US embassy cable - 04ANKARA7002

UNCLAS SECTION 01 OF 02 ANKARA 007002 
 
SIPDIS 
 
DEPT FOR EB/TPP/ABT - EHEARTNEY, EB/IFD/OIA 
COMMERCE FOR ITA/OTEXA/MARIA D'ANDREA 
DEPT PASS USTR FOR LERRION 
TREASURY FOR INTERNATIONAL AFFAIRS 
 
SENSITIVE 
 
E.O. 12958: N/A 
TAGS: ETRD, EIND, KTEX, EFIN, TU 
SUBJECT:  GOT PESSIMISTIC ABOUT POST-2005 TEXTILE AND 
APPAREL EXPORTS AND PRODUCTION 
 
Ref: (A) Istanbul 1807 (B) ADANA 112 
(C) Ankara 5661 
 
SENSITIVE BUT UNCLASSIFIED.  PLEASE HANDLE ACCORDINGLY. 
 
Summary 
------- 
 
1. (SBU) A Turkish Foreign Trade official expressed 
considerable pessimism about the likely losses of 
Turkey's textile industry post-2005, and urged the USG 
to impose safeguards on Chinese apparel imports. 
Turkey will retain some competitive advantages, 
especially proximity and short delivery times to the EU 
market, which should help limit the impact. 
Nevertheless, liberalization will create economic 
dislocation, varying according to region and product 
line.  In the wake of the Egypt QIZ announcement, there 
may be renewed pressure from the Turks for trade 
concessions from the USG.  End Summary. 
 
2. (U) Turkish officials, including State Minister for 
Foreign Trade Kursad Tuzmen, as well as industry 
executives have been bullish in their comments to the 
media on Turkish industry's future after textile and 
apparel quotas are lifted at the beginning of 2005.  In 
November, Tuzmen told the media that Turkey - with its 
strong record in and proximity to - Western markets, 
was ready for heightened competition with China. 
Turkish executives, such as the Chair of the Turkish 
Exporters Assembly (TIM), have made similar arguments, 
and have led business delegations to China to try to 
establish partnerships between Turkish and Chinese 
companies. 
 
3. (SBU) In a December 10 meeting with Econoff, Econ 
Specialist and TDY U.S. Treasury Economist, Foreign 
Trade Undersecretariat (FTU) Deputy Director General 
for Exports Ziya Altunyaldiz echoed the pessimism of 
Turkish textile and apparel industry executives on 
their ability to withstand increased competition after 
January 2005 (ref A).  Altunyaldiz opined that only a 
few countries (and principally China) would benefit 
from the end of the quota system, and that other 
developing countries including Turkey expected to lose 
ground in traditional export markets.  FTU believes 
that, beginning in the second half of 2005 and over the 
next several years, Turkey could lose 20 to 30 percent 
of its export market in these sectors.  Altunyaldiz was 
not optimistic that a focus on branding and high-value 
products would compensate for these losses.  Under 
these circumstances, Altunyaldiz added, it was vital 
that the EU and USG take a stand for "fair trade" and 
impose safeguard and other restrictive trade measures 
to combat unfair practices in the Chinese apparel 
industry. 
 
4. (U) Econoff suggested that cooperation with the USG 
in intellectual property protection and in maritime 
security could indirectly benefit Turkish exporters. 
He described the U.S. STOP! Initiative to combat 
counterfeit and pirated goods worldwide, and noted that 
some successful Turkish clothing exporters were already 
experiencing losses in foreign markets due to these 
problems.  Econoff also raised the U.S. proposal to 
include the port of Izmir in the Container Security 
Initiative.  Contrary to Turkish industry's perceptions 
(ref A), this program should enhance rather than damage 
Turkey's competitive position relative to countries not 
included in the program. 
 
5. (SBU) Several of Embassy's nongovernmental contacts 
in Ankara backed up the dire predictions of FTU as well 
as Istanbul-based industry associations on export and 
production losses in a post-quota world.  The General 
Secretary of the Cotton Manufacturer's Association, the 
 
SIPDIS 
Deputy Secretary General of TIM, and the leader of the 
Oz-Iplik Labor Union all agreed that Turkish industry 
would be hurt badly by Chinese competition "if" textile 
and clothing categories are fully integrated into the 
WTO system as planned.  Note:  Our non-governmental 
interlocutors believed that there is still a chance, 
albeit a small one, that WTO members would agree to the 
three-year postponement to the end of the quota system 
called for in the Istanbul Declaration of U.S. and 
Turkish manufacturers.  The GOT has not endorsed this 
delay, but has communicated serious concerns at the WTO 
Council for Trade in Goods about the likely negative 
impact on most developing countries.  End Note.  TIM 
predicted that Turkey's advantages (principally 
proximity to EU markets and a proven track record 
there) would limit losses to some extent.  On the other 
hand, Oz-Iplik hinted at massive job losses and 
possibly even social unrest in conjunction with the 
abolition of quotas. 
 
6. (SBU) Several of Consulate Adana's contacts in the 
industry in southeastern Turkey recently pointed out 
that unfair trade practices in Turkey's informal 
economy are also a source of pressure on taxpaying, law- 
abiding firms in Turkey.  These practices, including 
tax avoidance, theft of electricity, and violation of 
minimum wage legislation. FTU's Altunyaldiz expressed 
the opinion that the lifting of quotas would have a 
more severe effect on Turkey's formal sector apparel 
companies than on its informal sector companies. 
 
Comment 
------- 
 
7. (SBU) Turkish industry and, to a lesser extent, the 
GOT are stressing the prospect of losses in export 
markets for their apparel manufacturers, while 
multilateral organizations and investment banks predict 
a more limited impact.  The Turks have an incentive to 
magnify potential losses to encourage the U.S. and the 
EU to impose safeguard actions against Chinese goods, 
and possibly to support calls for trade preferences. 
This is even more likely now in the wake of the 
agreement on Egypt Qualifying Industrial Zones. 
Turkey's geographic and other advantages, as well as 
the trend toward a more diverse industrial and export 
base, will help limit Turkey's losses post-2005. 
However, some economic dislocation, varying on a 
regional basis and falling most heavily on the lowest 
value-added products, is likely. 
EDELMAN