Turkey could open WTO case over Indonesia flour tariff: Officials

ISTANBUL (REUTERS) - Turkey could ultimately bring a case against Indonesia at the World Trade Organisation over a tax that Jakarta imposed on flour imports, if the duty is made permanent, Turkish industry officials said.

The tax halted new Turkish flour exports to Southeast Asia's largest economy and the dispute could deal a blow to trade between the two countries which amounted to more than US$2 billion (S$2.5 billion) last year.

Indonesia imposed the emergency tariff on wheat flour imports for 200 days on Dec 5 while it investigates the impact of imports on domestic mills.

Jakarta may then opt to impose the tax for a four-year period which could later be extended for a further four years.

Turkey supplies 60 per cent of Indonesia's flour imports but with very thin margins and the tariff has made its products uncompetitive in the Indonesian market.

"This is of course a matter for the Economy Ministry, but I expect a case will be opened against Indonesia," said Mr Turgay Unlu, head of the Central Anatolian grain exporters union, which has regular contact with the government on trade issues.

"These relations are always based on reciprocity. I believe Turkey will exercise its rights within the WTO to the full extent," he said.

An economy official familiar with the subject said Turkey's response would take into account its friendly relationship with Indonesia and the priority was a diplomatic initiative to resolve the issue.

"Both countries are WTO members and it is clear how such trade disagreements are resolved. We are taking all measures to close the matter without any action. An initiative through WTO would be a last resort," the official in Ankara said.

Turkey, a major global flour exporter, exported 210,000 tonnes of flour to Indonesia in 2012, down from 376,000 tonnes a year earlier.

Indonesia, with a growing population of 240 million, is increasing its consumption of flour products as it moves beyond its traditional focus on rice consumption.

Indonesia imports all of its wheat needs, both unprocessed grains and flour, which is largely used to make noodles, bread, cakes, biscuits and convenience snacks.

Mr Unlu said that Indonesia's actions did not have a reasonable basis, saying its flour producers had been increasing their sales and were profitable before the tax was imposed.

Fast-growing Turkey, whose exports traditionally focused on European Union countries, has sought to diversify its markets in recent years through increased trade with Africa, the Middle East and Asia.