Saudi ban shows importance of rules-based trade

Turkey still does not have an ambassador in Tel Aviv, our president campaigns against Israel whenever he gets the chance, and conditions under the COVID-19 pandemic are less than ideal, yet Turkish-Israeli trade continues unhindered. In the first nine months of 2020, Turkey’s exports to Israel amounted to $3.2 billion, almost the same as the export volume of 2019. Troubled political relations between the two countries have not had a direct impact on bilateral trade. There are no calls for boycotts, nor measures to slow down trade between Turkey and Israel. Despite the troubled relationship between Erdoğan and Netanyahu, the system works.

Turkey still has an ambassador in Riyadh, yet we are now hearing calls for boycotting “made in Turkey” products in Saudi Arabia. Since the savage murder of Jamal Khashoggi in the Saudi consulate in Istanbul, political relations between the countries have been deteriorating, and it is having a direct effect on bilateral trade. The Saudis are calling for a broad boycott of Turkish products, or at the very least, slowing down customs procedures for Turkish products.

Note that Turkey’s bilateral trade with Saudi Arabia is about one third lower than its trade with Israel.

Turkey is a trading nation. It is very difficult to trade with its eastern and southern neighbors, which is why more than 50 percent of Turkish industrial products go to the West. The European Union is a cluster of rules-based nation states, and Turkey has become an integral part of its market. European value chains pass through Turkey, especially in the automotive sector. These relations resist and sometimes even grow under an incredible amount of political pressure.

Why is it hard to sell goods to the east and south? Turkey’s eastern and southern neighbors are not rules-based nation states. It means that if you want to enter their markets, your capital has to be on good terms with their capital. For a long time, Ankara got along tolerably well with Riyadh, and trade was fine. Now that political relations are suffering, trade is suffering.

Turkey and Israel are both functioning market economies, hence the commercial contacts between private companies are not directly affected by political problems between Ankara and Tel Aviv. Trade flourishes despite political bickering.

The level of political relations is, of course, not good for deepening commercial ties between the two countries, yet existing relations can continue. Trade stays more or less on the same level.

What do these calls for boycotting Turkish products and slowing down Turkish container traffic to Saudi Arabia entail?

Saudi Arabia is not yet anywhere near becoming a functioning market economy, I’m afraid. Despite ambitious transformation programs, the country is neither a market economy nor a rules-based nation state. If Saudi Arabia is serious about its post-oil future, it should get serious about its transformation program and become a constructive commercial player in our region.