US embassy cable - 03ANKARA6530

UNCLAS SECTION 01 OF 02 ANKARA 006530 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, EB, EB/CBED AND EUR/SE 
TREASURY FOR OASIA 
DEPT PLEASE PASS USTR FOR CNOVELLI/LERRION 
FAS FOR ITP/THORBURN 
USDOC FOR ITA/MAC/DDEFALCO 
 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, ETRD, EINV, ENRG, TU 
SUBJECT:  MFA on Economic Partnership Commission Agenda, 
Renewed Pitch for a QIZ Including Textiles 
 
Ref: Ankara 6164 
 
 
Summary 
------- 
 
 
1. (SBU) At an October 15 meeting with MFA on the 
upcoming Economic Partnership Commission (EPC) meeting, 
we suggested that both sides to focus on achieving 
progress on investment issues.  MFA acknowledged that it 
was making preparations on investment issues, and 
suggested that the EPC include two private sector panels 
- on investment and on regional issues (principally Iraq 
reconstruction).  MFA also asked the U.S. side to use 
the EPC to discuss a Qualifying Industrial Zone (QIZ) 
including textiles/apparel.  Emboffs responded that the 
proposal is a nonstarter.  End Summary. 
 
 
2. (SBU) Econoff and Commercial Counselor discussed the 
preliminary agenda for the second meeting of the 
Economic Partnership Commission with Mehmet Gucuk, MFA 
Deputy Director General for Bilateral Economic Affairs, 
and with Serdar Cengiz, MFA Department Head, Bilateral 
Economic Affairs, on October 15.   Emboffs emphasized 
resolving investment disputes and other investment 
obstacles as a key objective of the EPC, and raised 
problems facing Newmont Mining in Turkey as well as 
intellectual property rights (IPR) concerns.  Gucuk 
pressed for more "flexibility" in the scope of the 
Qualifying Industrial Zone (QIZ) proposal and offered 
suggestions on private sector participation. 
 
 
Investment Issues 
----------------- 
 
 
3. (SBU) Econoff told Gucuk and Cengiz that we viewed 
the EPC as a good opportunity to make progress on at 
least some of problems facing U.S. companies investing 
or otherwise doing business in Turkey, and thereby for 
Turkey to improve its global investment image.  FCS 
Counselor pointed out that resolution of issues facing 
Newmont Mines, including a new mining law, could result 
in huge investment inflows in the next several years. 
Econoff suggested that progress on intellectual property 
issues would be especially welcome given the upcoming 
Special 301 review. 
 
 
4. (U) Gucuk responded that MFA is also making 
preparations for the investment segment of the EPC.  He 
proposed that investment be the subject of one of two 
private sector workshops connected with the EPC.  At 
this session, U.S. companies could present their 
investment issues, and the GOT would brief on measures 
taken to improve the investment climate.  In a 
subsequent telephone conversation, we also suggested to 
Gucuk that MFA consider giving prominence to 
telecommunications, information technology and energy 
issues in this segment. 
 
 
Regional Cooperation 
-------------------- 
 
 
5. (U) Gucuk proposed that the other workshop be devoted 
to regional cooperation, including both Iraq and 
Afghanistan reconstruction, and also possibly including 
energy issues.  The idea is for Turkish companies and 
the GOT to interface with USAID, CPA, the Army Corps of 
Engineers and U.S. contractors on reconstruction 
opportunities. 
 
 
QIZs 
---- 
 
 
6. (SBU) Gucuk stated that the GOT was under renewed 
pressure from Turkish business associations to obtain a 
broader QIZ, e.g. one without an explicit exclusion for 
textiles and apparel exports or one which allowed 
textile/apparel exports made with U.S. inputs.  He 
underlined that, even without explicit exclusions, USTR 
would retain the authority to deny QIZ applications 
based on textile and apparel exports.  Gucuk also 
pointed out that the U.S. had offered a modified QIZ 
with some eligibility for textiles and apparel exports 
including U.S. inputs prior to Operation Iraqi Freedom. 
While the offer had been made under very different 
circumstances, he contended that Turkey's situation 
(implying the Turkish troop contribution for Iraq) had 
changed significantly in the past month.  Gucuk said 
that MFA Undersecretary Ziyal was very focused on QIZs. 
Gucuk stated that the QIZ issue would in fact be 
Turkey's only EPC trade agenda item. 
 
 
7. (SBU) Econoff responded that he would report Gucuk's 
proposal, but that the most one could hope for would be 
to pursue QIZ legislation along the lines of our 
original QIZ proposal.  He also noted that considerable 
efforts would be needed to secure Congressional approval 
even for a non-textile QIZ.  He suggested that if both 
sides could not use the EPC to discuss QIZs within their 
original parameters, it would be better to drop this 
subject from the EPC agenda. 
 
 
Scheduling 
---------- 
 
 
8. (U) Econoff told Gucuk that we anticipated a one-day 
EPC with a government-government morning session 
followed by private sector meetings in the afternoon on 
December 2.  Gucuk said the Turkish Embassy had advised 
him that the Brookings Institution may be available to 
host a lunch and the afternoon sessions, and that the 
Turkish Foreign Economic Relations Board (Turkish 
acronym DEIK) and the American Turkish Council (ATC) 
could host a dinner on the evening of December 2. 
 
 
Comment 
------- 
 
 
9. (SBU) Gucuk's request to reopen the QIZ conflicts 
with MFA Deputy U/S Kilic's assurance several weeks ago 
that Turkey was interested in pursuing a QIZ as 
originally proposed (reftel).  Our contacts at the 
Foreign Trade Undersecretariat also have not pressed for 
a modified QIZ.  If MFA continues to pursue this, we 
will stress that the scope of the QIZ is not open to 
negotiation, and will again propose striking discussion 
of the QIZ from the EPC agenda if the Turkish side is 
not prepared to work within the original framework. 
Edelman