Trade Balance of Turkey

Anatolia, situated between Europe and Asia as a bridge, has always been a attracting trade area for nations. Throughout the history, many nations tried to conquer this plentiful and strategic area to lead the trade between two continents.

After the collapse of Ottoman Empire, Republic of Turkey was founded by great leader Mustafa Kemal Atatürk in 1923. Agriculture and trade were the major economical activities. After the second world war, portion of agriculture in economy started to decrease. Manufacturing and service sectors started to grow up. If we disregard the years 1923 and 1930, first seven years of the newly founded country, exports of Turkey were higher than the imports until 1946 creating trade surplus for the Turkish citizens.

Beginning from 1946 to 2012, economy always confronted a trade deficit. Each political party promised to decrease trade deficit; however none of the promises came true. Although manufacturing sector started to grow up after the second half of the 20th century, it was based on basic production. Additionally production was dependent on intermediary products imported from other countries.

To create a trade surplus, exports should exceed the amount of imports. Because of the dependent production, everytime exports are increased in Turkey, imports are increased as well which prevents a trade surplus.

Secondly, thanks to the free trade, importing some products is now cheaper than producing at home because of comparative advantage, existing resources, technology and so on. This also leads less production in Turkey and increases the imports.

Exchange rates is also an affecting factor. Throughout the Turkish history, Turkish curreny (lira) was devalued many times. From 1946 to 1960, one US dollar was equal to 2.8 Turkish lira. In 1966, 1980, 1988, 1995, 2001, Turkish lira was devalued against dollar. Normally, this should be considered a positive effect on export. Because, for foreigners it will be cheaper for foreigners to import products from Turkey. However, in these years, trade deficit continued.

Other than these factors, fluctuations in input prices also affects trade balance. Turkey must definitely import oil owing to the lack of petroleum areas. Oil has a big pie on imports.

To decrease the trade deficit, fluctuations at exchange rates should be prevented at the same time production of intermediary products should be promoted. Import quote and tariffs can be helpful if amounts can be set correctly. Citizens should also be promoted to buy home made products.

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