Cablegate: Mfa On Economic Partnership Commission Agenda,

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





E.O. 12958: N/A
SUBJECT: MFA on Economic Partnership Commission Agenda,
Renewed Pitch for a QIZ Including Textiles

Ref: Ankara 6164


1. (SBU) At an October 15 meeting with MFA on the
upcoming Economic Partnership Commission (EPC) meeting,
we suggested that both sides to focus on achieving
progress on investment issues. MFA acknowledged that it
was making preparations on investment issues, and
suggested that the EPC include two private sector panels
- on investment and on regional issues (principally Iraq
reconstruction). MFA also asked the U.S. side to use
the EPC to discuss a Qualifying Industrial Zone (QIZ)
including textiles/apparel. Emboffs responded that the
proposal is a nonstarter. End Summary.

2. (SBU) Econoff and Commercial Counselor discussed the
preliminary agenda for the second meeting of the
Economic Partnership Commission with Mehmet Gucuk, MFA
Deputy Director General for Bilateral Economic Affairs,
and with Serdar Cengiz, MFA Department Head, Bilateral
Economic Affairs, on October 15. Emboffs emphasized
resolving investment disputes and other investment
obstacles as a key objective of the EPC, and raised
problems facing Newmont Mining in Turkey as well as
intellectual property rights (IPR) concerns. Gucuk
pressed for more "flexibility" in the scope of the
Qualifying Industrial Zone (QIZ) proposal and offered
suggestions on private sector participation.

Investment Issues

3. (SBU) Econoff told Gucuk and Cengiz that we viewed
the EPC as a good opportunity to make progress on at
least some of problems facing U.S. companies investing
or otherwise doing business in Turkey, and thereby for
Turkey to improve its global investment image. FCS
Counselor pointed out that resolution of issues facing
Newmont Mines, including a new mining law, could result
in huge investment inflows in the next several years.
Econoff suggested that progress on intellectual property
issues would be especially welcome given the upcoming
Special 301 review.

4. (U) Gucuk responded that MFA is also making
preparations for the investment segment of the EPC. He
proposed that investment be the subject of one of two
private sector workshops connected with the EPC. At
this session, U.S. companies could present their
investment issues, and the GOT would brief on measures
taken to improve the investment climate. In a
subsequent telephone conversation, we also suggested to
Gucuk that MFA consider giving prominence to
telecommunications, information technology and energy
issues in this segment.

Regional Cooperation

5. (U) Gucuk proposed that the other workshop be devoted
to regional cooperation, including both Iraq and
Afghanistan reconstruction, and also possibly including
energy issues. The idea is for Turkish companies and
the GOT to interface with USAID, CPA, the Army Corps of
Engineers and U.S. contractors on reconstruction


6. (SBU) Gucuk stated that the GOT was under renewed
pressure from Turkish business associations to obtain a
broader QIZ, e.g. one without an explicit exclusion for
textiles and apparel exports or one which allowed
textile/apparel exports made with U.S. inputs. He
underlined that, even without explicit exclusions, USTR
would retain the authority to deny QIZ applications
based on textile and apparel exports. Gucuk also
pointed out that the U.S. had offered a modified QIZ
with some eligibility for textiles and apparel exports
including U.S. inputs prior to Operation Iraqi Freedom.
While the offer had been made under very different
circumstances, he contended that Turkey's situation
(implying the Turkish troop contribution for Iraq) had
changed significantly in the past month. Gucuk said
that MFA Undersecretary Ziyal was very focused on QIZs.
Gucuk stated that the QIZ issue would in fact be
Turkey's only EPC trade agenda item.

7. (SBU) Econoff responded that he would report Gucuk's
proposal, but that the most one could hope for would be
to pursue QIZ legislation along the lines of our
original QIZ proposal. He also noted that considerable
efforts would be needed to secure Congressional approval
even for a non-textile QIZ. He suggested that if both
sides could not use the EPC to discuss QIZs within their
original parameters, it would be better to drop this
subject from the EPC agenda.


8. (U) Econoff told Gucuk that we anticipated a one-day
EPC with a government-government morning session
followed by private sector meetings in the afternoon on
December 2. Gucuk said the Turkish Embassy had advised
him that the Brookings Institution may be available to
host a lunch and the afternoon sessions, and that the
Turkish Foreign Economic Relations Board (Turkish
acronym DEIK) and the American Turkish Council (ATC)
could host a dinner on the evening of December 2.


9. (SBU) Gucuk's request to reopen the QIZ conflicts
with MFA Deputy U/S Kilic's assurance several weeks ago
that Turkey was interested in pursuing a QIZ as
originally proposed (reftel). Our contacts at the
Foreign Trade Undersecretariat also have not pressed for
a modified QIZ. If MFA continues to pursue this, we
will stress that the scope of the QIZ is not open to
negotiation, and will again propose striking discussion
of the QIZ from the EPC agenda if the Turkish side is
not prepared to work within the original framework.

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