Turkish Business World Must Be Informed About Brexit

Remzi Gür, Turkey-UK Business Council Chairman, reviewed the Brexit scenarios and the Turkey-England relationships.

England, having a significant place in the world trade ecosystem, has recently been a matter of debate with possible Brexit scenarios. These scenarios undoubtedly influence not only England but also the states with trade relations with this country. From Turkey’s point of view, England is one of the most important actors for the Turkish economy due to trade relations. The trade activities that have been increasing in the recent years between the two countries reinforce this situation, too. So, how important is England for Turkey in terms of trade? What path should Turkey take if the possible Brexit scenarios do take place? We discussed all these questions with Remzi Gür, Turkey-UK Business Council Chairman. According to Gür, Turkey and England, two old friends, should continue with their mutual trade and economic activities during the next process, too.

If we were to look at the importance of the Turkey and England relationships from a trade point-of-view, how big of an ally could we say England is for Turkey?

England, as one of the developed countries where Turkey gives trade surplus in its foreign trade and where it constantly increases its export, is an extremely notable trade partner of Turkey. In fact, England is at the status of being a European country where Turkey gives its biggest trade surplus. Trade volume of Turkey and England has reached a level of 18.6 billion Dollars as of the year 2018. 11 billion Dollars of the trade volume occurred as export, whereas 7.4 billion Dollars as import. An increase of 15.7% took place in export to the country in 2018, and a 13.7% increase in import from the country. In this sense, England is the second country where we export the most. The main products which we export to this country can be listed as electric home appliances, motor vehicles and textile products; and those we import there can be listed as raw materials, engines, turbines, heavy duty machineries and pharmaceutical industry substances.

How do you foresee that the possible Brexit scenarios will affect the trade relations between Turkey and England and the EU?

If England, being crucial in terms of our foreign trade, leaves European Union (EU) membership without any agreements – within the framework of the scenario also known as Hard-Brexit – we will encounter some obstacles in trade. In our trades with countries outside of the EU, we must apply the common customs tariff of this Union due to our Customs Union obligation. If England leaves the EU without an agreement, it will be able to trade with the remaining 27 European Union countries at a third country status. Hence, England will be expected to apply the same tariffs within the framework of the reciprocity principle. This tariff will also apply for the trade between Turkey and England. On the other hand, a trade co-operation group which has been in the making for the last two years has been set up between Turkey and England. However, because England cannot legally conduct Free Trade Agreement negotiations, this group could not yet implement an official contract. Therefore, I foresee that Hard Brexit would cause negative outcomes in terms of the Turkey and England trade relations. Since England will have no Customs Union relations with the EU, Turkey will also not be able to conduct its trades within this union. However, we will not be without any resolutions even in this worst scenario. The transition process foreseen with Hard Brexit might just be enough for the Free Trade Agreement negotiations between Turkey and England.
And Soft Brexit, another scenario, is better compared to Hard Brexit in terms of the Turkey-England trade relations. England staying within the Customs Union as a result of this scenario will allow its relations with Turkey to continue without interruptions. However, in the status-quo, it is observed that the possibility of Soft Brexit is getting weaker and weaker. So, I believe that the Hard Brexit option should be considered more and that we should be prepared for this scenario.

Could you please inform us in regard to Turkey’s influencing by the Brexit scenario without an agreement?

In a Brexit scenario without an agreement, Turkey is among the first of the countries to be negatively influenced after the European Union. As our Minister of Trade Ms. Ruhsar Pekcan states, the studies show that the trade between the two countries will have an impact of 3 billion dollars against Turkey. The sectors to be influenced the most include automotive, textile, electronics and white appliances. It is stipulated that an impact of 2 billion dollars will take place in the automotive sector, 1.3 billion dollars in the textile sector and up to 500 million dollars in the white appliances sector.

How should Turkey stand during this process?

It is of utmost importance that a balanced economy is sustained and improved between the two countries and potential areas of co-operation are determined. In this sense, it is crucial that we take our place in Brexit, which is the path chosen by England, in terms of both government and private sector and non-governmental organization. Though Brexit will also bring along serious opportunities to deepen the relations with other countries. As the possibility that the Hard Brexit option will happen is stronger at this point, the decision makers both in Turkey and England must take the necessary precautions taking into account this possibility. And if an agreement is made, well-evaluating the transition process and creating a benefiting structure using the advantages brought on by the Customs Union relationship will improve bilateral relations.

Turkey and England, two old friends, should continue with their mutual trade and economic activities during the next process, too. Both countries which have been showing an amicable approach to all issues so far should approach all scenarios with a positive mindset and settle the possible problems during the next period, too.

Could you tell us about what you have been doing concerning the Brexit process as the Business Council?

We are aware that our Ministry of Trade is closely monitoring the issue and is conducting consultations with the relevant sectors. Planning should already be made for what steps should be taken in order to at least alleviate some of the expenses that might be encountered due to Hard-Brexit. Furthermore, the business world should be informed in case of the possible Brexit scenarios and must definitely be prepared for any outcomes. Therefore, one of our Turkey-UK Business Council 2019 objectives is to be prepared in case of Brexit scenarios. As a guide to the business world in this subject, we conducted a study with Assoc. Prof. Dr. Yaprak Gürsoy, Lecturer at the Aston University, called “Brexit: Political and Economic Risks and Opportunities in the Turkey-United Kingdom-EU Relations” which allows comprehensively learning about and evaluating the Brexit process. We aim that this report which is available on the DEİK website will be a guideline for the business world.

Interview : Başak DOYUM / DEİK Europe Business Councils Coordinator