Since taking office, the U.S. President Donald Trump has never been one for letting tensions to de-escalate. Especially in the foreign policy, there has been a plethora of sanctions and embargoes imposed. What’s more is a border crisis, resembling the iron curtain. However, there is yet another issue affecting the whole world: The Trade Wars. We seem to hear you asking “A war? What war?”
As you might recall, in the wake of the Cold War, people were saying that all types of war were finally exhausted. Those who believed the collapse of the bipolar world order meant victory for liberalism at the time, how would they explain this “trade war” issue now? Despite their predictions, the constant battle between the opposite sides carries on, even if its direction and methods get changed. So, what does the term trade war really mean? And, where does Turkey stand in this war?
The economic system tensed up by the trade war causes some of the most arduous conflicts in the present-day. The trade war presents itself, as a certain country attacks another using sanctions and tariffs imposed on its imports, often causing the latter to retaliate. Resembling this, the conflict ignited between the U.S. and China is a result of Trump’s penchant for protectionism and aggressive foreign policy. For Trump believes that the economic system his country has been striving to establish since the end of WWII, is conflicting with national interests. The ongoing battle between the U.S. and China, the two largest economies in the world, concerns not only the two countries, but also the rest of the world.
Trump, who thinks his nation is highly foreign-dependent in the metal industry, often raises his concerns about it, stating that the country might not be able to produce an adequate number of weapons and vehicles in case a war breaks out. The U.S. Government wants local corporations to supply their steel and aluminum domestically, rather than resorting to foreign trade. On the other hand, the country wants to close its trade gap with China.
This is where the chapter concerning Turkey begins, as it is one of the countries the U.S. imports steel and aluminum from. Considering the tariffs imposed by the U.S. government, Turkey rises to the 7th rank in the list of countries affected, ranked after China, Russia, Taiwan, Japan, India, and the United Arab Emirates. Canada, Mexico, EU, Australia, Argentina, Brazil, and South Korea were exempt from the tariffs. The U.S. supplies 53 percent of its iron, steel, and aluminum from the countries with exemptions.
The decrease in international trade caused by the trade war may also result in an economic slowdown. The situation particularly affects countries in need of large amounts of foreign currency, like Turkey. Yet, all crises bring about their own opportunities as well. That’s why the main goods exchanged in Chinese and American international trade bears great significance for the country. Considering the new tariffs that are imposed, entering the American and Chinese markets could very well backfire. Countries that produce the same goods exported by the U.S. and China may also enter the markets as new players. Chinese needs, such as soy, cotton, and automotive products draw particular attention. Turkey may enter the Chinese market as well, exporting automotive industry products. In the first 7 months of 2018, Turkey’s exports to China increased by 5.89 percent year-on-year. In addition to this, Turkey wants to build partnerships with China in numerous fields.
The People’s Republic of China has followed protectionist policies for many years, and thus, it has long been regarded to be both intriguing and threatening by most international actors. When we examine the last forty years’ period, we observe a China that transformed into a global actor from a country isolated from the international community.
Looking at the bilateral relations between Turkey and China, there seems to be not many advances made since the Cold War, due to the positional differences they had during the polarization period. The first diplomatic relations between the two countries were established in 1971, yet there doesn’t seem to be much of an activity in either diplomatic or economic relations until the 90s. China would only start to draw the world’s attention after foreign expansion reforms it commenced in 1978. In the same period, China had its growth figures reach two-digit numbers.
While Chinese economy presented protectionism due to its being a socialist one-party state, Turkey pursued a self-contained path with import substitution policies. Foreign expansion could only be made possible with an increase in international interactions, and advances in communication technologies.
It would be safe to say that, China’s rise to prominence in the international arena owing to its economic prowess, made it possible to move away from the “unipolar world” picture that emerged after the Cold War. Though both countries supported restoring the balance between the global actors since the 2000s. China became one such global actor through regional partnerships it formed, and by developing trade relations with certain countries it was yet to interact with since the Cold War. On this, the establishment of the Shanghai Cooperation Organization (SCO), and its incorporation of economies such as India and Pakistan also played a role. In that sense, the organization could be regarded as an alternative to EU for Turkey from time to time. Especially, when the ever-ending negotiations with the European Union are considered, it seems necessary for Turkey to seek a policy of balancing by looking for alternatives.
There are numerous reasons for China’s growth, as it is currently the second largest economy in the world. The country’s high export share in economy, the ease of making rapid investments in Asian markets, and the fact that it ranks first among its Asian neighbors in by-product exports rendering it the center of attraction for the regional economy, all play roles in this success. China has also managed to come out unscathed from a number of global economic crises, by implementing outward-oriented economic policies. After becoming a member of the World Trade Organization in 2001, the country proved itself successful at adapting to international trade policies as well. When economic data of the recent years are examined, China stands out from the rest as the country with the highest credit growth rate and the greatest credit stock.
The recent convergence between Turkey and China is largely forming as a win-win policy for both countries. This has two bases. Firstly, instead of depending on the United States and EU, Turkey has started to look for alternatives, and as a result, it is evaluating the Shanghai Cooperation Organization (SCO) for future partnerships. The SCO comprises some of the most prominent actors in the world, such as Russia, China, and India. Turkey’s potential membership resonates favorably within the organization, and the country was also elected to chair the SCO Energy Club in 2017, despite solely being a dialogue partner. This marks the first time for a non-SCO country to do so.
On the other hand, regarded as China’s “Marshall Plan”, the modern Silk Road project dubbed “One Belt, One Road Initiative” regards Turkey to be highly significant in its development. Considering all these, it is clear Turkey’s position in Chinese foreign policy is secured, and its importance is consistently increasing. Moreover, the economic opportunities and infrastructure projects the new Silk Road is anticipated to bring are greatly substantial for Turkey, as the country plays a pivotal role in the trans-continental integration of the BRI.
As of late, there are a number of advances made to create an alternative to the dollar’s dominance in the markets. While many economists comment on the issue, President Recep Tayyip Erdoğan has also made a statement, saying “The dollar’s dominance must be ended”, as well. The existence of such discussions over dollar dominance is not a new phenomenon by any means. Turkey has previously emphasized its desire to use the local currency in its trade with the likes of Russia, Iran, and China. This way, the country intends to close its trade gaps. Especially in its Chinese trade, taking such a step forward would prove highly beneficial for Turkey, as the country’s trade deficit is at its highest with China.
Affected by all these factors, President Erdoğan’s call for usage of local currencies in trade, as he had first mentioned in 2016, came into full force as the Central Bank of the Republic of Turkey (CBRT) made its first currency swap transaction with the People’s Bank of China. Thus, an increase in Chinese investments can be predicted to follow.
China has become one of the most active players in the global trade, bringing its products to almost every corner in the world. The relatively inexpensive Chinese goods have increased the buying power of the poor. So much so that, many economists believe it helped halt inflation in numerous economies. Naturally, the rising volume of inexpensive goods in the global markets has also increased competition. Even though it looks like the growth figures are pretty much fixed at a rate of 7-8 for China at this point, it is predicted to become the world’s largest economy in the near future. Thus, it proves crucial for Turkey to advance its economic relations with China, and follow policies to bring balance to its trade with the latter without succumbing to become dependent on it.
Therefore, establishing constructive relations is not only beneficial for both Turkey and China, but also it helps bring balance to politics and prevent a unipolar world from forming. Considering the aggressive foreign policy the U.S. follows, and the trade war it has waged, promoting better bilateral relations with each other seem favorable for both Turkey and China. Thus, developing policies to form lasting relations with China should be an important target for the political will in Turkey, as it would benefit the country both politically and economically.