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Viewing cable 07ANKARA2442, TURKEY'S TEXTILE INDUSTRY GAINING IN EU, LOSING IN U.S.
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Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
07ANKARA2442 | 2007-10-02 04:50 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Ankara |
VZCZCXRO3885
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHAK #2442/01 2750450
ZNR UUUUU ZZH
P 020450Z OCT 07
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 3879
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL 3358
RUEHDA/AMCONSUL ADANA 2339
RUEHGV/USMISSION GENEVA 1568
RUCNMEM/EU MEMBER STATES COLLECTIVE
RUEATRS/DEPT OF TREASURY WASHDC
UNCLAS SECTION 01 OF 03 ANKARA 002442
SIPDIS
DEPT FOR EEB/TPP/ABT - GARY CLEMENTS
COMMERCE FOR ITA/OTEXA/MARIA D'ANDREA
DEPT PASS USTR FOR CAROYL MILLER, MARK MOWREY
TREASURY FOR INTERNATIONAL AFFAIRS
SENSITIVE
SIPDIS
E.O. 12958: N/A
TAGS: ETRD EIND KTEX ECON TU
SUBJECT: TURKEY'S TEXTILE INDUSTRY GAINING IN EU, LOSING IN U.S.
REF: A) STATE 114799, B) ANKARA 757
ANKARA 00002442 001.2 OF 003
¶1. (SBU) Summary: While overall Turkish exports of apparel
increased 15.4% in 2006, government and industry officials are
concerned about the continued drop in exports to the U.S., which
fell by 26% in 2006. The textile and apparel sectors in Turkey
comprise close to 7.8 percent of total GDP and 18.7 percent of its
manufacturing output, and employ an estimated 2 million people
countrywide (although over 1 million of those are reportedly
unregistered). Turkey's European Customs Union membership and EU
safeguards against China have enabled it to remain competitive in
the EU market and increase its exports of textiles and apparel.
U.S. safeguards against China, however, have done little to slow
Turkey's rapid loss of U.S. market share. Turkey continues to
develop its high-end, haute couture image and knows it must continue
to adapt and market itself globally if it wishes to remain
competitive in the post-2008 market. End Summary.
After the safeguards expire, other measures likely
--------------------------------------------- -----
¶2. (SBU) Turkish industry and government officials are beginning to
gain a clearer picture of the post-Multi-Fiber Agreement textile and
apparel market. Turkey was the first country to implement safeguard
measures against China in 2005 following the end of the Multi-Fiber
Agreement, and will keep measures in place for 44 products until the
law permitting them expires at the end of 2008. After that,
officials at the Turkish Foreign Trade Undersecretariat's (FTU)
Imports Department told us they will take the cue from industry on
what to do next, possibly using anti-dumping or other trade
protection measures.
¶3. (SBU) While official State Planning Organization (SPO) figures
show that Turkey's textile and apparel sectors employed
approximately 1 million in 2006, government and industry officials
estimate over 1 million employees are unregistered, bringing the
total employment in these sectors to just under 2 million,
approximately 21 percent of total registered and unregistered
industrial employment. The sectors account for 7.8 percent of total
GDP and 18.7 percent of total manufacturing output. Currently,
there are 44,000 registered companies operating in the sectors, and
their total production in 2006 was approximately 16.8 billion USD.
Companies staying in Turkey, but moving location
--------------------------------------------- ---
¶4. (SBU) According to Suleyman Orakcioglu, Deputy Chairman of the
Turkish Exporters Council (TIM) and President of the Istanbul
Ready-Made Garments Exporters Association (ITKIB), the flight of
Turkish textile and apparel companies to other countries (such as
Jordan and Egypt, who have Qualified Industrial Zones (QIZs) that
include some textile products) has slowed, but companies are moving
their factories from Istanbul, with its high labor and production
costs, to the southeastern region of Turkey, where costs are
cheaper. One area that has seen rapid growth in the textile sector
is Adiyaman, where the Turkish government offers incentives for
companies establishing factories. According to Orakcioglu, there
are currently 87 factories and 9,000 registered workers in the
textile and apparel industry in Adiyaman.
¶5. (SBU) Orakcioglu appealed to us for renewed consideration of a
Turkish QIZ (an appeal not echoed by the FTU Exports DDG, who was
also in the meeting, and said he had long ago "given up."). We
explained to him the political and domestic sensitivities to
expanding QIZs, in addition to the required Congressional approval
We asked him to work with us to think of new ways to increase
Turkey's textile and apparel exports to the U.S. instead of
repeatedly appealing for something so difficult to accomplish.
Targeting the next generation and keeping it green
--------------------------------------------- -----
¶6. (SBU) Turkish industry also is working to educate the next
generation of textile and apparel makers, in an effort to maintain
Turkey's high standards and experienced labor market for the sector.
Currently, 75,000 high school and university students are enrolled
in vocational programs focused on textile and apparel production and
design. In addition, the industry continues to push for and also
comply with western standards for product safety. Orakcioglu
mentioned the problems faced recently in the U.S. because of unsafe
products exported from China and told us that Turkey outlawed the
ANKARA 00002442 002.2 OF 003
use of certain chemicals in textile and apparel production over 12
years ago. "Hopefully Americans will begin to realize the danger of
relying so heavily on China for inexpensive products," FTU Exports
Deputy Director General Ziya Altunyaldiz added, "and agree to pay
more for safer and higher quality goods from other suppliers such as
Turkey."
EU exports growing; U.S. exports dropping
-----------------------------------------
¶7. (SBU) According to FTU figures, Turkish exports of apparel
increased 15.4% in 2006. 80% of Turkey's apparel exports go to the
EU, 13% goes to other markets, and about 7% (down from a 10% share
in 2004) goes to the U.S. For textiles, about 60% of exports go to
the EU. Turkey's membership in the European Customs Union has
enabled it to remain competitive in that market, and exports have
continued to increase even after the end of the Multi-Fiber
Agreement. Industry and government officials say that the Customs
Union's low tariffs (3 - 5% on textiles and apparel) enable them to
maintain their market share.
¶8. (SBU) Turkey's experience in the U.S. however, is not so
positive. Textile exports to the U.S. rose by 22% in 2003, but with
the end of the Multi-Fiber Agreement, its exports remained the same
in 2004, decreased by 4% in 2005, and by 22% in 2006. Six month
figures for 2007 show the same trend, with a further 20% decrease.
Apparel exports to the U.S. followed the same pattern, with a 21%
decrease in 2005, and a 26% decrease in 2006. Altunyaldiz hesitated
when asked about six month figures for 2007, which show a slight
increase from $287 million for the same period in 2006, to $303
million. "I don't know how to explain this," he added, "and we'll
wait to see the final year numbers before speculating."
¶9. (SBU) One possible reason for this increase could be the
preference of U.S. consumers for high-end goods. Turkish industry
officials have always emphasized its competitiveness in
high-quality, haute couture apparel. In addition, home textile
manufacturers in Denizli told us in December 2006 (ref B) that they
lost business after the end of the Multi-Fiber Agreement from U.S.
retailers such as Victoria's Secret. However, U.S. high-end home
textile retailers such as Pottery Barn, Williams-Sonoma and
Restoration Hardware returned to them a year later for towel and
other home textile production after discovering that U.S. consumers
will not pay the same amount for a kitchen or bath towel "Made in
China" or "Made in India." Orakcioglu said that this trend is
evident in the apparel sector as well. While Turkey has lost much
of its low-cost, high-volume apparel production to China and India,
it is producing more high-end items and making the same profit with
the production of fewer items at a higher cost.
Competitiveness still in question
---------------------------------
¶10. (SBU) It is still too early to tell whether or not Turkish
industry will remain competitive after 2008 when safeguard measures
against China will expire. Turkey's European Customs Union
membership likely will keep it competitive in that market, but its
fate in the remainder of the global economy will depend on
industry's ability to plan and adapt to increased competition. The
recent Chinese import recall crisis in the U.S. could turn U.S.
consumers to other suppliers in the short-term, but long-term it
should not have a significant impact on China as a lower cost
supplier. Turkey must continue to brand itself as a high-end
competitor and increase its global marketing, instead of pushing for
unlikely political solutions, if it wishes to compete in the
post-2008 global market.
Statistics
----------
-- Total industrial production USD: 103.0 billion
-- Total textiles and apparel production in USD: 16.8 billion
-- Textile/apparel share of Turkey's imports: (2006) 5.32 percent;
(2007 Jan-July) 5.17 percent
-- Textile/apparel share of Turkey's exports: (2006) 23.1 percent;
(2007 Jan-July) 22.0 percent
-- Textile/apparel exports to U.S. in 2006 in USD (year on end):
ANKARA 00002442 003.2 OF 003
1.2 billion (For the period ending June 2007, 515.5 million, down
15.0 percent from the same period in 2006).
-- Total registered manufacturing employment: 4.5 million
(Note: Official sectoral employment figures are grossly understated
due to Turkey's large unregistered economy, which many estimate at
close to 50 percent of GDP. End note.)
-- Total registered textiles employment (2006): 371,528 registered
employees
-- Total registered apparel employment (2006): 430,778 registered
employees.
WILSON