Two More Blows In a Row to Exports and Exporters

The impact on foreign trade with regional countries of Customs Union agreement signed between European Union and Turkey in 1995 still continues with the same intention. With this agreement the autonomy granted to imports caused gradual growth of the foreign deficits in trade. In addition, even the devaluations could not improve the shaking limitations brought on exports, the problem of foreign deficit became chronic and current deficit problem became more serious. One must remember that in a situation where Turkey’s growth was mostly provided by current deficit, the Customs Union agreement made the problem even deeper. Under these conditions another blow was dealt by the news that EU was preparing free trade agreement with Mexico and then South Korea nowadays. Free trade agreements that EU is concluding or trying to conclude with third countries began to pose a huge threat to Turkish economy in the long run. South Korea and EU, which have connections with Turkey in textiles, whiteware and automotive industries, will gian advantage with this agreement. Three important details display this phenomenon crystal clear. First of all, South Korea will be able to make its exports to EU tax-free. Secondly, as Turkey has signed Customs Union agreement, the importation of South Korean goods will be free. Lastly, European goods will enter South Korea without any taxes but Turkish goods will be subjected to taxation when entering South Korea. In addition, signing free trade agreements with Russia and India following South Korea is also on the agenda. When the import-expanding impact of these agreements, which will shrink exports indirectly, are taken into consideration, more serious foreign deficit problems are awaiting for Turkey. In addition, another blow was dealt at the conference held by National bank on monetary policies in Turkey. Exporters, who constantly repeat the negative impact of strong TL on exports, saw during the conference that their expectations for intervening to foreign currency rate would be shattered. Those exporters who envisaged that increasing reserves would weaken the value of TL and encourage competition could not find what they expected. Then where is the problem? Why is the value which used to be given to exports is not given now? I think that the answers to such questions can be given by looking at money entrances/dependency. Unfortunately Turkey is a country with low level of foreign direct investments, which attracts hot money with high interest rates, and which funds its investment, production and growth from these sources. The source of exchange rate is understood by means of the pressure of incoming hot money on TL. If monetary policy makes a 180 degree turn and intervenes in the exchange rate in favour of exports, the hot money will escape and national economy will come to a deadlock. I think that under this hot money dependency situation the only thing to say is that exporters will continue to have more blows dealt.