In December 2012, the U.S. Chamber of Commerce (USCC) and the Union of Chambers and Commodity Exchanges of Turkey (TOBB) established a formal partnership with the goal of strengthening the bilateral commercial relationship between the United States and Turkey. Shortly thereafter, the two institutions embarked on a comprehensive research project to assess actions needed to upgrade bilateral trade and investment, which has culminated in the present report. With the negotiations of the Transatlantic Trade and Investment Partnership (T-TIP) between the United States and the European Union already completing its tenth round, the intent was to identify the best mechanism for increased U.S.-Turkey commerce and develop a plan to achieve this goal.
Mr. Edward Gerwin, a leading U.S. trade expert was engaged to lead the research and writing of the report at the direction of the USCC and TOBB. Consultations were held with the U.S. Government, the Turkish Government, the U.S. and Turkish private sectors, as well as the two countries’ think-tank communities. These consultations greatly contributed to the research and literature review of the present report.
Bridging the Gap: 2014-2015
The original study was completed in 2014, and while overarching conclusions drawn remain the same, this prologue accounts for the important developments affecting the U.S.-Turkey commercial relationship in 2014 up until August 2015.
From a statistical perspective, U.S.-Turkey trade volumes have held steady in 2014 at $19.1 billion. Regarding this year, until July 2015, U.S exports to Turkey have been $5.2 billion and imports from Turkey have been $3.9 billion with a half-year trade figure of $9.1 billion. According to U.S Census Bureau statistics, between the 2013-2014 period, Turkish exports into the United States have grown by 10 percent, while U.S. exports to Turkey have declined by approximately 3.5 percent. In terms of FDI, the 2014 report, “EY’s Attractiveness Survey Europe 2014: Back in the Game,” stresses that although Turkey did not appear in the top 15 FDI destinations in Europe prior to the 2008 economic crisis, the country saw a significant increase in FDI projects, by 129 percent, accompanied by a 162 percent increase in job creation between 2009 and 2013. From 2003 until now, FDI in Turkey reached $152.7 billion. During the 1984-2002 period, this number was only at $14.6 billion levels. In the subject EY report, Turkey ranked the 10th most attractive destination for FDI in Europe in the year 2014, with United States and Germany remaining the largest investors in Turkey, accounting for 24 percent and 16 percent respectively.
U.S. Business Perspective
The U.S. business community is generally positive about long-term business opportunities in Turkey; however there has not been much improvement in economic conditions or the business environment since 2014. With two elections in Turkey since 2014 (presidential elections in 2014, followed by parliamentary elections in 2015), it has been difficult to achieve new reforms that would stimulate private sector growth and foreign investments. Following the inconclusive 2015 parliamentary elections, November 1 2015 was decided to be the date to renew the elections.
With respect to individual sectors, U.S. companies report both positive developments and outstanding commercial trade barriers. The aviation sector sees increasing opportunities in Turkey with the continued growth of Turkish Airlines and Turkey emerging as a regional transportation hub. Megaprojects such as the 3rd Istanbul Airport, the 3rd Bosphorus Bridge, PPP Health Campus and City Hospital Projects, Istanbul Financial Center, Istanbul Arbitration Center, among other large infrastructure projects, are attractive opportunities that have generated much interest from the U.S. private sector. In the life sciences, information communications technology, and agriculture sectors, U.S. companies are growing increasingly concerned with measures in Turkey to localize production in a manner that inhibits imported goods and Turkey’s integration into the global value chain. U.S. companies manufacturing in Turkey are seeking a comprehensive energy strategy to make manufacturing costs more competitive for value-added exports. While the pool of human capital in Turkey remains large, U.S. companies would like to see labor market and education reforms to enhance Turkey’s competitiveness in high-technology market segments.
Turkish Business Perspective
The Turkish business community is also generally positive about long-term business opportunities in the United States, however there are concerns about a number of trade, regulatory, and practical barriers while entering the U.S market. The United States is considered an open market for Turkish exports, as approximately 70% of U.S imports from Turkey are duty free. Turkey’s traditional export items, however, such as tobacco, textile, fruits, vegetables, plants, and leather products encounter relatively higher tariff rates. Turkish exporters are increasingly concerned with antidumping and counter countervailing duties implemented, especially towards the Turkish steel industry. The U.S. Generalized System of Preferences (GSP) program is an important, yet underutilized, vehicle for Turkish exports to enter the U.S. market duty free. Turkey continues to benefit from the program, but reports significant lapses due to Congressional approval and annual review of eligible imports for duty-free treatment.viii Turkish businesses note that the United States excludes an increasing number of Turkish products and that Turkey is only exporting approximately 1/5 of the GSP eligible articles, with export opportunities for other eligible items such as agricultural and consumer products, as well as machinery.
Turkey’s small and medium sized enterprises (SMEs) report complex post-9/11 security rules, U.S trade remedy decisions, product standards that can differ significantly from EU rules, visa related problems, sanitary and phytosanitary measures, and a range of business and licensing regulations. Turkish farm products must also navigate U.S. quotas and farm support barriers, while Turkey’s service providers and investors face restrictions in sectors including transport, finance, and communications.