Turkish Textile and Apparel Industry Position
For EU - Turkey Customs Union and EU - Third Country Trade Relations

This report will respond to the Turkish Undersecretary of Foreign Trade notice soliciting comments on Turkey's preparations and objectives for the WTO Ministerial Conference in Doha, Qatar.

These comments are submitted on behalf of the Turkish Textile and Apparel Industry by the Turkish Textile Employer's Association.

 

Crises in Turkish Textile and Apparel Industry before Doha
Today, to set out its position on the challenges for the upcoming WTO New Round is very important for the Turkish Textile&Apparel Industry that finds itself in the worst crisis.
- The industry crisis continuously deepened since 1998, after the Fareast crisis
- Textile& Apparel job losses are estimated in millions of people
- The manufacturing index of the industry is down more than 50 %
- Continuous crisis effecting Turkey; 1997 Fareast crisis, 1998 Russian crisis, 1999 devastating two earthquakes, 2000/2001 financial crisis, 2001 WTC crisis have caused hundreds of factories to close down
- A large part of the total investments made by modern EU technologies in the sector have been wiped out
- Many companies are fallen under the bankruptcy code because of the last four years never ending financial crises

 

Turkish Textile & Apparel Industry: a strong global competitor
International negotiations in Doha are crucial for the future of the Turkish textile and apparel industry, which represents
• 11 % of the national official and 20% of the temporary employment,
• 10 % of the official and 20% of the unofficial GNP,
• 38 % of the total Turkish exports

 

The industry, excited with the new EU market opportunities illusion with the Custom Union, invested more than 50 billion US$ in modern EU technology and infrastructure over the past 10 years. Today, Turkish textile and apparel industry hold the biggest capacity of yarn, weaving, dye and finish and apparel in EU. Turkey has;

. 90 % of the installed capacities of EU in ring spinning,
. 75 % of installed capacities of EU in open-end rotors,
. 80 % of the installed capacities of EU shuttle loom
. 27 % of the installed capacities of EU in shuttle-less looms
. One of the biggest dye and finish capacity in EU
. One of the biggest apparel manufacturing capacity in EU

 

The EU's Market Access policy have seriously damaged the trade deficit
Turkey as a candidate for accession to the EU is in an exceptional situation; it's the unique country that has entered into Customs Union.

In his letter dated 27 Th of September 2001 to Mr. Zoellick; Pascal Lamy, European Commissioner have been reflected the relations between Turkey and EU; “Turkey is the only large country with which the European Union has entered into customs union. This has a very practical consequence the application by Turkey of the same trade policy as the European Union as opposed to all other agreement-including those with the other countries that are candidates to the accession to the European Union-providing for Free trade, where our partners have retained the right to implement an autonomous and generally more restrictive trade policy.”

But previously successful efforts by Turkish Industry to increase its global competitiveness have now been overwhelmed by the Customs Union;

The trade deficit has increased by 108,1 % against Turkey’s favor while the total exports to EU has been increased by only 29,5 % in the last five years.

Over the past five years since the Custom Union, the negative trade balance trend between Turkey and EU has continuously increased at the expense of Turkey. The cumulated trade balance deficit reached to 59,7 billion US$. The trade deficit which was almost 5,8 billion US$ in 1995, increased to 12 billion US$ in 2000. (Attachment I)

 

Turkish Textile and Apparel Industry have been forced to face with the unfair imports from Far East with the EU Customs Union since 1996
Additionally, as Turkey has been automatically applying the same foreign trade policy for the third countries as of EU, unlike the other candidates, the Turkish Textile and Apparel Industry has suffered deeply by the negative impacts of the EU’s market access and wide open market policy. Whilst-average import duties for industrial products was reduced since the start of the customs union in 1996 from 16 % to 5,4 %, in case of textiles and clothing such duties were reduced from an average 27 % to close to 6 %. Turkey had in addition to introduce import and trading rules of the European Union, thus further facilitating imports. This has been of benefit to all countries trading with Turkey. This has caused a flood of artificially low-priced Asian imports into Turkish market. Asia's share in the Turkey's total fabric imports (in volume) has jumped from 53 % in 1998 to 67 % in 2000.

So many shockingly artificial low priced textile and apparel products are being imported to Turkey from Asia as well as through EU Countries by transshipment. (Attachment II)

 

- Thanks to EU’s "close to zero custom tariffs" and "wide open market" strategy, incredible amounts of textile products from all categories are being imported from different countries including EU at very unfair and artificial prices.

- Textile fabrics are being imported even from Nederland (0,38 US$/m2), Austria (0,33 US$/m2), Spain (0,32 US$/m2) and velvet fabrics imported from Nederland (0,90 US$/m2) have raised the question if this situation of transshipment is appropriate with the EU Free Circulation terms.

 

As unfair imports have continuously increased their market share in EU and Turkish domestic markets, millions of job losses and hundreds of factory closures have been widespread across the textile and apparel sector in Turkey.
The simple rules of origins, custom tariffs equivalent to zero or close to zero that are applied to the third countries due to the Custom Union, made Turkey a very open market not only to EU but to all third countries. The continuous deterioration of the local industries against this unfair competition has accelerated the growth of the economical crisis and millions of job losses in Turkey.

 

Turkey requires equity and reciprocity in WTO negotiations
As mentioned in Mr. Pascal Lamy’s letter dated 27 the of September 2001 to Mr. Zoellick, “…since the results of any negotiations between the European Union and third countries will have to be applied automatically by Turkey, the Commission needs to take into account in the European Union’s trade relations with other countries also the Turkish interest”. EU's trade negotiations and agreements made with series of third countries such as Mexico, Sri Lanka….without involvement of Turkey caused the elimination of reciprocity and symmetry against the interest of our industry.

 

Today, seven years after the signing of the Final Act, many countries have not reduced or eliminated the tariff and non-tariff barriers to trade in textile and apparel, which they committed to do in the Uruguay Round. Therefore, the first order of the Ministerial Conference should be to force these countries to open their domestic markets protected by excessive tariff barriers and a series of non-tariff barriers and establish symmetrical custom tariffs.

 

The Agreement on Textile and Clothing (ATC) tariff cuts have not been reciprocal
The EU has fulfilled her commitments under the ATC but the experience of her unilateral market access policy has shown that further tariff cuts cannot and will not persuade these countries to lower their tariffs. In the light of the existing closed market policy of the many of developing countries and even USA, the textile and apparel custom tariffs are still very high compared to EU (Attachment III).

 

Existing Very Low Custom Tariffs of EU in Textile and Apparel Products Eliminate the Custom Union Benefits for Turkey and New EU Candidates
Continuous unilateral reduction of textile and apparel tariffs from 26 % to average 6 % by EU to these ultra-protectionist countries has destroyed the "little" privileged access of Turkey to EU. As a result, Turkey has been forced to compete against the unfair trade practices of these third world countries in the EU market; child and forced labour, very low wages, environmental pollution, state subsidies, etc, causing all the labour intensive Turkish industries, especially the textile and apparel industry, inefficient and unprofitable.

 

Thanks to EU's "wide open market" foreign trade policy for textile and apparel products;
i. EU's total textile imports have risen dramatically between 1995-2000 (% 24,95) 'and reached to 17,914 billion ECU in 2000. In the same period, textile exports has climbed by 38,19 % and has worth 3,861 billion ECU. Meanwhile, imports from Asia rose strongly such as South Korea (increase of 145,08 %), Taiwan (106,39 %), China (90,57 %) in the 1995-2000 periods. In the same period imports growth from Turkey was only 75,49 %.

 

ii. EU's total apparel imports have also dramatically risen by 67% between 1995 - 2000 reaching to 51.600 Billion ECU in 2000, and EU exports have risen only by 39% reaching to only 16.654 Billion ECU in 2000. The imports indicators in apparel for EU underscore the gains obtained by S. Korea, China, Sri Lanka, Indonesia and other Asian countries, which are surprisingly much higher than Turkey.

Economic and social stability in Pan Euro zones including Turkey should be also an important trade and social policy of EU Brussels; reduction of textile and apparel tariffs asymmetrically below 20 % level has been threatening and damaging of this goal. NAFTA rules of origin and custom tariff terms and foreign trade policy are a good example for the enhancement of free trade among its members as a first priority.

 

Technical and Non-tariff Barriers Implemented by the Developing Countries Create Major Imbalance in Fair Trade Practices
Many of the developing countries in Asia or in Latin American have not undertaken the disciplines, which they have been committed. (Protection of intellectual property rights, custom valuation code, elimination of non-tariff barriers, lowering custom duties...)

. India and Brazil impose numerous taxes and other charges, many of which are WTO-illegal in order to boost effective tariff rates to 40 % or more;
. Bangladesh, Brazil, China, Colombia, Egypt, India, Indonesia, Malaysia, Pakistan and Thailand use customs procedures to revalue the declared value of textile imports in order to increase the net tariff that textile imports pay.

These and other details about the high custom tariffs and the non-tariff barriers have been mentioned in the report “Promises Unkept” realised by ATMI (American Textile Manufacturers Institute), (Attachment III).

This forces industries and countries to make recourse to the Dispute Settlement Body against non-tariff barriers imposed by other WTO members. But these actions stayed unresolved and every major market that was kept closed at the beginning of the WTO still remains closed today.

EU Actions Needed to Rebalance the Uncompetitive Arena and Unfair Trade Practices

I - ACTIONS TO DEAL WITH THE UNFAIR TRADE PRACTICES OF THE THIRD COUNTRIES
During the four years of long standing economic crisis in the domestic market the Turkish Textile and Apparel industry needs EU and Turkish Government to move swiftly and jointly to rebalance the ever increasing negative trade deficit of Turkey and unfair trade practices of third countries;

- Turkey has followed the textile and apparel trade policy of EU since Marrakech. But, Turkey and EU must act immediately to re-adjust this unfair trade practices and asymmetrical custom tariffs of the third countries in order not to risk further the total loss of the largest manufacturing industry in Turkey. EU actions should include a requirement of equity and reciprocity in trade with these third countries.
- The first order of the Ministerial Conference should force the countries to be in conformity with the Uruguay Round resolutions involving textile and apparel-related products.
- The Ministerial Conference should not undertake any other multilateral negotiations about these products before the Uruguay Round work finalized.
- Once the quotas are phased out under the existing Uruguay round schedule, EU, similar to USA, should establish for the textile and apparel industry the necessary safeguards for the protection of domestic employment, new investments, and the existence of these industries especially in Pan Euro zone until symmetrical tariffs are implemented by the Third countries.

- EU should not enter into any bilateral free trade negotiations with the other third countries at the expense of Turkey's and new EU candidates' national economic interests.
- EU should also adapt similar "Yarn Forward" NAFTA rules of origin and symmetrical customs tariffs for the enhancement of textile and apparel trade, new investments, and domestic employment within EU as a first priority.

 

II - ACTIONS TO ADJUST TURKEY’S TRADE POSITION WITH EU
As well as we do appreciate the need to spread the benefits of liberalisation to developing countries; we would like to mention our concerns such as the suggestion of “ less than full reciprocity” which comes out from the draft of Ministerial Declaration of the New Round. This ‘‘ less than full reciprocity ‘‘ approach of EU cannot continue to be at the expense of Turkey and other EU candidate countries’ national and economic interests. EU must protect not only the interests of the EU members but also the interests of the EU candidates in all foreign trade agreements and practices;

- Tariffs related to textile and apparel should not be reduced any further, and EU should make no further concessions in textile apparel sector until full reciprocity and symmetrical tariffs are achieved with the third countries.
- EU Textile and Apparel Custom Tariffs should be symmetrical and increased at least to the level of USA for all categories for equitable and fairer trade with third countries.
- All Non-tariff barriers eliminations should be requested as an integral part of the New Round work, if not achieved similar non tariff barriers should be implemented by EU without delay
- EU should implement adequate and substantial direct and indirect investment and tax incentives for the EU local investors for making direct investments and/or joint ventures in Turkey.
- Turkey has not enjoyed the benefits of major EU financial programmes and has not in the agenda of EU membership as the other candidates. It is so obvious that this exceptional situation of Turkey cannot be compatible with a sustainable trade and foreign policy.
- EU should strengthen enforcement of standing laws and regulations that prohibit fraud, under invoicing, and transhipment. Stricter Certificate of Origin forms and declaration of the manufacturer and the suppliers should be requested at customs.
- EU in her bilateral free trade negotiations with Eastern Europe and North African countries (Pan Euro Med) should include Turkey automatically in these agreements as a part of Turkey's EU Custom Union obligations. Furthermore EU should oblige and convince Morocco, Tunisia and other Pan Euro countries to finalise their long due parallel free trade agreements with Turkey within QI 2002.

 

In such an environment, which will only worsen in the months to come under terrible circumstances occurred after the horrible terrorist attacks of the 11th September 2001, the Turkish textile and apparel industry and its remaining two million workers and suppliers cannot afford to make other sacrifices in WTO.

 

We would like to remind that EU's foreign trade policy to open the EU's labour intensive sectors to third countries in order to obtain market access in other EU sectors has been clearly against the interests of Turkey and already caused an unrepairable economical and social damage.

 

The WTO Conference in Doha and subsequent meetings with EU and Turkish officials offers an opportunity to correct the elements of these unfair trade practices; very low priced imports, transhipments, non-tariff barriers, asymmetrical custom tariffs, state subsidies, etc.

 

Turkish Textile Employers Association expects also that this New Round will be an occasion for EU to be more considerate towards the economic and social interests of Turkey and the new EU candidates against unfair trade practices of the third countries.