Turkey can change its fate only by diversifying trade activities towards the east. But of course, trade diversification is not an easy task.

How do you deliver goods from one city to another? You just load the goods on a truck and send them, you might say. But when cities in two different countries are concerned, the truth of the matter is different. There must be free movement of goods and vehicles between the two countries concerned. The waiting time at borders must be short. The driver must be familiar with the recipient country. The roads of the recipient county must be safe and secure. The list goes like this. Therefore, the transportation of goods is best handled in the accustomed way. In that case, the best route to transport any good from Egypt’s capitol Cairo to Tunisia’s capital Tunis is through Italy. This is what I was told in Alexandria last week. I was wondering why the trade among North African countries was weak and asked them how they delivered orders, and Italy was their response.

The same applies also for Istanbul and Lahore. Say that you received an order from Lahore, the capital of Punjab in eastern Pakistan. So, you have to deliver goods from Istanbul to Lahore. But how? Let me tell you how. Here is the easiest way that has been tried before: You first put the goods in a container. Then you ship the container to one of the large European ports, Hamburg or Rotterdam, for instance. You secure a place for your container in a large container ship scheduled to go to Karachi. In other words, for a final destination that is in the east, you first transport the goods to a western port. For me, this is very weird, but historic.

Using this route, the time of delivery of goods from Istanbul to Lahore is around 26 days. You send the goods first to the west and then to the east, increasing the time cost substantially. But for whom? For the businesses in Turkey. Those who have a factory located in Hamburg, for instance, instantly ship their goods. As a result this picture emerges: assume that you have advanced in automobile manufacturing as far as Germany. You are able to produce automobiles with the same qualifications as those manufactured there. Still, Germany will sustain its structural advantage in selling goods to the Far East. German firms enjoy an unwavering cost advantage because the port is located there, due to the “first come, first served” principle in a way. History evolved this way, industry first flourished there and the first deep sea ports and container ports were built there. On our beautiful blue planet, countries that pioneered in development enjoy an unshakable cost advantage over transport routes. And we are talking about a huge advantage here. If a developing country industrializes by chance and wants to export to a neighboring country, it has to hold to the transport routes the west once drew. I guess international transport routes were first built during the colonial era. The system was designed in order to bring raw materials to Europe from all over the world and distribute processed goods from Europe to the rest of the world. Therefore, transportation cost is a critical constraint to the trade between two developing countries.

I believe that the issue with transportation costs is an issue of structural governance that is as important as the structure of the international organizations of the post World War Two era, that is, the United Nations, the IMF, and the World Bank. The transportation cost constraint must be handled some way as the number of newly industrialized, medium-size new world powers grows. Platforms like the G-20 must be utilized exactly from this perspective. This is kind of a “the child has grown and the dream is gone” syndrome. Turkey has become an industrial country because of Europe, with the contributions of trading with Europe. Turkey wouldn’t industrialize if it weren’t for the Customs Union. But the world has been changing. Today, there are two types of countries in the world: rapid-growing China and its suppliers, and Europe confined to slow-growth for some more time and its suppliers. Turkey is historically in the second group. Turkey can change its fate only by diversifying trade activities towards the east. But of course, trade diversification is not an easy task. It is a highly structural challenge.

This is the fate Turkey must alter with the G-20 mechanism.

This commentary was published in Radikal daily on 19.06.2012