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Cablegate: Letter From Foreign Trade Minister Tuzmen to Ustr Schwab

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Dianne Wampler 09/21/2006 04:36:30 PM From DB/Inbox: Dianne Wampler

Cable
Text:


UNCLAS SENSITIVE ANKARA 05511

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ACTION: ECON
INFO: CONS PA RAO FAS MGT FCS PMA POL DCM AMB

DISSEMINATION: ECON /1
CHARGE: PROG

APPROVED: ECON:TGOLDBERGER
DRAFTED: ECON:RKIMBRELL
CLEARED: NONE

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PP RUEHC RUCPDOC RUEHIT RUEHDA RUEATRS
DE RUEHAK #5511/01 2631421
ZNR UUUUU ZZH
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FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 8862
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL 1317
RUEHDA/AMCONSUL ADANA 1123
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 ANKARA 005511

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DEPT FOR EB A/S SULLIVAN
PASS USTR FOR AUSTR DONNELLY AMD MERIDETH SANDLER
USDOC FOR ITA/MAC/CRUSNACK
TREASURY FOR JONATHAN ROSE

E.O. 12958: N/A
TAGS: ETRD ECON TU
SUBJECT: LETTER FROM FOREIGN TRADE MINISTER TUZMEN TO USTR SCHWAB
REGARDING TURKEY'S GSP BENEFITS

REF: A) ANKARA 5401, B) ANKARA 5093, C) STATE 128359

1. On September 19, we received the following letter from State
Minister for Foreign Trade, Kursad Tuzmen, to USTR Schwab regarding
Turkey's Generalized System of Preferences (GSP) benefits. The
letter provides a number of arguments for Turkey's retention of GSP.
As stated in refs A and B, this issue has become one of paramount
importance for the Foreign Trade Undersecretariat (FTU) and Turkey's
business community, and they are taking the review very seriously.

2. Begin text of letter:

REPUBLIC OF TURKEY MINISTRY OF STATE

Ambassador Ms. Susan Schwab
The US Trade Representative

September 18, 2006

Dear Susan:

This correspondence is in response to the notice by your office of a
review or the eligibility of certain GSP beneficiary countries,
including Turkey, and of existing competitive need limitation
waivers of which Turkey holds two.

The conditions of trade and the global market are significantly
different from those existing in 1975 when the Generalized System of
Preferences was initiated by the United States and several other
"developed" countries. Since then, the competitive factors and
economic conditions affecting world trade have been dramatically
altered by events such as the end of the Cold War and the entry of a
number of "new" trading states in the global marketplace, formation
of the World Trade Organization with attendant disciplines in
non-tariff barriers (including the demise of global textile and
apparel quotas), seventy dollar per barrel oil, economic crises in
Asia, South America and in my country, and the burgeoning use of
unilateral and bilateral programs by the United States and Europe to
compete for low cost goods and market access.

Throughout these challenging times, the United States has maintained
one trade preference program that has offered a special dialogue and
an effective incentive for many developing countries to adopt free
market practices, economic diversification and related policies and
practices of democratic civil society. The Generalized System of
Preferences has been one of the most successful trade policy tools
in recent U.S. history. This success has been achieved by
recognizing that reducing tariff barriers to the products of
companies and people in developing countries, like Turkey, gives
them an opportunity to compete for a share of the U.S. market - an
opportunity that they appreciate and readily embrace. Certainly
Turkey has taken advantage of this opportunity. And Turkey asks that
it continue to be able to avail itself of the opportunity to improve
itself by doing business with the United States through the GSP
program.

When the GSP was adopted, it was contemplated that countries and
products would "graduate" from its benefits. Products are regularly
removed but wholesale discharge of a country from GSP eligibility is
rare. In 1989, the President found that Hong Kong, the Republic of
Korea, Singapore and Taiwan had reached a point in their economic
development and international competitiveness that warranted their
graduation, noting that these countries had "achieved an impressive
level of economic development and competitiveness, which can be
sustained without the preferences provided by the program." I add
the emphasis to the last part of the President's statement because
it is critical to the decision about to be made regarding Turkey.

Hindsight proves that the economies of the countries graduated in
1989 were and are capable of sustained development and
competitiveness. While Turkey has made significant improvements in
its economy in the past five years, it is not at all in the same
shape as the economics mentioned above at the time of their
graduation.

Turkey has been working with the International Monetary Fund since
1999 to restructure its economy. The work is not done, as the IMF
Country Report on Turkey dated July 2006 indicates. There are many
economic indicators that show Turkey to be economically healthier
than four years ago, but recent data also reveal the fragile nature
of our recovery. Our terms of trade are declining, largely due to
the strength of our currency and the stress our textile exporters
arc experiencing (they represent practically 30% of our overall
annual export earnings) by reason of the intense global competition
fostered by the demise of the global quota system.

An UNCTAD report in 2005 noted that of seventy categories of leading
products exported by major exporting "developing countries", Turkey
only ranked in 28 and 10 of those were in the textile and apparel
sectors (which are not eligible for GSP treatment) which are
steadily being overwhelmed by countries like China, Pakistan and
Malaysia. Thus, my country may he a substantial exporter in a few
sectors, but it is in serious need of diversification.
Notwithstanding challenges such as these, Turkey maintains one of
the lowest average ad valorem tariff rates on non-agricultural and
non-fuel products in the world: in 2003 it was 4.3%. Compared to
Brazi1 at 14.0% or India at 28.1 %, and it is evident that Turkey is
willing to suffer the competitive strains required to strengthen its
economy. But it still needs support like the United States GSP
program.

Turkey's improvements are yet to be determined as "sustained" and
have not shown themselves to have permeated many sectors that need
to improve export performance. Therefore, with respect to Turkey's
access to the U.S. market for newly developing sectors in our
economy, the GSP program remains a critical factor in our
developmental equation.

Assuming that the review of Turkey's economic condition leads your
office to the conclusion that country graduation is not warranted at
this time, I also would like to request that the one Turkish sector
currently benefiting from CNL waivers, continue to receive the
waivers. Our gold jewelry exports to the United States (HTSUS
numbers 7113.19:29 and 7113.19.50) have exceeded the monetary limit
for GSP but hardly come close to demonstrating the ability to
compete without the preference against country sources such as
China, India, Italy, Hong Kong or Mexico. Each country exports far
more to the U.S. than Turkey (China, Hong Kong and Italy without GSP
treatment, Mexico with the NAFTA advantage and India exporting four
times the amount than Turkey to the U.S. also under a CNL waiver)
and they will be more than able to pick off Turkish customers if a
duty is imposed on jewelry imports from my country.

In Turkey, the gold jewelry sector employs over 250,000 people,
often incorporating whole families in the business. With the price
of gold nearly doubling in the last three years, Turkey is at a
competitive disadvantage since it must source its gold from foreign
sources. In order to keep that important sector alive, we need to
maintain our competitiveness in markets such as the United States:
Without the CNL waiver, it becomes practically impossible.

Turkey is a developing and dynamic country with great promise. For
the past five years the people of Turkey have undertaken painful
economic reform measures and have made enormous efforts to adjust to
the realities of the new global market - while the country continues
to adhere to its WTO obligations and maintains liberal rules and
policies with respect to access to its market. These actions should
not be disregarded. What is left of affirmative trade policy tools
and programs for the United States to offer Turkey should remain in
place while Turkey's efforts bear fruit, not terminated at a time
when it would serve as a catalyst for serious economic and trade
difficulties. The GSP program is a vital factor in Turkey's
eventual achievement of sustained economic development and
international competitiveness. For that reason, I ask that you
maintain Turkey's eligibility in the program.

Sincerely Yours,

Kursad Tuzmen

Minister of State

End text of letter.

Wilson

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