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US Drops Turkey From GSP Trade Preference Program, Further Squeezing China Plus Sourcing Options

The United States has eliminated Turkey’s trade privileges under its Generalized System of Preferences (GSP) program, meaning imports from the country can no longer enter the U.S. duty free.

The news could pose additional problems for companies looking to Turkey for sourcing as they pull back from China.

Turkey had been participating in the trade program—which provides trade opportunities and duty breaks for developing countries—since 1975, but now President Trump says, based on Turkey’s economic development, “It is appropriate to terminate Turkey’s designation as a beneficiary developing country effective May 17, 2019,” according to a Presidential Proclamation released Thursday.

Trump had announced his intent to change Turkey’s designation in March, with the Office of the United States Trade Representative saying at the time, “Turkey’s termination from GSP follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the United States Market.”

USTR also mentioned the president’s intent to terminate the trade privileges for India, too. Though its status as a GSP beneficiary is still intact for now, negotiations regarding the country’s eligibility remain ongoing.

A recent report from the Coalition for GSP, a Washington, D.C.-based group of U.S. businesses, consumer and trade organizations, on “How GSP Termination Would Hurt American Businesses and Workers,” found both India and Turkey among the biggest beneficiaries of the GSP program.

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To skirt extra tariffs and in light of the tenuous trade situation between the U.S. and China, companies had been increasingly turning to countries like Turkey and India to source product. And particularly amid the latest increase in Section 301 tariffs on $200 billion worth of goods from China from 10 percent to 25 percent, sourcing diversification is top of mind for most companies—and many have been looking to GSP beneficiary countries for relief.

Now, however, those that may have turned to Turkey may need to reconsider the move.

“Products hit by Section 301 tariffs when imported from China account for 90 percent of increased GSP imports in 2019,” the Coalition found. For Turkey specifically, the Coalition said U.S. imports under the GSP program that are also on the China tariff target list, increased by $40 million. Ninety-seven percent of the increase in GSP imports from Turkey are on the China tariff lists.

“Not only would terminating GSP for India, Turkey, or others under review (Thailand, Indonesia) hurt many American companies and workers that have relied on GSP for years. It would also reduce viable sourcing options for companies looking to buy less from China in response to Section 301 tariffs—thereby undermining the President’s own objectives,” the Coalition said.

U.S. textile and apparel imports from Turkey totaled $1.69 billion in 2018, a 12.3 percent increase over 2017, according to data from the Office of Textiles and Apparel (OTEXA). For the year through March, textile and apparel imports from Turkey have already outpaced 2018’s total, reaching $1.73 billion, an 8 percent jump year over year. For comparison, India’s textile and apparel imports in 2018 totaled $7.7 billion, up 3.7 percent.