Turkey is leveraging its trade advantage

Turkey is focused on expanding its trade with the Middle East to offset the downturn in the economies of Europe. But imports are growing faster, creating a widening trade deficit

The Turkish lands have been the lynchpin of trade between Europe and Asia, ever since the conquest of Constantinople in 1453 sealed the shift in the centre of European power from the Byzantine to the Ottoman Empire.

Until the great European discoverers began to open up maritime trade routes towards the end of the 15th century, the Ottomans had a stranglehold on European trade to India and the East. And even afterwards they remained the masters of the land-based routes, famously known as the Silk Road.

At the end of the 17th century, the empire of the Ottoman Turks reached as far as Algiers in the west, Basra in Iraq and parts of modern-day Yemen in the east, and almost to Vienna in the north.

During the next 200 years, there was a rapid contraction of Ottoman territory to what, in 1923, came to be known as Turkey. But the country’s continued claim to land on both sides of the Bosphorus means that it has retained a strategic importance as a link between East and West.

Turkey’s external exports

Present-day Turkey has sought to leverage this natural advantage as much as possible and with some success. In 1923, Turkey’s external trade was worth about $50m. That has since grown to more than $100bn.

The liberal economic policies of the government of Tayyip Erdogan, whose Justice and Development Party (AKP) came to power in 2002, have accelerated the process in recent years. Under Erdogan’s stewardship, exports have grown from $31.3bn in 2001 to $114.0bn in 2010, an increase of almost $83bn in just 10 years. By comparison, export growth in the previous 10 years was only $14.2bn. Between 1996 and 2000, it was just $5bn.

The majority of Turkey’s exports are manufactured goods. In the first four months of 2011, manufacturing exports totalled $40.4bn, or 97 per cent of the country’s total exports. The export of vehicles and basic manufactured metals alone accounted for more than a quarter of all exports.

“Just like the rest of emerging Europe, Turkey is making big investments in the automotive sector and other machine-driven industries,” says Andrew Birch, a specialist in Turkey at IHS Global Insight in Washington.

“They are integrating themselves into the production cycle of Europe’s more developed countries, providing parts for markets such as Germany and Italy.”

While Turkey has a network of trading relationships across the globe, Europe is by far and away the country’s largest partner. Turkey’s exports to the EU in April alone amounted to $5.8bn, equivalent to 48.9 per cent of the country’s total exports, up from 45.9 per cent in April 2010, according to the latest government figures.

Imports rise in Turkey

Unfortunately for Turkey, while exports have grown quickly, import growth has been even more rapid. Imports – chiefly of intermediate goods such as semi-processed industrial materials and unprocessed fuels and oils – amounted to $185.5bn in 2010, up more than 300 per cent from $41.4bn in 2001.

The rapid growth in imports is having a worrying effect on the Turkey’s finances. Over the past 10 years, Turkey’s trade deficit has increased from $10bn to $71.6bn, and the gap is continuing to widen.

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Richard Nield is a freelance journalist, photographer and filmmaker covering the Middle East and Africa. In 10 years covering the region, he has been published and broadcast by clients including the BBC, Reuters, Al Jazeera, The Economist, The Financial Times, The Independent and Foreign Policy magazine. He has reported from throughout the region, including Algeria, Egypt, Libya, Morocco, Tunisia, South Sudan, Jordan, Lebanon, Syria, Kuwait and Saudi Arabia.