U.S.-TURKEY TRADE: NEED FOR HIGHER-LEVEL DIALOGUE

C O N F I D E N T I A L ANKARA 001166

SIPDIS

FROM AMBASSADOR JEFFREY
DEPT FOR EEB/FO, EEB/TPP/BTA, EUR/SE
DEPT PLEASE PASS USTR FOR CHRIS WILSON AND MARK MOWREY
DEPT PLEASE PASS DEPT OF AGRICULTURE
COMMERCE FOR CHERIE RUSNAK AND KRISTIN NAJDI

E.O. 12958: DECL: 08/09/2019
TAGS: ECON ETRD EINV USTR US TR
SUBJECT: U.S.-TURKEY TRADE: NEED FOR HIGHER-LEVEL DIALOGUE

Classified By: Ambassador James Jeffrey for reasons 1.4 (b,d).


1. (C) During President Obama's meeting with Turkish
President Gul in April, the two leaders agreed that we need
to do more to encourage the two-way flow of bilateral trade
and investment and President Obama tasked me to make that
happen (a message that was reinforced during the later
meetings between Secretary Clinton and Foreign Minister
Davutoglu in Washington). Following up on the President's
directive, we have held a number of meetings with the Turkish
government and both the U.S. and Turkish private sectors to
develop ideas that will strengthen the economic leg of our
Turkish alliance - a summary of those ideas will follow
septel. What has become clear in the course of these
discussions, however, is the need for us to bring our various
government-to-government mechanisms together under one
high-level umbrella that can achieve real progress.


2. (C) We currently have three main mechanisms for bilateral
economic talks:

-- The Economic Partnership Commission (EPC),chaired by the
Assistant Secretary of State for Economic and Energy Affairs
and the MFA Undersecretary, which looks at the entirety of
our economic relationship;

-- The Trade and Investment Framework Agreement (TIFA)
Council, chaired by the Assistant USTR and the Deputy
Undersecretary for Foreign Trade, which deals with barriers
to trade and investment; and,

-- The Energy Working Group, chaired by Special Envoy for
Eurasian Energy Morningstar and MFA Deputy Undersecretary
Kuneralp, which focuses exclusively on energy issues.

Each of these serves an important purpose in defining the
list of issues that prevent the economic relationship from
growing or in identifying areas for cooperation. The problem
that all of these groups encounter, however, is that the
Turkish counterparts are hesitant to commit to fixing issues
or taking real action because they are mainly working at the
bureaucratic level, a problem to some extent mirrored on our
own side. As a result, we end up with months of negotiation
to agree upon action plans that are never or only partially
implemented, or that contain nebulous phrasing on future
cooperation -- not a productive use of our time.


3. (C) During a recent meeting with MFA Undersecretary
Apakan, he made it clear that the Turks expect the
commitments made by President Obama and Secretary Clinton to
result in real, tangible action to increase trade,
specifically saying that "we need to do something big to
revitalize U.S.-Turkish economic relations." He recognized
that this would probably require us to raise the level of
discussion to include those with the power to effect change
(i.e. the ministerial or undersecretarial level). He
suggested the creation of a task force to set the direction
of the economic relationship, designing a program of work and
a political commitment to implement it that could then be
carried out through the existing bilateral mechanisms.


4. (C) For the Turkish side, Apakan suggested that the
appropriate interlocutor for this high-level group would be
either Deputy Prime Minister for the Economy Babacan, Foreign
Minister Davutoglu, or possibly State Minister for Foreign
Trade Caglayan. Their side would also include participation
from, at a minimum, the Undersecretaries and/or Deputy
Undersecretaries at Foreign Trade, Treasury, and MFA.


5. (C) If we can get this sort of high-level Turkish
attention, we will have a real opportunity to actually solve
many of the nagging impediments to trade and investment with
Turkey (it will also provide the Turks with the sort of
high-level spectacle that they often accept as a surrogate
for real action, a la Putin's recent visit to Ankara).
Seizing this opportunity will require us to pony up with an
equally strong commitment to bring high-level U.S. officials
to the table. The logical person to coordinate our side of
this task force would be the Undersecretary of State for
Economic, Energy and Agricultural Affairs, with active
participation at least at the Assistant Secretary level from
USTR and the Departments of Agriculture, Commerce, Homeland
Security (Customs and Border Protection),and possibly
Treasury.

6. (C) The main problem we face is one of timing.
Undersecretary-Designate Hormats is not likely to be
confirmed until September at the earliest and by the time he
is on board, up to speed, and available to meet we will have
lost several valuable months (and possibly Turkish
attention). To remedy this, I am willing to take on the task
of chairing this task force in the short term and get the
ball rolling, with the concurrence of the Department and NSC.


7. (C) The other problem we will encounter is that the Turks
still view economics in mercantilistic terms, and they
neither understand that we cannot simply order our companies
to do business with Turkey nor truly grasp that preferential
trade packages require legislative action. While this limits
our range of possibilities, we can show the GOT that the
executive branch is putting a priority on improving trade
with Turkey and that we will do what we can to facilitate it,
assuming an equal commitment on their side. Apakan pointedly
remarked that the Congress has been willing to pass laws for
other countries (South Korea, Colombia) and that he did not
understand why they could not do the same for Turkey. While
this is a form of the typical "If you really loved us you
would do this" argument that frequently comes up in Turkey,
it is also a valid point. Turkey is a critical ally of the
United States in a very troubled region, as well as a major
emerging market, and there is no reason why we cannot use an
enhanced trade relationship to complement our already strong
political one. To do so, we should act sooner rather than
later to set up this task force and develop an action plan
that will provide real results.


8. (C) In terms of ideas for the "something big" that we
could offer to Turkey, I have listed some possibilities
below. Some of these have been considered previously and
rejected, but now may be an opportune time to reconsider them.

-- Tweak the Generalized System of Preferences to help
Turkey, and where possible ensure that Competitive Needs
Limitation waivers are granted for Turkish goods to remain in
the program.

-- Consider Turkey as a privileged partner in the
Reconstruction Opportunity Zone that we are planning to
establish in Afghanistan and Pakistan. Given Turkey's huge
(proportionally speaking) aid program of over USD 300 million
for the two countries, the history of Turkish companies
operating in the region, and their other support for our
efforts to improve the situation in that area, Turkey is a
natural candidate to play such a role.

-- Design a CEO/business leader "road show" both in Turkey
and in the United States as a means to stimulate increased
two-way trade and investment.

-- Consider some sort of "lite" free trade agreement
(necessarily restricted in view of Turkey's membership in the
EU Customs Union) that could be deployed when and if we see
major political breakthroughs here.

Visit Ankara's Classified Web Site at
http://www.intelink.sgov.gov/wiki/Portal:Turk ey

Silliman