Turkey has proved its weight in the global economy

Turkey has proved its weight in the global economy with its agreement with the UK

Yesterday marked a significant day between Turkey-UK relations, a landmark free trade deal was signed between two counties both close to my heart, further extending trading arrangements and maintaining a no-tariff, no-quota partnership.”

Coming days before Brexit’s transitional period ends for the UK, President Recep Tayyip Erdogan has described it as Turkey’s "most important trade deal" since its 1995 Customs Union with the EU.

As a British born raised individual now residing and operating my business in a Turkey this is great news. The UK is a significant export market for Turkey who under the great leadership of President Recep Tayyip Erdogan has continued to establish itself globally with a strong economic system, established by production, employment, and exports reaching a staggering $166 billion.

In the UK Prime Minister Boris Johnson has delivered on his promise to the British people and successfully exited the European Union, allowing him now to focus his efforts on building a great “Global Britain” and extending trading relationships globally.

This deal is special as it locks in tariff-free trading. I am confident that it will provide a great number of jobs across the two countries, in the UK the manufacturing, automotive and steel industries in particular. These are sectors where British companies are excelling globally. The trading relationship previously in 2019 between the two nations was worth 18.6 billion pounds ($25.25bn). Making it at the time amongst the top 5 biggest deals the UK trade ministry had negotiated.

The U.K. is Turkey’s second-largest export market after Germany. Turkey exported £10.6 billion of goods and services to the UK. It is therefore a great time to showcase British manufacturers, companies and products to the Turkish counterparts to increase trade beyond military and defence to look at healthcare, infrastructure, renewable energy, technologies and creative industries.

Many said EU accession talks were the main driver for the modernisation of Turkey’s economy and business environment. Deals like this once again prove otherwise. Turkey has the ability to stand firm and build upon its international relationships with great credibility of its own. Simultaneously the UK is a global magnet for investors. The exit from EU allows Great Britain to showcase its ability and attract a new variety of investors. Our firms private equity division in Istanbul and London is extremely excited about exploring these possibilities, and we have witnessed a strong interest from Turkish firms considering expanding into UK.

Relationship - The deep rooted relations between Turkey and the UK, are based on shared values and continue to progress as witnessed by the high frequency of reciprocal presidential and ministerial visits. The leaders of both countries call the current period a golden era in Turkey-UK bilateral relations. The relations, which gained impetus by the visit of Her Majesty the Queen Elizabeth to Turkey in 2008.

Both governments share the political will to enhance bilateral relations in every field. Turkey and the UK share similar views for the settlement of many regional and international issues and often consult each other in order to seek for solution.

The UK government was one of the main supporters and strongest advocates of Turkish membership to the EU before the Brexit referendum. David Cameron, the former prime minister of the UK characterized Turkey as a “great European power” which helps Europe build links with the Middle East. Current Prime Minister Boris Johnson has said “In the past, I always felt that one of the mistakes the EU made was to push Turkey away, but Britain was 100% behind Turkish membership”

The “2010 Strategic Partnership Document”, which was signed during Prime Minister Cameron’s visit to Turkey in July 2010, set a road map laying out a wide range of concrete areas of cooperation to strengthen the strategic partnership.

Bilateral relations have as a result continued to strengthen in recent years as both countries relationship with the EU has deteriorated. Brussels and Ankara have clashed over foreign policy. Tensions have meant that the EU has been unwilling to launch negotiations to modernise the EU-Turkey trade relationship and extend liberalisation to areas such as services and procurement.

The UK was quick, and quite rightly so to condemn the attempted coup in Turkey in 2016. In early 2017, the UK and Turkey concluded a deal that would see BAE Systems take part in a project to build a fighter jet for Turkey’s air force. London has also been much less vocal than other European capitals about the domestic situation in Turkey.

The COVID-19 pandemic has provided an opportunity for the two countries to work together: Turkey sent protective equipment to the UK, with its government stepping in to help. Now the trade deal signals a close economic and political relationship with a major European power.

Industry - There are around 250 thousand Turkish citizens living in the UK. More than 2.5 million British tourists visited Turkey in 2019. More than 34,000+ British citizens own properties in Turkey.

There are a significant number of business links between the UK and Turkey. Over 2,500 UK companies are currently operating in Turkey including BP, Shell, Vodafone, Unilever (UK), BAE, Aviva and Diageo. Renowned retail chains, including Harvey Nichols, M&S have operations in Turkey.

White goods, cars and textiles are the products which would've been hit hard by any tariffs between the two countries had a deal not been reached. A free-trade deal with Turkey was key priority for the U.K - More than a third of the automotive engines built in Britain come to Turkey with many exported back to the U.K. in finished vehicles. Meanwhile, Turkey supplies around £2 billion worth of fashion and textiles products to the U.K. each year, including denim and kids wear.

The fact UK focussed its efforts on securing free-trade deals with sourcing markets such as Turkey shows the significance. Delivering a free-trade deal with the U.S. was going to be much harder for the UK in this instance. The deal with the Turkish government has been exceptional, shown willingness, support and commitment on both parts, making the deal much easier, much greater, quicker and impactful.

As a company it gives me optimism that in the post-Brexit era we are able to push boundaries with cross border trade between our two countries, knowing that a common goal and an aligned vision defines this relationship. We will further explore the areas of innovation, prop-tech, fintech, renewable energy and health as I feel the nations can benefit from these creating a better and more safer and sustainable future.

What if it didn’t happen, and why was it is so important? - If an agreement was not reached it would represent a steep deterioration in the terms of trade relative to the existing arrangements, and cause problems for companies trading between the UK and Turkey. Unlike trading within a customs union, in order for an exported good to qualify for tariff free trade under a free trade agreement, it needs to meet specific rules of origin criteria. This is to ensure that the export does not come from somewhere else. To give a specific example, EU trade agreements, and therefore Turkish trade agreements, often require at least 60 per cent of the value of an exported car to have been created locally for it to qualify for zero tariffs. If a similar threshold were to apply to a trade agreement with the UK it would create an issue for some Turkish car exporters, as they only source around 50 per cent of their inputs within Turkey. Even for sectors which source a large proportion of their inputs locally, rules of origin can create difficulties. Unlike Turkey, which is constrained by its customs union with the EU, the UK is also able to act unilaterally to mitigate problems for Turkish exporters, UK could unilaterally decide to adopt a flexible approach to rules of origin and imports from Turkey.

I would like to congratulate both governments on this signing and look forward to my company contributing to both economies through further trade and commerce.