How US will punish Turkey for Russian S-400

The Turkish government today criticized the US decision to remove Turkey from its list of nations that enjoy tariff-free access to the US market, saying the move would hurt producers in both countries. As Al Monitor writes in the article Turks fire back as Trump ends preferential trade status, Turkish commentators accused Washington of political motivations. One trade expert said it was not a coincidence that the move came as US envoys were trying to persuade Turkey to abandon its purchase of the Russian S-400 air defense system.

The US Trade Representative’s Office declared that Turkey was no longer entitled to benefit from the Generalized System of Preferences (GSP) because the country is “sufficiently economically developed.”

Turkey joined the GSP in 1975. It meant that certain products benefited from tariff-free access to the US market. Turkish Trade Minister Ruhsar Pekcan said the US decision “contradicts the $75 billion trade volume target that both governments have declared.” “This decision will also negatively affect the small and middle-sized companies and manufacturers in the US,” Pekcan added in a tweet. Pekcan said Turkey had been among the top five countries benefiting from the GSP, under which the United States imported $20.9 billion of goods from around the world. “With exports amounting to $1.74 billion, Turkey was the fifth largest supplier to the US with a share of 8.2%,” Pekcan tweeted.

The termination of Turkey’s GSP status will take effect in May, 60 days after President Donald Trump informed Congress on Monday. The move is not expected to have a huge impact on Turkey. In billions of dollars’ worth of trade, Turkish exporters sold about eight times more to European countries in 2018 as they sold to the United States. 

But it did have an immediate impact on the currency. The dollar rose 0.17% against the lira, closing at 5.39 liras to the dollar.

The US Trade Representative's Office argued the decision was rooted in economics. "An increase in Gross National Income per capita, declining poverty rates, and export diversification, by trading partner and by sector, are all evidence of Turkey's higher level of economic development," read a press release.

But Turkish commentators noted that Washington began reviewing Turkey’s participation in the GSP in August, the same month that Trump imposed sanctions on Turkey for its prosecution of American pastor Andrew Brunson on terrorism charges. Brunson flew back to the United States in October but tension between the two countries continued. In December, President Recep Tayyip Erdogan vowed to send troops into northern Syria to wipe out the Kurdish guerrilla group, the People's Protection Units (YPG), many of whose fighters have fought alongside US troops in the campaign against the Islamic State. In January, Trump threatened to “devastate” the Turkish economy if the Turkish army attacked America’s Syrian allies.

“When you think of the US having disagreements with Turkey in regional and global matters,” Sherif Dilek, a researcher at a pro-government think tank, said, “and if you remember Trump’s threat to punish Turkey economically, it is evident that political considerations were uppermost in this decision.” Dilek, who works for the Foundation for Political, Economic and Social Research (SETA), said the United States had also thrown India out of the GSP, but for economic reasons. The US Trade Representative’s Office said India would no longer benefit from the GSP because of “its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors.”

The head of a Turkish-US business association, Ali Osman Akat of TABA-AmCham, was blunter: “Trump’s decision is not a surprise. In the international arena, power is not displayed through war but through economics.”

A trade expert and consultant, Hakan Akbas, said the interesting factor in the US move was its timing. “It coincides with the critical bargaining for the S-400s,” he told NTV.

A high-level US delegation is currently in Ankara trying to persuade the government to cancel its acquisition of the Russian air defense system, which is not compatible with NATO air defense systems, and buy US Patriot missiles instead. Erdogan has insisted that the S-400 deal will go ahead. “There are other equally developed countries that are still benefiting from the GSP,” Akbas said, naming Brazil, Thailand and Indonesia. He suggested that if Turkey makes compromises on the S-400 issue during the next 60 days, the United States could be persuaded to keep Turkey on the GSP list.