Surveillance Practices Harm Production

Selçuk Gülsün, Chairman of the Board of Directors of the Plastics Industrialists Association (PAGDER), stated that the surveillance practices implemented to protect the domestic producer may lead to the exact opposite results and said, "The application of surveillance practices for the import of raw materials not only causes an increase in costs in the entire value chain, but also the products manufactured from the product in question." "In the absence of a similar surveillance application in imports, it also leads to the formation of a structure that makes imports attractive instead of production," he said.

It Decreases Our Competitiveness in Exports
Pointing out that cost increases resulting from surveillance practices reduce our competitiveness in export markets, Gülsün said, “Since the cost increases in question are a situation specific to our country and there is no similar additional cost situation in the countries with which we compete in our export markets, such practices negatively affect our competitiveness in international markets. Especially in certain product groups, the gap between the surveillance fee and the market price can be wide. For example, due to the surveillance applied to saturated polyester resins with GTIP 3907.99.80.00.11, additional cost increases arise in PBT imports under the same GTIP. While the surveillance value currently applied to this GTIP is 3.5-$/Kg, the CIF prices of PBT are between 1.35-$/Kg and 1.5-$/Kg. Surveillance practices in these and similar products cause very high cost increases. The competitiveness of the companies that import the raw material in question, process it domestically and turn it into products decreases in the export markets, and their hand in the domestic market also weakens. Imagine, you import raw materials with a very high surveillance cost and turn that raw material into a product by processing, on the other hand, an importer directly imports a finished product from that raw material, but does not incur any additional costs since there is no surveillance application on the final product. In this case, the producer's chance to compete disappears. For this reason, a more in-depth analysis should be made before implementing surveillance on the import of products in the raw material group. Instead of relying only on the declaration of the domestic raw material producer that there is sufficient production capacity, it should be discussed with the NGOs operating in this field and whether this declaration has a counterpart in the market or not. "If it is necessary, this path should be followed," he said.

Triggers Inflation
Stating that these cost-increasing factors on businesses also cause domestic inflation to rise, Gülsün said, “While the effect of surveillance practices applied to final products remains in a much more limited area, if applied to raw materials, this cost increase spreads to a much wider area with a domino effect and causes inflation.” . Moreover, with a decision published in the Official Gazette dated November 24, 2023, the right to deduct the value added tax calculated within the scope of surveillance and protection measure practices in imports has been abolished. This situation causes the already high additional costs to create a greater burden on companies. "It will be beneficial for the healthy development of our economy to revise both the decision to abolish the right to deduct VAT and the surveillance practices in raw material imports to take into account the benefit of the entire manufacturing industry," he said.