Turkey, world trade and top WTO post

Turkey, as an emerging export-oriented economy with a special focus on trade diversification policies in recent years, has a huge stake in the future role of the World Trade Organization (WTO), whose very existence has now been called into question with the failed Doha round of multilateral trade talks. Because the 159-member WTO is the largest international organization that arbitrates trade disputes and serves as a venue for agreeing on new rules for free and fair trading, Turkey would like to see the strengthening of the WTO rather than it fading away into irrelevance as some seem to have already concluded.

Pascal Lamy, the outgoing director of the WTO, begs to differ on some of the criticisms leveled against his organization, saying that the WTO has proved to be a resilient organization that weathered one of world history’s worst economic crises that started in 2008. “We kept the trade even more open,” he told me with full confidence during a conversation I had with him in Ankara on Friday, blaming the stalled Doha talks on the major differences among members. He sounded sure that the WTO members will reach a “trade facilitation” deal in December in Bali at their ninth ministerial meeting. The deal, which includes border simplification procedures and harmonization of customs rules, may reduce costs in the $22 trillion world economy by 5 percent, which corresponds to a savings of more than $1 trillion, he said. Turkey attaches great importance to this deal because it hopes to address the transit and quota problems that the Turkish transportation industry has long been facing in foreign markets.

Turkey has started playing a larger role in the WTO in recent years as its trade volume picked up speed from $88 billion in 2002 to $389 in 2012, an increase of 342 percent in a decade’s time. Turkey’s exports jumped to $153 billion from $36 billion in the same period. In 2012 alone, Turkey has increased its exports to 139 countries, with record-breaking figures in its volume with 97 countries. Hence Turkey has a vested interest in ensuring the WTO rules are applied in foreign markets to shore up fair trading discipline while reducing risk considerations. The success of Ankara’s opening up to new markets, in particular in Africa and Latin America, will to some extent depend on the performance of the WTO. If the all-inclusive Doha round talks conclude, that will be great. If not, a piecemeal compromise deal will do just fine. That is one of the reasons why Turkey has in principle maintained an endorsement policy for new members who want to join the WTO. Among Turkey’s immediate neighbors, Iran, Syria, Iraq and Azerbaijan are not members of the WTO at the moment. Ankara welcomed major trading partner Russian participation to the WTO last year after 19 years of protracted negotiations and looks forward to see Azerbaijan, Algeria and others join the club as well.

Turkey’s position and lobbying efforts in the organization change depending on the sector. For example, as part of the Doha round talks, Turkey allied itself with the G-33 group, a coalition of developing countries that want to continue to restrict access to their agricultural markets because of concerns on the job market. Of the 46 countries in this group, Turkey, along with India, China and Indonesia, is among the few that steer, shape and advocate policies. According to the Turkish Exporters Assembly (TİM), Turkey exported $19.2 billion worth of agricultural products last year, an increase of 7.19 percent compared to 2011. The share of agriculture in Turkish exports was 12.62 percent. This may not be much in terms of overall export figures. But agriculture accounted for 24.6 percent of Turkey’s employment in 2012, with more than 6 million people earning their living from this sector. In 2011, this was 25.5 percent. This roughly corresponds to the share of combined jobs in the manufacturing and construction industries, which was 26 percent last year. That is why agriculture is a very sensitive issue for Turkey, leaving little or no political room to maneuver.

In the manufacturing industry, however, Turkey acts in close coordination with the EU because of the customs union it has with the 27-member bloc. As a country that supports free trade, Turkey also works with other groups in the WTO to seek for more rules on the use of anti-dumping measures. Last year, it also joined the 21-member “Really Good Friends of Services” group to be part of the negotiations aimed at liberalizing the services trade. Turkey is active in promoting the development agenda in the WTO as the chair of the Fourth United Nations Conference on the Least Developed Countries (LDC-IV). There are 49 least-developed countries on the UN list, 30 of which are WTO members. Turkey donated $1 million in 2010 to the Integrated Framework (IF), the WTO technical assistance program for LDCs in cooperation with other international organizations.

There is a risk that regional trade agreements may hamper Turkey’s ambition to become among the top 10 economies in the world by 2023, the centennial of the establishment of the republic. Ankara is naturally worried about the announced talks between the US and the EU over the Transatlantic Trade and Investment Partnership (TTIP). Because Turkey has a customs union agreement with the EU, the TTIP will be automatically valid for Turkey. While the US goods will have a zero tariff when entering Turkey after the TTIP deal, Turkey needs to negotiate a separate deal with the US to have similar advantages in the US market. Therefore, it is crucial for Turkey to join in the talks for the TTIP or renegotiate the customs union agreement to level the playing field. Lamy was asked by Turkish officials about the TTIP deal when he was in Ankara last week and he said the deal will take a decade to work out. In contrast, the Trans-Pacific Partnership (TPP), in which the US is seeking to deepen ties across many large Pacific-rim economies, sidelining China, is less of a worry for Turkey.

Turkey’s active role at the WTO can also be measured with the financial contribution to the WTO. As the WTO’s budget is determined according to each member’s share of global trade for the last five years, Turkey’s contribution to the organization’s budget has increased from 0.76 percent in 2007 to 0.96 percent in 2012, an increase of 26 percent. In nominal figures, Turkish contribution has reached 196 million Swiss francs (approximately $210 million) in 2012. Turkey’s WTO representative, Selim Kuneralp, is a veteran diplomat who specializes in economics. He knows the intricacies of trade negotiations as he had worked in the secretariat of the WTO’s predecessor organization, the General Agreement on Tariffs and Trade (GATT), between 1986 and 1993. At the WTO, he is chairing the Special Session of the Committee on Trade and Environment, part of the Trade Negotiations Committee. Kuneralp is also heading the working party on the accession of Belarus that was established in 1993. Another Turkish diplomat, Kerem Alp, is chairing the Working Party on Domestic Regulation which is attached to the Council for Trade in Services. There are only three Turks working in the WTO secretariat, with one set to retire soon. In fact, there should be more Turkish nationals working at the WTO.

As for the fierce competition among the nine nominees to succeed Pascal Lamy in the WTO, Turkey has not made up its mind yet. From the talks I had with Turkish officials, I sense Ankara weighs more on the experienced and skilled negotiator. The leaning is more towards a candidate from a developing country, though some acknowledged that the New Zealand candidate is well qualified for the job. The Brazilian candidate may have a lesser chance of getting the green light from Turkey because Brazil was among nine countries that brought a suit against Turkey in the WTO. Some nominees met with the Turkish representative at the WTO in Geneva to make a case, while others have taken a trip to the Turkish capital. Herminio Blanco Mendoza, Mexico’s candidate for the post, was in Ankara in mid-February to talk to senior officials. South Korean candidate Bark Taeho, minister for trade, knows his Turkish counterpart, Zafer Çağlayan, very well as the two signed the free trade agreement between the two countries on August 2012 after long negotiations. New Zealand Minister of Trade Tim Groser will be in Ankara early next month to lobby for his candidacy. As the troika of ambassadors from Sweden, Pakistan and Canada will canvas all 159 members to see who the front-runners in the game are in April, a clearer picture will emerge on who will likely succeed Lamy this summer. It may take three to four rounds to determine the winner.

Because the WTO is still the leading watchdog organization in settling trade disputes with binding powers and is positioned to issue new rules of trade in the future, the decision on who will replace Lamy is as important as ever. Turkey has a significant stake in this game played out at the WTO. It has been increasingly attacked by other members, who initiated disputes against Turkey because of Ankara’s decision to invoke legitimate trade safeguards measures. As its trade has grown, Turkey has also had to resort to dispute settlement mechanisms to bring lawsuits against others to remove trade barriers.

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