October critical for Turkey-EU trade relations


Turkey has an opportunit­y to considerab­ly boost its exports in an instant next month, but the fallout of an ongoing political spat may yet block its route to greater trade. Ayhan Zeytinoglu, chairman of the Economic Developmen­t Foundation (IKV), one of the most influentia­l actors in Turkey’s long journey to the EU table, is sad but not hopeless about the interrupti­on to the process of the Customs Union update. According to Zeytinoglu, the German election on Sept. 24 will bring with it a serious reduction in tension between the two countries. If President Recep Tayyip Erdogan and German Chancellor Angela Merkel break the ice and shake hands at the EU Leaders’ Summit in Brussels on Oct. 19, the process will be completed quickly and Turkey’s exports will increase by up to 25% annually. Zeytinoglu believes the positive resumption of old economic ties between the two countries would make Turkey’s 2023 targets, which have recently become a dream, re-reachable and that Turkey can rapidly become a country that exports $500 billion annually through the potential increase in exports of around $40 billion a year.

With the business world set to make plans to find new markets according to the Customs Union expansion scenario, it remains entirely possible that those plans will be altered if Turkey doesn’t soon reach a revised agreement over the union. However, Zeytinoglu believes there is – as yet – no cause for alarm. “Now, first of all, after Sept. 24, I think there is a big possibilit­y that all the speeches made before that will change. Although Germany says, ‘This will not change, it is state policy,’ the country has never previously made decisions independen­t of its economic values,” he says.

“All their concentrat­ion is on the German economy. Yes, today, Turkey has serious links with the European Union, but Germany is the country that carries these links. For example, to take an example from Kocaeli Industrial Zone, we have 2,500 members: 280 of which are owned by foreign capital and 25% German.”

Bus nesses st ck w th the r plans

Indeed, Zeytinoglu thinks the business world hasn’t yet changed its plans anyway because business people are always able to turn a threat into an opportunit­y. Quoting Ministry of Economy figures, he says the Customs Union update is expected to contribute 1.5-2% per annum to GDP. “A 25% increase is anticipate­d in our exports,” he says. “An increase of 24% has also been calculated for EU exports to our country. I think these prediction­s are accurate. If Turkey can increase its exports by 25%, which is possible, we could reach our 2023 targets. I believe it is possible and there is so much time.”

A 25% increase in Turkey’s exports would mean a $37.5 billion increase in exports, says Zeytinoglu. He suggests that a 24% increase in EU exports to Turkey would also result in a huge trade increase. “This creates a $100 billion difference in GNP. No one says it anymore, but $500 billion of exports are still possible.”

EU cannot d scard Turkey

Asked whether he thinks the process of EU membership is completely broken for Turkey, Zeytinoglu gets philosophi­cal. “The EU and Germany are not places we can ignore, nor can they ignore us. Before 2000, we were the smallest country in the EU but now the situation has changed, we are the sixth- or seventh-largest.” He reiterates that Germany is the number one importer of Turkish goods and that the country sells value added products to Turkey. “This region cannot discard us. For a better life and peace, we need to complete our integratio­n with the EU. After the Customs Union update, even if we complete our integratio­n in the areas of human rights, freedoms and law, for which the EU criticizes us, our full membership may not be a target. England is coming out of the EU and Norway has not accepted membership. At IKV, we want Turkey to meet the EU’s standards.”

Change one f ne October day

Looming in the background as a potential hazard to internatio­nal investment in Turkey is the State of Emergency (OHAL) imposed on the country in the wake of the attempted coup on July 15, 2016.

Yet, Zeytinoglu believes OHAL should not be stressed as much as it is because the situation also exists in France at the moment. Instead, he believes changes made in the applicatio­n of OHAL in Turkey would better serve the economy. “If we can make some changes to its practice, maybe we will not be criticized so much,” he says.

“Turkey is in a highly troubled region in terms of security. [Heightened security] has recently started in Europe, but for years we have been entering shopping malls and hotels by passing through x-ray machines. More advanced than us in this matter is Israel. There didn’t used to be any security concerns in the US either. I remember getting on a plane in America was like boarding a bus. However, the security threat in Turkey has been a fact for years and it is only natural that we take measures against it. IKV is trying to explain that if we can improve the Customs Union update, Turkey will further increase its place in production quality and value chains, which will contribute to public wellbeing.”

Finally, Zeytinoglu doesn’t believe, as some do, that the EU bloc is using the Customs Union update as a trump card against Turkey. “The EU does not really stand behind any of the signatures it has signed. If you think about it, they have 28 countries and one of them says, ‘stop the process.’ What kind of democracy is that? It didn’t show the necessary reaction to the July 15 incident either, which we can’t ignore.”

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