Realignment in trade

Turkey is definitely changing its axis in trade, or at least trying to recalibrate its orientation to extract the maximum windfall from expanded business opportunities in non-EU member countries, be it in the East or the North or the South. That is a sound policy and makes perfect sense. Only five years ago, the European Union’s share in Turkey’s export portfolio was 59 percent. Today it is hovering below 50 percent. Nevertheless, Turkey can neither withdraw from the European market, which still has a lion’s share of the country’s exports, nor stay aloof to potential markets wherever they emerge.

Let’s look at the numbers on the EU side. Turkey exported almost $47 billion worth of goods to the 27-member EU market in 2009, which corresponded to 46 percent of total exports. The EU’s share was 48 percent in 2008. Although last year’s drop can be explained partially by the contraction in the European market, the general trend over the years has been a decline in the EU’s share. For the first four months of 2010, Turkey exported close to $17 billion worth of goods to the EU, which accounted for 47 percent of total Turkish exports.

I must say the diversification policy in business deals has worked to Turkey’s advantage, especially in the crisis, when many countries were hit badly as traditional partner economies contracted sharply. That is actually one of the main reasons why the Turkish economy was less impacted compared to others. With its strong manufacturing base and young workforce, Turkey’s vibrant economy was positioned to take advantage of booming markets in not so well-saturated markets in non-EU countries.

In fact, that is what drives Turkish foreign policy at the moment. The ruling Justice and Development Party (AK Party) is the most liberal market-oriented government Turkey has seen so far and its support base is made up of affluent business entrepreneurs emerging from the four corners of the country. It is no longer only İstanbul that spearheads the business dealings in Turkey; a number of other cities in the country’s heartland have been coming out in force.

Thus, it is no wonder that Turkey has had to say no to Iranian sanctions, as they simply go against everything Turkey stands for in the region: free and liberal trade, an open market, less bureaucratic hindrance and easy access to local markets. Is it not what the US has been pushing across the globe for two centuries? Just take the example of Gübretaş, the largest fertilizer company in Turkey. It bought the Razi Petrochemical Company in 2008, the largest chemical plant in the region, after it was put out for bid by the Iranian privatization authority. A consortium, in which Gübretaş was the leading partner, paid $656 million for the company.

This was the biggest industrial investment by Turkey outside of its borders at the time. Considering that 81 percent of Gübretaş shares were owned by the Turkish Agricultural Credit Cooperative (TKK), whose members numbered around 3 million — primarily small farmers and agricultural enterprises — one would realize how important it is for the government to keep relations with Iran stable from the business point of view. There are of course a number of political arguments that can be raised for maintaining good neighborly ties with Tehran, the least of which is the potential trouble Iran may cause Turkey and its allies in the West in Iraq, the Caucasus, Afghanistan and the Middle East.

Therefore, most arguments raised in the West about a Turkish change of axis are politically motivated and do not hold water. From the business perspective, however, there are growing signs that Turkey is realigning itself to seize the opportunities in markets where there is a competitive advantage. The EU should take part of the blame for this balancing act. The stalled negotiations with the EU over issues such as a visa-free agreement despite the customs union agreement simply do not make any sense. We often hear of Turkish entrepreneurs encountering impediments and hindrances at the consular offices of EU member countries. It is not surprising that they turn to other countries for investment and trade. Talks about easing the visa regime by the European Commission would not entirely solve the problem.

I should also point out that being outside the EU sometimes has advantages for Turkey as well. In contrast to the slow-moving cumbersome Brussels bureaucracy, Turkey can be very flexible and quick in reacting to changing dynamics in the region and the world. Ankara’s hands are also free to deal with third countries when signing free trade agreements and visa waiver deals.

I listened to an excellent presentation last week at the Norwegian Embassy in Ankara, where Ulf Sverdrup, senior researcher at the Center for European Studies at the University of Oslo, explained the challenges and advantages for non-EU member countries in Europe. The event — hosted by Norwegian Ambassador Cecilie Landsverk and Swiss Ambassador Raimund Kunz, whose countries are not members of the EU — celebrated the 50th anniversary of the European Free Trade Association (EFTA). Both ambassadors made the point that there are benefits at times to staying out of the EU in preserving sensitive national industries from EU interference. However, that comes at the cost of not being in a position to influence EU directives which would eventually impact non-EU companies as well.

I guess the verdict is still out on that discussion. The global crisis and euro jitters may have changed the dynamics of the appeal of EU membership. The best argument I heard last week was from one diplomat from the European Commission office in Ankara, who said, frustrated, that he has 27 mother-in-laws to deal with in the push to open new chapters for negotiations. Turkey, Norway and Switzerland are enjoying the privileges of being single for the time being.

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