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Cablegate: Tunisia's Textile Sector Bounces Back

VZCZCXRO2177
PP RUEHTRO
DE RUEHTU #1299/01 2671415
ZNR UUUUU ZZH
P 241415Z SEP 07
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 3914
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0931
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7541
RUEHEG/AMEMBASSY CAIRO PRIORITY 1485
RUEHLO/AMEMBASSY LONDON PRIORITY 1368
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0910
RUEHFR/AMEMBASSY PARIS PRIORITY 1839
RUEHRB/AMEMBASSY RABAT PRIORITY 8441
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0139
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4138
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 001299

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EEB/TPP/ABT (CLEMENTS) AND NEA/MAG (HARRIS)
STATE PASS USTR (BURKHEAD)
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES)
CASABLANCA FOR FCS (ORTIZ)
LONDON AND PARIS FOR NEA WATCHER

E.O. 12958: N/A
TAGS: ETRD KTEX BEXP TS
SUBJECT: TUNISIA'S TEXTILE SECTOR BOUNCES BACK

REF: A. STATE 114799
B. 06 TUNIS 2465
C. 06 TUNIS 2464

TUNIS 00001299 001.2 OF 002


-------
Summary
-------

1. (U) After experiencing job loss and a drop in exports in
recent years, the Tunisian textile sector appears to be back
in good health. Faced with competition from cheaper,
mass-produced Asian textiles, the Tunisian textile sector has
regained market share in Europe and the value of exports has
increased. Solid export performance for the second half of
2006 and early 2007 indicate that the sector's strategy of
re-orienting towards value-added production was a good one.
End Summary.

----------
Statistics
----------

2. (U) Per Ref A request, Post has gathered the following
statistics for 2006:

-- Total industrial production is estimated at US $5.2 billion
-- Total textile production is estimated at US $1.4 billion
-- Total value of textile exports is estimated at US $3.9
billion
-- Textile/apparel share of imports is about 16.76 percent
-- Textile/apparel share of exports is about 33.63 percent
-- Exports of textile/apparel to the US are US $17.65 million
-- Imports of textile/apparel from the US are US $14.32
million
-- Manufacturing employment is estimated at 554,600
-- Total textile employment estimated at 204,000

-------------------
Exports Bounce Back
-------------------

3. (U) Following the end of the Multifiber Agreement, the
Tunisian textile sector saw its market share erode in its
traditional European markets and experienced significant job
loss. Although 2005 and early 2006 looked bleak, the sector
appears to have bounced back, with the textile share of
exports rising 1.8 percent from 2005 to 2006. Najib Karafi,
Director General of GOT-founded Technical Center for Textiles
(CETTEX), told EconOff that textile exports are now back to
2001 levels. Although the volume of exports has not
increased, the focus on value-added production led to an
increase in the overall value of textile exports. In 2006,
textile exports earned US $3.9 billion, up from US $3.7
billion in 2005. The outlook for 2007 looks even brighter,
with textile exports up nearly 20 percent over the first half
of 2006.

--------
EU Bound
--------

4. (U) Although CETTEX and the National Federation for
Textile Employers (FENATEX) have emphasized the importance of
expanding into new markets, over 90 percent of textile
exports continue to be directed towards European Union
countries. Zied Charfi, Research Director at FENATEX, noted,
however, that there has been greater diversification within
the EU, with exports to Portugal, Spain and United Kingdom
rising. Karafi lamented that the sector has not had greater
success in diversifying trading partners, but stated that the
first priority had been to maintain market share in Europe.
He remarked that Tunisia had been successful in moving from
the 7th leading textile exporter to the EU to the 5th.

----------------------

TUNIS 00001299 002.2 OF 002


US Trade Still Limited
----------------------

5. (U) Charfi remarked that despite strong interest from
textile manufacturers, few producers have been able to
successfully break into the US market. Charfi expressed
disappointment that few of the manufacturers attending the
2006 Magic Show exposition in Las Vegas were able to generate
any business. Both Charfi and Karafi noted strong textile
sector support for a Free Trade Agreement with the United
States. Karafi added that most textile producers believe
they would benefit from an FTA.

------------------
Job Loss Staunched
------------------

6. (SBU) Estimates for jobs lost in the sector range from
36,000-50,000 over the period from 2000 to 2005. CETTEX
figures show that textile sector employment is 204,000
workers, up slightly from 194,000 in 2005. Karafi remarked
that while there have been closures and layoffs during the
past year, these have been offset by new investments and the
creation of new jobs. CETTEX recorded 71.3 million Tunisian
dinars (roughly US $56.7 million) in foreign direct
investment for 2006. A researcher from the General Union of
Tunisian Workers (UGTT) told EmbOff on September 20 that
while UGTT studies showed almost 36,000 jobs were lost
between 2000 and 2005, employment in the sector now appears
to have stabilized. Confirming the rosy picture presented by
CETTEX and FENATEX, he stated that textile unions and workers
indicate that the sector recovered in 2006.

-------
Comment
-------

7. (SBU) Given the importance of the textile sector to the
Tunisian economy, the sector's rebound is welcome news to the
GOT. The sector owes its rebound to successfully
re-orienting towards value-added production and to continued
foreign investment in the sector. Yet perhaps the most
important lesson from the textile sector's successful rebound
is that the GOT needs to allow market forces to operate
freely. Rather than bailing out failing manufacturers, the
GOT allowed non-competitive producers to close, despite the
job loss. In the end, the market, not the GOT, knows best.
End Comment.
GODEC

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