Why Brexit is an opportunity for Turkey
Brexit, as Prime Minister Boris Johnson likes to say, is done. The British have about a year to negotiate the deal that will determine their future relationship with the EU. The form Brexit takes will have significant repercussions for third parties, Turkey being only one of the many. I believe Brexit to be rather fortunate for Turkey. Let me explain what I mean by that.
Nearly half of Turkish exports go to the EU. Without the U.K., the EU’s share in Turkish exports will decline by more than 10 percent. Also, around 70 percent of our trade with the U.K., from textiles to electronics, is probably going to be hit directly or indirectly. This is because the current framework of the EU Customs Union has been the major determinant of our trade structure with the U.K.
Turkey’s membership in the EU Customs Union has been shielding Turkish products from Asian competition so far. That’s why, despite Turkey’s declining global competitiveness in the last decade, the EU is still our dominant trading partner.
What happens next, of course, will have a lot to do with the deal the U.K. negotiates with the EU. I understand that Mr. Johnson’s government has expressed confidence going into these negotiations, but as conscientious observers have pointed out, the EU vastly outweighs the U.K., and as such, is likely to want highly favorable terms. If the U.K. is anything like Turkey and Russia, and I believe it is, imperial hubris will prevent it from accepting those terms, which means a no-deal Brexit will become a distinct possibility. Whatever the case may be, our exports to the U.K. are unlikely to remain under the protective shield of the EU Customs Union. Greater shares of Turkish firms will be exposed to competition Chinese, Vietnamese and other Asian firms.
But why is this a good thing?
First, if, as seems likely, the EU’s Green Deal Commission puts a border levy on high-emissions goods, Turkey is going to lose the EU’s protective shield anyways. Brexit prepares Turkey for this because it forces us to think about our trade strategy more creatively. We need to show our European partners that there are options for us out there. Protective shields breed complacency, and Brexit may help us wake up.
Second, the Customs Union mostly covers products of the manufacturing industry. Turkey has so far only liberalized its industry effectively. The long-discussed deepening of the Customs Union was about liberalizing Turkey’s service and agricultural sectors. As this process has been politicized and drawn out, Turkey needs to start thinking about an immediate deal with the U.K. in areas not covered by the EU-Turkey Customs Union. Ankara could think of it as a kind of a dress rehearsal for upgrading its trade relationship with the EU. This is why it was useful for us to see the U.K. to jump first and negotiate later – it gives us time to think, but not enough time to idle around.
Third, the partial loss of the protective shield will be useful to start a policy discussion in Turkey on the new structural reform agenda. To make its growth sustainable, Turkey needs a structural reform agenda to improve its global competitiveness. This is of vital importance for the resiliency of the Turkish economy.
“Every door is an entrance as well as an exit” says a Chinese proverb. So, Brexit is not only about the U.K. leaving the EU, it is also an opportunity for Turkey to start thinking about a new partnership framework with both, the U.K. and the EU.
In 1570, when the Pope excommunicated Elizabeth I and it became hard for British traders to operate in Europe, Britain reached out to the Ottoman Empire for trading privileges. Just imagine that. The two empires were on opposite ends of the known world, and still they came together to trade. Politicians in Britain and Turkey these days like to wax lyrical about their imperial history, but use this as cover for their provincial policies. This is a time when new opportunities for deeper and more lasting engagement are unfolding before us. We should seize them.