VZCZCXRO2177
PP RUEHTRO
DE RUEHTU #1299/01 2671415
ZNR UUUUU ZZH
P 241415Z SEP 07
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC PRIORITY 3914
INFO RUEHAD/AMEMBASSY ABU DHABI PRIORITY 0931
RUEHAS/AMEMBASSY ALGIERS PRIORITY 7541
RUEHEG/AMEMBASSY CAIRO PRIORITY 1485
RUEHLO/AMEMBASSY LONDON PRIORITY 1368
RUEHNK/AMEMBASSY NOUAKCHOTT PRIORITY 0910
RUEHFR/AMEMBASSY PARIS PRIORITY 1839
RUEHRB/AMEMBASSY RABAT PRIORITY 8441
RUEHTRO/AMEMBASSY TRIPOLI PRIORITY 0139
RUEHCL/AMCONSUL CASABLANCA PRIORITY 4138
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RUCPDOC/USDOC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 TUNIS 001299 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EEB/TPP/ABT (CLEMENTS) AND NEA/MAG (HARRIS) 
STATE PASS USTR (BURKHEAD) 
USDOC FOR ITA/MAC/ONE (NATHAN MASON), ADVOCACY CTR (JAMES) 
CASABLANCA FOR FCS (ORTIZ) 
LONDON AND PARIS FOR NEA WATCHER 
 
E.O. 12958: N/A 
TAGS: ETRD KTEX BEXP TS
SUBJECT: TUNISIA'S TEXTILE SECTOR BOUNCES BACK 
 
REF: A. STATE 114799 
     ¶B. 06 TUNIS 2465 
     ¶C. 06 TUNIS 2464 
 
TUNIS 00001299  001.2 OF 002 
 
 
------- 
Summary 
------- 
 
¶1. (U) After experiencing job loss and a drop in exports in 
recent years, the Tunisian textile sector appears to be back 
in good health.  Faced with competition from cheaper, 
mass-produced Asian textiles, the Tunisian textile sector has 
regained market share in Europe and the value of exports has 
increased.  Solid export performance for the second half of 
2006 and early 2007 indicate that the sector's strategy of 
re-orienting towards value-added production was a good one. 
End Summary. 
 
---------- 
Statistics 
---------- 
 
¶2. (U) Per Ref A request, Post has gathered the following 
statistics for 2006: 
 
-- Total industrial production is estimated at US $5.2 billion 
-- Total textile production is estimated at US $1.4 billion 
-- Total value of textile exports is estimated at US $3.9 
billion 
-- Textile/apparel share of imports is about 16.76 percent 
-- Textile/apparel share of exports is about 33.63 percent 
-- Exports of textile/apparel to the US are US $17.65 million 
-- Imports of textile/apparel from the US are US $14.32 
million 
-- Manufacturing employment is estimated at 554,600 
-- Total textile employment estimated at 204,000 
 
------------------- 
Exports Bounce Back 
------------------- 
 
¶3. (U) Following the end of the Multifiber Agreement, the 
Tunisian textile sector saw its market share erode in its 
traditional European markets and experienced significant job 
loss.  Although 2005 and early 2006 looked bleak, the sector 
appears to have bounced back, with the textile share of 
exports rising 1.8 percent from 2005 to 2006.  Najib Karafi, 
Director General of GOT-founded Technical Center for Textiles 
(CETTEX), told EconOff that textile exports are now back to 
2001 levels.  Although the volume of exports has not 
increased, the focus on value-added production led to an 
increase in the overall value of textile exports.  In 2006, 
textile exports earned US $3.9 billion, up from US $3.7 
billion in 2005.  The outlook for 2007 looks even brighter, 
with textile exports up nearly 20 percent over the first half 
of 2006. 
 
-------- 
EU Bound 
-------- 
 
¶4. (U) Although CETTEX and the National Federation for 
Textile Employers (FENATEX) have emphasized the importance of 
expanding into new markets, over 90 percent of textile 
exports continue to be directed towards European Union 
countries.  Zied Charfi, Research Director at FENATEX, noted, 
however, that there has been greater diversification within 
the EU, with exports to Portugal, Spain and United Kingdom 
rising.  Karafi lamented that the sector has not had greater 
success in diversifying trading partners, but stated that the 
first priority had been to maintain market share in Europe. 
He remarked that Tunisia had been successful in moving from 
the 7th leading textile exporter to the EU to the 5th. 
 
---------------------- 
 
TUNIS 00001299  002.2 OF 002 
 
 
US Trade Still Limited 
---------------------- 
 
¶5. (U) Charfi remarked that despite strong interest from 
textile manufacturers, few producers have been able to 
successfully break into the US market.  Charfi expressed 
disappointment that few of the manufacturers attending the 
2006 Magic Show exposition in Las Vegas were able to generate 
any business.  Both Charfi and Karafi noted strong textile 
sector support for a Free Trade Agreement with the United 
States.  Karafi added that most textile producers believe 
they would benefit from an FTA. 
 
------------------ 
Job Loss Staunched 
------------------ 
 
¶6. (SBU) Estimates for jobs lost in the sector range from 
36,000-50,000 over the period from 2000 to 2005.  CETTEX 
figures show that textile sector employment is 204,000 
workers, up slightly from 194,000 in 2005.  Karafi remarked 
that while there have been closures and layoffs during the 
past year, these have been offset by new investments and the 
creation of new jobs.  CETTEX recorded 71.3 million Tunisian 
dinars (roughly US $56.7 million) in foreign direct 
investment for 2006.  A researcher from the General Union of 
Tunisian Workers (UGTT) told EmbOff on September 20 that 
while UGTT studies showed almost 36,000 jobs were lost 
between 2000 and 2005, employment in the sector now appears 
to have stabilized.  Confirming the rosy picture presented by 
CETTEX and FENATEX, he stated that textile unions and workers 
indicate that the sector recovered in 2006. 
 
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Comment 
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¶7. (SBU) Given the importance of the textile sector to the 
Tunisian economy, the sector's rebound is welcome news to the 
GOT.  The sector owes its rebound to successfully 
re-orienting towards value-added production and to continued 
foreign investment in the sector.  Yet perhaps the most 
important lesson from the textile sector's successful rebound 
is that the GOT needs to allow market forces to operate 
freely.  Rather than bailing out failing manufacturers, the 
GOT allowed non-competitive producers to close, despite the 
job loss.  In the end, the market, not the GOT, knows best. 
End Comment. 
GODEC