31st Meeting of the EU-Turkey Joint Consultative Committee

EU-Turkey Trade Relations

Dimitris TsarouhasJean Monnet Chair

Assistant Professor, Department of IRBilkent University

www.bilkent.edu.tr/~dimitris 20 December 2012, TOBB

Presentation Outline

• Free Trade: an Evolving Idea

• The EU’s Trade Policy

• EU-Turkey Trade Relations

• Global Business Bridges: Innovative Initiatives Adding Value to the EU-TR Partnership

Free Trade: An Evolving Idea• 1701, Considerations Upon the East India Trade (Henry

Martin): Technological progress and imports allows for an efficient use of resources

• 1817 David Ricardo: Comparative Advantage, trade as a non-zero sum game

• Mid-19th Century: repealing the UK Corn Laws, the Cobden-Chevalier Treaty of 1860 – MFN Clause

• Free Trade reliant on ideology and interests

• This is a fragile coalition at best (e.g. Interwar period, protectionism in most of Europe till 1945).

• Bretton Woods and WTO: trade as a welfare-generating mechanism

The EU’s Trade Policy• Goal: to create a fair and open trade system by use of WTO

mechanisms and procedures

• Assessment: benefits of globalization and open markets outweigh the costs

• How? Generates growth, reduces prices and enhances quality, offers more employment opportunities (trade sector employs 18% of EU workforce)

• The EU accounts for 20% of global exports and imports

• EU imports more agricultural products from the developing world than the US, CAN, AUS, JPN, and NZ put together

• EU and M-S account for more than half of all development aid

• EU trade market share: 19.4% (US 12.5%, Japan 8%).

• Trade volume doubled from 1999 to 2010

EU-TurkeyTrade Relations:Overview • Economic Relations date back to the 1963

Association Agreement – enhancing economic and trade relations

• 1970s Additional Protocol, 1996 Customs Union

• EU Turkey’s No.1 imports and exports partner; Turkey Europe’s 7th largest importer and 5th largest exporter

• Turkey exports machinery and transport equipment

• EU exports machinery, transport materials, chemical products and manufactured goods

• EU primary source of FDI in Turkey (75%)

EU Trade with Turkey: Going Strong Despite The Crisis

Year Imports (in mill. of €)

Share of Total Imports

Exports (in mill. of €)

Share of Total Exports

2008 45.960 2.9% 54.093 4.1%

2009 36.197 3.0% 44.101 4.0%

2010 42.323 2.8% 61.253 4.5%

2011 47.588 2.8% 72.588 4.7%

Turkey’s Trade with the EU: Robust Despite the EU Crisis

Year Imports (mill. of €)

EU Share of Total

Imports

Exports (in mill. of €)

EU Share of Total Exports

Trade

2007 49.910 40.8% 43.974 56.8% 93.884

2008 50.559 37.3% 42.916 47.9% 93.475

2009 40.432 40.5% 33.585 45.9% 74.017

2010 54.610 39.3% 39.754 46.3% 94.364

EU Remains Turkey’s Most Important Trade Partner: By Far

Turkey’s Imports Partners Turkey’s Exports Partners Major Trade Partners

1) EU-27 54.610 39.3% 1) EU-27 39.755 46.3% 1) EU-27 94.364 42.0%

2) Russia: 16.291 11.7% 2) Iraq 4.564 5.3% 2) Russia 19.788 8.8%

3) China: 13.000 9.4% 3) Russia 3.497 4.1% 3) China 14.715 6.5%

4) USA 9.338 6.7% 4) USA 2.906 3.4% 4) USA 12.244 5.4%

5) Iran 5.791 4.2% 5) UAE 2.522 2.9% 5) Iran 8.092 3.6%

Global Business Bridges • Promoted by the EUD – a Positive Business Agenda• Aims to facilitate EU-Turkey business matchups, reaping

the benefits of the CU• Economic and investment synergies of enterprises • Joint Ventures in neighbouring markets • A win-win approach, supported by M-S and TR authorities

(TOBB, MoE etc.)• Aims: business alliances, PP partnerships, technology and

know-how transfer, cross-border service provisions, joint investments and ventures

Global Business Bridges II: the Salience of Synergy

• Target Regions Phase 1: Tunisia, Egypt, Palestine

• Target Regions Phase 2: Iraq, Kazakhstan, Azerbaijan

• Arab Spring and global political change pose huge challenges to economic governance

• EU-TR partnership a uniquely placed stabilizing factor

• Ideal to facilitate investment, support local infrastrcuture and promote a business-friendly environment