US embassy cable - 02ANKARA9193

UNCLAS SECTION 01 OF 02 ANKARA 009193 
 
SIPDIS 
 
 
STATE FOR E, H, EB, EUR/SE AND NEA 
DEPT PLEASE PASS USTR FOR DBIRDSEY 
USDOC FOR ITA/MAC/DDEFALCO 
 
 
SENSITIVE 
 
 
E.O. 12958: N/A 
TAGS: ETRD, PREL, TU, IS, USTR 
SUBJECT:  Turkish Foreign Trade Officials Seeking Broader 
QIZ, New FTAs 
 
 
1. (SBU) Summary:  In recent meetings, Foreign Trade 
officials reiterated their desire for a QIZ with fewer 
sectoral restrictions, contending that, in its current 
form, the QIZ would have a very limited impact on Turkish 
exports.  They also made contradictory statements on the 
EU Customs Union and its relationship to an FTA with the 
United States.  End Summary. 
 
 
QIZs 
---- 
 
 
2. (SBU) In a December 24 meeting with Husnu Dilemre, 
Deputy Director General for Agreements, Econoff noted that 
U.S. legislation to create Qualifying Industrial Zones in 
Turkey would have to be resubmitted to the new Congress, 
and that the legislative vehicle for doing this is not yet 
clear.  Dilemre said that he hoped this would provide an 
opportunity to revisit the QIZ's sectoral exclusions, as 
Foreign Trade's research to date had shown that a QIZ, in 
the form originally proposed, would have little economic 
benefit.  He offered an alternate proposal which would 
limit a Turkey QIZ's impact on sensitive sectors of the 
U.S. economy by capping total exports (at a level to be 
negotiated) in exchange for the right to export duty-free 
in all sectors.  This single QIZ, to be located in an area 
of high unemployment (likely in eastern Turkey), would be 
used as a development tool.  Dilemre implied that this 
idea had not been fully cleared by the new State Minister 
for Foreign Trade Kursad Tuzmen.  Econoff said he would 
report the idea. 
 
 
Customs Union and FTAs 
---------------------- 
 
 
3. (SBU) Meeting with new Foreign Trade Undersecretary 
Tuncer Kayalar on December 20, Ag Couns and Econoff 
discussed new Turkish quarantine regulations (septel) and 
the EU customs union.  Commenting on State Minister 
Tuzmen's recent statements calling for review of the 
customs union, Kayalar told us that the GOT would not seek 
wholesale revisions to the customs union.  Rather, Turkey 
is seeking EU support in negotiating free trade agreements 
with third countries.  Under the customs union, Turkey is 
required to align commercial and trade policy with the EU, 
which includes signing FTAs with the same third countries. 
Kayalar told us that some of these third countries are 
delaying negotiations because of an asymmetry in 
industrial tariffs:  some countries, notably Algeria, have 
little incentive to conclude an FTA because they would be 
required to cut their own relatively high tariffs on 
Turkish goods to zero, while Turkish tariffs on their 
goods are already relatively low.  Kayalar said Turkey 
seeks EU pressure on these countries to accelerate 
negotiations and end Turkish firms' competitive 
disadvantage vis-a-vis European exporters. 
 
 
4. (SBU) Kayalar also said the GOT is interested in 
negotiating FTAs with the United States, Russia and 
Ukraine, none of which have FTAs with the EU.  He 
acknowledged that this would require a derogation from the 
EU, and that obtaining this would be difficult.  However, 
he added that the new GOT would try harder than its 
predecessors in this area.  Conversely, Dilemre told 
Econoff several days later that an FTA with the United 
States would be a major departure from current Turkish 
trade policy, which is based on alignment with EU 
commercial/trade policy under the customs union.  He also 
questioned the value of negotiating an agreement that 
would have to be abandoned on Turkey's EU accession. 
 
 
Comment 
------- 
 
 
5. (SBU) The Turks have raised the idea of an FTA with the 
United States periodically over the last several years, 
while acknowledging that it is not compatible with the 
customs union.  Further, it is not clear that the GOT 
would be willing to offer the concessions (lowering 
tariffs and non-tariff barriers, especially in 
agriculture, strengthening intellectual property 
protection, among others) needed to negotiate an FTA based 
on mutual benefit.  For these reasons, the Turks have 
sought unilateral preferences, such as U.S. concessions in 
the textiles and apparel trade and a less restrictive QIZ, 
rather than a more far-reaching reciprocal liberalization 
of trade. 
Pearson