VZCZCXYZ0017
OO RUEHWEB

DE RUEHC #9109 1790050
ZNR UUUUU ZZH
O 270051Z JUN 08
FM SECSTATE WASHDC
TO AMEMBASSY ANKARA IMMEDIATE 0000

UNCLAS STATE 069109 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PREL
SUBJECT: ACTION REQUEST:  TURKEY GSP WAIVER REVIEW 
 
¶1. This is an action request; please see paragraph 8. 
 
¶2. SUMMARY AND ACTION REQUEST:  The USG is concluding the 
2007 Generalized System of Preferences (GSP) Annual Review, 
which includes the review of the competitive need limitation 
(CNL) waiver for Turkish exports of gold jewelry (except 
necklaces and neckchains) to the United States.  Post is 
requested to meet with appropriate GOT officials to convey 
that under the GSP statute, which establishes a 
non-discriminatory and rules-based approach to all of the 
products under review, we will be making a recommendation to 
the President on whether to revoke the CNL waiver for gold 
jewelry from Turkey.  Post is also requested to convey that 
the petitioned request for a new waiver for copper cables and 
plaited bands from Turkey will likely be approved.  END 
SUMMARY AND ACTION REQUEST. 
 
BACKGROUND 
 
¶3.  In December 2006, Congress extended the GSP program 
through December 31, 2008, and also amended the GSP statute 
to create a "super-competitive" category.  The statutory 
language provides that the President should revoke any CNL 
waiver that has been in effect for at least five years, if a 
GSP-eligible product from a specific country has an annual 
trade level in the previous calendar year that exceeds 150 
percent of the annual dollar-value limit ($195 million in 
2007) or exceeds 75 percent of all U.S. imports. 
 
¶4.  Based on an application of the statutory criteria, the 
President revoked CNL waivers for eight products from six 
countries in the 2006 review, including gold jewelry (except 
necklaces and neck chains) from India and Thailand. 
 
¶5.  The gold jewelry product from India and Thailand that was 
the subject of last year's revocations is the same product 
that is under review from Turkey in this year's review. 
Because Turkey's CNL waiver had been in effect for four years 
during last year's review, it was not subject to the 
"super-competitive" criteria.  Based on an application of the 
"super-competitive" criteria this year, the United States 
Trade Representative is recommending that the President 
revoke the CNL waivers for four products, including gold 
necklaces and neck chains from India and gold jewelry (except 
necklaces and neck chains) from Turkey. 
 
¶6.  We know that these exports are important to Turkey. 
While imports of this product accounted for 21 percent of 
imports from Turkey under GSP, our bilateral trade 
relationship of $4.6 billion (2007) is strong and comprises a 
diversity of exports of which this type of gold jewelry 
accounts for only 5 percent. 
 
¶7.   The loss of duty-free treatment for gold necklaces and 
neck chains from India, which is the second largest import 
under GSP from Turkey, may provide an important market 
opening for Turkish jewelry manufacturers.  If imports of 
this product from Turkey were to exceed the CNL in the 
future, we look forward to working with the GOT and industry 
to submit a petition for a waiver of the CNL to ensure that 
Turkish exporters can take advantage of this opportunity.  A 
petition from the Istanbul Metal and Minerals Exporters 
Association (IMMIB) to grant a new CNL waiver for copper 
cables and plaited bands was approved as part of this year's 
GSP review.  This product has been the third largest import 
under GSP from Turkey, with exports growing 185 percent 
between 2006 and 2007. 
 
ACTION REQUEST 
 
¶8.  Department requests that Ambassador Wilson provide the 
GOT with advance notice of our deliberations, and raise with 
appropriate GOT officials on June 27, 2008 the decisions that 
are pending concerning the revocation of the CNL waiver for 
gold jewelry from Turkey and the grant of a petition for a 
new waiver for copper cables and plaited bands from Turkey. 
Informed by the GOT's reaction, a final recommendation to the 
President will be made.  A response from Post regarding the 
GOT's reaction is requested no later than the opening of 
business on Saturday, June 28, Washington time.  The 
Ambassador may draw from the points below. 
 
¶9.  As a result of the review of products meeting the 
statutory "super-competitive" thresholds that were added by 
Congress in 2006, the United States Trade Representative is 
recommending that the President revoke the CNL waiver for 
gold jewelry (not including necklaces and neck chains) from 
Turkey.  As you know, while future imports will be subject to 
the MFN rate of 5.5 percent for this product after waiver 
revocation, Turkey will continue to have access to our 
market. 
 
¶10.  This action, if taken, is based solely on the 
implementation of U.S. law and is in no way a reflection on 
our bilateral relationship.   The United States continues to 
view Turkey as a strong strategic partner and values its 
friendship with Turkey. 
 
¶11.  The GSP statute, as amended in 2006, directs that the 
President "should" revoke CNL waivers for products that 
exceed the super-competitive thresholds.  In 2007, the year 
on which the review is based, the threshold was $195 million. 
 Imports of gold jewelry from Turkey were about $233 million, 
exceeding the statutory threshold by 19 percent.  Turkey has 
already benefited from four years of a CNL waiver on this 
product. 
 
¶12.  Based on the statutory directive, with one exception 
involving carnations from Colombia, with which we have signed 
a free trade agreement, we have adopted a consistent approach 
with respect to revocation of CNL waivers in order to ensure 
that we administer a rules-based GSP program.  This resulted 
in revocation of the CNL waiver for gold jewelry from India 
and Thailand, among other products, in last year's review. 
The revocation this year of the gold jewelry waiver for 
Turkey is consistent with a rules-based approach. 
 
¶13.  As you know, the WTO allows for preferential tariff 
programs under GSP but requires that they be administered in 
a non-discriminatory manner.  India successfully challenged 
the EU's GSP program on the basis that it created arbitrary 
distinctions in treatment among beneficiaries.  If we exempt 
Turkey from revocation of its CNL waiver, we are concerned 
that our trading partners may well challenge the U.S. GSP 
program in the WTO by claiming that they are not receiving 
the same treatment under the GSP program. 
 
¶14.  The GSP program is currently scheduled to expire on 
December 31, 2008, and the Congress will need to approve 
legislation extending it before that date if the program is 
to continue.  In addition to securing reauthorization, we 
also want to avoid any unhelpful amendments to the GSP 
program as a whole.  During the debate on renewal of GSP in 
2006, there was an effort in Congress to graduate entire 
countries from the program - such as the top ten users of 
GSP, including Turkey - rather than the targeted graduation 
of individual products demonstrated to be globally 
competitive that was ultimately approved by Congress.  The 
"super-competitive" provision was the compromise that averted 
such Congressional action. 
 
¶15.  Based on the ten months of trade data since last year's 
GSP Annual Review, previous revocations of CNL waivers for 
products demonstrated to be super-competitive have not had 
significant adverse consequences for imports of those 
products.   During this period, when all U.S. imports of gold 
jewelry have dropped significantly, the U.S. import share of 
gold jewelry from Thailand declined by one percentage point 
(10.1 to 9.2 percent), while India's import share declined by 
12 percentage points (36.4 to 24.2 percent), but the country 
continues to provide to the United States nearly one-quarter 
of all U.S. imports of gold jewelry. 
 
¶16.  If imports of gold jewelry from Turkey in 2008 were to 
drop below the CNL level of $135 million, the product may be 
redesignated for GSP eligibility. 
 
¶17.  While imports of this product accounted for 21 percent 
of imports from Turkey under GSP, our bilateral trade 
relationship of $4.6 billion (2007) is strong and comprises a 
diversity of exports of which this type of gold jewelry 
accounts for only 5 percent. 
 
¶18.  We also recognize the significance of the U.S. GSP 
program to Turkey as well as the diversification of its 
exports, and we have approved a new CNL waiver for copper 
cables and plaited bands that will ensure that imports of 
that product from Turkey continue to enter duty-free under 
GSP.  This product has been the third largest import under 
GSP from Turkey, with exports growing 185 percent between 
2006 and 2007. 
 
¶19.  We look forward to working with the GOT to diversify and 
strengthen imports from Turkey under GSP in the future. 
 
¶20.  Because Turkey benefits from the GSP program, we would 
not want to endanger Turkey's continued benefits, given 
Congressional consideration of renewing the GSP program and 
the prospect of a challenge by our trading partners in the 
WTO. 
 
¶21.  It is impossible to know what would happen to Turkey's 
exports of gold jewelry if the waiver were to be revoked. 
Even under a worst-case scenario, we would expect that Turkey 
would continue to export significant quantities of gold 
jewelry to the United States.  To the extent there are 
dramatic changes in Turkey's import levels, the product may 
be eligible for reinstatement of GSP benefits. 
 
¶22.  We would welcome your views on the points I have just 
made. 
RICE