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Cablegate: Foreign Trade Undersecretary On Wto

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

051329Z Feb 04

UNCLAS SECTION 01 OF 02 ANKARA 000655

SIPDIS


DEPT FOR EB AND EUR/SE
DEPT PLEASE PASS USTR FOR LERRION
USDOC FOR ITA/MAC/DDEFALCO


SENSITIVE


E.O. 12958: N/A
TAGS: ETRD TU
SUBJECT: Foreign Trade Undersecretary on WTO
Negotiations, Regional and Bilateral Trade Issues


SENSITIVE BUT UNCLASSIFIED - PROTECT ACCORDINGLY


Ref: (A) State 6662 (B) Ankara 6048


Summary
-------


1. (SBU) Foreign Trade Undersecretary Tuncer Kayalar and
Department Head Hasan Yalcin told us on January 30 that
they found USTR Zoellick's letter on the WTO
negotiations to be very encouraging, particularly on
ending export subsidies in agriculture. Kayalar
reviewed GOT efforts to conclude a series of trade
agreements in the region and elsewhere, in part to align
Turkish trade policy with that of the EU. He also
contended that continued high Syrian tariffs are
blocking use of the railways to trade fuels with Iraq
and to relieve congestion at the Habur Gate. Kayalar
maintained that a Turkey QIZ would have no benefit for
Turkey unless textiles and other sensitive sectors were
included in its scope. He expressed some concern that
the strong lira was beginning to hurt Turkish exports.
We urged Kayalar to support rapid implementation of data
exclusivity protection for pharmaceuticals. End
Summary.


WTO Negotiations
----------------


2. (U) In a January 30 meeting with Econ Counselor and
Econoff, Foreign Trade Undersecretary Kayalar and
Multilateral Affairs Department Head Hasan Yalcin said
they were encouraged by USTR Zoellick's letter (ref A)
on moving the WTO negotiations forward in 2004. Yalcin
told us that Turkey views very positively the proposal
for a definite end date for export subsidies and an end
to the subsidy component of export credits in
agriculture. He added that, although many developing
countries had reacted positively to the letter, the EU's
position on export subsidies would be key. Yalcin told
us that State Minister Tuzmen planned to send a written
response to the letter in the near future.


Liberalizing Trade in Line with the Customs Union
--------------------------------------------- ----


2. (SBU) Kayalar said that Turkey is actively pursuing
trade liberalization with a number of countries in the
region, within the framework of aligning its trade
arrangements with the EU under the customs union. A
free trade agreement with Morocco was to have been
signed in late January, but the signing will be
postponed until the visit of the Moroccan Prime
Minister; the timing of this visit has not been
finalized. Kayalar said he expected FTAs with Tunisia
and "Palestine" to be completed after the Moroccan FTA
signing. Turkey continues to negotiate with Jordan on a
possible FTA. Outside the region, Turkey is also keen
to negotiate an FTA with Mexico, which Kayalar
characterized as closed to Turkish exports following the
EU - Mexico FTA.


3. (SBU) Kayalar told us that Turkey is pressing
Brussels to intercede with its FTA partners on the need
to negotiate with Turkey. Turkey would prefer that the
EU and Turkey negotiate new FTAs with third parties in
parallel, or that future EU FTAs include a clause
requiring that the third party negotiate an FTA with
Turkey. Note: In adopting Europe's common external
tariff under the customs union, Turkey made steep,
unilateral cuts in tariffs on third country products,
including on those from the EU's FTA partners. Those
partners will thus realize relatively small gains in
Turkish market access under an FTA with Turkey, but will
have to give up relatively high levels of protection
against Turkish imports. This, the Turks have long
said, creates an incentive for those countries to drag
out FTA negotiations and diverts trade. End Note.


Neighboring Countries
---------------------
4. (SBU) Kayalar said Turkey is keen to liberalize trade
in border regions with Syria and Iran. He predicted
that Turkey and Iran would soon come to agreement on a
border trade scheme, and said the Syrians were
considering a similar arrangement. To relieve
congestion at the Habur border crossing, the GOT would
like to trade fuels with Iraq by rail through Syria.
However, the rail link is not being used due to
continued Syrian insistence on high transit fees (ref
B).


Textiles and the QIZ
--------------------


5. (SBU) The Undersecretary told us that he had not as
yet received a readout on the Prime Minister's
Washington meetings and was not sure whether Qualifying
Industrial Zones (QIZs) had been raised. He
acknowledged that MFA took the position that Turkey
should pursue a QIZ excluding textiles and other import-
sensitive goods. However, Kayalar maintained that only
the Turkish apparel industry could benefit from the QIZ,
largely because U.S. tariffs outside that sector were
very low or nonexistent. He did say that one Turkish
fish processing company had expressed interest in a QIZ,
but this did not appear to be feasible unless the QIZ
could consist of a single factory.


6. (U) Kayalar remarked that Turkey's apparel
manufacturers were investing abroad. He noted that he
had visited Uzbekistan earlier in January, and that that
country has garnered about USD 300 million in Turkish
investment, including a factory exporting to Fruit of
the Loom.


Data Exclusivity
----------------


7. (SBU) EconCouns raised Assistant USTR Novelli's
letter to Kayalar urging implementation of data
exclusivity protection for pharmaceuticals. Kayalar
stated that the GOT was considering delayed
implementation (at the end of 2007). EconCouns replied
that this would be perceived negatively in Washington,
and could result in Turkey's elevation in the Watch List
system in the 2004 Special 301 cycle. Kayalar said he
would represent the USG position to others in the GOT,
but added that no action was likely before the municipal
elections in March 2004.


Turkey's Trade Deficit
----------------------


8. (SBU) Kayalar told us he was pleased with Turkish
exporters' record sales in 2003, but that the strong
lira was beginning to put a dent in future orders. He
characterized the level of imports, at some USD 8.5
billion in December, as alarming. While acknowledging
the central bank's dedication to cutting inflation
through a strong lira, Kayalar opined that Turkish
exports could not continue to compete globally at
current exchange rates.
Edelman

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