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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

TURKEY TAKES REVENGE ON UKRAINIAN SHIPS Ukrainian metallurgy will suffer losses

13 November, 2012 - 00:00

There is every reason to think that Ukrainian-Turkish trade relations entered a new stage in late July, when the Turkish official newspaper Resmi gazett published Presidential Edict #23412. This stage will be probably remembered as a sharp conflict between the economic interests of both countries, which with time may develop into a trade war.

The new regulations for importing metallurgical products with international nomenclature codes 7208, 7209, and 7211 from third countries officially came into effect on July 24, creating a real threat to the economic interests of Ukraine. The regulations are not valid for the EC and EFTA countries, but threaten free trade in Ukrainian rolled stock on the Turkish market. Rolled metal codes numbered 7208 and 7209 constitute 25% of the overall Ukrainian exports.

Over the past few years this rolled stock has been subject to anti-dumping procedures in a number of developed, solvent countries, (e.g., USA, Mexico, Canada, India, Indonesia, Thailand, Chili, South Africa, and Argentina). EC countries introduced analogous import quotas even earlier.

According to statistics, export of cold- and hot-rolled metal, which now comes under the fire of quantity limitations in Turkey, constitutes 50% of all Ukrainian exports to that country.

If export of Ukrainian metal to Turkey is halved due to the quota introduction, domestic exporters will lose a market approximately totaling $150-160 million. Budget revenues will shrink correspondingly. Finally, the tendency of foreign trade to decrease, which started in 1997, will be boosted. Also, the 0.1% industrial production increase, with which present authorities tend to illustrate stabilization processes in the nation's economy, will disappear.

According to Turkish statistics, Ukrainian exports to Turkey of cold- and hot-rolled metal totaled $300 million in 1997, and constituted 35% of all Ukrainian exports to Turkey.

Turkish officials attribute this decision to the economic crisis in Southeast Asia, the decline in demand in Europe, and the necessity to protect their own domestic producers. Official Ankara also claims that the new regulations are valid for all third countries, barring EC and EFTA members, and thus cannot be considered discriminatory against Ukraine.

However, Ukrainian metal exporters constitute 45-48% of all foreign exporters of the product. In other words, it will be Ukraine which will suffer the most from such actions of Turkish authorities.

Apparently the Turkish government was prompted to take such steps by recent Ukrainian Cabinet decrees relating to customs procedures for products imported by business entities registered other than legal entities. According to Turkish mass media, the situation is such that due to steep decrease of shuttle trade, hundreds of Turkish sellers, cheap textile manufacturers and go-between are losing their jobs.

One way or another, Ukraine is able to respond in kind, for instance by introducing textile import quotas. We can see the situation as a contradiction between economic interests of two friendly neighboring countries. With time it may develop into a trade war (if so, casualties will be high on both sides), if Kyiv and Ankara fail to find a solution.

The Day's note: The quota's amount (till the end of the year) – 550,000 tons, from which 450,000 tons is hot-rolled metal and 100,000 tons of cold-rolled metal in special rolls. Customs duty above quota is now 22.5-30%. Until this enactment it was 5%.

Photo by Valery MILOSERDOV,The Day:

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