Many predicted Afghanistan, Iraq, Armenia, Cyprus and Iran would top the agenda while forgetting the weak link in the trade chain between Turkey and the US.I’m a passionate believer in economic cooperation, which eventually paves the way to more sustainable political dialogue among countries. For long, Turkish-US trade relations have been sacrificed to military and political ties, limiting trade mostly to defense contracts and military tenders. Unfortunately, trade has failed to diversify into multiple industries, and the role of private enterprises has been restricted.
Cognizant of the lack of a sufficient economic base for sturdy relations with Turkey, Americans seem to have come up with very a pragmatic and practical approach to beef up business ties, albeit with a long delay. We know that Turkey’s complaints about difficulties in accessing the US market have for many years been falling on deaf ears. On the eve of the visit, Kürşat Tüzmen, a former trade minister and now in charge of the ruling Justice and Development Party’s (AK Party) external relations, told me how hard it has been to negotiate with US representatives to get favorable terms in trade. He accompanied Erdoğan during the prime minister’s visit to Washington.
The landscape has now changed dramatically and for the better. Turkey’s renewed foreign policy enthusiasm on multiple fronts actually follows the economic drive to diversify its market portfolio, thereby reducing the risk associated with economic fluctuations during different cycles. It paid off well during the crisis and helped soften the blow by cushioning the impact.
The logic for engaging with Iran was pretty much centered on economic factors, which evidently benefit Turkey immensely with a $10 billion trade volume. Close ties with Syria resulted in doubling the trade volume between 2007 and 2008, and it is likely to have doubled again in 2009, to an estimated $4 billion. Russia turned out to be Turkey’s largest trading partner with a $38 billion trade volume, though the bulk of it is in energy.
It is hard to produce a counter-argument to Turkey’s legitimate reasons for getting involved in trade with its neighbors. It appears, on the surface at least, that the new US administration has come to recognize this. Rather than pressing hard on Turkey to back away from this engagement, possibly out of concern that it may backfire on the US, the Obama administration is offering a carrot to Turkey, hoping to lure Erdoğan’s government to engage more on the Transatlantic side.
It makes sense, of course. Turkey will now have a new dimension added to its relations with the US. Looking at trade numbers between the two countries is pretty daunting and depressing. In the last decade, while Turkey’s exports jumped from $30 billion to $130 billion, the US share in Turkey’s portfolio dropped from 10 percent to a little over 3 percent now. The trade volume for 2008 was $15 billion. On a year-on-year comparison for the first seven months of 2009, our trade volume with the US fell from $8.9 billion to $5.8 billion, corresponding to an almost 35 percent drop during that period.
Though the global economic crisis has played a role in the decline, the pre-crisis numbers are worlds away from satisfying Turkey’s appetite. There are many areas in which to expand on this long-ignored field, with huge potential for new opportunities. Obama was expected to announce a new plan to boost trade and investment between the two countries. He came up with the “Framework for Strategic Economic and Commercial Cooperation,” which creates a new Cabinet-level forum to discuss ways to expand bilateral trade and investment flows and to try to resolve disputes when they arise. United States Trade Representative Ron Kirk and US Secretary of Commerce Gary Locke will co-chair the US side while Deputy Prime Minister Ali Babacan, who is also responsible for the Turkish economy, and Foreign Trade Minister Zafer Çağlayan will co-chair the Turkish side.
Now that the US has made an accurate diagnosis, fleshing out this new so-called “modal partnership” with a business drive remains the hardest part. We’ll see whether free enterprising Americans will be accommodating to allow Turkish goods to enter into the biggest consumer market in the world much quicker and with reduced tariffs. There are encouraging signs, but we also see comments dashing hopes on the Turkish side.
Today some Turkish goods are treated under the Generalized System of Preference (GSP), and there are a number of quotas in many categories, making access to the US market harder for Turkish goods. Ankara would like to see more flexibility on these quotas and hopes to revive the long-sought Qualified Industrial Zone (QIZ) initiative, which would allow Turkish goods to enter the US with zero or reduced tariffs, as is the case with Egypt.
We’ll see how this plays out in the near future. But judging from US Trade Representative Kirk’s comments during Erdoğan’s visit, it is too early to be hopeful. He said the new Cabinet-level initiative was not intended to be a stepping stone to talks with Turkey on a free trade agreement, highlighting that there were no immediate plans to pursue a free trade agreement between the two countries. If that is the case, Turkey should keep exploring new markets and further develop business ties with partners to its east, north and south despite the fact that some deals may draw the ire of Washington.
