APPAREL EXECUTIVES ON CHINESE EXPORTS, TIFA,

UNCLAS SECTION 01 OF 02 ANKARA 002294

SIPDIS

DEPT FOR EB/TPP/ABT - EHEARTNEY, EB/TPP/MTA/MST, EUR/SE
COMMERCE FOR ITA/OTEXA/MARIA D'ANDREA
DEPT PASS USTR FOR LERRION
TREASURY FOR INTERNATIONAL AFFAIRS - PLANTIER

SENSITIVE

E.O. 12958: N/A
TAGS: ETRD KTEX EFIN TU CH EUN
SUBJECT: APPAREL EXECUTIVES ON CHINESE EXPORTS, TIFA,
QIZ AND OTHER SUBJECTS

Ref: (A) Ankara 2161 (B) Ankara 2170


1. (U) This message was coordinated with Amconsul
Istanbul.


2. (SBU) Summary: In an April 8 lunch, textile and
apparel industry representatives praised U.S. movement
toward limits on Chinese textile imports and expressed
the hope the European Commission would follow suit.
They also supported convening a meeting of the U.S.-
Turkey Trade and Investment Framework Agreement (TIFA)
Council and plan to lobby the GOT to again propose
creation of Qualifying Industrial Zones with duty-free
access for Turkish textiles. Textile manufacturers
have called on the GOT to cut taxes on labor and value-
added and to reduce energy costs for their sector. A
representative of the Turkish exporters union remarked
that U.S. GSP was not a major benefit to Turkey. End
Summary.


2. (U) Istanbul Polecon Chief and Econoffs met with
Suleyman Orakcioglu, Chair of the Istanbul Ready-Made
Garment Exporters Association (IHKIB),A. Rusen Cetin,
an IHKIB board member, and Ziya Sukun, the U.S.
representative of the Turkish Exporters Assembly (TIM),
to discuss developments in the textile and garment
industry, as well as broader trade concerns.

Urging Limits on China, Breaks for Domestic Industry
-------------- --------------


3. (U) Orakcioglu praised the decision taken earlier
that week by the U.S. Committee for the Implementation
of Textile Agreements (CITA) to investigate imports
from China, the first step toward measures to limit
Chinese imports (and reduce competition for Turkish
exports). Orakcioglu expressed the hope that the EC
would also impose limits on its imports from China. He
and his colleagues deployed standard arguments on the
inability of Turkish industry to compete against unfair
Chinese labor, subsidy and exchange rate practices,
maintaining that Turkish apparel exporters to U.S. and
European markets observe fair labor and other
practices.


4. (U) Note: Early in April, IHKIB, TIM and a raft of
other business chambers issued a manifesto urging the
GOT to reduce employment taxes and premia as well as
energy costs for the apparel sector, arguing that
continuing loss of employment in this area threatened
social stability. More recently, these groups called
on the GOT to cut value added tax rates from 18 to 8
percent. Although Finance Minister Unakitan told the
press that such incentives were a real possibility, the
IMF strongly opposes this on fiscal and equity grounds
(ref A). End Note.

Interest in Both a TIFA and a QIZ
--------------


5. (SBU) Econoff's told Orakcioglu and his colleagues
that the U.S. side was interested in making use of the
Trade and Investment Framework Agreement (TIFA) to deal
with bilateral economic problems, but that we had been
unable to schedule a TIFA with the Foreign Trade
Undersecretariat as yet. Orakcioglu agreed that that a
TIFA meeting would be useful, and promised to raise
this directly with State Minister Tuzmen. He stated
that industry would lobby the GOT to resurrect their
longstanding proposal to grant textile and apparel
products duty-free preferences in a Turkey Qualifying
Industrial Zone (QIZ).

GSP of Marginal Interest
--------------


6. (SBU) Econoff pointed out to Sukun, who, unlike
Orakcioglu and Cetin, theoretically represents the
range of Turkish exporters rather than solely the
textile industry, that Turkey had made great strides in
diversifying exports and in expanding use of the
Generalized System of Preferences (GSP) in recent
years. Echoing recent comments by a Foreign Trade
official (ref B),the TIM representative disparaged GSP
benefits as limited to several somewhat marginal, low
value-added sectors which would be subject to low U.S.
tariffs without GSP.

Mandatory Importers Associations a Great Idea
--------------


7. (SBU) Econoff also raised concerns that the GOT plan
to require all importers to join and pay fees to
importers associations could result in new nontariff
barriers, and asked Sukun the status of efforts to
implement an alternate concept which would create a
hybrid (but still mandatory) business chamber based on
TIM and including both importers and exporters. Sukun,
who may not have been current on this issue, offered a
passionate defense of mandatory importers associations
as necessary in collecting improved import statistics.
He criticized the Foreign Investor Association (YASED)
for opposing the measure, denouncing them as a group of
"foreign agents". Econoff responded that it would be
unusual for an association representing foreign
investors to ignore foreign business views and
interests on questions of Turkish trade policy.

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


8. (SBU) Turkish textile exporters are pleased with
evolving U.S. policy on imports from China, and are
eager to see us and the Europeans do even more. While
not explicitly stated at this meeting, good relations
with the U.S. textile industry may be inflating the
hopes of Turkish textile producers for preferential
trade with the U.S., such as through a QIZ. The Turks
would likely argue that any increase in Turkish exports
would come at the expense of China or other lower-cost
producers, rather than of U.S. industry.
Edelman