GETTING THE MOST OUT OF THE ECONOMIC PARTNERSHIP

UNCLAS SECTION 01 OF 02 ANKARA 005314

SIPDIS


SENSITIVE

FOR E, EB AND EUR/SE


E.O. 12958: N/A
TAGS: ETRD EINV PREL ENRG TU
SUBJECT: GETTING THE MOST OUT OF THE ECONOMIC PARTNERSHIP
COMMISSION MEETING



1. (SBU) Summary: Embassy recommends an ambitious agenda
for the next Economic Partnership Commission meeting,
tentatively slated for October, as a way to advance our
economic agenda with Turkey and bolster the broader bilateral
relationship. We suggest sessions on economic reform,
foreign direct investment (with private sector
participation),trade, and regional cooperation, to include
Iraq, Afghanistan and energy issues. The best prospects for
achieving concrete results lie in the investment and regional
cooperation arenas. We should, for example, shoot for
concrete steps to resolve some of our long-pending investment
problems, in return for which we could offer the Ambassador's
participation in an FDI roadshow. We also might consider a
session -- ideally with Iraqi participation -- to promote
Turkish-Iraqi trade and move forward on some of Turkey's
reconstruction proposals. End Summary.



2. (SBU) Embassy will discuss with the Foreign Ministry
this week the idea of holding the next EPC meeting in
Washington in early October. Assuming the meeting goes
forward, one of our most pressing challenges will be in
shaping Turkish expectations. The Turks saw the first EPC
meeting in February 2002 in terms of what the U.S. could do
for Turkey, and they will be inclined to view this one the
same way, despite the changes in the relationship. We will
need to work hard to make clear that this meeting is about
building a partnership, not offering one-way benefits.



3. (SBU) Embassy recommends an ambitious agenda for the
meeting, both to advance our full economic agenda and to
provide the best opportunity to achieve tangible results that
will boost bilateral relations. We suggest sessions on the
key aspects of the economic relationship highlighted in U/S
Larson's June 26 speech: economic reform, trade, foreign
direct investment, and regional cooperation, with the latter
including Iraq, Afghanistan, and regional energy issues.
Such an ambitious agenda might require more than one full day.



4. (SBU) We could use the economic reform session to remind
Turks that the key to enhancing bilateral trade and
investment is for Turkey to continue to implement the reforms
needed to stabilize the economy and improve the foreign
investment environment. If the meeting roughly coincides
with the release of the first disbursement under the new U.S.
financial assistance package, we could think about announcing
the disbursement at the EPC, though we note this could work
against our goal of shifting the EPC's focus from unilateral
benefits to bilateral partnership.



5. (SBU) On trade, we will want to note our concerns on
market access, especially in agriculture, but also want to
try to move the trade discussion off the textile/agriculture
talking points that both sides have used, with few results,
for the past several years. Options to consider include
initiating a dialogue on how to manage the trade (and
investment) relationship during Turkey's movement toward EU
accession, or exploring ways to enhance cooperation in the
WTO. The latter would fit nicely with our desire to focus
more on regional and global cooperation. We also should
decide whether to proceed with or kill the QIZ initiative.



6. (SBU) We expect the investment and regional cooperation
sessions to offer the best prospects for concrete results.
Private sector participation could be particularly helpful in
the investment session. We recommend inviting
representatives from U.S. companies with investments in
Turkey, and asking the GOT to invite executives from Turkish
companies with investments in the U.S. or which are working
with U.S. investors here (eg. Koc, Enka). Together, these
executives could discuss the keys to successful investments.
We also will want to urge the GOT to take action to resolve
long-pending problems, including those affecting U.S.
companies in the pharmaceutical, power, cola, and corn-based
sweetener industries. We could offer the GOT, in return for
concrete progress on some or all of these issues, the
Ambassador's participation in a Turkish FDI roadshow in the
U.S.



7. (SBU) The regional cooperation session could begin with a
discussion of the East-West energy corridor, with the goal of
deciding on next steps in bringing surplus natural gas to
Europe. From that, we could segue into a discussion of
Iraq-Turkey energy questions -- if there are any pressing
issues -- and then discuss Iraq reconstruction/trade.
Embassy suggests two possible goals: implementation of one
or more of the Turkish reconstruction proposals discussed
during FM Gul's recent visit; and holding a separate session
-- preferably with Iraqi participation -- on Turkish-Iraqi
trade, possibly as a first step toward some kind of customs
arrangement to facilitate cross-border trade.






EDELMAN