President Trump directed U.S. Trade Representative (USTR) Robert Lighthizer to make changes to a little-known U.S. trade assistance program that will affect U.S. rice exporters and importers. Lighthizer announced on Monday that India and Turkey would lose beneficiary status under the Generalized System of Preferences (GSP), the oldest U.S. trade preference program that’s designed to promote economic growth in developing countries by allowing duty-free entry to the U.S. for many products if certain criteria set by Congress are met.
According to USTR, India’s termination from GSP follows its failure to provide the United States with assurances that it will provide equitable and reasonable access to its markets in numerous sectors. Turkey’s termination follows a finding that it is sufficiently economically developed and should no longer benefit from preferential market access to the U.S. market. Both countries’ GSP status will end 60 days after Congress and the governments of India and Turkey are informed. These notifications were reportedly sent on Monday.
India, the second largest source of imported rice to the United States, will no longer be able to ship rice here duty-free. India exported 187,000 metric tons of rice to the United States in 2018, most of which was long grain milled rice, up from an average of 139,000 MT during 2013-2016. Imports from India of long grain rice, including basmati, will go from zero duty to 3.1 cents per pound. The highest import duties are on parboiled rice at 11.2 percent ad valorem.
Five years ago, Turkey was the United States’ fourth largest export market bringing in more than 240,000 MT of rice, valued at $121 million. This valuable export market evaporated last year, bringing in less than 1,000 tons of U.S. rice making Turkey the 62nd largest export market for rice.
A major factor in the disappearance of this important market is the 50 percent retaliatory tariff levied on U.S. rice in response to the U.S. Section 232 duties on steel and aluminum imports from Turkey. In addition to the 50 percent tariff for U.S. rice, there are prevailing tariff rates which are 34 percent for paddy, 36 percent for brown and 45 percent for milled. This means that U.S. rice is subject to tariffs ranging from 84 percent to 95 percent depending on the form of rice.
Turkey’s imposition of retaliatory tariffs on U.S. products preceded a U.S. review of Turkey’s GSP eligibility. Approximately 3,500 products from Turkey are eligible to enter the U.S. duty-free, which amounted to $1.1 billion in imports in 2012.
“Rice is a global commodity which means our industry is vulnerable to actions outside the sphere of our control,” said Bobby Hanks, chair of the USA Rice International Trade Policy Committee.
“Government actions can create new markets, such as Mexico via NAFTA, or level playing fields when people aren’t playing by the rules as we see now with India, or they can erode markets such as what we’re seeing here in Turkey. We have to do our best to be nimble, patient, and adapt to the realities on the ground. But no matter what, we stand by our product as safe, sustainably-produced, delicious, and nutritious.”