VZCZCXRO9977
PP RUEHDA
DE RUEHAK #0902/01 1301643
ZNR UUUUU ZZH
P 091643Z MAY 08
FM AMEMBASSY ANKARA
TO RUEHC/SECSTATE WASHDC PRIORITY 6235
INFO RUCPDOC/USDOC WASHDC PRIORITY
RUEHRC/USDA FAS WASHDC PRIORITY
RUEHIT/AMCONSUL ISTANBUL 4207
RUEHDA/AMCONSUL ADANA 2920

UNCLAS SECTION 01 OF 02 ANKARA 000902 
 
DEPT PLEASE PASS USTR FOR MSANDLER AND MMOWREY 
USDOC FOR ITA/MAC/KNAJDI 
USDA FOR ONA/SPITZER AND OCRA/SEIDBAND 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR ECON TU
SUBJECT: GSP PROGRAM VITAL TO TURKISH EXPORTERS 
 
¶1. (SBU) Summary.  Turkish officials and businessmen have already 
begun expressing their concern about this year's review of Turkey's 
participation in the Generalized System of Preferences (GSP) 
Program.  Turkey's GSP exports account for one-quarter of its total 
$4.6 billion exports to the U.S.  As Turkey's use of the GSP Program 
increases, so does market access for U.S. agricultural products.  We 
are enjoying a period of considerably increased market openness in 
Turkey, with U.S. agricultural exports reaching a record $1.5 
billion in 2007.  The GSP program is Turkey's only preferential 
trade arrangement with the U.S. It is vitally important to its 
exporters, who are mostly small and medium enterprises (SMEs), 
during this period of economic instability.  Functioning SMEs and a 
strong rural economy in Turkey are important for U.S. policy 
objectives here.  End Summary. 
 
¶2. (SBU) Turkish officials and businessmen are concerned about this 
year's upcoming Generalized System of Preferences (GSP) Program 
review.  The GSP Program is the only preferential trade arrangement 
under which Turkish companies can export duty-free goods to the U.S. 
 Turkey's European Customs Union membership prevents them from 
entering into any bilateral preferential trade agreements with the 
U.S.  It is a vitally important program to the Turkish economy and 
allows them to remain competitive in certain U.S. markets. 
 
¶3. (SBU) As with previous years, Turkey's 2007 GSP exports, totaling 
$1.1 billion, accounted for almost one quarter of its $4.6 billion 
total exports to the U.S.  Gold jewelry was again their main GSP 
export and totaled $344 million.  Other items included monumental or 
building stone, shotguns, fruit juice, copper wire, marble slabs, 
bulk olive oil for repackaging, pickled vegetables, aluminum alloy, 
and non-adhesive plates. 
 
 
2007: A Banner Year for U.S. Ag Exports 
---------------- ---------------------- 
 
¶4. (SBU) As Turkey' use of GSP increases, so does market access for 
U.S. agricultural products.  We are enjoying a period of 
considerably increased market openness in Turkey, with U.S. 
agricultural exports reaching a record $1.5 billion in 2007.  Turkey 
was the tenth largest market for U.S. agricultural exports overall, 
and the second largest market for U.S. cotton exports after China. 
Cotton sales of $767 million provided more than one-half of the 
total U.S. export value.  In addition to cotton, Turkish imports of 
U.S. soymeal, feed ingredients, vegetable oils, animal fats, fruit 
and vegetable juices, tree nuts, and panel products (including 
plywood) all reached record highs in 2007. 
 
Market Access: Important Successes and Continued Challenges 
------------------- ---------------- ------------- 
 
¶5.  (SBU) 2007 saw several successes in easing market access 
problems for U.S. exports and persuading GOT officials to make 
several regulatory changes that have benefited U.S. products.  A 
protocol negotiated in July 2007 reopened the market for live 
cattle, which had been closed since 2003.  We also convinced the GOT 
to modify a standard that had restricted imports of U.S. dried 
distillers grains (DDG's), a feedstock that is a byproduct of 
ethanol manufacture.  By the end of 2007, Turkey was the 
fifth-largest purchaser of U.S. DDG's.  We also successfully 
negotiated a change in the regulations that facilitated increased 
U.S. pet food exports to Turkey.  Although Turkey has met all of its 
1994 WTO obligations to lower tariffs, we continue to encourage the 
GOT to lower them further.  Most are bound at very high levels, 
including those for grains, oilseeds, processed products, and wine 
and alcoholic beverages, which also face high excise taxes.  Because 
a drought has reduced domestic supplies, tariffs on many foodstuffs 
have been lowered, at least for the time being. 
 
¶6.  (SBU) Turkey is also a major importer of U.S. biotech products, 
including almost $1 billion annually in corn, cotton, soybeans and 
products.  A proposed amended Biosafety Law, however, would disrupt 
U.S. exports and likely mimic EU restrictions.  Because of this, we 
do not draw public attention to these imports. 
 
 
WTO DSB Rice Case Resolved 
-------------------------- 
 
¶7.  (SBU) In 2006, the U.S. requested that the WTO Dispute 
Settlemen" Body establish a panel to review Turkey's protectionist 
measures against U.S. rice exports.  In November 2007, the panel 
agreed that certain Turkish import measures were inconsistent with 
its WTO obligations.  Since this panel decision, the U.S. and Turkey 
have been negotiating a schedule during which Turkey will comply 
 
ANKARA 00000902  002 OF 002 
 
 
with the panel's decision.  Ironically, faced with domestic 
shortages, Turkey recently authorized its State Grain Board (TMO) to 
import up to 100,000 tons of rice duty-free. 
 
Turkey Needs GSP 
---------------- 
 
¶8.  (SBU) Comment:  The GSP Program is Turkey's only preferential 
trade program with the U.S.  As economic conditions worsen and the 
dollar's value decreases, this program has become even more 
important for Turkey's economy, which is fueled by small and medium 
enterprises (SMEs) with very narrow profit margins.  As Turkey 
continues to open its markets to U.S. agricultural products, we 
cannot use its previous reluctance to do so as a reason for reducing 
its participation in this program.  Strong and functioning SMEs, in 
addition to a well-developed rural and agricultural economy, are 
important to U.S. policy goals in Turkey.  End comment. 
 
WILSON