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