The Turkish economy will enter 2018 with a record growth rate. We expect the economic growth, which was 5 percent in the first quarter of 2017, to be 5 to 6 percent in the second quarter and reach 7 percent in the third quarter. However, dynamics outside of Turkey, especially those in the eurozone, might drag down this high growth rate. The dynamism in Turkish economy has already reached a level from where it can eliminate "external" adversities and even turn them into new opportunities.
Last week, German Chancellor Angela Merkel made an attempt to threaten Turkey over the customs union, but her remarks were in vain. Turkey's Minister of EU Affairs Ömer Çelik was quick to respond, saying: "We are not in a hurry about the customs union update. It is an unfortunate statement and should not be made in the name of the European Union [EU]."
Çelik was right in his statement as Turkey's desire for acceleration in this area actually concerns the update of the customs union agreement between itself and the EU, depending on the Transatlantic Trade and Investment Partnership (TTIP).
TTIP is an old fairy tale and no one should think that it failed under the U.S. President Donald Trump's administration. The project fell off the agenda since it is now impossible for the EU and the U.S. to dominate world trade as before. The world has no longer a triple economic pillar composed of London, New York, and Frankfurt. The technology rent and monopoly has become a thing of the previous century. Now, the entire hinterland from Istanbul to Beijing is connected via new economic networks such as the internet and telecommunications.
The geopolitical macro bloc theory that the EU, or more precisely Germany, and the pre-Trump administration designed, has failed.
They designed three macro blocs: The first would be centered in the U.S. and include the EU (Germany) in line with TTIP. The second would be based on the Trans-Pacific Partnership (TPP) in an attempt to control China, Pacific, and Latin America under the U.S.'s lead. The third bloc would include uncontrollable countries like Russia, India, and Iran. However, they would pursue a policy to block trade and undermine economic growth by creating hot and cold conflict areas in these countries.
In this sense, Turkey, the Middle East, and the Caucasus would be disciplined with terror, instability and would be kept away from the main axis of the new world trade. However, the TTIP and TPP are no longer relevant and the new trade order that would have been achieved between the EU and the U.S. has collapsed. This failure eventually saw Trump's rise to power and the Brexit as the U.K. decided to break off from the EU. Now, Turkey and the U.K. can reach a new trade agreement, independent of the EU, and at the same time, Turkey might chalk up partial or comprehensive agreements on Eurasia.
The customs union agreement between Turkey and the EU was signed in 1996 when there was no such homogeneous global market. Therefore, the Turkish industry, especially in areas such as automotive, was seriously disciplined by the customs union and achieved major gains in terms of quality, technology, standards, and scale.
In 1996, automobiles produced in Russia, China and even some in Japan had no air conditioning, road safety features and these were considered luxurious. That is, homogeneity in the global markets did not concern brand, quality, and technology. Now, however, we do not know which brand is produced in which country because of fast transactions, as well as the highest quality and technology homogeneity. Regardless of its origin, an ordinary car today is almost a software-wonder, a walking computer.
Regional trade agreements are inevitable in a world where capital mobility maintains such a high level. Likewise, Prime Minister Binali Yıldırım, during his recent visit to Singapore, announced that Turkey-Singapore free trade agreement will come into effect in October.
Huge factories and large scales are no longer valid in the world market. Procurement diversity, flexible and multipart production at different regional locations and flexible work systems require labor force mobilization, and hence duty-free trading, which is also true for the services sector. Hence, Merkel's remark is irrational, not just for Turkey, for Germany and the EU as well.
Now the central banks are gathering in Jackson Hole in the U.S., but they do not know why. If you ask "What do you do?" they will say "everything."
The post-World War II global trade and monetary system established under the U.S. leadership was a new colonial system that was based on civil wars, partial local conflicts between countries and terrorism. Thus, it was confined to the U.S. and the EU as the U.S. backup and that became central in these countries. This system was also built on the idea of further undermining the underdeveloped regions of the world and cutting their relations with each other. This system is becoming a thing of the past and even if its remnants survive, there will be little that central banks can do.
Our central bank is also attending the meeting in Jackson Hole and I guess it will be the most attractive banks among others. This is because we no longer repeat the clichés, instead, we teach.
Meanwhile, our Credit Guarantee Fund (CGF) delegation is in South Korea to tell the world why CGF should continue and how it will endure as a unique example.