TURKEY: TRADE MINISTER SEEKS TO END WTO RICE CASE

C O N F I D E N T I A L SECTION 01 OF 02 ANKARA 001496

SIPDIS

SIPDIS

DEPARTMENT PLEASE PASS USTR FOR JWEISS, LERRION
USDA FOR FAS JFLEMINGS, BLEIER, JDEVER

E.O. 12958: DECL: 03/20/2016


TAGS: ETRD EAGR WTO TU
SUBJECT: TURKEY: TRADE MINISTER SEEKS TO END WTO RICE CASE

Classified By: Ambassador Ross Wilson for reasons 1.5 (b) and (d).


1. (C) Summary: Foreign Trade Minister Tuzmen told
Ambassador March 21 that he will present a letter to USTR
Portman on March 27 agreeing to abolish the tariff quota
system and licensing requirement. Separately, post receive
by anonymous fax an internal memo from Tuzmen to other GOT
Ministers arguing that if this case goes to panel, the GOT
will lose and it will result in negative economic
repercussions. End summary.


2. (SBU) As discussions have continued in Geneva between the
USG and the GOT about rice, Turkish officials have become
visibly uncomfortable with the prospect of the case going to
panel. Prior to the March 17 WTO Dispute Settlement Body
(DSB) decision to form a panel, communication from our
Turkish interlocutors increased. Post's Agriculture
Counselor was summoned to meet with the GOT Undersecretariat
for Foreign Trade's (FTU) Multilateral Office on March 16 to
discuss the issue. In addition, we also received an
anonymous fax on March 17 with pertinent information
regarding the GOT's views on the issue. Text of this
document is included in paragraph 6.


3. (SBU) FTU Deputy Director General for Multilateral
Affairs, Hasan Yalcin, told Ag Counselor March 16 that
Minister Tuzmen was prepared to sign a letter stating that as
of July 31, 2006, Turkey will rescind its domestic purchase
requirements for rice and agree to our requests on the
control certificates. In a meeting Tuzmen requested with
Ambassador on March 21, Tuzmen said he will present a letter
to USTR Portman during their March 27 meeting in Washington
agreeing to "abolish the tariff quota system and licensing
requirement." We are trying to obtain an advance copy of the
letter.


4. (C) On March 17, we also received an anonymous fax that
included a March 10 "secret" internal memo from Tuzmen to the
Foreign Ministry, Deputy PM, State Minister for Economy Ali
Babacan, the Finance Ministry and the Agriculture Ministry.
In this memo, Tuzmen argues that, should the rice matter go
to panel, Turkey will almost certainly lose the case and
lists the areas in which Turkey's rice policy is inconsistent
with WTO requirements. He warns them that the USG will not
accept their previously offered solutions. Finally, he
cautions that, should this matter go to panel, protective
measures for other agricultural products could also be
challenged at the WTO, bringing negative economic
repercussions. He ends the memo by urging them to settle the
matter as quickly as possible.


5. (C) Comment: Tuzmen's memo confirms what we long
suspected, that is that the FTU knew the GOT rice import
regime violated WTO obligations, but they did not have enough
support within the government to counter the Ministry of
Agriculture's protection of Turkish farmers. During our
meetings on this issue they appealed to our humanity (you'll
be putting poor Turkish farmers out of business),they
appealed to our pockets (if you drop this matter, we'll make
sure that the regime provides preference to American rice),
but in the end, the GOT has realized that it will lose this
case in a WTO panel. End comment.


6. (C) Begin unofficial translation of memo text:

You are aware of the fact that the USG brought our
implementation to impose tariff quotas based on a domestic
purchase requirement, and our prevention of the issuance of
import control certificates for rice, to the WTO Dispute
Settlement Body on November 2, 2005, claiming that this
implementation is against WTO rules and disciplines.

Within this framework, our basic policy, which was also
shared by other related ministries, including the Ministry of
Agriculture, has been to resolve the dispute between the two
countries without establishing a panel and to prevent the
discussion of the control certificate implementation in the
WTO platform.

However, since U.S. Officials have turned down all of
our proposals, we have not been able to reach a
mutually-agreed upon solution as a result of the bilateral
discussions. We expect the panel, which the USG requested
for the resolution of this dispute, to be established March
17, 2006. It appears that our country's chances of winning
the panel are very weak, almost none.


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We find it difficult even to find the legal arguments
to use during the panel process, given the fact that
imposition of the restrictions on rice imports through the
prevention of issuance of control certificates is against
Article XI of GATT 1994, which clearly states that the member
countries cannot use any import restrictions or bans,
including quotas, import licenses, or any other regulations
than tariffs. In addition, the WTO Law Consulting Center has
refused to defend our country for this reason.

On the other hand, the implementation of the tariff
quota based on a domesic purchase requirement, which is the
second art of the U.S.'s complaint, is against Article III
of GATT related to national treatment. According to
paragraph one of this article on general implementation,
member countries cannot use taxes and other domestic fees,
and laws, regulations and other legislation that affect the
sale, marketing, purchase, transport, distribution and use of
goods in order to protect the local production or to
influence the consumer between the imported or local
products; (member countries) cannot use domestic regulations
that impose use of certain amounts or ratios in the
composition of the goods, or for processing or use of these
goods; (Article III also addresses) all implementations that
protect domestic production or producers, given a selection
of domestic and imported goods.

Within this framework, in a certain period, we will be
required to lift our implementation to prevent issuance of
import control certificates, which is against our obligations
under the WTO, and our tariff quota system based on a
domestic purchase requirement.

On the other hand, the proposed solutions that we
brought to the agenda to improve the current system, such as
completely prohibiting rice imports and providing U.S. paddy
rice with easy access to the market and periodically issuing
import control certificates, are also contradictory to our
WTO obligations under articles III and XI of GATT 1994.

Therefore, the proposals we made thus far were not
found by the U.S. to be sufficient to stop the panel process.

In addition, even if the USG accepted our proposals
within the context of the bilateral negotiations, it is
highly possible that other beneficiary WTO members will take
Turkey to the panel. Therefore, in order to convince the USG
to reach a bilateral compromise and to prevent other lawsuits
that could be filed against our country in the long term, we
find it essential to abolish the current effective protection
policy to prevent the issuance of import licenses and to
urgently develop protection policies in line with WTO rules.

Otherwise, we should consider that similar protection systems
implemented for other products in our country may be
questioned during this panel process, which could have
unforeseen and serious economic repercussions.

Within the framework of the facts and opinions stated
above, it is highly recommended that we urgently finalize the
studies started by the related ministries and organizations,
(and that we) make a radical change in the protection
mechanisms implemented in our agricultural sector.

I present this to your information.

Signed
Kursad Tuzmen
Minister of State

End unofficial translation text.

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WILSON