Archive

  • March 2024 (1)
  • December 2022 (1)
  • March 2022 (1)
  • January 2022 (1)
  • November 2021 (1)
  • October 2021 (1)
  • September 2021 (2)
  • August 2021 (4)
  • July 2021 (3)
  • June 2021 (4)
  • May 2021 (5)
  • April 2021 (2)

    Why Turkey’s exports are still in the pit?

    Güven Sak, PhD29 July 2010 - Okunma Sayısı: 1086

     

    Please take a look at the figure below? It shows the movements in world trade and Turkey's total exports. What the figure reveals is clear: In terms of exports, the world seems to have come out of the pit whereas Turkey has not. Why is that so and what must be done? If you wonder what this is all about, please read on.

    Figure 1. Year-on-year Change in World's and Turkey's Exports (%), 2006-2010

    referans2907.520px

    Source: World Trade Organization (WTO)

    Let us highlight some findings right away. "Why is Turkey still in the pit?" I remember writing on this subject quite recently. Actually, I argued that we can compare Turkey's performance with that of Mexico's. After all, the former was proximate to the European Union (EU) market and the latter was proximate to the US market. Turkey's proximity to the EU market which will recover slowly due to the Greek crisis spreading its effects throughout the Union also contributed to the outlook against Turkey seen in the figure above. I guess the message is clear in this respect. The world average has been offsetting the loss while Turkey is still in the pit of the crisis. By the end of the first quarter of 2010, Turkey compensated only 25% of the total loss in exports. What does this imply? Turkey has re-earned only 25% of the loss in exports between the pre-crisis peak and the trough. On the other hand, Turkey's soul mate Mexico has compensated 75% of the export loss faced during the crisis. What is the underlying cause of this difference? It is the demand stimulating measures implemented in the USA against the policy inertia across the European Union. I believe this is the first point to take into account when talking about Turkey's export performance.

    The second point goes as follows: policy note by TEPAV economists issued yesterday stresses that the problem is not directly related with the contraction of the EU market. Therefore, as much as it is correct, the point emphasized above is not alone sufficient in explaining the weak export performance. Czech Republic and Hungary who also export to the EU market, for instance, have achieved a more rapid recovery in export performance in the first quarter of 2010. In this period, the said countries compensated 43% and 41% of the loss in exports, respectively. The rate for Turkey still stands at 25%. The export market at hand is the same for all of the three while the contraction is felt more rapidly by Turkey. The circumstances facing Poland and Romania that are becoming rivals to Turkey in medium-technology exports are apparent. There are countries that are more proximate to the EU market demonstrating better performances then Turkey. This point must definitely be kept in mind.

    Why is that so? It is possible that this is not Turkish firms' call. Do you wonder what this means?  Please wait and hear then. Beginning with 2002, Turkish firms in many sectors started to operate within the international value chain. The executive headquarters of these value chains have increasingly been heading to Istanbul. The executives of the international value chains might have decided that Turkey should leave the EU market to other members of the value chain and diversify its exports towards other countries. It is evident that, the headquarters of a firm in the automotive and parts sector would not be located in Turkey. Similarly, the decisions about who will service in which parts of the world would not be Turkey's call either. Then, the trend stressed in the second point might be of key importance. Western capitals might have judged for shift of axis in Turkey's exports. The markets have decided Turkey to become a medium-technology country from a low-technology manufacturer. Since Turkey does not have an industrial strategy of its own, the global trends have shaped Turkey's industry. And it is possible that the same dynamics have now been altering the axis of Turkey's exports. This is the third point to take into account.

    Fourth: successful export performance is a possibility. Indonesia, for instance, is among the countries which took the highest advantage of the 2008 crisis. While Turkey's government was playing the "sleeping beauty" Indonesia was benefiting from the World Bank funds. In the first three months of 2010, the country enabled 115% recovery in exports. That is, exports of the country have fully recovered from the crisis. Let me tell you about the countries that took the highest advantage of the confusion of the Western people sometime.

    Let the fifth point conclude: there are three reasons why Turkey's exports are still in the pit: one about the business cycles and two structural. The first is the contraction of the EU market. Though important, this is not sufficient to explain the export market losses facing Turkey. The second is a structural reason: it appears that while the new-normal is being designed, markets throughout the world are being shared. If so, market losses can prove permanent. In that case, we had better start talking about the "access to new markets myth". What we won is too small compared to what we had lost. Then, revising the export subsidy mechanism rapidly is not a temporary measure but a must requirement for Turkey.

    How about that? Which one is correct? Which part of the often highlighted new export strategy does this constitute?

    To whom this might concern.

     

    This commentary was published in the Referans daily on 29.07.2010

    Tags:
    Yazdır