Turkish flour dumping in Philippines hurts U.S. wheat producers
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WASHINGTON, Aug. 27, 2014 - U.S. wheat producers have been losing between $60 million and $70 million in export sales annually in recent years due to an influx of what the Philippines' Department of Agriculture has determined is unfairly priced Turkish flour into the country. However, that could change if the Philippines' Tariff Commission makes provisional anti-dumping duties put in place in April more permanent.
The Philippine Association of Flour Millers, the group that filed the petition to impose the anti-dumping duties, was quoted in a Philippines' Department of Agriculture document as saying, “Local flour millers have been on the losing side of the battle against Turkish flour which is being dumped on domestic markets at prices even lower than their cost of raw material, which is wheat.”
A decision as to whether the anti-dumping duties will be extended for five years is due at the end of August but could be delayed for up to two months, according to Shannon Schlecht, vice president of policy at U.S. Wheat Associates (USWA).
The Philippine market is the fifth largest for U.S. wheat producers. An established milling industry in the country imports most of its milling wheat needs, with more than 90 percent of that wheat coming from the United States, according to USWA.
U.S. exports to the Philippines have grown from 200,000 metric tons in 1961 to an estimated 2.2 million tons (80.8 million bushels) in marketing year 2013-14. Prior to the recent anti-dumping provisions, unfairly low-priced Turkish flour was displacing about 10 percent of Philippine milling wheat imports, says Schlecht.
“Ten to 12 years ago, Turkish flour exports accounted for only about 200,000 tons of world wheat trade,” says Schlecht. “Today annual world exports of Turkish flour account for about 2.5 million metric tons of wheat.” Other major markets targeted by Turkish millers are Iraq and Indonesia.
USWA has had an office in the Philippines since 1961, providing technical, marketing and trade expertise to domestic millers. Today the organization is helping Filipino millers, who can't compete with Turkish flour, to provide information for their anti-dumping petition and investigate their options under World Trade Organization (WTO) rules.
“This issue is very important to U.S. wheat producers, due to lost sales to this important market, and to our long-term flour milling customers,” says Schlecht. USWA has been looking into the issue since 2010 and has uncovered some questionable trade practices in Turkey's wheat and flour-milling industries.
“Turkey has very high minimum support prices, and the Turkish Grain Board buys wheat from Turkish farmers at administered prices that are above world market prices,” says Schlecht. “The Turkish Grain Board then sells the wheat to mills below their purchase price for use in flour exports, which in effect is an export subsidy.”
Another questionable practice is that Turkey doesn't differentiate wheat quality in its flour export scheme, when wheat actually is highly variable in quality, use and protein.
“Under the Turkish system wheat is wheat,” says Schlecht. Effectively that means that the ability to import duty free and substitute different qualities of wheat imports for flour exports equates to a subsidy. For example, when using the country's 130 percent tariff rate and the $80 per ton spread between a high-protein hard U.S. milling wheat and a low-protein soft wheat, the importer can avoid a $100-per-ton import tariff payment.
Yet another questionable practice: Turkish flour mills that export flour are issued certificates by the government, allowing them to import wheat duty free. These mills can turn around and sell these certificates, reaping a financial windfall they can then use to further reduce prices on their flour exports.
There's a lot of complexity and opportunity for subsidies to enter into the flour export system operated in Turkey, says Schlecht.
USWA has asked USDA and the Office of the U.S. Trade Representative to look into the issue. It also continues to work with the milling industry in the Philippines and has initiated discussions with other major exporters of wheat about the problem.
The U.S. government, through the WTO Committee on Agriculture, has submitted several questions to the Turkish government, but a formal challenge under WTO trade rules has not been launched.
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