance with WTO rules. U.S. exports have dropped by
almost 60 percent from the previous year. The Turkish
seasonal ban has continued for over a year and even with the
changes, will last until January 2005. End Comment.


3. (SBU) The Ambassador pointed out the discrepancy in
Turkish policy, pointing out that, while Minister Tuzmen may
claim that Turkey needed to import, statistics showed that
trade had been impacted. The Ambassador informed the
Minister that the issue would be raised at the WTO Committee
on Licensing scheduled for the end of September in Geneva.
Minister Tuzmen responded that the Secretariat would work
with the Turkish Agriculture and Rural Affairs Ministry on
this.


4. (SBU) The Ambassador also raised the issue of Turkish
regulations limiting import of distilled spirits, but noted
that this issue appeared to be on its way to a mutually-
satisfactory resolution.

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Ministry of Agriculture and Rural Affairs
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5. (SBU) On September 20, the Ambassador met with Sami
Guclu, the Minister of Agriculture and Rural Affairs. The
Ambassador reported on his meeting with Minister Tuzmen and
raised the points regarding Turkey's rice import regime from
reftel. The Ambassador noted that, despite what Turkish
officials have reported, the impact of seasonal bans and the
requirement that domestic purchases be made in order to
import, U.S. exports to Turkey have declined nearly 60
percent from a year ago. He informed the Minister that the
issue would be raised at the WTO Committee on Import
Licensing in Geneva ant that unless our differences were
worked out, the United States would have to consider all its
options including dispute settlement.


6. (SBU) Minister Guclu responded that relations with the
United States were good and that bilateral confidence was
growing particularly on Turkey's trade in the region. He
felt that trade issues should be discussed bilaterally and
both sides should find a solution. Minister Guclu noted
that while some groups in Turkey sympathize and support the
importation of U.S. products, some are not as supportive.


7. (SBU) On the rice issue, Minister Guclu stated that
there were 100,000 Turkish rice farmers and the government
needed to protect their income and living standards. There
is tremendous pressure on the government to maintain their
income level. Guclu noted that Turkey imports over 50
percent of its demand and that the new quota system does not
limit U.S. exports nor does it discriminate against U.S.
exporters. Guclu stated that the reason for the drop in
U.S. exports was not the ban on import licenses but rather
high U.S. freight costs. Comment: At a meeting with the
head of the Turkish Grain Board that same day, AgCounselor
was informed that Turkey had maintained its seasonal ban
despite rising U.S. prices and freight costs (averaging USD
75 - 90/ton and subject to a 32 percent tariff) because
Turkey's domestic price for rice is even higher. According
the head of TMO, Turkey would need a 90 percent duty on
imported rice in order to protect its market. End Comment.


8. (SBU) The Minister suggested that U.S. and Turkish
technical staff should find a better solution (than the WTO)
and that the Ministry would make the necessary amendments.
He added that anything can be resolved bilaterally.
Comment: Turkey has imposed the seasonal ban for the past 3
years and refused to respond to requests to lift the ban.
End comment. In response, the Ambassador noted that it is
always better to find a bilateral solution, particularly for
politically sensitive issues. The Ambassador also suggested
that it is incumbent on all of us to balance domestic
policies with our international trade commitments.

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Other Ag Issues
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9. (SBU) The Ambassador took the opportunity to raise other
agriculture related issues. He thanked the Minister and his
staff for their assistance in resolving Cargill's investment
dispute, noting that it would instill greater confidence in
Turkey and hopefully encourage more foreign investment.


10. (SBU) The Ambassador also noted that, hopefully,
changes in Turkish standards would allow the resumption of
U.S. whiskey and bourbon exports to Turkey. He encouraged
the Minister to accelerate the formation of the food codex
committee, which will review all changes in Turkish food
regulations. The Ambassador expressed the hope that the new
Turkish regulations, which would amend Turkish whiskey
standards, would be one of the first regulations submitted
to the committee.

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Minister Guclu's Issues
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11. (SBU) Minister Guclu requested information on three
topics. First, the Minister inquired about the status of an
MOU between USDA and MinAg. This MOU had been signed in
1995 and expired in 2000. The Minister requested training
assistance for Turkish agriculture officials.

Edelman