The volume of trade between Turkey and the US is increasing, as the two countries strive to improve commercial ties despite occasional strains in political and military relations. US officials and private sector groups are promoting Turkey to American businesses as a growing economy in a strategic location with a massive labour force.
The US accounted for more than $3.7bn of Turkey’s exports and $12.3bn of its imports in 2010, making it the nation’s seventh top export partner and fourth top import partner. Meanwhile, according to Uğur Terzioğlu, the chairman of the Turkish-American Businessmen’s Association, “Trade between the US and Turkey is set to increase 60% over volumes in 2010”. In the first eight months of 2011, Turkish imports from the US rose 50% while exports rose 23%, for a total of 43% growth.
Turkey’s exports to the US consist mostly of machinery ($458m); vehicles ($453m); stone, plaster, and cement ($254m); and textiles ($198m); while leading imports from the US include aircraft ($2.2bn); iron and steel ($1.6bn); machinery ($1bn); cotton yarn and fabric ($867m); and mineral fuel ($603m).
US investors held some $6.3bn in foreign direct investment (FDI) stock in 2009, the latest year for which figures are available. Turkey’s International Investors Association (YASED) expects FDI inflows of $12bn in 2011, with the US historically responsible for around 8% of that figure, for an approximately $1bn increase. US investment in Turkey is led by the wholesale trade and manufacturing sectors. Turkish FDI outflows to the US are much smaller, at around $218m in 2007, the most recent year for which figures are available.
One persistent worry for Turkey is the lopsided nature of Turkish-American bilateral trade, which is symptomatic of Turkish trade relations in general, and exposes a potential weak spot in the country’s demand-driven growth strategy. Turkey’s current account deficit hit $4bn in August, which was down from $5.3bn in July but pushed the 12-month cumulative deficit to $75.1bn.
Terzioğlu warned, moreover, that recent depreciation would not immediately address this deficit, given the nature of Turkey’s external trade. “The current spike of the dollar over the lira has made Turkish exporters happy, because their dollar-denominated contracts are doing very well,” he said. “This is somewhat short-sighted, however, because roughly 78% of our imports are for export products, which means that only 22% of our export profit results from truly Turkish goods.”
Righting the trade imbalance will require linkages between US and Turkish small and medium-sized enterprises (SMEs). In the interest of promoting greater entrepreneurship in this area, US Vice-President Joe Biden is expected to visit Turkey in December. During his visit, Biden will participate in the Global Entrepreneurship Summit, which follows a similar event hosted by President Obama in Washington, DC in 2010.
Another encouraging step is a partnership signed in September 2011 between Turkey’s SME Development Organisation (KOSGEB) and its US counterpart, the Small Business Administration (SBA). KOSGEB and SBA will promote knowledge exchange, share best practices, and highlight the availability of loan guarantee and technical assistance programmes.
In March, US commerce secretary Gary Locke outlined American goals for further deepening of ties. He highlighted four natural areas for cooperation: promoting renewable energy, boosting entrepreneurship, developing Istanbul as a financial capital, and empowering SMEs. Plans for implementation include conducting trade missions for US businesses and establishing a US-Turkey Business Council to make policy recommendations to both governments. The two countries will also establish a “Near-Zero Zone” in Izmir, a demonstration project that will pair Turkish companies with US firms and their technical resources to improve energy efficiency.
While Turkey and the US have traditionally been close allies, economic ties have long taken a back seat to political and military cooperation. Turkey’s foreign policy has taken on an increasingly independent tack in recent years, however, showing differences with the US on Iraq, Iran and the Israeli-Palestinian conflict. Increased commercial exchange, therefore, serves as a welcome reminder that bilateral relations are still healthy.
Turkish businesses worried about financial trouble in the industrialised Western economies fear the impact that a slowdown would have on foreign investment and trade. While these fears are justified to some degree, Turkey’s economy is nonetheless projected to grow at a healthy 6.6% in 2011 and a respectable 2.2% in 2012, outpacing most of Europe. US businesses and investors looking for a bright spot amidst a gathering storm could do well to consider Turkey.