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RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHAK #0479/01 0371541
ZNR UUUUU ZZH
R 061541Z FEB 06
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC 2962
INFO RUEHRC/USDA FAS WASHDC
RUCPDOC/USDOC WASHDC
RUEHIT/AMCONSUL ISTANBUL 9757
RUEHDA/AMCONSUL ADANA 0373
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 04 ANKARA 000479 
 
SIPDIS 
 
FAS/W FOR ITP 
USDOC FOR ITA/MAC/OEURA/CPD/CRUSNACK 
STATE PLEASE PASS USTR FOR SDONNELLY AND LERRION 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR KIPR TU
SUBJECT: FOURTH TIFA RENEWS DIALOGUE FOR EXPANDING TRADE 
WITH TURKEY 
 
Ref: A) 05 Ankara 7658 
     B) Ankara 327 
     C) 05 Ankara 6899 
 
ANKARA 00000479  001.2 OF 004 
 
 
This information is sensitive but unclassified.  Please 
protect accordingly. 
 
¶1. (SBU) Summary:  The fourth meeting of the U.S.-Turkey 
Trade and Investment Framework Agreement (TIFA) Council 
held January 24 in Ankara was an opportunity for the 
U.S. and Turkey to discuss ways to revive our bilateral 
trade relationship in an open and positive dialogue. 
Along with the specific issues of market access, 
taxation, IPR protection, Qualifying Industrial Zones 
(QIZs), the GSP program and U.S. anti-dumping cases, 
both sides stressed the potential for trade expansion 
more than continuing differences.  Both sides left with 
a greater understanding of the other's views and a 
renewed interest in cooperating on trade and investment 
issues.  End summary. 
 
2.(SBU) The fourth meeting of the US-Turkey Trade and 
Investment Framework Agreement (TIFA) Council convened 
January 23 - 24 in Ankara.  This was the first Council 
held since 2001, although the 1999 TIFA called for 
annual meetings.  Assistant USTR Shaun Donnelly led the 
U.S. delegation, which included representatives from the 
Departments of State, Commerce and Agriculture.  GOT 
Foreign Trade Under Secretary Tuncer Kayalar led the 
Turkish delegation, which included representatives of 
the Ministries of Health, Agriculture and Foreign 
Affairs, and the Turkish Sugar Board.  The meetings 
comprised a morning plenary session and a working 
luncheon with the two delegation heads.  An afternoon 
session discussed technical issues at the working level. 
AUSTR Donnelly met on the margins with the Under 
Secretary of the Ministry of Agriculture (ref B) and 
 
SIPDIS 
with officials of the Turkish Federation of Chambers of 
Commerce and Industry (TOBB).  A breakfast meeting with 
the U.S. business community in Turkey was cancelled for 
unavoidable logistical reasons. 
 
-------------------------------------------- 
Desire for Expanded Trade Sets Positive Tone 
-------------------------------------------- 
 
¶3. (SBU) In the morning plenary session, Donnelly and 
Kayalar stressed the importance of the bilateral 
relationship and a desire for it to expand beyond the 
traditional military and political partnership. 
Kayalar's presentation emphasized the growth and 
stability that Turkey's economy has enjoyed since the 
2001 financial crisis.  He pointed out, however, that 
despite this growth, the level of trade between the US 
and Turkey is far below its potential, with the Turkish 
share of U.S. imports only 0.3% and the U.S. share of 
Turkey's imports only 4.6%, and both countries losing 
market share in the other.  In order to build Turkish 
exports to the United and Western Hemisphere, Kayalar 
noted that 2006 marks the beginning of the Department of 
Foreign Trade's "Year of the Americas" trade promotion 
strategy (ref B). 
 
¶4. (SBU) Donnelly similarly emphasized the potential for 
expanding the bilateral trade relationship.  He noted 
Turkey's positive economic growth and the resolution of 
several longstanding disputes involving US companies. 
He commended the GOT for its steps to address many of 
the issues that the USG has raised regarding protection 
of intellectual property and congratulated Turkey for 
the recent start of formal EU accession talks, noting 
that the U.S. has supported Turkey's integration into 
the European Union for more than forty years.  Donnelly 
encouraged continued reforms that strengthen investor 
confidence and attract businesses to Turkey. 
 
----------------------------- 
Discussion of Specific Issues 
----------------------------- 
 
¶5. (SBU) Regarding Turkey's specific areas of concern, 
Kayalar mentioned the long-standing anti-dumping cases 
that have been brought against Turkey and expressed 
 
ANKARA 00000479  002.2 OF 004 
 
 
Turkey's concerns regarding the Byrd Amendment.  He 
requested USG support for a GSP competitive needs limit 
waiver for Turkish exports of travertine marble to the 
U.S.  Finally, on the long-standing idea of the creation 
of Qualifying Industrial Zones (QIZs) in Turkey, Kayalar 
stated that this subject had been on the agenda for many 
years, but that it remained the FTU's opinion that QIZs 
would only make economic sense for Turkey if they 
allowed for duty free export to the United States of a 
broad spectrum of textile products.  He asked for U.S. 
clarification of its views on whether or not this issue 
should remain on the bilateral agenda or be dropped. 
 
¶6. (SBU) For the U.S. part, Donnelly raised the local 
U.S. cola companies' concerns about the "special 
consumption tax" Turkey levies on cola beverages and the 
inability of U.S. companies to access sweeteners at 
internationally competitive prices under Turkey's 
current sugar regime.  On IPR, he praised Turkey for 
finally implementing data-exclusivity regulations, but 
noted that the 2005 regulations fall short of Turkey's 
obligations under the WTO TRIPS agreement.  Donnelly 
added that U.S. research-based pharmaceutical companies 
continue to have concerns regarding the fate of 
approximately 35 products for which generic applications 
were filed prior to the January 1, 2005 start of the new 
law.  Regarding QIZs, Donnelly noted the political 
sensitivity of textile imports for the U.S. and the fact 
that a QIZ program for Turkey would require legislative 
action.  Finally, regarding agriculture, Donnelly 
discussed in general terms the current WTO bilateral 
consultations on Turkey's rice import regime and 
expressed concern at Turkey's failure to issue 
regulations governing the importation of meat, poultry 
and beef, which effectively prevents such imports. 
 
--------------------------------- 
WTO: Cooperation on NAMA Possible 
--------------------------------- 
 
¶7. (SBU) Explaining Turkey's views on the Doha Round 
negotiations, Kayalar said the GOT is concerned about 
its agricultural sector, which accounts for about 30% of 
total employment, and wants to see market access changes 
affecting developing countries (such as Turkey) phased 
in over as long a period of time as possible.  Turkey 
supports the phase out of export subsidies by developed 
countries.  On non-agricultural market access (NAMA) 
issues, Turkey considers itself a developed and 
competitive country in the market and could possibly 
find ways to cooperate with the U.S. on these issues 
during the Doha Round.  Donnelly noted that Turkey was 
well positioned to be a major beneficiary of the new 
trade flows that an agreement would unleash and stated 
that the U.S. understands the sensitivity of the 
agricultural sector to many countries, including Turkey. 
He explained, however, that until meaningful agreement 
is reached on agriculture, the Doha Round cannot move 
forward on NAMA and services. 
 
--------------------- 
Technical Discussions 
--------------------- 
 
¶8. (SBU) In the afternoon "technical discussions" that 
did not include the two delegation heads, USTR Director 
Lisa Errion and representatives from the Departments of 
Commerce, State and Agriculture met with Turkish 
officials (almost twenty) to discuss in detail the 
issues raised by the principals during the morning 
discussions.  Turkish officials were not prepared to 
discuss meat or livestock import regulations during the 
technical discussions and suggested a separate meeting 
at a later date.  In addition, the WTO rice case was not 
discussed ruing the afternoon discussions. 
 
Cola Taxation and Sugar Law 
--------------------------- 
 
¶9. (SBU) The U.S. side raised two issues of concern to 
the U.S. soft drink industry in Turkey: discriminatory 
taxes on cola and the high cost of sweeteners due to 
domestic production quotas and high import duties for 
 
ANKARA 00000479  003.2 OF 004 
 
 
starch-based sweeteners.  On the tax issue, GOT 
officials stated that the total tax on cola drinks is 
46% and that these taxes are levied on all carbonated 
soft drinks, not just colas. As such, they argued that 
there is no discriminatory treatment as compared with 
other beverages sold in Turkey because they do not 
consider juices, coffees, and waters as direct 
substitutes for soft drinks. 
 
¶10. (SBU) Regarding the cost of sweeteners, GOT 
officials reported reductions to two discrete tariff 
lines related to starch-based sugar and argued that 
liberalizing imports of these items would create more 
supply in the market.  They also touted a 2005 increase 
in the domestic fructose production quota from 10% to 
15% of sugar production as creating new supply for the 
industry.  More in-depth discussion revealed, however, 
that the tariff lines in question have no relevance to 
the products needed by this industry.  Even with the 
increase in the production quota, there is still 
significant excess production capacity in the Turkish 
fructose industry and insufficient domestic fructose 
supply.  In response to a question from the U.S. side 
about allegations that a Turkish cola-producer was 
illegally producing fructose, a representative of the 
Sugar Board reported that Turkish cola maker Ulker was 
recently fined and made to cease in-house production of 
fructose outside of the sugar regime.  The U.S. side 
requested that the Foreign Trade Undersecretariat extend 
its good offices to meet with representatives from the 
U.S. beverage manufacturers to discuss these issues in 
more depth, and FTU officials indicated they would be 
happy to do so. 
 
Daimler-Chrysler 
---------------- 
 
¶11. (SBU) The U.S. side raised concerns about an 
increase in the taxation of imports of Daimler 
Chrysler's Voyager minivan from 10% to 84% following a 
customs reclassification of the vehicle.  GOT officials 
said they reclassified the Voyager from 8704 (commercial 
vehicle) to HS code 8703 (passenger vehicle) based on an 
opinion received from the World Customs Organization 
(WCO).  While most vehicles in that category are subject 
to a tax rate of 10%, the Voyager's weight, capacity, 
and engine size put it in a category of a luxury vehicle 
which is assessed a tax rate of 84%.   The Turkish side 
alluded to an outstanding court case on this issue.  The 
U.S. side indicated that it intended to discuss the 
matter in greater detail with the company and would 
follow up on the issue at a future date through the U.S. 
Embassy. 
 
IPR 
--- 
 
¶12. (SBU) The U.S. expressed its concerns about the 
Turkish legislature's consideration of a proposed 
amendment to Turkey's patent law that reportedly would 
weaken patent protection in Turkey (ref C).  Concerns 
regarding the current draft legislation include: lack of 
patent term restoration for regulatory delay to ensure 
the internationally required 20 year term of patent 
protection for pharmaceuticals; compulsory licensing 
provisions that appear inconsistent with TRIPs; and lack 
of a clear right of action against those using 
infringing products.  Representatives of FTU and the 
Turkish Patent and Trademark Office said that they share 
our misgivings and that they are urging the legislature 
to prevent its passage. 
 
¶13. (SBU) The U.S. side also reiterated points made by 
Donnelly in the morning session about the research-based 
pharmaceutical companies' concerns regarding data 
exclusivity.  Turkish officials indicated that the 35 
generic applications submitted in late 2004 just before 
the new DE regulations went into effect are being 
reviewed, but this review does not necessarily mean that 
they will subsequently be approved.  The Turkish side 
argued that, under European Customs Union (ECU) 
regulations, Turkey cannot differentiate itself from 
other ECU countries and thus the data exclusivity period 
 
ANKARA 00000479  004.2 OF 004 
 
 
must begin with the first marketing approval in an ECU 
country. 
 
--------------------------------------------- -------- 
Comment: Positive Tone Renews Interest in Cooperation 
--------------------------------------------- -------- 
 
¶14. (SBU) This TIFA Council meeting restored the 
bilateral dialogue on trade issues and provided an 
opportunity to discuss future cooperation. 
WILSON