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1 1 (January 15, 2020)

handle is hein.crs/govbexw0001 and id is 1 raw text is: , . ' ,iE S .r , i , U.S.-Turkey Trade Relations - mmm, go mppm qq\ , q I aS 11LULANJILiN, Updated January 15, 2020 Turkey, a NATO ally and emerging market straddling Europe and the Middle East, offers potential for U.S. trade and investment. U.S.-Turkish trade ties are relatively weak overall, and their further expansion depends on a number of economic and political factors. At a time of continued bilateral tension, Congress is monitoring U.S.-Turkish trade ties and related policy developments more intensively, as well as considering possible sanctions against Turkey. At $767 billion in gross domestic product (GDP, current dollars), Turkey was the world's 19th largest economy in 2018. After a financial crisis in the early 2000s, Turkey's economy largely rebounded, due to Turkish government actions to make market-oriented reforms, improve rule of law in commercial markets, and invest in infrastructure. EU membership prospects also helped drive economic reforms, but Turkey's EU bid is stalled currently. Despite economic growth, Turkey continues to face challenges, including sizeable debt denominated in foreign currencies and high inflation. In late 2018, a currency crisis in Turkey eroded investor confidence. Economic growth subsequently slowed, and the Turkish government is engaged in expansionary policies to boost the economy. Downside risks to the Turkish economy remain, including domestic political uncertainty and foreign policy tensions. Turkey has reduced its trade barriers since 1995, following its accession to the World Trade Organization (WTO) and conclusion of a Customs Union with the EU, which allows free movement of goods between Turkey and the EU (excluding agriculture, coal, and steel). Turkey has a well- diversified export base, but relies heavily on energy imports. Turkish firms are typically toward the end of global supply chains, manufacturing most end-use products of high-value and sourcing intermediate inputs elsewhere. One exception is the Turkish auto industry, which supplies components to major global auto manufacturers. Turkey also recently unveiled prototypes of what it hopes will be its first domestically-produced electric car. Goods. Turkey is a small but growing U.S. trading partner (see Figure 1). In 2018, two-way goods trade accounted for less than 1% of U.S. global trade in goods. The United States exported $10.2 billion in goods to Turkey (led by civilian aircraft, engines, and parts; waste and scrap; cotton; coal; and petroleum refinery products), and imported $10.3 billion in goods from Turkey (led by iron and steel products; carpets and rugs; autos and other light-duty motor vehicles; petroleum refinery products; and stone products). The trading relationship is more consequential for Turkey. The United States was both its fourth largest market for exports (5.5% share) and imports (5.1%). The EU, overall, is Turkey's leading trading partner, representing 47.8% of its exports and 36.4% of its imports. (WTO, 2017 data.) Figure I. U.S. Trade in Goods with Turkey .... .... ... .... ..... .... ... .... ..... .... .... .... ..... .... .... ..... X.X. .... . .... .... .... . XX X xx ix: ... .. ..... .... .... ..... .. .... ..... .... .. ..... .... .... .... ..... ..... .... ..... .... . ... X X .... ..... .. ..... ...... .... ..... .. .. ..... .. ..... ..... .... .. .. ..... ... ..... . .... ..... ..... .... ... ...... .... ... ..... .... .. ..... .... .... ..... .... .... .... .. . .... ..... .... .... .. .... ..... ..... .... **** '**** **** * - ..... .... .. .... .... ..... .... .... . ... .... .... ..... .... .... ...... ...... .... .... ..... ..... r, CO rl :. J S'Z $ Source: CRS, data from U.S. International Trade Commission. Services. In 2018, bilateral services trade ($5 billion) was about a quarter of bilateral goods trade. U.S. services exports were $3.1 billion and imports were $1.8 billion, resulting in a trade surplus of over $1 billion. Travel (e.g., for education or business), transport, and business services were top traded services. Charges for Turkish use of U.S. intellectual property rights (IPR) was a top U.S. export. Foreign Direct Investment (FDI). While Turkey accounts for less than 0.1% of the stock of U.S. FDI abroad and FDI in the United States, bilateral investment ties are notable in some respects. U.S. majority-owned multinational firms in Turkey had 55,000 employees in 2017, and, for some U.S. companies, Turkey serves as a regional base for doing business. Turkey was the 9t-fastest-growing source of U.S. inbound FDI in 2018. According to official Turkish data, between 2003 and 2018, the United States cumulatively comprised 8.8% of Turkey's inbound FDI. The EU, at a share of 68.6%, ranked as Turkey's largest source of FDI. K,-., Trade ll-s, u Tariffs. On October 14, 2019, after Turkey's incursion into northeast Syria, President Trump announced plans to apply sanctions against Turkey and raise Section 232 national- security-based tariffs on U.S. steel imports from Turkey from 25% back to 50%. While the Administration applied the sanctions and then lifted them after an announced cease- fire in hostilities, it has not applied the tariff increase. Section 232 steel tariffs on Turkey, when first applied in March 2018, were 25%, in line with other countries subject to the tariff measure. In August 2018, the President doubled steel tariffs to 50% for Turkey, on the basis that U.S. steel imports had not declined as much as expected and U.S. domestic steel capacity use had not risen to the target level. Some analysts argued, however, that the new steel tariffs appeared to be at least partly linked to Turkey's prosecution of a U.S. pastor whose release President Trump had demanded; the pastor was released in October 2018. In May 2019, the President lowered the steel tariffs on Turkey to 25%, citing the decline in U.S. steel imports from Turkey and improved U.S. industry capacity utilization.

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