US embassy cable - 03ANKARA7790

UNCLAS SECTION 01 OF 03 ANKARA 007790 
 
SIPDIS 
 
 
SENSITIVE 
 
 
STATE FOR E, EB/CBED, EUR/SE AND NEA/NGA 
TREASURY FOR OASIA - JLEICHTER AND MMILLS 
DEPT PLEASE PASS USTR FOR CNOVELLI/LERRION 
FAS FOR ITP/THORBURN 
USDOC FOR ITA/MAC/DDEFALCO 
DEPT PASS OPIC - BRIAN TREADWELL 
DEPT PASS EXIMBANK - RAY ELLIS 
 
 
E.O. 12958: N/A 
TAGS: ECON, PREL, ETRD, EINV, ENRG, BEXP, KIPR, TU, IZ 
SUBJECT:  Economic Partnership Commission:  Comment on 
Action Items and Next Steps 
 
 
1. (U) This is an action cable.  See paras 13 and 14. 
 
 
Summary/Introduction 
-------------------- 
 
 
2. (SBU) Washington's draft EPC action plan can help 
build a stronger bilateral economic and commercial 
relationship with Turkey on economic reform, investment, 
trade, energy and regional issues.  Although the GOT 
accepted much of this program in comments given to 
EUR/SE on December 12, their proposed changes indicate 
they are not ready to commit to resolving investment 
disputes.  We recommend rejecting the GOT's language 
predicating tariff cuts for investors to resolve the 
Build-Operate-Transfer (BOT) disputes in the power 
sector.  Embassy strongly endorses Washington's proposal 
of a follow-on visit by experts on intellectual 
property, agriculture, investment and WTO issues, and 
urges USTR to respond in writing to the Turks' QIZ 
proposal.  End Summary. 
 
 
Economic Reform 
--------------- 
 
 
3. (U) The Turks agreed with our proposed action items 
reinforcing the reform program.  Embassy will continue 
to give particular emphasis to regulatory independence 
and privatization in our discussions with Turkish 
officials. 
 
 
Investment 
---------- 
 
 
4. (SBU) The GOT agreed to respond to the Advisory 
Committee on International Economic Policy (ACIEP) 
report, but watered down our suggested language on 
resolving investment problems and offered a text which 
presupposes that tariff cuts will be the answer to the 
BOT dispute.  While resolving these issues is one of our 
top economic priorities, we do not believe the Turks 
will agree to a text committing them to do so.  Embassy 
suggests the following language for the action item on 
investment and business disputes:  "Both sides recognize 
that resolution of existing investment and business 
disputes with U.S. companies and investors doing 
business in Turkey is key to attracting greater foreign 
direct investment inflows."  We recommend that 
Washington reject the Turkish Government's BOT language 
and propose the following text: "The parties noted that 
a resolution of the dispute with private power plants 
should be negotiated on the basis of mutual agreements." 
We will continue to raise the need for Turkey to resolve 
investment disputes - indeed, the Ambassador pushed hard 
on this matter with Ministers Babacan and Unakitan on 
December 17 (septel) - and suggest that it be raised 
with the Prime Minister during his January visit to 
Washington.  Investment issues should also be on the 
agenda for the proposed experts visit on trade issues 
(see below). 
 
 
5. (U) Embassy will pass information on OPIC investment 
funds to the GOT shortly, as promised at the EPC. 
 
 
Trade 
----- 
 
 
6. (SBU) Eximbank:  Embassy hopes to use the January 
2003 visit of U.S. Eximbank staff to followup on our 
offer of assistance to the Turkish Eximbank on 
establishing a framework agreement with the Trade Bank 
of Iraq. 
 
 
7. (SBU) Experts Visit:  We strongly support 
Washington's offer of an expert visit on intellectual 
property rights (IPR), Turkey's nontariff barriers in 
agriculture and WTO compliance.  We do not object to the 
Turkish proposal to discuss U.S. meat/poultry export 
issues in this forum.  The Turkish Foreign Trade 
Undersecretariat is receptive to such a visit, and has 
hinted that these discussions need not take place in the 
Trade and Investment Framework Agreement (TIFA) context. 
In view of the imminent start of the Special 301 IPR 
cycle, Embassy urges USTR and USDA to visit Ankara as 
early as possible in the first quarter of 2004 (see 
action request below).  The delegation should be 
prepared to offer an inventory of Turkish practices in 
IPR and agriculture which are inconsistent with its WTO 
obligations, and to drive home the point that Turkey is 
likely to be elevated to the Priority Watch List if 
corrective action is not taken.  Offering our views in 
writing on Turkey's IPR regime could help spur 
corrective action on problem areas, such as data 
exclusivity. 
 
 
8. (SBU) Qualifying Industrial Zones (QIZs):  At the 
EPC, the Turkish delegation provided U/S Larson and USTR 
with a QIZ proposal that would provide duty free access 
for limited textile/apparel exports, provided that there 
is U.S. product content or ownership interest in the 
exporting company.  Foreign Trade representatives told 
USTR and Econoff on the margins of the EPC that a QIZ 
without textiles is not worth pursuing, but MFA appears 
to disagree with that position.  Embassy urges USTR to 
respond to the Turkish proposal in writing.  Washington 
needs to make absolutely clear, and at the earliest 
possible date, the scope of the QIZ we are willing to 
pursue with Congress.  Absent absolute clarity, we will 
repeat the unproductive dialogue on textiles and QIZs. 
 
 
9. (U) Cooperation on Textiles:  The GOT proposed a new 
item which would bring experts together to discuss 
"cooperation possibilities" in textiles and apparel for 
the post-2005 period.  We raised this item in a meeting 
with Foreign Trade Undersecretariat officials on 
December 18.  They responded that the Turkish exporters' 
unions had asked for this item, and that the U.S. 
textile and apparel industry was reportedly also 
interested in holding these discussions.  Foreign Trade 
said it would consult with the exporters' union to 
further develop this proposal. 
 
 
Energy 
------ 
 
 
10. (SBU) Ambassador Mann is visiting Ankara this week 
to promote cooperation on both the Baku-Tbilisi-Ceyhan 
(BTC) pipeline and the completion of the Greek 
interconnector so that natural gas can transit Turkey to 
other European markets. 
 
 
Regional Cooperation 
-------------------- 
 
 
11. (SBU) The GOT proposed language on cooperation in 
Iraq which calls on Turkey and the CPA, rather than just 
Turkey, to implement the December 1 - 2 agreement on 
border cooperation, and added a commitment to open a 
second border gate.  We recommend reverting to our 
original wording, as the USG/CPA cannot promise 
implementation.  This is something the Turks will have 
to do jointly with the Iraqis. 
 
 
12. (SBU) Embassy suggests that we also considering 
coordinating diplomatic approaches to the Syrian 
Government to encourage greater cooperation and lower 
tariffs on rail shipments to Iraq via Syria. 
 
 
Action Requests 
--------------- 
 
 
13. (U) For USTR, USDA and other agencies:  Embassy 
strongly recommends that Washington agree to send an 
expert-level delegation to Ankara to discuss IPR, 
agriculture, WTO and investment issues as soon as 
possible. 
14. (U) For USTR:  Embassy recommends that USTR respond 
in writing to Turkey's proposed QIZ legislation as soon 
as possible. 
 
 
15. (U) Baghdad minimize considered. 
Edelman