Time to Take a Look at QIZs
Helena Kane Finn, The Washington Institute February 11, 2002 - [Excerpts] - As a result of Prime Minister Bulent Ecevit's visit to Washington in January, business contacts between the United States and Turkey have intensified, adding a new and very significant dimension to the relationship. Perhaps the most concrete result of the meeting between President George W. Bush and the Turkish prime minister is the State Department's creation of the Economic Partnership Commission (EPC), scheduled to hold its first meeting in Ankara on February 26- 27. State Department undersecretary for economic affairs Alan Larson will lead the U.S. delegation.

Qualifying Industrial Zones
The first meeting of the EPC will include the establishment of Qualifying Industrial Zones (QIZs). A full Free Trade Agreement (FTA) is far too complex to be realized in the immediate future. In the interim, these QIZs would be industrial parks in Turkey from which hightech, non-textile goods could be exported duty-free to the United States, the world's largest consumer market (investors would save the U.S. tariff on goods exported). QIZs are designated by the Office of the United States Trade Representative (USTR) in consultation with the Department of State and other U.S. government agencies. Robert Zoellick, the current USTR, told the Turkish delegation during its visit that the United States would encourage the diversification of the Turkish economy and particularly welcome exports in the high-tech area. Under the auspices of the U.S.- Israel FTA, QIZs were established by the U.S. Congress in Jordan, Egypt, and the Palestinian Authority to support the peace process in the Middle East. Reports indicate that the Jordanian QIZs have been very successful. There is no question that Turkey is an important player in the long-term stability of this volatile region.

U.S.-Israel Free Trade Agreement
Adding QIZs in Turkey to the U.S.-Israeli FTA would require not just Israeli support, but Israeli willingness to amend the FTA. Amendment of the FTA would then have to be approved by Congress. While such an amendment would be evidence of the great importance that both the United States and Israel

attribute to the economic development of Turkey, the devil is in the details. The United States has made it clear, for example, that this cannot be a back door for textiles. All three partners in this venture will have to use tremendous imagination to find a formula that is mutually beneficial -- the political and strategic impetus is there. A few years ago, it seemed that the Baku Ceyhan oil pipeline was a plan destined for oblivion. Now it is clear that the pipeline will become a reality. It is a similar case for QIZs, and the strategic justification may be the added impulse for all three sides to find a way to implement this eminently good idea.

The Turkish Perspective
Turks were pleased that U.S. Trade Representative Zoellick endorsed the expansion of the U.S.-Israel FTA to include Turkey. Although it is no secret that the large delegation of Turkish businessmen accompanying Prime Minister Ecevit was principally interested in Turkey's most prized export, textiles, the QIZ proposal has given rise to serious discussion within the Turkish business community about export diversification. Turkey is the world's sixth largest exporter of cotton. Furthermore, the textile industry is an almost visceral part of the Turkish identity. The fact that the EPC will discuss the QIZs has prompted a larger debate in Turkey about the economic future of the country: is it wise to put all the eggs in the textiles basket? Turkey must consider the growing competition from China. On December 31, 2004, textile restrictions will cease, and many believe that China will dominate this industry soon afterward. There are indications that Turks are beginning to consider expanding their exports in areas other than textiles. The diversification of the Turkish economy would be as revolutionary as the Ozal reforms of the 1980s.

An additional advantage of the QIZs is that they could address some of the regional divides in Turkey. If they are set up away from the traditional business hubs, they would alleviate some of the structural pressure on the already overbuilt industrial rings around Istanbul, Izmir, and Bursa. Both the Northeast -- Trabzon, Samsun, Erzurum -- and the Southeast -- Sanliurfa, Iskenderun, Mersin -- would benefit from such a boost. The increased prosperity of these cities would have a positive impact on all of southern and eastern Turkey, and promote a higher level of integration. Of course, there is a need to devise arrangements of a more general nature to increase trade, and these measures should be designed to increase diversification. Turkish success in the construction sector in Russia, the Caucasus, Central Asia, and the Middle East is an excellent example of effective diversification.

The U.S. Perspective
There is no question that the United States is seriously committed to an economically secure Turkey. For two decades, the United States has supported Turkish aspirations to join the European Union (EU). Increased trade with the United States will make Turkey a more attractive partner for the Europeans and encourage Turkey's Western orientation. In other words, the United States wants to promote both U.S.- Turkish trade and EU-Turkish trade. Turks have recently demonstrated their ability to make the necessary sacrifices and implement the required legislation to meet world standards in the economic sphere. Dedicated to building a Western-style market economy, Turkey has passed new banking laws, started the privatization of state monopolies, and devised strategies to fight corruption. While the United States is concerned about its own textile lobby, it welcomes the development of high-tech and related industries in Turkey. Furthermore, Turkey's geographic location as the bridge between Europe and Asia, and its success as the sole secular democracy in the Muslim world, have given it a heightened importance for American policymakers since September 11. If it is understood in Congress that the QIZs do not threaten the U.S. textile and garment industries, no objection is anticipated. There is wide and growing appreciation on Capitol Hill of Turkey's strategic importance.

Helena Kane Finn is a senior fellow at The Washington Institute. For the full text of this Policy Watch essay please visit www.washingtoninstitute.org

Çanakkale Olive Oil Hits Grocery Chains in Michigan
The Turkish Times - On January 26th, 2002, Adatepe Olive Oil importer and distributor in the US, had a "tasting event" set up in one of the Whole Food stores in Michigan, Merchant of Vino in Ann Arbor.

Imported and distributed by Anatolia.com, a Turkish web portal, Adatepe's cold pressed olive oil is setting out to compete with purest kind olive oils from Italy, Spain and Greece under its Turkish name. Anatolia.com's Sales and Marketing Manager Asli Yashin said "it is about time Turkish olive oil takes its well deserved place in the international market place using its own name," implying that Turkish olive oils have been consumed in the international markets under western European sponsor brands for many years. "The reason for this is not having enough investors in a particular Turkish brand overseas continuously". She continued "we have to build confidence in the consumer that we are here to stay and the taste of this olive oil will speak for itself"

When asked what other challenges were they facing in this business, Asli Yashin said "although there has been a great big confusion in the market about what cold pressed, extra virgin olive oil is all about, tasters can easily detect the light, fruity, fresh taste olive oil of Adatepe which is obtained by crushing the olives within 12 hours of harvesting in granite stone mills in Canakkale versus majority olive oils with "Extra Virgin" has that throat catching oils with high acidity levels". She acknowledged that it is matter of taste preference but added "cold pressed olive oil will keep its antioxidants due to not having gone through any heat or centrifuge system to begin with."

When we inquired the marketing manager about the reasons why Anatolia.com picked olive oil to import from Turkey, she answered: " Olive oil is in general enjoying its peak demand in the last 5 to 7 years, the aging Baby Boomers generation is looking for more ways to diversify its kitchen by trying other ethic food recipes while wanting to avoid cardiovascular diseases, number one cause of death in the U.S. We also see many immigrants who came to the U.S. 30-40 years ago from Mediterranean region an other olive producing countries looking for taste of old country at these International grocery stores and influencing their children."

Following IMF's approval of new loans to Turkey, the Turkish government said on Wednesday that it would cut public sector jobs and keep taxes high, as it implements an austerity plan that has won backing from the IMF. Turkey promised the IMF it would reduce public sector overstaffing by two-thirds by October, and remove all remaining surplus workers by June 2003. The plan, based on spending cuts, tax hikes and privatization, aims to end a yearlong crisis that has cost 1.5 million jobs. Its implementation will mean another tough year for most Turks in 2002, ministers have warned. The government's letter to the IMF said the cuts would be made "through voluntary retirement offers, and layoffs only when necessary." The government also promised to achieve a primary budget surplus of 6.5 percent of GNP. Minister of Finance Sumer Oral said Wednesday that the government would meet some of this through higher taxes on gasoline, natural gas and real estate. "We can't compromise on the program's financing targets in 2002," Oral said.

Meanwhile, Turkey is expected to unveil an action plan soon for fighting corruption and bad governance as part of its Stand-by Arrangement with the IMF. The action plan, drawn up by Minister of Economy Kemal Dervis, is being circulated for signature by all cabinet ministers. It sets out solutions for various problem of public life - ranging from over-employment and petty corruption in public services to the judiciary's inadequate handling of financial crimes. The plan also stipulates the need for effective regulations to clean up campaign finance. This includes requiring parties and candidates to declare the amounts and sources of all political donations. /AP news-Cumhuriyet-NTVMSNBC/ You may find IMF's Press Release on new loans to Turkey at: www.imf.org

Greece, Turkey agree to expand trade volume
ATHENS, Feb 12 (Reuters) - Eastern Mediterranean neighbours and long-time rivals Greece and Turkey pledged on Tuesday to increase trade, as the countries' foreign ministers met in Istanbul to discuss more thorny political issues.

Greek-Turkish trade volume, hampered for decades because of tense political relations between the two countries over territorial issues in the Aegean sea and the divided island of Cyprus, currently stands at about $1 billion.

"Our aim is in the coming years (for trade) to grow to $ 5 billion," Turkish Deputy Commerce Minister Kursad Tuzmen told a bilateral economic meeting in Athens.

Greece mainly exports cotton and fuel to Turkey while Turkey sells metal and cotton fibres across the Aegean. Greek Foreign Minister George Papandreou and his counterpart Ismail Cem were due to meet in Istanbul on Wednesday in an ongoing thawing of relations and in an effort to tackle issues that have often brought Ankara and Athens to the brink of war.

Tuzmen also said Ankara was keen to see natural gas from Turkey to flow to Europe via Greece. "Natural gas which will be imported from Central Asia is important to be distributed to the West through Turkey and Greece," he said.

Turkey imports natural gas from Iran, which has the world's second largest reserves of natural gas after Russia, through a newly-opened pipeline from Tabriz to Ankara.

Iran also said last week it was seeking ways to export gas to the European market via Greece.