A “New Era” in Turkish-American Relations?
ANATOLIA REPORT
October 2023
According to the Erdogan’s recent declaration, strong defence ties and the need for geostrategic cooperation between Türkiye and the US used to provide the main resilience against problems and crises between two countries. The level of economic and trade ties, by contrast, never reflected the strategic cooperation between the two allies. In fact, Türkiye’s purchase of armaments constituted the main bulk of economic relations.
It appears that, currently, the two capitals are trying to melt the ice at the political level through rising trade relations.
Although economic relations remained at modest levels for decades, they do have a significant historical background. For example, the Hilton hotel at Istanbul’s Bosphorus, where the representatives of the Turkish-US business community held their press conference on September 7, was the very first hotel the Hilton group opened outside of the US.
One of the sponsors of Türkiye’s “sultans of the net”, the Turkish national women volleyball team, which has been the pride of the nation with their successive victories, is Orkid, a Turkish company that took the decision to sponsor after being bought by the American P&G.
“When we decided to become the sponsor of the team in 2003, we were the only ones; there were no other sponsors,” said Tankut Turnaoğlu, AmCham Türkiye Chair and P&G CEO.
While it is not easy to separate trade from political relations, despite the deterioration of the political atmosphere and the stalemate of diverging positions in certain theatres, there has been a striking rise in trade relations.
Türkiye’s second export market: the US
The US has become Türkiye’s second-biggest export market (after Germany) and its fifth-biggest import market.
Türkiye-US bilateral trade volume, which used to be below $20 billion in 2019, has reached beyond $32 billion in 2022. While trade volume has seen 60 percent growth in the last decade, it has seen 22 percent growth in one year (2021–2022).
What is critical is the balance of trade relations. Türkiye’s export to the US in the period between August 2022 and July 2023 was around $15,5 billion, while its import was around $15,4 billion; in other words, there is a surplus in favour of Türkiye.
Against this background the Biden administration appears to have the political will to boost further trade relations. One of the most significant proofs of that is Washington’s recent decision to hold “Trade Wings,” the largest US government-led trade mission and business development forum, in Istanbul next May.
Held each year in a different country, it is the second time Türkiye has been chosen to host Trade Wings within 15 years, and this is unprecedented, according to Mehmet Ali Yalçındağ, the president of the Turkish American Business Council (TAİK).
Aware of the need to work with President Recep Tayyip Erdoğan after his election victory last May, the Biden administration seems to first focus on economic ties.
The revival of the bilateral mechanism established for the sustainability of trade and investment relations, called the TIFA mechanism, is yet another sign. The last meeting of the mechanism took place in 2017, and a new meeting is scheduled for the coming months.
Effects of “rational policies”
No doubt there is also the “Mehmet Şimşek” factor, Türkiye’s new finance minister, and his call for more “rational policies” that play a role in the increasing interest.
The meeting organised by TAİK in mid-September in New York, hosted by Goldman Sachs, where Şimşek will meet investors, has seen an interest beyond expectations, said Yalçındağ.
The representatives of the Turkish and US communities based in Türkiye appear highly optimistic, as they have not hesitated to name the period ahead as a “new era” in relations.
One needs to be cautious at this stage, however, as Turkish ratification of Sweden’s NATO membership as well as the need for the US Congress’ greenlight on the sale of F-16 fighter jets remain the main obstacles in front of the relations.
The Turkish parliament will return from the summer recess at the beginning of October. It is expected to proceed with the ratification of Sweden’s NATO bid, followed by a green light from the US Congress for the F-16s and an invitation to Erdoğan for an official Washington visit.
Yet Erdoğan could opt to wait for the US Congress to take the first step before sending the accession protocol to parliament. While there could be simultaneous processes, a stalemate over the sequence of the processes at the two countries’ legislative organs could dismiss the optimism of the business community.
At this stage, however, the signs coming from the two capitals indicate a willingness to avoid a stalemate.
The military student exchange, which was terminated in 2017, was put back in force this year, while Türkiye has seen several US warship port visits in recent months. Meanwhile, the US is showing an effort to solve the visa problems, according to the representatives of the business community.
The Ukraine-Russia factor
As some US companies have relocated some of their activities to Türkiye; there is no doubt the war in Ukraine has had a positive effect on rising trade ties. By the same token, the huge growth in trade with Russia due to the war remains a headache in relations with Washington. In fact, relations with Moscow will hang like Damocles’ sword over the Ankara-Washington axis.
Yet looking at the numbers, the imbalance in trade with Moscow is striking. With more than $58 billion, Russia ranks number one in Türkiye’s imports, which can be explained, of course, by the rise in the purchase of Russian oil and gas. Yet Türkiye’s exports stood at a little bit more than $9 billion last year. The neighbouring Russia ranks eighth in Türkiye’s exports, while the US, the transatlantic partner, ranks second. The arrival of five million Russian tourists, a number incomparable to the US visitors, although their numbers are rising, as well as the Turkish construction activities in Russia factor into the trade imbalance.
By the way, a similar imbalance exists in trade with China and India.
Despite rising anti-Western sentiments fanned by AKP officials, the West remains the country’s most important market and trade partner.
In short, while signs in trade relations give room for optimism, a new era between Ankara and Washington will depend on the “ratification” equation. The need to keep quiet in the Eastern Mediterranean is also important. If indeed we will see the beginning of a new era following positive outcomes from the two countries’ legislative bodies, the positive atmosphere is expected to facilitate discussion on thorny issues like Syria. One still has to be cautious, however, as the two countries are entering the election period, as local elections in Türkiye in the spring will be followed by presidential elections in the US in November.
