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Turkey has entered an unprecedented, yet pivotal, time in its modern history. With parliamentary elections scheduled for Nov. 1, Turkey’s leadership has the opportunity to reset its economic agenda. As Turkey is at a crossroads in its commercial relationship with the United States, we call upon the governments of both countries to prioritize the economic relationship the same — or more — as the security relationship, and to enact major economic reforms to deepen bilateral trade and investment.
From 2002 to 2011, Turkey experienced tremendous economic growth. During this period of economic reform, Turkey’s GDP more than tripled, from $232 billion to $774 billion. As a result of its economic liberalization, Turkey’s foreign direct investment (FDI) inflows peaked in 2007 at over $22 billion. As reforms began to slow in 2012, so too have Turkey’s annual growth rates. Foreign investment inflows, a critical element in balancing Turkey’s current account deficit, have also tapered. In 2014, Turkey’s FDI significantly reduced to almost half of 2007 levels, at about $12 billion. Similarly, U.S.-Turkey trade volumes have plateaued at $19 billion a year. Since 2013, Turkish exports into the United States have grown by 10 percent, while U.S. exports to Turkey have declined by 3.5 percent. It is important for Turkey to arrest these recent economic declines through rejuvenating its economic agenda.
Behind these statistics, Turkey has much to offer with major infrastructure projects underway, a vibrant business community, and talented human capital. By 2023, Turkey plans to complete 27,500 miles of new roads and 8,500 miles of new rail lines; build new bridges on the Bosporus and the Dardanelles Straights; and construct 16 large-scale logistics centers, a new $10 billion airport in Istanbul, and one of the world’s ten largest seaports. Each of these projects is a highly attractive opportunity for the U.S. private sector, provided Turkey structures its tendering process in a competitive and transparent manner.
Turkey’s geostrategic location allows it to serve as an ideal hub for many U.S. companies. Turkey is home to 1,400 U.S. businesses that employ talented Turkish citizens to lead their regional offices. The country is also a burgeoning marketplace with small and medium enterprises comprising a large share of the Turkish private sector. Additionally, Turkey’s young, urban, and increasingly prosperous consumers are driving growth in Turkey’s consumption of modern goods and services.
Despite the phenomenal economic opportunities in Turkey, American and Turkish businesses continue to struggle to unlock the significant potential needed to deepen bilateral trade and investment. U.S. companies commonly seek to form innovative partnerships with Turkish companies and modern collaboration strives to include U.S.-Turkey joint technology development and knowledge transfer. If such partnerships are to be achieved, regulatory reforms are essential.
Expanding market access and broadening trade facilitation are just some ways to get started. Reforms also mean upgrading the U.S.-Turkey trade and investment relationship to address regulatory issues in services, public procurement, and agriculture. U.S. companies see the Turkey-EU Customs Union modernization as a vehicle for Turkey to make inroads on these reforms. These negotiations will propel discussions to address major concerns for U.S. companies in the health care and information-communication technology sectors in Turkey. Reforms can further align Turkey with U.S. trade and investment standards and begin a valuable conversation on initiating a U.S.-Turkey Free Trade Agreement (FTA). The expectation for Turkey is to recognize that comprehensive trade agreements with the United States for any country require not only the political will but also a highly detailed process.
However, the United States cannot stand on the sidelines and wait its turn as Turkey upgrades its Customs Union with the EU. The U.S. government needs to engage Turkey as a full trading partner, equivalent to many EU countries, and work toward an equal relationship based on equal parts. To unlock the potential of this relationship would translate into more than $10 billion in additional U.S. exports and more than 10,000 additional U.S. jobs. Upgrading the economic relationship would create additional employment opportunities for Turkish citizens and boost Turkey’s outbound trade and investment. U.S companies would seek to increasingly use Turkey as a services hub and a regional export platform for value-added goods.
In this vein, the U.S. Chamber of Commerce and The Union of Chambers and Commodity Exchanges of Turkey (TOBB) have launched a comprehensive study on upgrading the U.S.-Turkey Trade and Investment Relationship. The study highlights potential opportunities and crucial reforms that can lead to a U.S.-Turkey FTA. The report calls for Turkey to commit to significant levels of intellectual property protection and enhanced market access. Most importantly, the study provides the broader architecture and building blocks that can lead to an eventual FTA.
The United States and Turkey should develop practical mechanisms to re-engage the bilateral commercial relationship. The conversation must transcend the strong historic bonds between the two countries. Turkey’s new government will have the chance to accelerate economic reforms, and the U.S. government can restart the conversation. We certainly hope they will seize the opportunity.