US embassy cable - 05ISTANBUL1839

UNCLAS ISTANBUL 001839 
 
SIPDIS 
 
SENSITIVE 
 
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA 
USTR FOR LISA ERRION AND ABIOLA HEYLIGER 
 
E.O. 12958: N/A 
TAGS: ETRD, KTEX, TU, Istanbul 
SUBJECT: TURKISH TEXTILE SECTOR RENEWS CALL FOR 
PREFERENTIAL TRADE AGREEMENT 
 
 
This message was coordinated with Embassy Ankara.  Sensitive 
but unclassified -- not for internet distribution. 
 
1. (SBU) Summary:  In meetings with General Scowcroft's 
visiting American Turkish Council Delegation (ATC), Turkish 
textile representatives renewed their call for a preferential 
trade agreement to enable application of lower U.S. customs 
duties to Turkish textile exports to the U.S.  The industry 
has moved away from a Qualified Industrial Zone (QIZ) 
approach, pushing instead a model where Turkish manufacturers 
would use U.S. inputs and then re-export the finished product 
back to the United States.  At an October 18 IKTIB-sponsored 
dinner in Istanbul, Trade Minister Tuzmen also pushed for 
exploration of new approaches with the U.S. to encourage 
increased bilateral trade, suggesting a "free trade 
agreement" as one possibility.  End Summary. 
 
2. (SBU) Customs Concessions: In their meetings with General 
Scowcroft's delegation October 18, as in earlier sessions 
with Consulate and Embassy officers, Turkish textile industry 
representatives reiterated the need for either a free trade 
or a preferential trade agreement with the United States to 
counteract the "unfair" competition they see coming from 
China and other low-wage textile producing countries.  Rusen 
Cetin, a senior executive at the Istanbul Textile and Apparel 
Exporters' Association (IKTIB), estimates that his business 
alone has lost USD 8 million this year as a result of the new 
global textile trade rules, which have led to dramatic 
increases in Chinese textile exports to the U.S. and 
decreases for many Turkish producers.  IKTIB officials have 
pushed for a model where they would utilize U.S. inputs 
(perhaps 15-20 percent of final value-added), do final 
assembly here in Turkey, and then re-export the finished 
product to the United States.  Istanbul Textile and Apparel 
Association (IKTIB) President Suleyman Orakcioglu told 
Econoff that the association has consulted extensively with 
U.S. industry on this proposal, and that the U.S. side is 
supportive. 
 
3. (U) Customs Burden: In public remarks to the ATC 
delegation on October 18 at an IKTIB-hosted dinner in its 
honor, Orakcioglu noted that Turkey pays USD 255 million in 
customs duties on its USD 5.5 billion in exports to the U.S.. 
 (Note: both U.S. and Turkish trade figures show an export 
level of USD 4.8-4.9 billion.  End Note.)  USD 235 million of 
that total, he said, is levied on textiles and apparel, given 
prevailing rates of up to 33 percent.  He compared that rate 
to Turkey's own customs duties of 11 percent, and argued that 
without trade concessions Turkey's textile industry "will be 
finished."  If the European Union and Mexico can reach 
agreement on lowering customs rates, he concluded, there 
shouldn't be a problem for the U.S. and Turkey to do likewise. 
 
4. (U) Free Trade: In a speech to the same IKTIB dinner, 
Trade Minister Kursad Tuzmen reiterated the difficulties that 
Turkish exports face as a result of the 600 percent increase 
in Chinese exports to the U.S.  "There are many things that 
can be done with the U.S. from the perspective of trade," he 
said, adding that "even a free trade agreement" is possible. 
(Note: The minister frequently makes such statements, despite 
knowing that such an agreement is inconsistant with Turkey's 
customs union with the EU.  End Note.) 
 
5. (SBU) Comment: We continue to stress in our contacts with 
industry the need for it to look beyond preferential or free 
trade agreements and to focus instead on moving up the 
production chain to higher value-added products where Turkish 
industry can find its niche.  As IKTIB's continued agitation 
for a preferential agreement reflects, however, that effort 
has had little success.  We are not in a position to assess 
the extent to which IKTIB's statements accurately reflect the 
status of its discussion with U.S. industry, but forward them 
to alert Washington agencies to an issue that may well emerge 
in next month's TIFA consultations.  For their part, Trade 
officials in Ankara continue to note that the Turkey-EU 
Customs Union precludes the "dream" of a U.S.-Turkey FTA. 
End Comment. 
JONES