THE ERA OF REGIONAL COOPERATION AND “ALLIANCES” IN GLOBAL TRADE

The COVID-19 pandemic and the Russia-Ukraine War have led to fundamental changes in global trade, marking the end of the “Globalization 2.0” era. Countries are turning to regional cooperation and trade with friendly countries to reduce vulnerabilities in their supply chains. In the coming period, we will witness a new trust-based restructuring in global trade

Since 2020, the leading countries and leading companies of the world economy have been redefining and repositioning their positions, strategies, and policies in global trade, depending on the consequences caused by the main and after-effects of the two “black swans” – the COVID-19 pandemic and the Russian- Ukrainian War. The term “black swan” is used to describe events that are highly unlikely to occur, but which, when they do, cause major changes in the world on a global and regional scale. Both events brought with them an important consequence for the world economy: “the Collapse of Globalization 2.0.”

Since the second half of the 1990s, the neo-liberal economic approach suggested that if the leading economies of the world economy were producing more costly goods and services themselves, they should source goods and services with high production costs from countries that were able to produce and supply them more cheaply. This approach, which is also based on the comparative advantage model, has made East and Southeast Asia, and China in particular, the world’s top priority geography for the production and supply of goods since the early 2000s. In fact, China, which had a 6 percent share in the global manufacturing industry, increased its share to 30 percent in 25 years. As countries began to trade more intensively among themselves, global trade volume, which was $318 billion in 1970, $2 trillion in 1980, $3.5 trillion in 1990, and $6.5 trillion in 2000, is expected to exceed $26 trillion by 2024.

One of the most important justifications for this volume leap in global trade in goods was the growing confidence in the mutual supply of goods between countries. However, two black swans have upset this confidence in the last 4 years. Due to the serious supply problems, they have been experiencing due to COVID-19 and the Russia-Ukraine War, the world’s leading countries have increasingly preferred to intensify regional cooperation in their international trade relations and, beyond that, to intensify trade relations (friendshoring) with countries they consider “friendly” or “allied”. Therefore, in the coming period, we will witness a further intensification of regional cooperation in global trade.

In global trade, one of the key drivers of regional cooperation is expectations regarding the logistics network. In a conjuncture of escalating global geopolitical tensions and conflicts, disputes over the Suez and Panama Canal have multiplied the problems in the world’s known maritime trade corridors.

REGIONAL TRADE COOPERATION ON THE RISE

We are living through a period when trade cooperation between neighboring regions is seen as more effective and beneficial. Another fundamental rationale is that countries that develop regional trade cooperation contribute more positively to each other’s development and economic progress. In addition, through regional trade cooperation, it is possible to increase the competitiveness of an entire regional trade area through joint investments and joint marketing strategies. Another important reason is that the intensification of regional trade cooperation between neighboring or nearby countries in the same region also reinforces political trust between these countries. Therefore, it also increases the ability of countries to solve regional problems and strengthen the region’s position in production, competitiveness, and global trade.

The platforms, which enable the development of regional economic and commercial cooperation, pave the way for the development of high value-added cooperation not only in the trade of goods and services, but also in areas such as logistics and transportation, customs clearance, creating joint industrial specialization zones, free zones and special customs specialization zones to increase the competitiveness of the region. At this point, the European Union (EU) and the Customs Union should be considered as the first and most effective of the regional economic and trade cooperation, in a sense regional trade blocs, which developed after World War II, and as a project that inspired the work and efforts in other continents.

Likewise, NAFTA, as the North American Free Trade Bloc, is another effective world example in this sense. The European Free Trade Area (EFTA), established as an alternative to the European Economic Community (EEC), which was once the first stage of the EU, the South American Common Market (MERCOSUR), the Latin American Integration Community (LAIA), the Association of Southeast Asian Nations (ASEAN), the Asia Pacific Economic Cooperation Forum (APEC), the Black Sea Economic Cooperation (BSEC) and the Economic Cooperation Organization (ECO), which were established under the leadership of Türkiye, are successful and effective regional economic and trade cooperation platforms.

As the 21st century’s rising continent, Africa has recently come to the fore with regional economic and trade cooperation platforms and projects. The Economic Community of West African States (ECOWAS), the Economic Community of Central African States (CEMAC), and the African Continental Free Trade Area (AFTZ) are successful examples, while the European Union or EFTA also have regional cooperation agreements with countries in Africa and the Caribbean region. In the next decade, it will be essential for regional economic and trade cooperation platforms and communities to conclude agreements and international arrangements to deepen trade integration among themselves and intensify cooperation among themselves to deepen their role in the global supply chain. As the global economic and political system and the global supply chain restructure in the next decade, regional trade integration-oriented country groups that succeed in making progress in direct investments, mutual trade, efficient logistics networks, and new generation payment systems will benefit.

TIME TO WRITE NEW STORIES FOR TÜRKİYE WITH REGIONAL COOPERATION

The development of transportation corridors and the technological leap in shipping were crucial in facilitating global trade. However, when we look at the effects of freight and transportation costs and distance on global trade, especially when we compare the data for the period 1870-1969 with the 1990s, we observe that contrary to popular belief, “distance in international trade” has a 37 percent more challenging effect. This should be a sufficient clue as to why the phenomenon of “regionalization” in international economic and trade cooperation has gained momentum since the 1990s.

Today, global trade is conducted over an average distance of around 5100 km. Türkiye’s total export distance is 3000 km. This suggests that Türkiye needs to increase its average export distance by at least 2000 km to double its exports. This requires us to focus on Africa, Latin America, and Southeast Asia and deepen our relations with regional economic and trade cooperation platforms and communities in these geographies. In a conjuncture where the world’s economic-political center of gravity is moving from the Atlantic to the Asia-Pacific, where Türkiye is truly at the center of the global system, in the articles we have written in many media for the last 25 years, in our statements we have expressed in the audio-visual media, I would express that we should listen to the real Türkiye, our dear homeland from Southeast Asia, Africa and Latin America; that we should listen to the rising importance of our country in these geographies and the meaning attributed to Türkiye.

Words are inadequate to express the pride we feel from the statements of the Prime Minister of Malaysia Anwar Ibrahim for our President and our country, and his strong emphasis on their invaluable role in building the future with “National Awareness” for our country, our region and the world. Prime Minister Anwar Ibrahim emphasized that Türkiye has transformed into a self-confident country, free from the shackles of past expectations, and has become a global power in a way it has not been in its modern history. He said that with this change, the Turkish people are also liberated and moving forward with hope for the future. He also said that our President has an influence that transcends borders and that they are proud to be together with him as a leader who is loved and admired around the world. Malaysia and Indonesia are countries with which we share the same sensibilities, and the same goals for the glorification of the Islamic World, for today and the future. Therefore, we will carry out many projects and strategize together for sustainable cooperation in the world economy and global trade.

While the global economic-political system is experiencing the biggest earthquake of the last 80 years, while the center of gravity of the global economic-political system continues to move eastward, President Erdoğan states that they consider the recent increasing impositions as the struggles of those who do not want to lose their privileges, and emphasizes that they openly express our objection to this unjust order where the right one is not strong, but the one who holds the power is always right. Stating that Türkiye believes that a structure in which the Islamic World, whose population exceeds 2 billion, is not represented, cannot distribute justice because it is not fair, our President points out that a structure in which a quarter of the world’s population is excluded cannot be expected to distribute security and serve global stability and peace.

Our President Erdoğan, who has always emphasized the need for a new understanding and a new global order to solve problems from economy to diplomacy, from trade to security with the slogan “The world is bigger than five”, is leading the awakening that the construction of a system that embraces everyone, is fair, sharing, sees differences as the richness and is based on trust is a necessity rather than a preference, by signing a great call and a great awareness in all continents. Our President reminds us that we, the emerging economies, must first and foremost believe in the possibility of building a world where peace prevails over conflict, trust over fear, peace over terror and violence, and prosperity over poverty. When he says “a fairer world is possible”, he points out that a fairer world is possible in terms of economic, commercial, social, and international representation, even if the “privileged club” that benefits from the current system does not want it. While Türkiye is building its own “century” with the motto of “National Awareness”, “National Sovereignty” and Independence, it is time to write common stories in new geographies.