US and GOT Discuss Bilateral Ag Issues

UNCLAS SECTION 01 OF 03 ANKARA 000327 SIPDIS SENSITIVE STATE FOR EUR/SE, EB/EPD, AND EB/TPP/ABT DEPT PLEASE PASS USTR FOR SDonnelly, JWeiss, LErrion USDA FOR FAS FOR ITP/Young, Flemings, Leier USDOC FOR RUSNAK GENEVA FOR FAS/Miller E.O. 12958: N/A TAGS: ETRD EAGR PGOV PREL GR TU SUBJECT: US and GOT Discuss Bilateral Ag Issues Sensitive but Unclassified. Not for Internet Distribution. ¶1. (SBU) Summary. On January 24, U.S. and Turkish officials met on the margins of the Trade and Investment Framework Agreement (TIFA) Council Meeting in Ankara to discuss bilateral trade issues at the Ministry of Agriculture and Rural Affairs (MARA). Assistant U.S. Trade Representative for Europe and the Mediterranean, Shaun Donnelly, and MARA Under Secretary, Hasim Ogut, discussed the U.S. WTO rice case as well as other bilateral trade issues including imports of meat and taxes on cola consumption. End Summary. -------------- Changes in Turkish Agriculture Strategy -------------- ¶2. (SBU) Under Secretary of Agriculture, Hasim Ogut, welcomed the opportunity to discuss U.S.-Turkish bilateral agriculture trade issues. He noted that Turkey had made major revisions in its agriculture policies since the early 1980s and that the GOT is seeking to further restructure its agriculture sector, primarily as part of its EU accession process. Ogut explained that the government's strategic plan included: (1) Continued Market Reform based on free market principles; (2) Parastatals will be reduced to a regulatory role in the agriculture market; (3) Support an increase in direct income support programs. The GOT hoped that by making these changes, Turkey could avoid any future trade problems. -------------- 2006 - 2010 -------------- ¶3. (SBU) U/S Ogut outlined the measures the GOT plans to structurally change its agriculture sector based on the principles of the free market in which the private sector and competition will play the dominant role. He noted that this was the first time in Turkey's history that the GOT had developed a 5-year plan for agriculture. Among the areas they hoped to address were implementation of deficiency payments, support for the livestock sector, rural development projects including cold storage and some sort of government-supported crop insurance program. The U/S told the U.S. delegation that draft legislation encompassing these plans had been prepared and had already passed through the necessary parliamentary committees. He hoped that the law would be passed in a month. The goal would be to ensure that agriculture policies do not interfere with the market. In addition, these new policies will be much more transparent for farmers and investors. He underscored that before 1980, Turkey followed an import substitution policy for agriculture products but that that will no longer be the case. -------------- WTO Rice Case -------------- ¶4. (SBU) In addressing the proposed U.S. WTO case against Turkey on rice, the Under Secretary acknowledged that the agriculture ministry understands the process and had 2 of their experts attend meetings in Geneva and respond to the U.S. questionnaire. ¶5. (SBU) U/S Ogut stated that there already were limits on paddy rice production in Turkey due to constraints on the availability of water and competition from alternative crops, which were proving more profitable. As a result, Turkey would never be able to meet total demand in the country. (Note: Turkey only produces about 60 percent of rice demand. End note.) He reported that the 2003 rice program had reached its objectives and that the country's rice regime was again being modified to be more in-line with the country's agricultural strategy described above, i.e. more market oriented, more direct payments, less parastatal involvement.). -------------- Livestock and Meat -------------- ¶6. (SBU) U/S Ogut reported that meat and livestock restrictions were directly linked to GOT legislation. Ogut noted that the GOT respects OIE guidelines and that, according to those guidelines, a country can ban imports of meat and livestock from any country, which has a single case of BSE. Given the OIE guidelines and the 2 cases of BSE in the United States, the U/S felt that Turkey was within its rights to ban imports from the United States. Ogut did acknowledge that the BSE outbreaks in the United States were minor in nature and that most of the country was completely free of BSE. Given their negotiations with the European Union on trade in livestock and livestock products, it would be difficult to lift the bans at this time. -------------- U.S. Concerns -------------- ¶7. (SBU) Ambassador Donnelly stated that U.S. concerns with Turkey's rice import regime had been discussed for some time and at various levels to no avail. He noted that the U.S. rice industry was very concerned with a loss of market share. Moreover, the U.S. two major problems with the current regime. First, the USG was concerned with linking issuance of import licenses with domestic purchases, which the U.S. believes was inconsistent with WTO obligations. Second, the GOT refused to issue any out-of-quota licenses for rice imports. Any settlement must address these issues. ¶8. (SBU) Ambassador Donnelly emphasized that the United States values its friendship with Turkey and that the GOT should not take our concerns regarding rice as a sign that this relationship had failed. He noted that countries had agreed to the dispute settlement clause specifically as a way to address trade concerns. ¶9. (SBU) On the livestock and meat issue, Ambassador Donnelly stated that the U.S. was very competitive on meat products and that many Turkish importers were interested in U.S. breeding livestock. He asked the Under Secretary to again look at this issue. ¶10. (SBU) Finally, Ambassador Donnelly raised the issue of Turkish taxes on cola products as well as the GOT's sugar policy. U.S. companies are complaining that the cola taxes discriminate against U.S. companies and that Turkey's sugar policy limits production of High-Fructose Corn Syrup in U.S. plants in Turkey. He encouraged the GOT to examine these issues again. -------------- Turkish Response -------------- ¶11. (SBU) U/S Ogut again emphasized that Turkey's Agriculture Policy is based on its current strategy, which is meant to be more market oriented. Ogut committed future agriculture policy to be in line with WTO commitments and its agreements with the European Union. U/S asked for patience from the United States because changing the current laws in Turkey is very difficult and would open the GOT up to law suits by domestic companies. ¶12. (SBU) The U/S stated that the current domestic purchase requirement for 2005/2006 had been fulfilled and that any changes to the requirement would subject the GOT to legal action. The current regulation is due to expire on July 31, 2006 and Ogut emphasized that the GOT plans to modify the domestic purchase requirement under any new regulation. He hoped that any disagreement would be addressed in the consultative process. The GOT is committed to limiting paddy rice production, which results in continued rice imports. ¶13. (SBU) Concerning meat and livestock imports, U/S Ogut stated that the GOT is constrained by its discussions with the European Union and by an internal scientific committee, which reviews all scientific information concerning the issue. Unless this committee changes its recommendation regarding imports of meat and livestock from the United States, it would be impossible for the Ministry of Agriculture to permit such imports. ¶14. (SBU) U/S Ogut responded that his ministry was responsible for sugar beet production while the Ministry of Industry and Trade had authority over sugar production quotas. Consumption taxes are strictly the concern of the Ministry of Finance. -------------- Comment: WTO Rice Dispute -------------- ¶15. (SBU) The meeting concluded with both sides expressing the hope that some sort of agreement might be reached to resolve the rice issue. Turkish officials seem to genuinely want to resolve the rice dispute outside the WTO dispute settlement process, but the timeline Ogut described for changing the current regulations in a satisfactory manner remains unclear and similar to other vague promises to change the system that we have heard in the past. End Comment. ¶16. (SBU) AUSTR Donnelly did not clear this message. Wilson