Why the potential US-Turkey free trade deal could be mutually beneficial

Washington and Ankara have endured several rough patches while navigating the alliance they have today. The history of their rocky relationship goes back to the 1950s when Turkey joined NATO and became its indispensable partner with the second biggest army against Russia-led communist bloc. 

Since then, both countries have developed strong connections in various fields - from industry to the military, and to other economic aspects. 

Most recently, Lindsey Graham, a powerful Republican senator, who reportedly wields a strong influence over US President Donald Trump, has suggested that relations between Washington and Ankara could be taken to the next level if the two allies were to sign a free trade agreement. 

"If you ask me what the one thing the United States and Turkey could do to change the relationship for the better, it would be a free trade agreement -- not just aspiring to have more trade to hit $100 billion, but actually integrate the economies through a free trade agreement," said Graham on Wednesday during a conference organised by the US-Turkey Business Council. 

Like Graham, economists also think that a free trade agreement could work for both countries’ interests. 

“Whatever angle you like to evaluate the prospects of this kind of agreement, it’s clear that it would benefit Turkey,” said Hasan Vergil, professor of economics at the Istanbul University. 

“In terms of export and manufacturing sectors, a free trade agreement with the US will produce enormous benefits for Turkey,” Vergil told TRT World. 

The views of other experts are in sync with Vergil's. 

“In the subsequent 18 years, Turkey’s industrial and technological base has broadened substantially. As a result, several sectors of Turkey’s economy could now benefit from a bilateral trade agreement with the US,” said Matthew Bryza, a former top American diplomat, who also served as the country’s Former Deputy Assistant Secretary of State for Europe and Eurasia. 

“Meanwhile, with Turkey’s GDP having tripled during this period, the Turkish market could be significantly more meaningful for US exporters than was the case in 2002,” Bryza told TRT World. 

According to a WorldCity analysis of most updated US Census Bureau data, Turkey’s trade with the United States reached $7.66 billion in the first four months of 2020, amounting to a near 17 percent increase compared to the same period last year. 

In 2018, Turkey’s trade volume with the US was $20.5 billion according to US official estimates. The Turkish trade ministry indicated last year that Ankara aims to increase its trade with Washington to $75 billion.

Why both countries could not increase trade volume

Recently, high US taxation on Turkish steel and other goods due to political disputes, negatively affects the trade volume of both countries. 

“Trade ties have been negatively affected due to US taxes over Turkey’s steel exports and other trade preventions over political disagreements, creating distrust between the two countries,” said Vergil.

“Both US and Turkish presidents have intentions to increase the trade volume. But when it comes to practical realities, bureaucratic structures in both countries appear to be more preventive [than being constructive],” the professor opines. 

In recent years, while both Turkish President Recep Tayyip Erdogan and Trump have developed strong personal relations, some serious political rifts have emerged between Ankara and Washington over various issues ranging from Syria and American support of the YPG in northern Syria to Turkey’s purchase of Russian S-400 air defense system. 

Despite partial opposition from the US military, Turkey has fought with the YPG, the Syrian wing of the PKK, which is recognised as a terrorist organisation by Turkey, the US and NATO, several times in the past years. 

In the same speech, Graham has cited both issues as certain obstacles to realise a free trade agreement. "The way we do that is to work through our differences. It can’t be through the use of military force," the Senator said. 

“Resolving these disputes will require a shift in thinking in both Washington and Ankara toward a deeper appreciation of how a new spirit of strategic partnership could benefit both countries,” observed Bryza, the former diplomat, who was at the centre of a free trade agreement pursuit between the two countries back in 2002. 

“This will be challenging but certainly not impossible,” Bryza viewed. 

US needs Turkey against China

Despite political disputes, a great trade potential between the two countries remains, particularly in the face of the US-China trade war, where Washington seeks new partners to prevent the global expansion of the Chinese economy. 

“While it has not happened in the past, Turkey and the US could potentially increase their trade volume. The US-China disagreements could create a good opportunity for Turkey to realise that,” Vergil said. 

Trump, Graham and their allies desperately need economic partners to limit China’s reach in the Middle East as Well as Africa. Turkey appears to be the perfect candidate for that. 

“Their call to Turkey means they could not find a country to offset China’s domination in several sectors. This is a serious problem for the US. But it will be a different story for Turkey. Our possible replacement with China will be beneficial for us across the board,” the professor said. 

Graham appears to be eager for the partnership. 

"Once you begin to economically integrate the two economies, then we’ll be more effective partners in Africa. Nothing would please me more than to partner with Turkey to offer to the African continent alternatives to Chinese products and Chinese influence," adds Graham.

"You seem to have a sophisticated capability but a really low-cost alternative that would be very competitive with China.”

The Turkish economist agrees with Graham.

“As a result of a free trade deal between the US and Turkey, if we increase our production capacity and diversify our products, the Chinese domination in the African market could be broken,” Vergil said. 

“If supposedly we are able to decrease our expenses to produce cheaper goods for Africa and get closer to the level of China, then, the Chinese influence in Africa will be broken in that sense.”

“But no one should expect that it could happen suddenly. In order to realise that, we need to decrease our labor and income costs, becoming a production center in Africa like China,” he concluded.