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Viewing cable 06ANKARA5093, TURKEY (NOT SURPRISINGLY) HOPES TO SAVE GSP

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Reference ID Created Released Classification Origin
06ANKARA5093 2006-09-01 14:20 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Ankara
VZCZCXRO3393
PP RUEHDA
DE RUEHAK #5093/01 2441420
ZNR UUUUU ZZH
P 011420Z SEP 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 8387
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL 1196
RUEHDA/AMCONSUL ADANA 1057
UNCLAS SECTION 01 OF 02 ANKARA 005093 
 
SIPDIS 
 
DEPT PLEASE PASS USTR FOR LERRION 
DEPT PLEASE PASS WTO COLLECTIVE 
USDOC FOR ITA/MAC/CRUSNACK 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD TU
SUBJECT: TURKEY (NOT SURPRISINGLY) HOPES TO SAVE GSP 
 
REF: A) STATE 128359 
 
     B) ANKARA 1898 
 
1. (SBU) Summary.  Turkish officials lost no time responding to news 
that the Generalized System of Preferences (GSP) program was up for 
review (ref a).  State Minister for Foreign Trade Kursad Tuzmen's 
letters to USTR Schwab and Secretary Gutierrez were highly 
publicized in local media.  MFA officials have also begun to chime 
in.  Business reactions are more muted, but companies fear losing 
competitive advantage to countries enjoying preferential trade 
agreements with the U.S.  Turkey's $1 billion in GSP exports compose 
approximately 20 percent of Turkey's total exports to the U.S.  If 
Turkey lost GSP benefits, its companies would face an average tariff 
of about 5% on these products.  Even coming as part of global 
changes in the program, a loss of the benefits Turkish companies 
currently enjoy will be seen here as a policy decision deliberately 
and specifically aimed at Turkey.   End Summary. 
 
------------------------------ 
Government Officials Take Lead 
------------------------------ 
 
2. (SBU) Within days of our delivery of ref A, media highlighted 
State Minister for Foreign Trade Kursad Tuzmen's letter to USTR 
Schwab in which he argues that it would be unfair if Turkey lost GSP 
benefits because Turkish companies' competitors in the U.S. market 
benefit from preferential or free trade agreements (which Turkey is 
prevented from signing with the U.S. because of its membership in 
the European Customs Union).  Tuzmen added in a handwritten 
postscript his hope that Turkey will receive favorable consideration 
from USTR during this review because Turkey accounts for only 0.3 
percent of total U.S. imports. 
 
3.  (SBU)  More recently, MFA officials have begun to speak up. 
During the recent American Turkish Council (ATC)-sponsored Staffdel, 
MFA officials responsible for bilateral relations appealed to the 
staffers to ask their Congressional Members to favorably consider 
Turkey during the GSP review process.  They argued that eliminating 
Turkey's GSP privileges would benefit China and developed countries 
such as Italy the most, rather than shifting the benefits to 
less-developed countries.  MFA officials are also raising the 
subject in meetings with Embassy officers. 
 
------------------------------ 
Business More Subdued, For Now 
------------------------------ 
 
4. (SBU) Local Turkish jewelry producers told us that the loss of 
GSP benefits would negatively affect their $384 million in 
GSP-covered exports, on which they currently do not pay the 5.5 
percent tariff.  While large producers such as Goldas, a company 
based in Istanbul that produces high quality gold jewelry, could 
remain competitive, smaller companies who compete on very low profit 
margins would be driven from the U.S. market due to competition 
mostly from China.  (Many of these smaller companies operate in 
Turkey's many covered bazaars, whose small business and tradesmen 
form part of the backbone of ruling AK party support.)  Goldas 
representatives added that while they believe that larger, higher 
quality producers can remain in the market, they will certainly lose 
their competitive advantage, from which, according to them, Italian 
jewelry producers will benefit the most. 
 
5.  (SBU)  We also recently began receiving correspondence on this 
issue.  The Turkish Foreign Trade Association and the Turkish 
Exporters Assembly wrote the Ambassador to argue that the loss of 
Turkey's GSP privileges would mostly affect Turkish SMEs and reduce 
our bilateral trade volume below its already relatively small level. 
 Losing trade benefits during Minister Tuzmen's "Year of America," 
they added, would be an "ironic circumstance to evolve in a negative 
direction."  TURKTRADE also echoed Minister Tuzmen's argument that 
other countries that might lose their GSP privileges also enjoy 
benefits under other preferential trade agreements with the U.S. 
 
----------------------- 
COMMENT: Not Unexpected 
----------------------- 
 
6.  (SBU)  Because A/USTR Shaun Donnelly alerted his counterparts in 
the January 2006 Trade and Investment Framework Agreement (TIFA) 
Council meeting that Congress was considering a review of the entire 
GSP program, ref A did not come as a complete surprise to FTU 
officials.  Still, the news will change the nature of U.S.-Turkey 
trade discussions, which have traditionally focused on Turkey's 
request for additional preferential arrangements for Turkish 
exports, such as under a QIZ program.  If Turkey loses its GSP 
privileges, many here in the government and press will see it as a 
 
ANKARA 00005093  002 OF 002 
 
 
decision aimed specifically at Turkey and will spin political 
theories that go far beyond the commercial realm.  The point that it 
was part of a global review of the program will be completely lost. 
 
7.  (U) TURKISH EXPORTS COVERED BY GSP 
 
                      2005 Exports     2006 
Product                 (USD 1,000)     YTD    Tariff 
-------              -------------    ------   ------ 
 
1. Jewelry - gold          279,853    105,553     5.5 
    or platinum 
2. Jewelry - gold          103,992     43,574     5.5 
    necklaces or chains 
3. Copper wire              37,421     34,386     4.9 
4. Marble (not slabs)       32,709     18,896     4.9 
5. Olive oil                31,548     11,315  USD.034/kg 
6. Motor vehicle parts      30,212     15,954     2.5 
7. Aluminun plates          24,538     10,398     3.0 
8. Travertine, dressed or 
    polished                22,538          0     4.2 
9. Copper parts for certain 
    appliances              21,782      9,720     3.0 
10. Travertine, 
     flat surface           15,684          0     4.2 
11. Furskin apparel         15,305      2,077     4.0 
12. Copper wire, 
     not insulated          14,436      8,335     3.0 
13. Propylene sheets 
     film, etc.             14,218      8,202     4.2 
14. Olive oil               13,874     13,195  USD.034/kg 
15. Other calcareous 
     stone                  12,535      6,966     4.9 
16. All others             396,351    254,674 
 
TOTAL GSP EXPORTS        1,067,000    543,245 
 
Note: Total Turkish 2005 imports USD 5.1 billion. 
 
WILSON