Is Turkey Turning Its Face Away From Japan to China and Korea? Evidence from Trade Relations

Abstract

The economic relations between Turkey and Japan have recently been on the decline. This is partly a reflection of the ongoing economic transformation in the East Asian region, where China and Korea have caught up with Japanese industries and technology in most sectors. Korean and Chinese firms have gained competitive power over Japanese firms, which have traditionally been champions of manufacturing. Partly as a consequence of the ailing Japanese economy, Turkish industry has recently turned to Korea and China as sources of industrial supplies. This paper shows the extent to which the Turkish economy has become more dependent on industrial inputs from Korea and China at the expense of the declining importance of Japan. This is discussed in conjunction with the ongoing free trade negotiations between Turkey and Japan

Keywords

• Turkey, Japan, Free Trade Agreement, Import Dependence, Foreign Direct Investment.

References

1. For a detailed analysis of Turkey-Korea FTA, see, K. Ali Akkemik and Utku Ören, “Kore-Türkiye Serbest Ticaret Anlaşması’nın Genel Denge Analizi”, in K. Ali Akkemik and Sadık Ünay (eds.), Doğu Asya’nın Politik Ekonomisi: Japonya, Çin ve Güney Kore’de Kalkınma, Siyaset ve Jeostrateji, İstanbul, Boğaziçi University Press, 2015, pp. 238-262.
2. Reviews are available at Sebastian Edwards, “Openness, Productivity and Growth: What Do We Really Know?”, Economic Journal, Vol. 108, No. 447 (March 1998), pp. 383-398; Jeffrey D. Sachs and Andrew Warner, “Economic Reform and the Process of Global Integration”, Brookings Papers in Economic Activity, Vol. 1 (1995), pp. 1-118.
3. Recall that Turkey is not a member of the EU, but did sign a Customs Union Agreement with the EU in 1996, effectively forcing Turkey to sign an FTA with any third party country signing an FTA with the EU.
4. A recent study by Ceren Gündoğdu has found using the WIOD Database that China accounts for a substantial part of foreign value-added in Turkish exports. See, Ceren Gündoğdu, “Domestic Contents of Exports and the Vertical Specialization: An Analysis for Turkish Exports, 1995-2011”, unpublished MA Thesis, Middle East Technical University, September 2015.
5. The discussions in this and the following sections are based on data prepared for a presentation titled “Türk-Japon Ekonomik İlişkileri ve Serbest Ticaret Anlaşması” (Turkish-Japanese Economic Relations and the Free Trade Agreement) and presented at “Uluslararası Ertuğrul’un İzinde Deniz Kuvvetleri ve Diplomasi Sempozyumu” (International Symposium: Naval Forces and Diplomacy Tracing Ertuğrul) held at Deniz Müzesi (Naval Museum) in Istanbul during 15-17 September 2015.
6. The WIOD Database is available at http://www.wiod.org (last visited 12 June 2016).
7. See http://www.wiod.org for the technical details.
8. See, for instance, Ali Eşiyok “Türkiye Ekonomisinde Üretimin ve İhracatın İthalata Bağımlılığı, Dış Ticaretin Yapısı: Girdi-Çıktı Modeline Dayalı Bir Analiz”, Uluslararası Ekonomi ve Dış Ticaret Politikaları, Vol. 3, No. 1-2 (2008), pp. 117-160; Şeref Saygılı, Cihan Yalçın and Türknur Hamsici, “Türkiye İmalat Sanayii İthalat Yapısı”, Türkiye Cumhuriyet Merkez Bankası Çalışma Tebliği, No 10/02, 2010.

9. Details about Japan’s declining industrial power is available at, K. Ali Akkemik “Recent Industrial Policies in Japan”, in Murat Yülek (ed.), National Strategic Planning and Industrial Policy in the Globalizing Economy: Revisiting Concepts and Experience, Heidelberg, Springer, 2015, pp. 181-206.
10. The developments in Turkey-Japan FTA talks can be followed in the press: “Turkey, Japan take Important Step Toward Reaching Free Trade Accord”, Hürriyet Daily News, 12 August 2013; “Japanese Bosses to Visit Turkey to Explore Ties”, Hürriyet Daily News, 12 February 2014; “Japan, Turkey Foreign Ministers Eye Working for Free Trade Talks”, Kyodo, 13 April 2014.
11. See http://www.meti.go.jp/english/policy/economy/growth/report20100618.pdf (last visited 18 September 2016).
12. See Scott Morrison, “Japan and Turkey: The Contours and Current Status of an Economic Partnership/Free Trade Agreement”, Insight Turkey, Vol. 16, No. 2 (Spring 2014), pp. 183-195. Morrison is quite optimistic about the future of trade and investment relations between Turkey and Japan.