Cablegate: Turkish Foreign Trade Officials Seeking Broader

This record is a partial extract of the original cable. The full text of the original cable is not available.

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

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