US to end preferential trade status for Turkey

US says Turkey is "sufficiently economically developed" and can no longer take part in US trade preference program.

ANKARA - The United States intends to end Turkey's preferential trade treatment under a program that allowed some exports to enter the United States duty free, the US Trade Representative's Office said on Monday.

Turkey is no longer eligible to participate in the Generalized System of Preferences program because it "is sufficiently economically developed," USTR said in a news release.

USTR said in August it was reviewing Turkey's eligibility in the program after the NATO ally imposed retaliatory tariffs on US goods in response to American steel and aluminum tariffs.

Removing Turkey from the program would not take effect for at least 60 days after notifications to Congress and the Turkish government, and it will be enacted by a presidential proclamation, USTR said. Trump notified Congress on Monday.

The USTR said it would also be removing India, which is the biggest beneficiary of the GSP program

Turkey is one of 120 countries that participate in the GSP, the oldest and largest US trade preference program. It aims to promote economic development in beneficiary countries and territories by eliminating duties on thousands of products.

The United States imported $1.66 billion in 2017 from Turkey under the GSP program, representing 17.7 percent of total US imports from Turkey, according to USTR's website. Turkey was the fifth largest beneficiary of the program in 2017.

The leading GSP import categories were vehicles and vehicle parts, jewelry and precious metals, and stone articles, the website said.

Trump has made an overhaul of global trade and the slashing of American trade deficits a central plank of his presidency. 

Annual trade between the NATO allies stands at around $20 billion, with Trump and Turkish President Recep Tayyip Erdogan agreeing in talks last month to set a trade target of $75 billion in the event a free trade deal is agreed between the two countries.

Turkey's trade minister on Tuesday said the plans to end the preferential trade status conflicted with the countries' stated aim of increasing commercial exchanges.

"This decision contradicts our mutual objective of reaching bilateral trade volume of $75 billion... The decision will also negatively affect US small and medium-sized enterprises and manufacturers," Ruhsar Pekcan said on Twitter.

"We still would like to pursue our target of increasing our bilateral trade with the US who we see as our strategic partner, without losing any momentum," she said.

Trump and Erdogan have had several disagreements including over the conflict in Syria, trade with Iran and Venezuela and Ankara’s purchase of Russian weapons systems.

Last summer ties worsened over the detention of an American pastor, during which Trump doubled tariffs on Turkish steel and aluminium, and sanctioned two senior Turkish officials. Pastor Andrew Brunson was later released and relations improved, although the sanctions fueled a dramatic downward spiral of the Turkish currency.

Another key dispute has been over the requested extradition of Pennsylvania-based preacher Fethullah Gulen, who Ankara accuses of organising a failed coup in 2016.

Turkey’s economy, which has weakened considerably in the last year, is a key issue ahead of local elections on March 31.

Monday's decision also came as Washington and Beijing seek to negotiate an exit to the Trump administration's most high-profile and costly trade battle.

The US and China eventually agreed to a 90-day truce to work out their differences, and Beijing and Washington have been edging closer to an agreement in recent weeks.

The truce was scheduled to end on Friday, but Trump lifted an ultimatum on further tariff hikes after expressing satisfaction with the progress made in several rounds of talks.

Under an agreement taking shape, Beijing would lower some barriers on US companies' operations in China and purchase large amounts American agricultural and energy goods if the United States lowered most of the tariffs in return.

However, leading news reports have said significant details remained unresolved.