Wither the US-Turkey economic partnership

The US-Turkish economic partnership is one of the underdeveloped aspects of the countries' relationship despite several economic frameworks introduced by the two governments in the last two decades. The Framework for Strategic Economic and Commercial Cooperation (FSECC), the Trade and Investment Framework Agreement (TIFA) and the Energy Initiative are just a few of these strategic frameworks. The NATO-based and security-oriented strategic alliance of the US and Turkey is often challenged by regional problems that require close cooperation, which leads to a very strong military and strategic cooperation but never an economic one, until recently.

Bilateral trade numbers were fluctuating around $10-15 billion in the past decade but rose recently thanks to aviation and defense industry purchases by Turkey, reaching $14.6 billion in 2011. This was up from $10.5 billion in 2010 and constitutes a 38.7 percent increase. The top categories of US exports to Turkey in 2011 were aircraft ($2.9 billion), iron and steel ($2.5 billion), agricultural products ($2.5 billion), mineral fuel ($2.1 billion), cotton yarn and fabric ($1.2 billion) and machinery ($952 million).

Turkish exports to the US amounted to $5.2 billion in 2011, up 24.1 percent. The main export sectors were vehicles ($662 million), machinery ($544 million), agricultural products ($497 million), iron and steel ($401 million), stone, plaster and cement (travertine and marble) ($280 million) and iron and steel products ($220 million).

According to a McKinsey analysis, Turkey's main export items are labor intensive (textile) and capital intensive (automotive, iron and steel). However the US's main import items are mostly natural resources, like petroleum products, and research-intensive products such as machinery. This is a crucial mismatch that limits the potential of US-Turkish economic partnership. In addition, since half of US trade is intra-company or affiliated company trade, US investments in Turkey and Turkish investments in the US are crucial to improving trade figures in the coming years. Logistical disadvantages and high customer expectations requiring Turkish companies to be present in US markets is also another burden for Turkish companies.

The small and medium-sized enterprises (SME) element of this partnership is not working properly. Business organizations from Turkey attempt to work on this area to improve their business via networks and cooperation. They often have a hard time in finding local American partners to run successful programs and trade missions. American institutions understandably work on one-sided projects aiming only to export US products abroad or to attract investments to the US. The only organization that has a chance of overcoming this hurdle is the Turkish Confederation of Businessmen and Industrialists (TUSKON). In the last year alone, more than 300 businesses came to the US with more than 20 trade delegations.

There is another weak link in the economic partnership, which is foreign direct investment. Recently, many US investors have been highly attracted to the growing retail business in Turkey. Shopping malls, national food chains, textile and groceries are all on the shortlist of US investors who want to become a minority partner and inject capital to increase growth. Just last year, five of the top apparel retailers formed partnerships with US equity investors. These are good signs but are not enough.

Turkish entrepreneurs in the US are on the rise as well. Chobani, a yoghurt brand in the US that began in 2007 via the purchase of a bankrupt Kraft facility, is now a billion-dollar company in just five years despite the crisis and is one of highest-growth US company formed by a Turkish-American. Kenan Şahin, a board member at the Massachusetts Institute of Technology and the innovator and startup chair of TIAX, and Yalçın Ayaşlı of Hittite Microwave are other very successful Turkish entrepreneurs who have built billion-dollar businesses successfully in the US.

Ford Transit is a good example of a joint partnership that worked successfully to improve trade figures. The Boydak group with its İstikbal Furniture, Çalık Group with their denim business, Nema Food, Dünya Telekom, Sena Cases and Atlas Construction, Marble and Granite stores are other examples of Turkish SMEs that have become successful in the US.

The technology and innovation culture in the US may be a good example for Turkish companies and innovators in the region. Our education system can be redesigned to find ways to encourage a generation of future innovators.

Entrepreneurship programs, trade promotion facilities that decrease the market penetration costs of Turkish companies and venture capital networks that specialize in subsidizing Turkish-American brains working for high-tech American companies are good ways of strengthening the Turkish-American presence in the US, which in turn would help more Turkish companies to penetrate the local US market in all sectors. This would also accelerate Turkish-American participation in local politics in the US.