The rise and demise of the Turkish trading state

“The rise and demise of the Turkish trading state; is there a way out?” was the title of the speech Professor Kemal Kirişci delivered recently to mark the fifth year of the Foreign Policy Forum of Boğaziçi University and TÜSİAD, Turkey’s top business body.

Kirişci, who currently works at Brookings Institute as a TÜSİAD senior fellow, is the scholar who had  introduced the concept of a “trading state” to explain one of the factors transforming Turkey’s foreign policy in the 2000’s from “’regional coercive power’ to a ‘benign’ if not ‘soft’ power.”

Kirişci had substantiated his thesis by providing key statistics about Turkey’s foreign trade. In 1975, the percentage of overall trade in the GDP was 9 percent. In 1995, it reached 23 percent. By 2005, trade made up 39 percent and by 2007, 42 percent of the GDP; this showed the degree to which Turkey was integrating into the world economy.

Beginning with the liberalization policies of the 1980’s, several factors contributed to Turkey’s integration into the world economy. A Customs Union with the European Union and the start of accession talks with the Union, as well as the world’s economic situation, are but a few of them.

The ruling Justice and Development Party (AKP) came to power a few months after the term BRICS (Brazil, Russia, India, China and South Africa) was introduced into the jargon as a symbol of the apparent shift in global economic power away from the developed G7 economies towards the developing world. As the Western world suffered from financial crisis, in the “West and the Rest” equation, the latter was becoming more attractive.

The AKP government’s zero problem policy with their neighbors, including decisions such as lifting visa requirements, contributed to another transformation of Turkey’s trading trends; the country’s trading partners became diversified, with Europe’s share diminishing while that of the Middle East and other regions steadily rose.

But in 2010, the tide began to turn. Kirişci summarized the external dimension of the change as “the gradual return of the West and the decline of the Rest.” He also talked about the rise of chaos in Turkey’s neighborhood and the loss of markets that came with it. Looking at the statistics, one can see very clearly the drop in Turkey’s trade with Russia and the Middle East.

Obviously Turkey’s role in the international environment’s change is minimal. Yet some of the country’s policy choices have led to further deterioration of its regional standing. “If we are isolated, if we stand alone in our stance, this is a precious loneliness,” İbahim Kalın, one of AKP’s high-level policy makers, had said.  Yet this so-called “precious loneliness” has become extremely costly, as Turkey’s trade relations with Israel, Syria, Egypt and beyond have been seriously affected.

The title “The rise and demise of the Turkish trading state” is most probably inspired by Paul Kennedy’s “the Rise and Fall of Great Powers,” where he presents strategic military economic overextension as the main cause for the fall of big powers.

In the case of Turkey, one can speak of rather a strategic overextension of ambitions coupled with a strategic “contraction” of trading routes.

The government is still in a mood of denial about its own mistakes and prefers to blame “the interest rate lobby,” or the “Gülen movement.” But instead of chasing ghosts, it should concentrate on finding ways out of this precious loneliness.

The way out suggested by Kirişci is a re-emphasis of ties with Turkey’s traditional Trans-Atlantic community partners.

His point is simple: As instability in Turkey’s neighborhood continues to erode its exports markets and capital inflows, it will need the Trans-Atlantic communities’ business. In this respect, despite the standstill in the accession process, keeping the EU as an anchor remains important. Turkey should revive its reform agenda to enable the continuation of the process according to Kirişci. He also suggests Turkey should upgrade its Customs Union with the EU.

Another area Turkey has to pay the utmost attention to is the Transatlantic Trade and Investment Partnership (TTIP) that the EU and the U.S. are in the process of negotiating. While Turkey’s exclusion from the TTIP will be extremely costly, its inclusion will prove highly difficult. Turkey, the U.S. and the EU need to find a way that will prove to be a win-win for all sides. If there is a will there is a way, but for that Turkey has to stop bashing the West all the time and start behaving as an ally rather than a foe.