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Cablegate: Setting the Tone for the 2007 U.S.-Turkey Tifa Meetings

VZCZCXRO2442
RR RUEHDA
DE RUEHAK #0655/01 0811313
ZNR UUUUU ZZH
R 221313Z MAR 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 1423
INFO RUEHRC/USDA FAS WASHDC
RUCPDOC/USDOC WASHDC
RUEHIT/AMCONSUL ISTANBUL 2377
RUEHDA/AMCONSUL ADANA 1779

UNCLAS SECTION 01 OF 03 ANKARA 000655

SIPDIS

FAS/W FOR ITP
USDOC FOR ITA/MAC/OEURA/CPD/CRUSNACK
STATE PLEASE PASS USTR FOR SDONNELLY AND LERRION

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ETRD EAGR KIPR TU
SUBJECT: SETTING THE TONE FOR THE 2007 U.S.-TURKEY TIFA MEETINGS

Ref: A) Ankara 128, B) 06 Ankara 5335

This information is sensitive but unclassified. Please protect
accordingly.

1. (SBU) Summary: The fifth U.S. Turkey TIFA discussions in
Washington provide an opportunity to build on the positive tone set
in the 2006 meetings to further improve our bilateral trade
relationship. Turkey has made significant improvements to its
investment climate, and FDI is rising considerably, but certain
market access issues remain important for U.S. companies. Access
for agricultural products is the most limited, while IPR is an
ever-present issue that deserves a broad discussion during the
talks. The Turkish side will raise recent discussion of new
investigations into Turkish exports of iron and steel products,
which they argue could affect approximately one quarter of total
Turkish exports. We encourage the early establishment of the U.S.
delegation in order to pressure the broadest participation possible
on the Turkish side. End summary.

2. (SBU) The fifth U.S.-Turkey Trade and Investment Framework
Agreement (TIFA) discussions are scheduled for April 12 - 13, 2007,
in Washington. The Turkish delegation will be led by Foreign Trade
(FTU) Deputy Undersecretary Ulker Guzel. Building on the positive
dialogue restarted during the 2006 TIFA in Ankara, the 2007 TIFA
meetings provide an opportunity for a discussion focusing not only
on our bilateral trade problems but also on ways to improve
U.S.-Turkish trade relations.

3. (SBU) The TIFA is an important part of Secretary Rice and Foreign
Minister Gul's "Shared Vision and Structured Dialogue" in which they
specifically call for strengthening Turkey's economy by deepening
economic cooperation and increasing business exchanges. This year's
meetings come at a time when many of the trade disputes that have
plagued our bilateral trade relationship have been resolved. Turkey
has also made significant progress in improving its investment
climate, and FDI levels continue to rise significantly (ref C).

4. (SBU) While there have been considerable improvements, market
access issues remain. The sector in which these issues are most
prominent is access for U.S. agricultural products. The United
States is currently pursuing a case at the WTO Dispute Settlement
Body that challenges Turkey's import restrictions on U.S. rice.
Turkey also restricts or prevents imports of U.S. beef and poultry
and other grains, fruits and vegetables. Turkey has made
considerable improvement in its IPR protection infrastructure and
legal framework (ref A), but issues related to pharmaceutical data
exclusivity and pricing and reimbursement continue to be a major
concern to U.S. pharmaceutical companies. In addition to
pharmaceutical IPR, Turkey also needs to continue its law
enforcement efforts to combat the production and distribution of
counterfeited goods.

Ag Market Access a Key Topic
----------------------------

5. (SBU) Turkey is currently going through the EU accession
process, which requires harmonization of its laws and regulations
with the so-called 'acquis communautaire.' While it joined the
European Customs Union in 1996, the Customs Union is limited to
industrial goods and does not apply to agricultural trade. Because
of this, Turkey has been able to retain a number of barriers to
agricultural imports that would threaten the viability of local
production. In 2006, however, USTR filed a case against Turkey in
the WTO's Dispute Settlement Body (DSB) that challenges the use of
control certificates to limit imports of rice, and by extension,
other agricultural products. Agricultural market access issues
should compose a large part of the upcoming TIFA discussions.

6. (SBU) Specific agricultural market access issues include
Turkey's:

-- lack of Sanitary and Phytosanitary Standards(SPS)/Technical
Barriers to Trade (TBT) Notification;
-- unscientific SPS measures;
-- unscientific import documentation requirements;
-- inordinately high tariffs;
-- and de facto import restrictions on items such as beef and
poultry.

IPR -Systemic Changes and Expectations Should Be Addressed
---------------------------------------------

7. (SBU) IPR protection is an ever-present topic on our bilateral
economic agenda, and Turkey currently sits on USTR's Special 301

ANKARA 00000655 002 OF 003


Priority Watch List. Significant improvements have been made to
Turkey's protection infrastructure (ref A), and they continue to
make progress on harmonizing Turkey's legal infrastructure with EU
requirements. A number of problems, however, still remain. U.S.
pharmaceutical companies in Turkey continue to express concern about
the remaining marketing applications for generic products filed
prior to January 1, 2005, on which the Ministry of Health has not
yet made a decision. Indeed, in our meetings with MOH officials
they have made it clear that their priority is to process the post
2005 applications, both for generic and innovative drugs, and that
many of the files for the generic applications in question have
never been completed by the companies. We do not anticipate that
decisions will be made on these applications. However, U.S.
companies continue to suffer from the resulting uncertainty.

8. (SBU) The Foreign Trade Undersecretariat eagerly cooperated with
us to compile the requested information during the Advance Special
301 review process (ref A). We encourage USTR and EEB/IPE to
respond to this information indicating the areas in which progress
was positive, and areas in which more action is expected. We
propose creating an "IPR Action Plan" similar to the one developed
for Greece that would provide Turkish policy makers with concrete
indicators of success and a clear plan of what is expected by U.S.
IPR policy makers. We hope that the TIFA will provide the two sides
with an opportunity to have a broader discussion of IPR protection
that goes beyond pharmaceutical data exclusivity and the generic
applications still awaiting a decision (ref B).

Distilled Spirits
-----------------

9. (SBU) Little has been done to rectify the preferential treatment
given to raki manufacturers in Turkey since our discussion of this
issue in the 2006 TIFA. The issue is the same - raki is classified
differently than other distilled spirits and therefore is taxed and
priced lower than other alcoholic beverages. In addition, distilled
spirit importers are required to get separate licenses from two
unrelated Turkish agencies, a time consuming and frustrating
process.

Government Procurement
----------------------

10. (SBU) We believe that it could be worthwhile to encourage the
Turkish delegation to move from observer status to full member of
the WTO Agreement on Government Procurement. Turkish firms,
particularly in the construction sector, are anxious to compete for
other governments' projects, especially those related to
construction. At the same time, U.S. companies complain frequently
to us about the obstacles they face bidding on Turkish government
contracts. An argument can also be made that gaining access to U.S.
public tenders could provide an alternative market for Turkey's
well-established general pharmaceutical manufacturers that have
traditionally taken advantage of gaps in Turkish IPR protection. If
Turkey is not willing to join the WTO Government Procurement
Agreement because of fears of competition from other non-U.S.
countries, we may wish to offer to negotiate a bilateral agreement
on government procurement.


Doha Round
----------

11. (SBU) Turkey does not have a unified position when it comes to
WTO issues but rather chooses to side with developed countries in
NAMA discussions and developing countries on agricultural issues.
For this reason, Turkey has not been a constructive participant in
WTO negotiations. USTR may wish to encourage a more flexible
position on agricultural issues given Turkey's potential as a
producer of manufactured products. Turkish officials will
undoubtedly raise their interest in special safeguard measures in
the textile sector.

Likely Turkish Issues
---------------------

12. (SBU) Iron and Steel: According to FTU officials, they plan to
raise iron/steel dumping investigations during the TIFA talks.
Atilla Bastirmaci, Head of America's Department, said Turkey
understands that U.S. iron and steel manufacturers have recently
called for new investigations into past U.S. iron/steel imports
because these manufacturers believe that investigations conducted
during the last three to four years were not done in the appropriate
way. He added that such new investigations could affect
approximately one quarter of Turkish exports to the U.S. during this

ANKARA 00000655 003 OF 003


time period.

13. (SBU) Regional Initiatives: The U.S. delegation should be
prepared to discuss the proposed "Joint Production Opportunities"
concept raised by EEB A/S Sullivan and MFA U/S Apakan during the
February Economic Partnership Commission (EPC) meeting. The GOT
sees this proposal as a replacement for including Turkey in
Qualified Industrial Zones (QIZs) and thus will need to be apprised
of what can and cannot be done under such an arrangement.

14. (SBU) GSPs: The Turkish delegation will likely raise Turkey's
participation in the Generalized System of Preferences (GSPs) and
request an update following last year's decision to temporarily
extend the current arrangements.

Meeting Logistics
-----------------

15. (SBU) FTU officials have asked whether Deputy U/S Guzel should
be prepared to give a detailed presentation on the Turkish economy
or a more brief introduction that addresses the bilateral trade
relationship. In addition, they asked if Deputy U/S Guzel and
A/USTR Donnelly would participate for the full day or only for a
morning session.

Comment
-------

15. (SBU) We look forward to the fifth U.S.-Turkey TIFA and stand
ready to assist with the preparations. Turkish officials, ever
mindful of protocol, will not begin to develop their delegation
until they find out the composition of the U.S. delegation and the
topics for discussion. In order to encourage broad Turkish
participation, we should present to FTU officials the U.S.
delegation as soon as possible so that they can begin urging their
colleagues from other agencies to attend. End comment.

MCELDOWNEY

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