US embassy cable - 03ANKARA6262

UNCLAS SECTION 01 OF 02 ANKARA 006262 
 
SIPDIS 
 
 
DEPT FOR EB, EUR/SE 
DEPT PLEASE PASS USTR FOR LERRION 
USDA for FAS/ITP Henke, Meyer, Hansen 
TREASURY FOR OASIA 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ETRD, EAGR, KIPR, EFIN, TU, USTR, WTO 
SUBJECT:  Foreign Trade Officials' Views on Cancun, IPR 
and Free Zones 
 
 
Ref: (A) Ankara 5594 (B) Ankara 5808 
 
 
Summary 
------- 
 
 
1. (SBU) Turkish Foreign Trade officials maintained that 
agriculture, particularly elimination of export 
subsidies, was their key concern at the Cancun 
Ministerial.  This issue led the Turks to support the G- 
21 at Cancun, though our interlocutors told us that 
actually joining the group would have been "politically 
incorrect" with respect to the European Union.  Foreign 
Trade also suggested that there might have been a chance 
for progress in Cancun had the talks gone on longer, and 
if there had been a better flow of information at the 
Ministerial.  The Foreign Trade Undersecretary told us 
he agreed with the EU that WTO decision-making needed to 
be revised.  On tax reform, which is a key condition for 
the IMF's sixth review, Foreign Trade believes that free 
zone incentives will not be eliminated, arguing that the 
IMF should focus on bringing in tax revenue from the 
informal sector.  Econoff raised USG concerns with IPR 
protection, particularly for pharmaceuticals.  End 
Summary. 
 
 
2. (SBU) Econ Counselor discussed Turkey's role at the 
Cancun Ministerial and tax reform of the free zone 
system with Foreign Trade Undersecretary Tuncer Kayalar 
on October 6.  Meeting with Econoff on September 26, 
Husnu Dilemre, Deputy Director General for Agreements at 
Foreign Trade, and Bilgehan Sasmaz, of Foreign Trade's 
free zones department, discussed the Cancun Ministerial, 
intellectual property problems and the free zones. 
 
 
Cancun - Agriculture the Key Issue for Turkey 
--------------------------------------------- 
 
 
3. (SBU) Dilemre began by reiterating Turkey's concerns 
about liberalization in agriculture (ref A).  He 
maintained that the GOT does not have the resources to 
offer sufficient domestic subsidies or the legal right 
to implement safeguard measures to counter developed 
world food subsidies.  Turkey is very cautious about any 
dilution in tariffs - the only (legal) tool it has to 
protect its farmers from the effects of foreign 
subsidies.  Turkey's position, insisting on elimination 
of export subsidies in agriculture, was identical to 
that of the Group of 21 in this area. 
 
 
4. (SBU) Dilemre said that Turkey nevertheless did not 
formally join the G-21 in Cancun, as this would have 
been "politically incorrect" in view of its customs 
union with the EU.  He explained that Turkey has no 
difficulty in aligning its position with the EU on areas 
covered by the customs union, such as public procurement 
and investment.  Despite the fact that the EU does not 
attempt to consult with the GOT on the WTO talks in 
advance and that Turkey is a long way from becoming an 
EU member state, Turkey does factor EU positions into 
its decisions at the WTO.  Dilemre maintained, however, 
that the customs union does not require complete 
alignment of negotiating positions. 
 
 
5. (SBU) Dilemre opined that there might have been a 
chance for progress at the Cancun Ministerial had the 
talks been allowed to continue longer, and if there had 
been a better flow of information between the various 
negotiations.  He suggested that some developing country 
representatives might not have stonewalled on Singapore 
issues if they had been made aware of the limited 
movement in the agriculture negotiations. 
 
 
6. (SBU) Kayalar attributed the failure at Cancun to 
excessively high expectations on the part of some 
developing countries.  He said the G-21 pressed Turkey 
to join, but the Turkish delegation decided not to do so 
in view of its relations with the EU.  Kayalar does not 
expect the G-21 to last, given internal disagreements. 
He said he agreed with EU Trade Commissioner Lamy that 
the WTO's consensus-based decision-making system needed 
to be revised. 
 
 
Laying a Marker on IPR 
---------------------- 
 
 
7. (SBU) Econoff told Dilemre and Sasmaz that the USG 
continues to have serious concerns about Turkish 
protection of intellectual property rights, particularly 
for pharmaceuticals.  In particular, proposals to delay 
data exclusivity protection until 2007 and to weaken 
patent protection are major concerns (ref B), and could, 
if not addressed, result in Turkey's elevation in the 
Special 301 Watch List in 2004.  Dilemre responded that 
Foreign Trade had been involved in the interagency 
process on these proposals, but did not know the 
situation in detail.  He promised to look into this 
issue. 
 
 
Free Zones 
---------- 
 
 
8. (SBU) Kayalar criticized the IMF's insistence on 
eliminating tax exemptions for Turkey's free zones, 
arguing that the Fund should instead focus on Turkey's 
huge, untaxed shadow economy.  Noting that State 
Minister Tuzmen staunchly defended the free zone system, 
Sasmaz told us he did not believe that upcoming tax 
reforms would completely eliminate tax preferences for 
the free zones.  He also opined that the tax incentives 
at the zones were not as attractive as they appeared to 
be, since businesses in the zones are more strictly 
audited with regard to their (reduced) tax liabilities, 
while many companies outside the zones manage to avoid a 
large proportion of their (unreduced) tax bills. 
Edelman