While the impact of the financial crisis affecting the whole world, starting with the USA, is increasingly being felt, the political and bureaucratic team steering Turkey’s foreign trade is seeking new ways of expansion. Plans call for Turkey’s exports to reach USD 125 billion by the end of 2008. The target established for 2010 is USD 200 billion. Will Turkey be able to reach that figure, and to what extent will the current crisis affect targets? How will the crisis in the USA, the greatest importer in the world, affect the purchasing power of the US and the exports of other countries? We asked Kürşad Tüzmen, State Minister responsible for Foreign Trade, about Turkey’s foreign trade strategy in the near future and about its short and long term goals.
What point have the activities aimed at the US reached? What is planned for the future?
Within the framework of our strategy to develop trade and investment relations with the USA, we first carried out a series of technical activities in order to establish target states and sector groups.
Now we have reached the stage when activities aimed at particular markets and in accordance with established targets will be carried out. In the meantime, we have also focused on activities to launch a promotion campaign, which constitutes the most important leg of the strategy. These activities can be divided in two groups, long term and short term.
The activities we can define as long term aim to a large extent to consolidate the image of Turkey and of Turkish products. Within this framework, for example, the Turquality project and other activities by groups promoting hazelnuts, leather and ceramics aims to consolidate the image of Turkish products and to emphasize the element of quality.
The implementation of the strategy to develop trade with the USA will continue over the next few years, but we need to keep in mind that we need to be patient for investments in the US market to produce results.
Can you tell us about programs taking place in the near future?
A trade delegation traveled to Miami at the end of April 2008 and another to the state of Georgia in October 2008. Meetings were held with delegations of 20-25 people, especially on a sectoral basis. Other activities planned for the near future include active participation in important fairs, inviting Investors and Out-sourcing Delegations, the organization of reciprocal seminars, the intensification of sectoral promotional activities in the US market, and the development of collaboration among private sector organizations.
Activities conducted by promotion groups and the targeting of the US market are also continuing. The Turkish Leather Fair, begun by the Leather Promotion Group and first organized in January 2008, will become a traditional element and a brand.
The project begun in 2007 in conjunction with the Turco-American Businessmen’s Association in the state of California with the aim of establishing a communication network between Turkish and American companies will be completed in 2008.
In 2008 we are also planning to invite purchasing delegations from US chain stores, exclusively for Turkey and to show American importers all the production stages of Turkish products from all sectors.
On the other hand, seminars held in Turkey for food and automotive products to promote the US market will continue to be held in other sectors too.
What does Turkey need to do in the field of technology?
One of the priority subjects in our activities concerning the USA was the removal of Turkey from the “Special 301 – Priority Foreign Countries,” category, a classification that is made in consideration especially of those companies that make technological investments in Turkey. Although it has no sanction power, this indicator is seen as a sign of the importance given by companies to intellectual property and it affects high level technology investments. It is for this reason that we continuously provide the USA with information on the developments taking place in Turkey with regard to the protection of intellectual property rights. Turkey has therefore been removed from the list of Priority Foreign Countries.
In short, the objective of the activities held within the framework of our strategy is to consolidate the image of Turkey and of Turkish products, to increase our exports to the USA, to draw the attention of US investors, and to develop bilateral relations in general, taking advantage of the positive effect that trade relations will have on political and cultural relations.
What can be done to increase sectoral variety?
The products currently exported to the USA do not present a wide variety. Approximately 35% of our exports to the USA currently consist of textiles, ready made clothing, and iron and steel products. Because of the focus on these sectors, an export problem in these sectors can cause our total export performance to drop.
We also need to calculate that the problems in the housing sector, which have triggered the crisis in the USA, can negatively influence the iron and steel sector that plays an important role in the US market.
In this context, increasing sectoral variety and consolidating our presence in the US market are two of our main means to avoid being affected by these periodical economic developments. However, we must also not forget that the USA is a market where there is a need for long term policies in sales and marketing.
Which are the sectors that should be emphasized?
In the light of these data, it is important that activities planned for the near future and in accordance with our strategy be distributed to targeted sectors and states, that there be some focus on other target markets, apart from traditional export sectors such as iron and steel and textiles, and that activities are increased. We can see that there has been an increase in exports in the sectors of machine industry, jewelry and ceramics and we will continue to support these sectors.
We will continue organizing promotional activities that emphasize quality and providing incentives towards branding, in order to successfully compete in the export of textiles and ready-made garments and to empower our exporters. In this context, we are continuing to offer incentives to companies that wish to open offices or set up representatives in the USA.
The main objectives that we have established within the scope of our strategy for the near future include the diversification of our export products’ range with the addition of products of high added value that embody high technology and that are fashion and brand oriented, the increase of the share of states other than New York within our exports, and the resulting reasonable increase of our share in the USA’s total imports.
On the other hand, in spite of all the recent unfavorable developments, the USA has occupied the 7th place in our exports for the year 2007. We have no doubt that if we consolidate our strategy on the basis of our experiences we will definitely achieve our objectives for the near future.
How will the recession in the USA affect Turkey?
In 2008, when there will be an increase in the influence of the recession in the USA, fair organizations, purchasing and trade delegation programs will continue to be actively employed in order to develop our economic dialogue with foreign markets, starting with the target countries. Preferential trade and free trade meetings will be intensively pursued. Our current position in the international construction contract market will be further consolidated. Trade policies will continue to be implemented against the increase in imports, which damages local industries, and against low priced imports that result in unfair competition.
Work is underway that aims to increase activities in the Chinese People’s Republic and markets in North and South America. We are planning on taking a major step towards exceeding our export objective of USD 125 billion in 2008 and achieving the target of USD 200 billion in 2010.
The main objective of the said activities and projects is to achieve an export structure that will not be affected by an economic recession that may be experienced in any of our markets, as is the case with the USA. This is only possible via an export structure that is not regionally dependent and that has a strong competitive power.
Our aim is for the share of our country’s exports in world trade to reach a level that reflects the true potential of our country. The first step to take in order to fulfill this objective is to decrease the sectoral and regional dependency of our exports. The second step is to increase our share in our current markets and the third is to increase the export of products with high added value.
How much success has been achieved in these stages?
Thanks to the superior export performance shown in recent years, we can say that our country has achieved success in the first two steps. As for the third stage, which consists of increasing the export of products high in added value, we are working intensively on image-making projects and promotion and branding activities, such as TURQUALITY. These activities give our country the opportunity to compete in fields other than prices, too. Over the next few years our exporters are going to position themselves in accordance with economic developments.
Significant projects are being realized in the field of construction contracting in oil rich countries. Because of the financial accumulation in these countries, this process will continue in the near future too. High level economic growth is expected to continue in China, India, and the Far East; some commentators even claim that these countries will be able to compensate for the recession in the USA.
What do you think about the production plants of some sectors moving outside Turkey?
It is very important to present entrepreneurs with an appropriate and easy investment environment. Cost is the most important element in such an environment. The fact that some Turkish companies are moving their production plants abroad because of lower costs is a natural consequence of trade. And anyway such a process is happening all over the world. The same issues are being experienced in the USA and in Europe and companies are moving to the places where labor costs are lower.
This situation no doubt has some negative consequences from the point of view of employment in Turkey; however, these companies bring their profits to Turkey and contribute to an investment accumulation. To change this situation it is necessary to lower costs for investors and entrepreneurs in Turkey. In this context, for example, factors such as energy prices and labor costs come into prominence in investment decisions. Last of all, an analysis is being conducted with the goal to increase competitive power in Turkey, with the participation of all relevant organizations. We expect this project to shed light on our work.
What kinds of incentives exist for foreign investors?
Incentives for investors were renewed in 2006 and the manufacturing industry, energy and export were identified as priority sectors. Apart from exemption from customs duties and from VAT, depending on investment amounts, measures particular to some cities have been taken. Research and development activities are gaining prominence in this context. Moreover, work is being conducted on new legislature regarding incentives in this area.
Many incentives such as income tax reduction and social security payment reductions can also be provided within this framework. Moreover, for example, land can be allocated in the field of technological investments,
SHORT TERM ACTIVITIES AIMED TO DEVELOP ECONOMIC RELATIONS WITH THE USA
• The 3rd Term Meeting of the Economic Cooperation Committee (EOK) and the 5th Term Meeting of the Trade and Investment Council with the USA were held in 2007; the 4th Term Meeting of the EOK was held in 2008.
• The 6th Term Meeting of the Trade and Investment Council was held in October in Ankara.
• Meetings have been organized where information was presented on the US market, with the aim of facilitating Turkish companies’ entry into the market. Informative seminars have been held for exporters in Istanbul, Gaziantep, Bursa, Izmir and Ankara concerning the USA Generalized System of Preferences.
• Conferences were held in 2007 in Ankara, Istanbul and Izmir and in March 2008 in Gaziantep, Mersin and Konya, on the “Kosher certificate.”
• Seminars have been held in Bursa, Ankara, Konya, Izmir and Istanbul, with the participation of US purchasers, aiming to promote the automotive and food sectors of the US market.
• These are mainly short term ventures that will introduce our companies directly to their distribution channels.
• Apart from the existing trade representation offices in New York and Washington, new representation offices were opened in 2007 in Chicago and Los Angeles. The aim is to achieve an increase in the services provided to our companies in the USA.
• Trade and boutique trade delegation programs have been organized since 2006 to target states. Many conferences, starting with conferences jointly organized by the Foreign Economic Relations Board (DEIK) and the American Turkish Council (ATC) have been attended.
• The trade chambers of states, sectoral associations, and PR companies relevant to trade delegations and Turkish associations and chambers have been contacted, as well as other organizations and individuals considered useful.
U.S. IMPORTS FROM TURKEY (2003 to 2007) (In thousands of dollars) / OVER $50 MILLION
End-Use Code 2003 2004 2005 2006 2007
Fruits and preparations, including frozen juices 47,857 54,339 46,822 79,887 108,047
Vegetables and preparations 31,274 41,506 51,706 64,595 69,727
Fuel oil 39,017 50,899 123,365 83,846 73,000
Other petroleum products 88,476 67,996 354,598 150,787 252,376
Other (tobacco, waxes, nonfood oils) 154,203 154,357 189,027 161,489 183,550
Synthetic cloth and fabrics, thread and cordage 92,690 102,154 122,308 130,318 149,414
Finished textile industrial supplies 48,610 95,783 98,645 53,171 54,099
Stone, sand, cement, and lime 218,292 285,694 394,782 453,483 452,680
Iron and steel mill products-semifinished 212,776 887,697 458,677 918,807 269,422
Finished metal shapes & advncd manuf 38,767 75,351 74,872 124,251 146,334
Other (boxes, belting, glass, abrasives, etc.) 37,683 47,784 56,026 77,811 80,880
Other industrial machinery 43,503 51,667 64,515 61,509 64,338
Agricultural machinery and equipment 58,203 69,190 80,938 66,413 57,026
Parts for civilian aircraft 15,114 29,834 49,523 71,112 85,449
Engines for civilian aircraft 55,263 60,399 71,328 79,155 107,893
Apparel and household goods-cotton 1,218,827 1,116,483 931,808 698,523 589,534
Apparel and household goods-wool 45,187 74,346 85,418 52,316 58,529
Apparel and household goods-other textiles 253,075 270,197 250,070 290,115 211,547
Rugs and other textile floor coverings 41,489 59,273 75,221 80,892 96,792
Jewelry (watches, rings, etc.) 248,872 369,871 405,893 359,828 358,030
TOTAL (All imports) 3,788,189 4,933,808 5,182,052 5,359,038 4,600,537