Focus: US-Turkey Trade Relations

Three’s a Crowd?

Three’s a Crowd?

Jun. 17, 2014

Given Turkey's geopolitical significance in the region and the economic power of the US, the relationship between the two countries is mutually beneficial. Both nations agreed in 2009 that they wanted to move past the traditional Cold War-era strategic relationship to a more economically and politically integrated partnership.

According to the most recent data from the Office of the US Trade Representative, Turkey was the US' 32nd largest trading partner in 2011. And more recent data shows that trade continues to increase between the two countries, where Turkey imported $14.13 billion in 2012 and exported $5.6 billion, leaving it with a deficit of $8.53 billion. These figures improved in 2013 with imports falling 14.6% to $12.06 billion and exports rising by 19.1% to $6.67 billion. While total trade between the two nations fell by a slender 5%, the trade deficit for Turkey also fell by 36.7% to $5.4 billion. These strong figures come at a propitious time for Turkey as the US and the EU are currently contemplating the Transatlantic Trade and Investment Partnership (TTIP), which would create a trade agreement between the EU and the US, Canada, and Mexico and, effectively, a free trade area covering the two continents. While Turkey is not a member of the EU, the country's close ties with its neighbors to the west would bring added value to the already lucrative deal. Turkey is very much an advocate of the deal, and Prime Minister Recep Tayyip Erdoğan wrote a personal letter to President Obama in support of Turkey's inclusion in it. Turkey's Minister of Foreign Affairs, Ahmet Davutoğlu, also brought up Turkey's role in the agreement when Secretary of State John Kerry paid a state visit to the country in March 2013.

Turkey's advocacy for its inclusion in the deal is clear to see and quite appropriate. Ankara's exclusion could have damaging consequences for national trade. One aspect of the EU and Turkey's trade agreement, which had anticipated Turkey already being in the transitional agreement and on its way to full membership, is that whenever the EU signs an agreement with a third party, Turkey has to petition for its inclusion in it. In the past, this hasn't been a problem for Turkey as the EU mainly signed agreements with smaller nations and Turkey was able to sign parallel agreements with little resistance. However, in recent times the EU has been negotiating agreements with larger economies, such as the US, Mexico, India, Canada, and Japan, for example. Turkey is now finding it harder to sign parallel agreements, as evidenced by its inability to start negotiations with Algeria, Mexico, and South Africa. Because of Turkey's economic ties with the EU, failure to negotiate an agreement means that imports can enter the market duty free, while Turkey is unable to protect its sensitive industries with import quotas; what's more, it must still pay any duties in place when exporting its own goods.

If the TTIP agreement were to come into play with the exclusion of Turkey, it would almost certainly increase the trade deficit with the US, as Turkey would be unable to protect itself from US imports, or avoid duties when exporting to the US. It could potentially even lead to a geopolitical shift from the West to the East as Turkey turned to markets with lower duties.

However, should Turkey be included in the TTIP, it is likely to solidify its relations with the EU and the US, as well as create jobs for Turkey's burgeoning young population. The agreement would surely also lead to economic growth for Turkey, while allowing US and EU companies easier access to the Middle Eastern market.