In recent years, Turkey has been significantly affected by unfair trade practices, including dumping and subsidies. As a result, Turkish industries such as steel, textiles, plastics, and chemicals have faced increased pressure from imports, often sold at prices that undermine local production. To combat these challenges, Turkey has adopted a range of trade defense measures, including anti-dumping and countervailing duties. However, foreign exporters often respond by absorbing these duties, reducing their prices to maintain competitive advantages in the Turkish market. To address this, Turkey is considering further to activate the anti-absorption review mechanism, which already exists under the Article 39 of the Regulation on the Prevention of Unfair Competition in Imports. In fact, anti absorption is a tool that could enhance the country’s trade defense system and ensure that protective measures achieve their intended effect.
This article explores how the implementation of an anti-absorption review could transform Turkey’s approach to protecting domestic industries, using the examples of steel, textiles, and other key sectors. It also highlights the potential economic and trade implications of such a move, drawing on comparisons with other countries that have implemented similar mechanisms.
The Context for Anti-Absorption Reviews in Turkey
Anti-dumping and countervailing duties are crucial tools in international trade used to protect domestic industries from unfair competition. These measures are imposed when foreign exporters sell products at unfairly lower prices than origin countries (dumping) or when foreign governments provide subsidies that distort the market. Turkey, like many other countries, has relied on these measures to shield its industries from harmful trade practices. However, the effectiveness of these duties can be weakened if foreign exporters absorb the duties by reducing their prices. This practice, known as absorption, undermines the impact of the duties and allows foreign exporters to continue competing unfairly in the Turkish market.
An anti-absorption review (i.e., re-investigation in the Regulation) is a process that allows the investigating authorities to examine whether the duties imposed on foreign products are being absorbed by exporters. If it is found that absorption is occurring, the authorities can take corrective action, such as increasing the duties or extending their duration, to ensure that the measures remain effective. The review mechanism provides a faster and more dynamic response compared to traditional interim or sunset reviews, making it an attractive option for countries looking to strengthen their trade defenses.
Key Sectors Impacted by Unfair Trade Practices
Several Turkish industries have been significantly affected by unfair trade practices in recent years, including steel, textiles, plastics, and chemicals. These sectors play a vital role in Turkey’s economy and employ large numbers of people, making their protection a priority for the government.
1. Steel Industry
Turkey’s steel industry is one of the most important sectors in the country, both in terms of production capacity and export potential. However, the industry has faced increasing pressure from foreign competitors, particularly from the People’s Republic of China and South Korea. These countries have been alleged as selling steel products in the Turkish market at prices that cause serious injury to the local producers. Despite the imposition of anti-dumping duties on steel imports, Turkish steel producers have struggled to compete due to the ability of foreign exporters to absorb these duties by reducing their prices.
An anti-absorption review would allow Turkey’s investigating authorities to examine whether the duties imposed on steel imports are being absorbed, and if so, take corrective action to ensure that Turkish steel producers are not disadvantaged. This would help level the playing field and provide much-needed relief to the domestic steel industry.
2. Textiles and Apparel
Turkey is a major player in the global textile and apparel industry, with a strong manufacturing base and a large export market. However, the sector has been under pressure from low-cost imports from certain countries. Those countries benefit from lower labor costs and, in some cases, government subsidies, allowing them to sell textiles and apparel at prices that harm Turkish producers.
In response, Turkey has imposed anti-dumping duties on certain textile imports. However, similar to the steel industry, foreign exporters have been able to absorb these duties, maintaining their competitive advantage in the Turkish market. An anti-absorption review mechanism would help ensure that the duties have the desired effect of raising prices and protecting Turkish textile manufacturers from unfair competition.
3. Plastics and Chemicals
The plastics and chemicals industries in Turkey have also faced challenges from unfair trade practices, particularly from Asian countries. These countries often export plastics and chemicals at artificially low prices, putting Turkish producers at a disadvantage. Anti-dumping and countervailing duties have been imposed against the imports of these products, but concerns remain that foreign exporters are absorbing the duties and continuing to sell at low prices.
An anti-absorption review mechanism would provide Turkish authorities with a tool to address this issue, ensuring that the duties are not being undermined by price absorption and that Turkish producers are adequately protected.
How an Anti-Absorption Review Would Work in Turkey
In accordance with the Article 39 of the Regulation, the process of an anti-absorption review in Turkey would involve several key steps:
- Initiation of the Review: The review would be initiated either by Turkish industry stakeholders or by the trade authorities themselves if there are concerns that duties are being absorbed by foreign exporters. The review process would be conducted in an expedited manner, allowing for faster determinations than traditional review mechanisms.
- Investigation: The investigating authorities would carry out an investigation to determine whether the duties are being absorbed. This would involve comparing the export prices of the products in question with their normal value, taking into account of production costs and other relevant factors. If it is found that export prices have been reduced without a corresponding decrease in production costs, this could indicate that the duties are being absorbed.
- Corrective Action: If the investigation confirms that duties are being absorbed, the authorities could take corrective action. This might include increasing the level of duties, extending the duration of the measures, or applying other trade remedies to ensure that the duties remain effective.
Economic and Trade Implications of Implementing an Anti-Absorption Review
The active implementation of the anti-absorption review mechanism in Turkey may have significant economic and commercial impacts both domestically and internationally. On the domestic front, the mechanism would provide stronger protection for Turkish industries, ensuring that they are not disadvantaged by unfair trade practices. This would help save jobs, support economic growth, and secure the long-term viability of key sectors such as steel, textiles, plastics, and chemicals.
Internationally, the active implementation of an anti-absorption review could signal Turkey’s commitment to enforcing fair trade practices and protecting its industries from unfair competition. It would also align Turkey’s trade defense mechanisms with those of other major economies, such as the European Union and the United States, both of which actively implement anti-absorption provisions.
Moreover, the implementation of an anti-absorption review mechanism could serve as a safety measure, discouraging foreign exporters from attempting to absorb duties by lowering their prices. Eventually, this could help ensure that trade defense measures are more effective in the future and that Turkish industries receive the full benefit of the protections put in place by the authorities.
International Comparisons
Many countries have already implemented anti-absorption review mechanisms as part of their trade defense frameworks. For example, the European Union has long had anti-absorption rules in place, allowing it to take action when exporters lower their prices to offset the impact of anti-dumping duties. The United States also has provisions to address duty absorption, ensuring that its trade defense measures provide the intended protection to domestic industries.
By effectively applying a similar mechanism, Turkey would be aligning itself with international best practices in trade defense. This, in turn, would enhance Turkey’s ability to protect its industries from unfair competition.
Conclusion
An active implementation, where necessary, of the anti-absorption review mechanism under Article 39 of the Regulation would represent a significant step forward in Turkey’s efforts to protect its domestic industries from unfair competition. Ensuring that anti-dumping and countervailing duties remain effective, the mechanism would provide stronger protection for key sectors such as steel, textiles, plastics, and chemicals. It would also signal Turkey’s commitment to fair trade practices and align the country’s trade defense policies with those of other major economies.
As Turkey continues to face increasing unfair competition from abroad, the anti-absorption review mechanism could become a crucial tool in the country’s trade defense arsenal. By providing a faster and more dynamic response to unfair trade practices, the mechanism would help ensure that Turkish industries can compete on a level playing field in the global markets.
