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Cablegate: Got Pessimistic About Post-2005 Textile And

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 007002

SIPDIS

DEPT FOR EB/TPP/ABT - EHEARTNEY, EB/IFD/OIA
COMMERCE FOR ITA/OTEXA/MARIA D'ANDREA
DEPT PASS USTR FOR LERRION
TREASURY FOR INTERNATIONAL AFFAIRS

SENSITIVE

E.O. 12958: N/A
TAGS: ETRD EIND KTEX EFIN TU
SUBJECT: GOT PESSIMISTIC ABOUT POST-2005 TEXTILE AND
APPAREL EXPORTS AND PRODUCTION

Ref: (A) Istanbul 1807 (B) ADANA 112
(C) Ankara 5661

SENSITIVE BUT UNCLASSIFIED. PLEASE HANDLE ACCORDINGLY.

Summary
-------

1. (SBU) A Turkish Foreign Trade official expressed
considerable pessimism about the likely losses of
Turkey's textile industry post-2005, and urged the USG
to impose safeguards on Chinese apparel imports.
Turkey will retain some competitive advantages,
especially proximity and short delivery times to the EU
market, which should help limit the impact.
Nevertheless, liberalization will create economic
dislocation, varying according to region and product
line. In the wake of the Egypt QIZ announcement, there
may be renewed pressure from the Turks for trade
concessions from the USG. End Summary.

2. (U) Turkish officials, including State Minister for
Foreign Trade Kursad Tuzmen, as well as industry
executives have been bullish in their comments to the
media on Turkish industry's future after textile and
apparel quotas are lifted at the beginning of 2005. In
November, Tuzmen told the media that Turkey - with its
strong record in and proximity to - Western markets,
was ready for heightened competition with China.
Turkish executives, such as the Chair of the Turkish
Exporters Assembly (TIM), have made similar arguments,
and have led business delegations to China to try to
establish partnerships between Turkish and Chinese
companies.

3. (SBU) In a December 10 meeting with Econoff, Econ
Specialist and TDY U.S. Treasury Economist, Foreign
Trade Undersecretariat (FTU) Deputy Director General
for Exports Ziya Altunyaldiz echoed the pessimism of
Turkish textile and apparel industry executives on
their ability to withstand increased competition after
January 2005 (ref A). Altunyaldiz opined that only a
few countries (and principally China) would benefit
from the end of the quota system, and that other
developing countries including Turkey expected to lose
ground in traditional export markets. FTU believes
that, beginning in the second half of 2005 and over the
next several years, Turkey could lose 20 to 30 percent
of its export market in these sectors. Altunyaldiz was
not optimistic that a focus on branding and high-value
products would compensate for these losses. Under
these circumstances, Altunyaldiz added, it was vital
that the EU and USG take a stand for "fair trade" and
impose safeguard and other restrictive trade measures
to combat unfair practices in the Chinese apparel
industry.

4. (U) Econoff suggested that cooperation with the USG
in intellectual property protection and in maritime
security could indirectly benefit Turkish exporters.
He described the U.S. STOP! Initiative to combat
counterfeit and pirated goods worldwide, and noted that
some successful Turkish clothing exporters were already
experiencing losses in foreign markets due to these
problems. Econoff also raised the U.S. proposal to
include the port of Izmir in the Container Security
Initiative. Contrary to Turkish industry's perceptions
(ref A), this program should enhance rather than damage
Turkey's competitive position relative to countries not
included in the program.

5. (SBU) Several of Embassy's nongovernmental contacts
in Ankara backed up the dire predictions of FTU as well
as Istanbul-based industry associations on export and
production losses in a post-quota world. The General
Secretary of the Cotton Manufacturer's Association, the

SIPDIS
Deputy Secretary General of TIM, and the leader of the
Oz-Iplik Labor Union all agreed that Turkish industry
would be hurt badly by Chinese competition "if" textile
and clothing categories are fully integrated into the
WTO system as planned. Note: Our non-governmental
interlocutors believed that there is still a chance,
albeit a small one, that WTO members would agree to the
three-year postponement to the end of the quota system
called for in the Istanbul Declaration of U.S. and
Turkish manufacturers. The GOT has not endorsed this
delay, but has communicated serious concerns at the WTO
Council for Trade in Goods about the likely negative
impact on most developing countries. End Note. TIM
predicted that Turkey's advantages (principally
proximity to EU markets and a proven track record
there) would limit losses to some extent. On the other
hand, Oz-Iplik hinted at massive job losses and
possibly even social unrest in conjunction with the
abolition of quotas.

6. (SBU) Several of Consulate Adana's contacts in the
industry in southeastern Turkey recently pointed out
that unfair trade practices in Turkey's informal
economy are also a source of pressure on taxpaying, law-
abiding firms in Turkey. These practices, including
tax avoidance, theft of electricity, and violation of
minimum wage legislation. FTU's Altunyaldiz expressed
the opinion that the lifting of quotas would have a
more severe effect on Turkey's formal sector apparel
companies than on its informal sector companies.

Comment
-------

7. (SBU) Turkish industry and, to a lesser extent, the
GOT are stressing the prospect of losses in export
markets for their apparel manufacturers, while
multilateral organizations and investment banks predict
a more limited impact. The Turks have an incentive to
magnify potential losses to encourage the U.S. and the
EU to impose safeguard actions against Chinese goods,
and possibly to support calls for trade preferences.
This is even more likely now in the wake of the
agreement on Egypt Qualifying Industrial Zones.
Turkey's geographic and other advantages, as well as
the trend toward a more diverse industrial and export
base, will help limit Turkey's losses post-2005.
However, some economic dislocation, varying on a
regional basis and falling most heavily on the lowest
value-added products, is likely.
EDELMAN

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