Ambassador David M. Satterfield
September 23, 2020
Ambassador Satterfield: I would like to thank the U.S.-Turkey Business Council and TAIK for inviting me to join this 38th American Turkish Conference. All of these organizations have played a critical part in our bilateral relationship for decades. We all value the U.S.-Turkish strategic relationship and continue to see opportunities for American and Turkish business and we will do everything in our power to promote that.
Many of your companies have formed close partnerships that have connected and will continue to connect our countries in the most enduring of senses. This commercial partnership has been instrumental to our continued engagement with the Turkish government itself. Maintaining this relationship is critical to making progress on all of the issues that affect our bilateral trade.
Now I know you have heard from a number of distinguished speakers including Secretary of Commerce Ross who spent an extraordinary 72 hours of meetings in Turkey just about a year ago, doing what he could to try to identify areas for trade promotion, for partnerships, for business that would help America and help Turkey. We very much hope that a year later as much as possible can be done to move on the initiatives which Secretary Ross set out.
I am not going to repeat the various commitments and pledges which you heard from him or the points which Under Secretary of State Krach or our Deputy Secretary Steve Biegun have made. Instead, I’d very much like to be able to hear from you and Tamer has a variety of questions already prepared which I look forward to responding to. If those of you listening have additional issues you’d like to raise, I’m available.
But Tamer, thank you and ATC thank you very much for the opportunity to have this fireside chat.
Moderator: Thank you very much, Ambassador. The pleasure is ours. Let’s start with our first question.
As we know that the U.S. government has been investing in Turkey more than in any other country. We have a very deep and tight relationship. We have a long history in the economic side.
So how much impact do U.S. companies have in Turkey?
Ambassador Satterfield: U.S. companies have a very significant impact in Turkey. There are more than 1700 separate U.S. companies operating today in Turkey, and what this means is about 80,000 Turkish workers are employed by those companies or in the process of working with those companies. This trade generates tens of billions of dollars. We’d like it to be more, of course. But this is a very significant impact in terms of employment and in terms of U.S. dollars spent.
And it’s not just the number of companies. It’s the quality and the character of the companies. GE, Ford, Dell, Lockheed Martin, many others. All have a long history of successful profitable operation in Turkey. They remain committed to the Turkish market.
Moderator: Thank you, Ambassador.
We all know that right now as a world we are experiencing unique and tough times because of the Coronavirus pandemic. It has affected the world as both economic plans, social, and politically.
So how has COVID-19 affected the U.S. and Turkey economic relationship?
Ambassador Satterfield: In the most immediate sense, Turkey came very quickly to the front of the market in producing high quality, high standard personal protective equipment. Over $110 million worth of that equipment has been exported to the United States.
Let me make clear here, Turkey was a market leader. Turkey remains a market leader in this field because of the reliability and the consistent quality of production.
But broadly speaking, COVID has had an impact. U.S. trade through July of this year in goods was $12.4 billion U.S. dollars. At the same time last year it was $12.1 billion. Now that sounds like a modest increase — $300 million — but for that increase to have taken place in the midst of the major impact on global markets, the U.S. market and Turkey, that is significant, but we would like to grow this trade much, much further.
Moderator: Thank you very much.
Of course in the last year we were having the 100 million trade volume target before Covid. And then how do you see the progress on that issue? And also does the United States on applying the special trade agreement or lower tax on some goods for Turkey? Where are we to achieve its goal? We have a special plan when we reach the 100 million U.S. dollars at U.S. side.
Ambassador Satterfield: Sure and you’ve both heard from Minister Pekcan from the Turkish side as well as Secretary Ross. But what I’m going to do is respond very specifically to the question that Tamer just posed.
When Secretary Ross was here a year ago the purpose of his 72 hours of meetings was to filter through, winnow through the various sectors that presented the potential for business deals, business opportunities with the United States, to hear from Turkish government officials, Turkish private industry officials, parastatals on their concerns regarding the trade relationship. The Secretary identified several areas in which progress could indeed be made through bilateral discussion, bilateral negotiation with Turkey.
Two of the most prominent areas which held the most potential for profitable for Turkey, profitable for the U.S. engagement that would require negotiations, structural changes on both sides, were steel and aluminum, and textiles.
For textiles, a discussion about the barriers to trade, tariffs, other restrictions for import of U.S. precursors and finished goods, Turkish goods to the United States. It’s something that Secretary Ross on his behalf, on behalf of U.S. Trade Representative Lighthizer pledged our willingness to do. These are sensitive issues. Textiles are a very hot button issue in the United States as I think many of you listening know, particularly in a politically charged environment. But we see advantage to U.S. businesses and Turkish businesses of all kinds by engaging in this dialogue. We’re ready to do it.
The other area that Secretary Ross raised with Minister Pekcan was how to address the removal of Turkey from the General Schedule of Preferences. What was done in terms of that discussion was a willingness if not agreement by both sides to enter into negotiations on quotas, which would allow a more advantageous than at present treatment for Turkish goods. This is not an uncommon process for the United States. We’ve engaged in quota discussions quite successfully with major producers around the world including South Korea and Brazil. We are fully prepared to enter into discussions with Turkey.
I want to be clear here. There will be no return to the GSP but there are ways to address this, but we need engagement from the Turkish government. That was agreed one year ago. Now it is time, a year later, for real progress to be made.
Ambassador Satterfield: I can’t hear, Tamer Bey.
I’m going to assume, Tamer Bey, that you raised the question of how the U.S. views Turkey’s digital economy. I can’t hear you right now. I hope those listening are able to hear.
With respect to the digital economy, the U.S. is very concerned at new laws, new regulations in Turkey for U.S. companies including major U.S. firms that are highly problematic. Those new regulations, new laws include the digital services tax and the more recent social media law.
The United States government supports an international global solution to questions of digital sales tax, international taxation at the OECD. But in the meantime, before there is such a global solution we hope that we’ll be able to work with the Turkish government in a cooperative manner to resolve this matter until a global addressal can be done.
Now we’re also concerned with Turkey’s new law affecting social media firms. A policy that mandates that large social media firms store consumer data only in Turkey could create an inherently uneven playing field and place onerous compliance costs on U.S. firms or alternately compel them to leave the market.
Data localization requirements also undermine innovation by making it very difficult for startups to do business in different countries. We’re addressing these issues now, of course, with our Turkish partners.
Moderator: I think I am back, Ambassador. Can you hear me now?
Ambassador Satterfield: I can hear you now.
Moderator: That’s perfect. Sorry about that.
Actually, I would like to go back to the previous question about the trade, the trade volume issue. I was about to ask, do you see the actions which both sides can take to be able to have, to increase the current level of our trade?
Ambassador Satterfield: Certainly Tamer Bey, and there are two sets of actions. One has to do with individual sectoral engagement. We spoke about our willingness to discuss changes in the way textiles and textile related products are handled between our two countries. We discussed the issue of how to address steel and aluminum through a quota negotiation. Those are two big highly competitive, highly profitable Turkish industries or Turkish sectors where we’re prepared to work to advance the presence in the United States and the presence in terms of textiles of U.S. products here in Turkey. And we are very willing to engage on behalf of other sectors to help them become more competitive in a very tight global and specifically U.S. market. That is what our Foreign Commercial Service does. We are fully open for business in that regard, as we’re open for business in promoting any U.S. company’s desire to do business here. COVID notwithstanding. Our contacts remain. We are happy to engage.
But I will address the other side to this which is structural. Investors, both domestic, Turkish and foreign, whether from the U.S., the EU or other countries, want to see a consistent, predictable, reliable business, judicial and fiscal environment for their businesses. It’s true for Turkey, true for the United States, true for any country, any market around the world. The more there is such predictability, consistency, reliability, transparency, the better opportunities there are for productive investment.
Above all, businesses need to know that their investments, their provision of products will be paid for. And here we do have a significant issue. When Secretary Ross visited Turkey a year ago the debts owed by government hospitals to pharmaceutical and medical equipment companies in the U.S. and elsewhere — Asia, Europe — totaled around $230 million. Today that debt is in the vicinity of $2.3 billion U.S. dollars. A year ago when Secretary Ross raised this issue with the most senior Turkish government officials including President Erdogan and the Minister of Finance Albayrak, he was assured the government understood the problem, understood its responsibilities to deal with the problem, and arrangements would be made for prompt payment and resolution.
It is a year later and the government now informs those companies there will be no full payment on those debts. Instead, they are asked to accept a range of very significant reductions in the amount owed.
There will be a consequence to non-payment of debt or to demands that companies accept a reduction in the total for equipment and services provided. Companies will consider departing the Turkish market or will reduce their exposure to the Turkish market. This is not a direction which serves the interests of Turkey, its business persons or its citizens and it needs to be addressed and addressed promptly.
On the positive side, we have had an extremely good engagement with the Turkish government in terms of one sector, hydrocarbons. U.S. sales of liquid natural gas have increased dramatically. We are now one of the largest suppliers in the world to Turkey. How is this possible? A simple answer. Because we can provide almost unlimited supplies of liquid natural gas to Turkey which has a very robust reception hub and distribution network. We can do it at prices that are vastly below the long term Russian pipeline contracts which are now in the process of ending.
We continue to hope that for the sake of Turkish citizens and the Turkish budget that Turkey looks to the most reliable and the most inexpensive sources of energy available in the market. It’s LNG, and we hope it’s from the United States.
Moderator: Thank you very much, Ambassador.
Another hot issue around the world is 5G. There is growing 5G around the world, and when Turkey announced it will have important role in 5G in our region.
Then how do you see the cooperation in that area between the U.S. and Turkey? And then how do you see the [inaudible] the possible U.S., the contribution [inaudible] to be able to be leader in our region in the 5G?
Ambassador Satterfield: Sure. I think you have heard at length from Under Secretary Krach, you have all heard the speech which the President delivered virtually at the United Nations, and you have heard the comments made in different fora on the record by Secretary Pompeo. The United States is very concerned at the security and the integrity of communications networks. We are concerned at attempts by China through supply chain penetration, particularly involving Huawei and ZTE to affect the security of those fundamental communication networks.
For over two years the United States has called on countries around the world including Turkey to secure their 5G networks from untrusted vendors such as Huawei and ZTE. The world is increasingly waking up to the magnitude of this threat. We hope that that happens in Turkey as well. We believe at an expert level there is no safe place for these untrusted vendors in any part of 5G networks. Allowing them even into test networks leaves communication systems exposed and the critical services that run on top of them.
This is a significant issue. It’s significant particularly in Turkey where there is exposure in Turkey’s com systems to Huawei. We hope very much that Turkey works with us as other countries around the world are doing to address alternatives to these unsafe vendors.
Moderator: There is no, everybody actually aware of the current issues between U.S. and Turkey. We have some political issues. So let’s look at the defense side. Again the S-400 issue aa very hot issue in Turkey but it was not referred to because of Covid. So how do you see it, can you give us some view on that?
Ambassador Satterfield: The acquisition by Turkey of the Russian S-400 air defense system, the most advanced system which Russia possesses has created significant concern and significant impact on aspects of our cooperation with respect to the F-35 program and Turkey’s acquisition of the F-35 aircraft itself. I think most of you on this screen know Turkey has been suspended from the F-35 program. We are in the process of spinning down, spinning out Turkish program participation because of the acquisition.
We have engaged the Turkish government at the highest levels. The President of the United States has engaged President Erdogan directly, extensively on this, to discuss how best this can be resolved. No such resolution is forthcoming from the Turkish side. But we have robust defense and security sector cooperation with Turkey. We hope that that cooperation can continue to the maximum extent possible. But there are indeed consequences to the acquisition by a NATO partner and ally of a sophisticated Russian air defense system. There have to be. From a U.S.-Turkish bilateral standpoint and from the standpoint of the F-35 program as a whole.
Can there be a resolution here? There certainly can be and the conditions and terms for such a resolution are well known to the Turkish government. We hope that we see progress on that.
I would have to note in this regard that the House of Representatives in the text of the National Defense Authorization Act now pending before the Congress has language which would mandate that the administration impose costs and sanctions on Turkey for the acquisition.
The Senate has not yet taken up the bill in conference. That will need to be done probably at a point in November. We very much hope that Turkey acts in a manner that forestalls any possible sanctioning which the Hill may decide upon that cannot be subject to a sustainable veto.
Moderator: Thank you very much, Ambassador.
So another issue, actually several times we have talked about the issue, but maybe we heard some comments on that area also during this conference. Maybe we can one more time can get from you the U.S. position about the GSP. So you know Turkey was part of it, not anymore, and [inaudible] GSP. How do you see it?
Ambassador Satterfield: I will quote the expert on this issue, Secretary Wilbur Ross. Secretary Ross had very extensive and quite detailed discussions on this point with Minister Pekcan and with other senior Turkish officials. This was a year ago. Our position has not changed. Turkey has graduated from the GSP. Turkey will not be returned to the GSP.
Instead, the best way to address the issue of steel and aluminum is through quota negotiations. That is what Secretary Ross offered. It is what was accepted by his counterpart a year ago. But the negotiations need to actually start.
Moderator: Okay. So we have some questions from the audience, Ambassador, if you allow me I would like to go to them. The first question is how do you see the potential role in the business community of our leaders to focus on long term potentials between the two countries?
Ambassador Satterfield: I think the business community, whether in the United States or in Turkey, has, has always had and will always have a vital role to play. It is your investment in the United States, in Turkey which is at stake here.
Governments have a strong interest in seeing business expand, productive industry expands as much as possible. It employs citizens. It provides a better livelihood. It feeds and grows economies in a sustainable manner. Business, open markets are absolutely critical. And when businesses see practices which do not contribute to those goals, they have every right starting in their pocketbooks to make those points to governments.
Moderator: You are right.
Another question is that what makes you more optimistic about the U.S. and Turkey partnership?
Ambassador Satterfield: What makes me most optimistic is this, both the United States and Turkey have a large, complex, sophisticated economy, industrial, high tech, agricultural base. Name the sector, Turkey and the U.S. are participating not just within domestic markets but globally in all of these areas. Turkey is enormously competitive. Turkey is at the cutting edge of technological proficiency in many sectors. Turkey has not just the potential. Turkey has demonstrated that it is able to be a marketplace for the most advanced industries in the world. Something the U.S. does as well.
That is what gives me optimism and confidence in the future of Turkey as a whole and the future of the Turkish economy.
COVID has imposed a burden on all of us. Structural issues in the case of Turkey. Questions of predictability have raised question marks for investors at home and abroad. But none of them affect, none of them erode the capacities, the expertise, the professionalism of Turks and Turkish business.
Moderator: Thank you very much, Ambassador.
I think our time is up. First of all I would like to thank your open and frank comments. Thank you so much. It was a great pleasure for us in our third day of the ATC conference. We appreciate your support for our relationship between U.S. and Turkey. I think altogether we would like to enhance our relations, also our trade volume.
I want to thank all participants for joining us on the third day of our conference. We will begin in Turkey for our opening session with Deputy Minister of Energy Alparslan Bayraktar and U.S. Assistant Secretary of Energy Steve Winberg.
Thank you and I wish you a good rest of your day or the evening, depends on where you’re at. Thank you so much, Ambassador, again, and see you soon.
Ambassador Satterfield: Thank you all.
# # # #