Electronics, ICT key sectors to boost US trade

Barçın Yinanç - ISTANBUL

Turkey’s business community has determined electronics and information and communication technologies (ICT) as the two potential sectors Turkey can fill the gap expected to open in U.S.-China trade.

The U.S. policy of decreasing China’s share in its imports has entered an irreversible course, and the extend of the drop will be higher than anticipated, opening a window of opportunity for Turkey, said the head of a business group on July 29.

”The US. is decided to decrease China's share in its trade. US' imports from China decreased by $91 billion," said Mehmet Ali Yalçındağ, the president of Turkish-American Business Council (TAİK). In the same year Vietnam, Mexico and Taiwan have increased their exports to the U.S. by $18, 12 and 8 billion, according to Yalçındağ.

U.S.-China trade wars have furthered fueled after the pandemic and the effects of COVID-19 especially on the supply chains have consolidated U.S. policies do diminish China’s dominant position in the global economy.

The trade corridor between U.S. and China is expected to narrow between $150 to 200 billion until 2023, Yaçındağ said, adding, “This is an opportunity for Turkey, but we have strong rivals like Vietnam, Taiwan, Mexico and Poland.”

While prior work was undertaken by the Boston Consultancy Group (BCG) to determined priority areas to boost trade with the U.S., a recent work conducted by the same group have determined two sectors, where Turkish companies current small share to U.S. exports carry the potential to grow as a result of Chinese losses.

Electronics and electrical equipment have been one of the sectors which seen the highest drop in Chinese exports to the U.S. in 2019 with $34 billion. This trend is anticipated to continue. By contrast, Chinese share in sectors where Turkey has competitive advantages like textile and automotive have decreased by $3 billion.

While companies active in the sectors that already have a prominent share in U.S. imports should step up their efforts to increase that share, companies active in electronics as well as Information and communication technologies should start focusing further on U.S. market.

“We have companies that are significantly competent in these sectors, but it appears they have not forged strong relations with the U.S. market. They have not focused enough on U.S. market,” said Yalçındağ, naming companies like Arçelik, NETAŞ and Aselsan.

Turkish companies should prioritize increasing their competence and production capacity, aim at further integrating in global value chain and seek partnerships with global U.S. companies, according to Yalçındağ.

Information and communication technologies are another area where Turkey can increase its current very low share, which stands at 0.05 percent in U.S. $44 billion imports in this sector according to 2019 figures. In that respect companies like Koç, Sabancı and Çalık should take an active role using their competence and cost advantages better. In addition, Turkey should become a regional technology center for global players and more incentives should be provided to encourage technology startups, according to Yalçındağ.

The second sector would however involve additional challenges as the U.S. and China are also in technology battles in terms of the next generation of wireless services. The U.S. is already putting pressure on its allies not to opt for China for 5G. This issue will be as contentious as Turkey’s decision to purchase Russian S400s, prompting U.S. reaction and sanctions.

Cooperation in Africa

Bilateral cooperation on Africa is, meanwhile, another area Turkey seeks to profit from the U.S.-China rivalry. Irritated by heavy Chinese presence in the continent, the U.S. might as well see Turkey as a potential partner to work in Africa, according to Nail Olpak, the president of Foreign Economic Relations Council (DEİK). Speaking at the same conference, Olpak said U.S.-Chinese competition is taking place due to reasons independent of Turkey, therefore, they are not expecting China to take hostile action against Turkey for eyeing to benefit from potential Chinese losses in U.S. trade.