Integration in the EU

The integration of Turkish industry in the EU economy becomes eloquent when analysing trade in finished and intermediate goods. Turkey is attractive in terms of low labour costs.

Oyak Renault car plant is seen in Bursa, Turkey. REUTERS/Murad Sezer
Oyak Renault car plant is seen in Bursa, Turkey. REUTERS/Murad Sezer

Not by chance, for example, 85% of exported metal goods to the EU are intermediate goods. A similar trade pattern is found in the chemical and automotive industries. Specifically, German companies produce intermediate goods cost-effectively in Turkey and then re-import them for domestic further processing. Not surprisingly, in fact, the majority of Foreign Direct Investments (FDIs) in Turkey come from Germany. Turkey has then become an increasingly important part of European production chains.

Figure n°6: Turkey’s exports to the EU: product composition (USD millions)

Source: UN Comtrade (2014)

Figure n°7: Turkey’s exports to the EU: product composition (% of total)

Reading the trends well, it is clear that the Customs Union, in the last twenty years, has made the Turkish industrial sector much more efficient and productive, thanks to greater transparency and competitiveness in the domestic market. Turkey has experienced a profound process of structural transformation, mainly related to the type of goods produced and exported. If we break further, in fact, the graphs reported, on the basis of data from the Turkish Investment Support and Promotion Agency, production and export of high-tech sectors (including machinery, electronic equipment and automotive industries) have increased considerably, at the expense of exports of less sophisticated goods, such as textile products: in the first half of the 1996-2017 period, already, export quotas for agricultural and textile products fell dramatically from 18% to 8% and from 48% to 26.5%, respectively. On the contrary, exports quotas in the automotive and machinery sectors increased from 3% to 18% and from 3% to 10%.

@manu_scogna10

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