1. Relations with Neighbours-South Caucasus Ümit Özlale
tepav
Relations with Neighbours-South Caucasus
Economic Policy Research Foundation of Turkey
EMERGING POWERS, NATIONAL INTERESTS, AND THE FUTURE OF MULTILATERALISM WTO Public Forum Geneva, September 26, 2012
Ümit Özlale

2. Turkey’s foreign trade dynamics in eight slides

3. Turkey in the region: Rapid growth in manufacturing after mid-90’s
Relations with Neighbours-South Caucasus
Turkey in the region: Rapid growth in manufacturing after mid-90’s
Share in exports of the region and level of industrialization (1996)
Country’s share in total manufacturing exports of the region
Role of customs union and the EU in our export performance
Share of manufacturing in Country’s total exports (%)
Source: UN COMTRADE, TEPAV Calculations

4. Relations with Neighbours-South Caucasus
Today Turkey is the largest manufacturer in the region (thanks to Customs Union and closer EU link)
Share in exports of the region and level of industrialization (2010)
Country’s share in total manufacturing exports of the region
Role of customs union and the EU in our export performance
Share of manufacturing in Country’s total exports (%)
Source: UN COMTRADE, TEPAV Calculations

5. Improvements in productive capacity:1984-2011

6. Relations with Neighbours-South Caucasus
However, Turkey has no star industries in exports
Rising sectors
Star sectors
Traditional sectors
Failing sectors
Market share in 2011
Source: UN COMTRADE, TEPAV calculations

7. Relations with Neighbours-South Caucasus
And loss of competitiveness is a challenge: Comparison of Turkey with EU- Accession 12
Source: WEF ( ), REF Calculations

8. Comparison of Turkey with BRIC in terms of competitiveness measures
Relations with Neighbours-South Caucasus
Comparison of Turkey with BRIC in terms of competitiveness measures
Source: WEF ( ), REF Calculations

9. Regional economic integration is the current trend
Geographical distribution of Turkey’s exports:
Actually during the crisis, the problem is from the exports side. Slow recovery process in the European markets affected us very negatively
Diversifying exports to the Middle East and North African markets became our first crisis response.
Diversification is good. And it helped our businessmen a lot, during the first year of the crisis.
Europe’s share in our exports decrease by 10 percent. But Europe is still our major market. And the European Unions’ share is still about 46 %.

10. Turkey’s west & east: Varying degrees of European integration
Relations with Neighbours-South Caucasus
Turkey’s west & east: Varying degrees of European integration
İstanbul
USD 51 billion
Kocaeli
USD 10 billion
Bursa
USD 11.2 billion
İzmir
USD 6.6 billion
Kayseri
USD 1.1 billion
Konya
USD 1 billion
Gaziantep
USD 3.6 billion
Kocaeli: 10 billion
Ankara: 5.2 billion
Adana: 1.3 billion
Mersin: 1 billion
Eskişehir: 658 million
Source: TURKSTAT

11. Regionalism vs. Multilateralism: Case for Turkey

12. Regional Trade Agreements
There has been an increase in the number of RTAs for Turkey.
Some of them are EC, EFTA, Egypt, Albania, Macedonia, Bosnia-Herzegovina, Croatia, Georgia, Israel, , Montenegro, Morocco, Palestine, Syria, Tunisia
And RTAs are flourishing worldwide, mostly in the form of FTAs and common markets.

13. Why the rise of RTAs and the fall of Multilateralism?
Problems in negotiation
More bargaining power with RTAs
Higher market share and easier market access
Barriers to trade and NTB in RTAs are reduced more quickly and to a significant extent
And as long as multilateralism fails to liberalize international trade, regionalism tends to continue.

14. However; Danger of being excluded from the RTA block for non-members
Conflicting multiple RTA memberships (Spaghetti Bowl)

15. How does that affect Turkey?
Fact 1: Europe is Turkey’s major trade partner
Fact 2: Customs Union agreement between EU and Turkey was a major factor for that close trade relation
Fact 3: EU gave pace to signing FTAs with its trade partners, which means that Turkey may no longer to reap the customs union benefits in the future.
Fact 4: Turkey can do almost NOTHING. It works like an exogenous negative trade shock.

16. Does diversification of markets help?
Turkey has successfully diversified its export destinations, after the global financial crisis.
However, EU is still (and should be) the main actor:
Export sophistication
Political issues

17. Is MENA the solution? In terms of diversifying the exports, yes.
However, it does not provide a long-term solution
Quality of exports and the value added
The size of the MENA market as a whole
Growth prospects for the MENA region and the increasing uncertainty.

18. To Conclude;
Although Turkey is one of the leading exporters in the region, structural problems such as competitiveness exist.
There is a high probability that, increased regionalism and the associated EU policies will further emerge as a challenge.
MENA is far from providing a sustainable solution.
There should be more focus on a new industrial policy design.