This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 ISTANBUL 001619 
 
SIPDIS 
 
SENSITIVE 
 
DEPARTMENT FOR EUR/SE AND EB/TPP/ABT EDWARD HEARTNEY 
COMMERCE FOR ITA/OTEXA MARIA D'ANDREA 
USTR FOR ABIOLA HEYLIGER 
 
E.O. 12958: N/A 
TAGS: KTEX ECON ETRD TU
SUBJECT: TURKISH TEXTILE AND APPAREL SECTOR: STATISTICS AND 
TRENDS 
 
REF: STATE 146213 
 
This is a joint message with Embassy Ankara.  Sensitive but 
unclassified.  Not for internet distribution. 
 
SIPDIS 
 
¶1. (SBU) Summary: Total production in the textile and apparel 
sectors stands at over USD 30 billion, according to estimates 
by both industry and government officials.  Registered 
exports for the sector in 2004 totalled 17.6 billion USD, or 
28 percent of total Turkish exports.  In addition, however, 
industry sources estimate that USD 4-6 billion is exported 
via unregistered "suitcase" or "luggage" trade, mostly to 
Russia, the Ukraine, and Central Asia.  Due in part to the 
lifting of quotas (as well as the growth of the automotive 
sector), the textile and apparel sector's share in total 
exports slipped to 26.5 percent through the middle of 2005. 
End Summary. 
 
¶2. (SBU) Caveat: Due to the significant share of the informal 
economy in Turkey's textile and apparel sectors, it is 
difficult to obtain accurate figures for exports and 
production.  Our contacts in these sectors, including in 
government and large industry associations, provide their 
best estimates.  However it is clear that the textile and 
apparel sectors are vital for the Turkish economy, and 
account for significant shares in total national industrial 
production, employment and exports. 
 
¶3. (SBU) Statistics:  The most recent statistics taken from 
government and industry sources are : 
 
Total Turkish Industrial Production  --  62 billion USD (2004) 
Total textile and apparal production --  30 billion USD (2004) 
 
(note: This figure, which was most recently cited by Trade 
Minister Tuzman in a September 2005 speech, is taken from 
textile association estimates, and has not changed since 
¶2003.  Trade Undersecretariat officials disclaimed the number 
in a meeting with Ankara Econoff, however, stating that the 
GOT does not calculate a dollar value for textile and apparel 
production.  They estimated instead that the sector produced 
2.5 million tons of material.) 
 
Share of exports                     --  28 percent (2004) 
                                     --  26.5 percent 
(through mid-2005) 
Share of imports            --   6.4 percent (2004) 
                                     --   6 percent 
(through mid-2005) 
 
Total Employment            --  20 million 
Textile and apparel sector's share 
in employment                        --  11 percent 
Total employment in textile 
and apparel sector                   --  2.5 million 
 
Note: Separately the government estimates that employment in 
the manufacturing sector is 4 million, and that 30 percent of 
industrial workers are in the textile and apparel sector. 
This official estimate falls well short of the generally 
accepted figure of 2.5 million, however. 
 
¶4. (SBU) Trends: Beyond the slight decline of textile and 
apparel exports in overall Turkish exports in 2005, few 
statistics are available regarding the impact of the lifting 
of quotas on the sector.  Industry sources note too that the 
2005 slowdown continues a trend that began earlier in 2004, 
in that while Turkish exports rose 32.8 percent in 2004, 
textile and apparel exports rose only 16.4 percent. 
Similarly, in the first half of 2005, apparel exports (8.7 
percent) and textile exports (10.2 percent) rose at a much 
more modest pace than the 20.3 percent increase in overall 
Turkish exports.  Contacts note that the 2005 increase is 
actually exaggerated, in that the Turkish lira appreciated 
significantly during the period.  In Turkish lira terms, 
exports were largely stagnant. 
 
¶5. (SBU) Anecdotally, producers speak of declining margins 
and falling capacity utilization, noting that whereas the 
industry earlier used 75 percent or more of its capacity, 
that ratio has since fallen to 60 percent.  Producers note 
that margins have been squeezed, particularly for low-value 
added products, where the competition from China is most 
intense.  They suggest that Turkey was more vulnerable to the 
Chinese challenge than other exporters in the Middle East and 
North Africa because it enjoyed large quotas in several 
categories under the old system, categories that were 
attractive targets once the quotas ended.  In meetings in 
Istanbul, however, producers expressed hope for the remainder 
of the year, noting that the June China-EU agreement 
reimposing restrictions on Chinese exports to the EU was 
bringing business to Turkey.  Esin Benoz, Secretary-General 
of the Turkish Clothing Manufacturers' Association (TCMA), 
told us that the group expects increases of up to 50 percent 
in exports to the EU market in some months during the second 
half of 2005.  August figures, she stressed, already showed 
20 percent increases for both textiles and apparel. 
 
¶6. (SBU) How to respond: Both government and industry 
officials recognize that mass market low-value production is 
likely leaving Turkey for good.  Instead, the industry must 
focus on more profitable high-fashion and "technical" 
products.  Bilal Surucu, textile export head at the Trade 
Undersecretariat in Ankara, conceded to Ankara Econoff that 
the GOT recognizes that Turkey cannot compete with China and 
other low-wage competitors in the manufacture of inexpensive 
t-shirts.  Rather it must separate itself from mass producers 
and focus on quality textiles and apparel for high-end 
retailers in the EU and U.S.  To that end, he said the GOT 
will support establishment of a Fashion Institute in 
Istanbul, for which the EU has allotted a EUR 10 million 
grant.  Surucu expressed hope that this institute will bring 
high fashion designers to Turkey and broaden its share in the 
high couture market.  Separately, industry sources note that 
over 200 Turkish companies now provide high-tech waterproof 
and stain-proof fabrics for Western companies like Nike, a 
field in which few were present just a few short years ago. 
 
¶7. (SBU) Agreement/Safeguards: Notwithstandig their focus on 
high-tech and high-fashion prodcts, Turkish industry also 
remains transfixed by the idea that preferential agreements 
can buy it everal more years to make the transition it 
faild to make before 2005.  In a meeting with visiting 
Ankara Econ Counselor and Trade Officer, Istanbu Textil 
Exprtr ITKB) representatives pressedfor ether 
uaifid industrial zone (QIZ) or ree rae areement with 
the U.S., though they hd difficulty explaining how the 
latter could be econciled with Turkey's EU Customs Union. 
They nted that they continue to be in close contact with he 
U.S. and European textile industries, followig up on their 
joint "Istanbul" declartion lst ear pressing for delay in 
endng of hetetil quota system.  Similarly, Suuc tld 
Akar Eonoff that the GOT wants more safeguards in place, 
though he did not provide specifics.  (Already Turkey has 
taken a number of unilateral measures to limit Chinese 
imports in the Turkish market.)  Notwithstanding the fact 
that the EU remains Turkey's major textile market, he 
expressed particular concern about the inroads China was 
making in the U.S. market. 
 
¶8. (SBU) Comment: With the reality of 2005 sinking in, 
Turkish industry increasingly recognizes that it must adapt 
to survive, even if further safeguards are imposed that limit 
the rate of at which China's exports increase.  Producers and 
government officials recognize too, however, that even if 
they make the transition, textiles are unlikely to weigh as 
heavily in the national economy in future as they have in the 
past, forcing government to begin considering how it can best 
encourage industries that will absorb sector workers.  End 
Comment. 
 
JONES