India in Consultation with Turkey at WTO on Turkish Action of Extending Safeguard Duty on Cotton Yarn

Last week saw India take its complaints about Turkey’s safeguard duties on cotton yarn to the next level by formally initiating WTO dispute proceedings between the two countries. Two of the world’s top cotton producers entered the first phase of WTO dispute settlement on 13 February, when India requested consultations with Turkey over the latter’s safeguard measures on cotton yarn imports (DS428).

India alleges that Turkey’s re-introduction of extra safeguard duties on cotton yarn violates WTO safeguard rules in the General Agreement on Tariffs and Trade (GATT) and the specialised Safeguards Agreement. The measures could cost India around US$600 million per year in exports, one Indian official told Reuters.

“[T]he measures at issue have a serious adverse impact on the export of cotton yarn from India,” New Delhi said in the consultation request.

As part of its WTO commitments, Turkey agreed to limit its cotton yarn duties to five percent. However, its tariffs applied on Indian cotton yarn in the form of safeguard measures are as high as 15 to 20 percent.

Safeguard rules allow countries to increase duties beyond agreed upon limits when an increase in imports caused by unforeseen events threatens to cause serious injury to domestic producers.

Ankara first levied safeguard import duties on cotton yarn imports from 2008 to 2011. Provisional safeguards were then applied while Turkey conducted a review on whether to continue the initial safeguards; the initial safeguards were then extended last year.

New Delhi claims that Ankara should not have used provisional safeguard measures as a means of extending the expired final safeguard measures, citing WTO law in this regard. India further argued that the extension of the original safeguard measures is no longer necessary.

India made a similar consultation request in 2009, also against Turkey. At the time, Ankara argued that its 2008 safeguard measures were a justified response to surging imports that threatened its domestic industry. Turkey noted that its cotton yarn imports increased by 63.6 percent in 2005, 46.9 percent in 2006, 119.7 percent in 2007, and 32.1 percent in the first half of 2008.

Turkey, which produced 3.1 million bales of cotton in 2011 according to the National Cotton Council of America, has waived its safeguard tariff on cotton for many developing countries that do not contribute significantly to imports.

This waiver does not hold for India, which has ranked second in the world in total cotton production since 2006 and generated 27 million bales in 2011. It has also ranked second in cotton exports each year during the same period except for 2008.

The two sides will now have 60 days to reach an agreement; otherwise, India can request a WTO panel to review the dispute.