Turkey Pulse

Despite AKP hype, foreign trade scores should worry Turks

Article Summary
Turkey’s exports increased and its imports decreased last year, but government critics see little reason to celebrate, pointing out the gloomy dynamics underlying the shifts in foreign trade.

The Turkish lira’s nearly 30% depreciation last year had a boosting impact on the country’s exports, while curbing its imports. Exports rose 7% from the previous year to hit a record level of more than $168 billion, while imports decreased 4.6% to some $223 billion, according to official figures released last week.

The largest exports were in the land vehicles category, which includes motor vehicles, tractors, bicycles and motorcycles. Rising 11.8% from last year, exports in this category reached some $26.8 billion. In contrast, vehicle imports dropped 20.3% to about $13.9 billion, with luxury cars leading the decline under the impact of increased foreign exchange prices.

Among the top 20 export categories, the biggest increase — 40.6% — was in iron and steel products, with the sales totaling some $11.5 billion. The rise came despite the US tariff increase on steel products from Turkey, which was widely expected to hit its exports. But evidently, Turkish exporters boosted sales to other markets, especially the European Union, and even expanded to new ones, including Latin American countries such as Chile, Panama, Colombia, Peru, Jamaica, Costa Rica and Mexico.

The lira’s slump hit the importation of not only luxury products, but also intermediate goods, which in turn curtailed the exportation of items whose production relies on intermediate goods. The most striking example is in the category of “precious and semiprecious stones, precious metals, pearls, imitation jewelry and metal money,” in which imports dropped 28% to about $12.6 billion, and exports slumped 34.1% to some $7.2 billion.

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The increased foreign exchange prices caused a 21.7% drop in imports in the category of electric machines and devices, audio and television devices and related parts and accessories, including mobile phones. These imports were worth about $16.6 billion in 2018, down from nearly $21.2 billion the previous year.

In some categories, imports increased despite the higher foreign exchange prices. Livestock imports, for instance, rose to nearly $1.8 billion from $1.2 billion in 2017, reflecting the downturn in Turkey’s farming sector, which has led to an alarming surge in food prices.

Orhan Saribal, deputy chair of the main opposition Republican People’s Party (CHP) and an agricultural engineer by profession, said the livestock imports in 2018 were the largest ever, slamming the policies of the ruling Justice and Development Party (AKP). “The imports have increased sixfold from $300 million in 2010. In the 2010-2018 period, Turkey spent $6,386,000,000 on livestock imports and $1,378,000,000 on meat imports,” Saribal, who closely follows the husbandry and agricultural sectors, told Al-Monitor. “The import policy is based on fatlings and slaughter animals rather than animals for breeding. Resources supposed to go to local farmers were [channeled] to foreign farmers by the AKP.”

Turkey’s largest imports are in the energy category. They were worth nearly $43 billion last year, an increase of 15.6% from about $37.2 billion in 2017.

Germany tops the list of Turkey’s export markets, followed by Britain, Italy, Iraq, the United States, France, Spain, the Netherlands, Israel and Belgium. China and Russia, which are among the leading sellers to Turkey, are absent from Turkey’s top 10 export markets but, perhaps in consolation, Turkish tomato sales to Russia — an unlikely item in bilateral political tensions — skyrocketed to $30 million last year.

The top 10 exporters to Turkey are led by Russia, followed by Germany, China, the United States, Italy, India, France, Britain, South Korea and Iran.

Given the shifts in Turkey’s foreign trade last year, can one speak of an overall balancing?

Faik Oztrak, another CHP deputy chair and former treasury undersecretary, told Al-Monitor, “In the 2003-2018 period under the AKP, Turkey’s exports totaled $1.9 trillion, while its imports climbed to $3 trillion. The gap between imports and exports, the country’s foreign trade deficit, stands at more than $1 trillion for the past 16 years. This means that Turkey posted a foreign trade deficit of $1.2 billion every week under the AKP. That’s the truth the government cannot bring itself to utter.”

Asked about the downtick in imports, Oztrak said, “The composition of the decreased imports points to stagnation in the economy. The importation of capital goods dropped 11.5% in 2018, which means a serious decline in the importation of goods used in investments supposed to boost the country’s production capacity. Coupled with other indicators such as the decline in industrial output and the slowdown in the loan volume, this augurs a significant contraction in the Turkish economy.”

Former Finance Minister Zekeriya Temizel, for his part, stressed that Turkey’s exports were largely dependent on imports. “About 80% of Turkey’s exports rely on imports, which is a disadvantage. If an increase in exports stems from the impact of exchange rates, this could be seen as [a sign of] recession,” Temizel told Al-Monitor. “If you fail to increase the export of goods with zero imported input or if you fail to produce a given product in an easier and more efficient way than other countries, you cannot be successful. Like you export flour but you import wheat — that’s wrong.”

Kursat Tuzmen, who served as the AKP’s state minister for foreign trade from 2002 to 2009, said Ankara’s target to boost exports to $500 billion by 2023 had slipped out of reach due to the fallout from the government’s foreign policy, among other factors.

“Foreign policy has become an obstacle to trade. Problems in relations with Syria, Iraq, Iran, Russia and the EU, followed by negative trends in global trade, have unfortunately curbed Turkey’s targets,” Tuzmen told Al-Monitor. “Exports were worth $36 billion in 2002 [when the AKP came to power], and we managed to increase them by nearly $100 billion in six years to bring them to $133 billion at the end of 2008. Had we managed to sustain that trend, the $500 billion target for 2023 would have been easily attainable.”

In sum, the foreign trade figures that the government is boasting about are seen as an omen of economic recession by its critics. In the last quarter of the year in particular, the increase in exports and the decrease in imports owe much to the impact of foreign exchange rates and shrinking domestic demand. This can hardly be described as an achievement. One can speak of success only if Turkey’s economy grows for several years in a row with a simultaneous decrease in its current account deficit.

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Found in: foreign trade, turkish lira, inflation, turkish economy, turkish economic policy

Mehmet Cetingulec is a Turkish journalist with 34 years professional experience, including 23 years with the Sabah media group during which he held posts as a correspondent covering the prime minister’s and presidential offices, economy news chief and parliamentary bureau chief. For nine years, he headed the Ankara bureau of the daily Takvim, where he also wrote a regular column. He has published two books.

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