India takes up yarn duty issue with Turkey

The commerce ministry has started consultations with the government of Turkey on the protectionist measures taken by it against import of cotton yarn. The ministry has also started an investigation into the additional duty imposed by Egypt on the product.

Turkey had in July 2008 imposed safeguard duties on cotton yarn imports. As a result, the effective import duty on natural yarn in Turkey now ranges between 13 and 20 per cent, whereas Turkey’s bound import duty rate (its commitment to the World Trade Organization, or the WTO) is 5 per cent. Egypt imposed a safeguard duty of 30 per cent on natural yarn in January 2009 as against its bound duty rate of 15 per cent.

Safeguard duty is an emergency levy to restrict imports. To be compatible with the WTO norms, a country has to prove through an investigation that the surge in imports has caused “injury” to the domestic industry. This is a temporary import duty that can be imposed for four years and extended up to a total of eight years.

“Turkey is our second-largest export destination while Egypt is the fifth. Imports to both these destinations have come down drastically,” said Siddhartha Rajagopal, executive director, Texprocil, a quasi-government export promotion agency for cotton textiles.

Cotton yarn exporters have been demanding that the government take up the issue at the dispute settlement body under the WTO.

Commerce ministry officials said they had initiated bilateral consultations with Turkey. WTO norms specify that an exporting country can seek compensation from the nation that has imposed safeguards that are against the norms. If not satisfied with the outcome of the consultations, the exporting country (in this case India) can take retaliatory steps like increasing import duties on products from the countries (like Turkey) that have imposed the duty.

Meanwhile, the commerce ministry has also started investigating the safeguard duties imposed by Egypt. “Once the details are received, we may ask for consultation,” the official said.