The seeds of today’s globalization were planted in the period between 1871 and 1914. One of the important reasons for the acceleration of global trade could have been an international monetary system based on a "fixed exchange rate system" between countries.
The British Empire, aka the U.K., was leading a gold standard monetary system since 1860. The Ottoman Empire was also a part of the system, Germany had agreed to join it in 1871 and then other countries followed. By 1914, the number of countries included in the system increased to 45.
Another reason for the facilitation of global trade was the development of transport corridors and the technological advancement in shipping.
Contrary to what one might expect, the data show that the distance factor in international trade – i.e. the distance traveled, geographic conditions, transportation costs, etc. – was worse in the 1990s than it was in the period of 1870-1969.
Perhaps this would provide a sufficient clue as to why the phenomenon of “regionalization” has gained momentum in international economic and commercial cooperation since the 1990s.
The Association of Southeast Asian Nations (ASEAN) and the European Union Customs Union (EUCU) are some of the oldest examples of trade cooperation.
In almost all regions of the world, there are many such cooperations including the Asia-Pacific Economic Cooperation (APEC), the Southern Common Market (MERCOSUR), the Organization of the Black Sea Economic (BSEC), the Economic Community of West African States (ECOWAS) and the North American Free Trade Agreement (NAFTA).
Today, global trade is carried out at an average distance of around 5,100 kilometers (3,169 miles). The total export kilometers of Turkey, on the other hand, is 3,000. This shows that Turkey has to increase its average export distance by at least 2,000 kilometers in order to grow its exports.
This, in turn, requires us to focus on Africa, Latin America and Southeast Asia.
A recent study by Yusuf Kenan Bağır, an economist of the Central Bank of the Republic of Turkey (CBRT), confirms how valuable Turkey’s Africa initiative is as the country ranks sixth in the world – ahead of countries like Germany, the U.K., Spain and Italy – in the number of diplomatic missions it has around the world.
Between 2008 and 2016, Turkey opened 39 new embassies. The research reveals that, after such diplomatic steps, the country’s exports increased by 26.9%, product variety by 9.9% and the number of exporting companies by 7.7%.
In this context, the most critical project that will top out Ankara's steps are the Turkey Logistics Centers (TLM). The COVID-19 pandemic has brought new challenges to global trade. Worldwide e-commerce has exceeded $25 trillion and it is now about to pass $1 trillion between countries.
It is possible for Turkey to increase its exports first to $250 billion and then to $500 billion, to bolster its claim in electronic exports. This can be achieved by opening 15 TLMs in total in the world (three in Africa, three in North America, three in Europe, three in East and Southeast Asia and two in Latin America).
While the Turkish Foreign Ministry will be enriching our diplomatic missions, the Ministry of Commerce and Export Assembly of Turkey (TIM) will accelerate trade missions.
2021: A year of recovery
The pandemic caught the world economy unprepared and will cause a contraction in the global gross domestic product (GDP) in 2020. According to the International Monetary Fund (IMF), that contraction is minus 4.4% while the Organization for Economic Cooperation and Development (OECD) says it is minus 4.2%.
Both institutions predicted that there would be a 5.5% to 6% contraction for the end of spring and early summer
On the other hand, the World Trade Organization (WTO) has stated its contraction forecast for global trade as minus 12.9% at first but has now pulled its new forecast up to minus 10%.
As 2020 is coming to a close, figures indicate that the global tourism industry suffered a loss of $3 trillion this year, and the aviation industry will lose $750 billion. It is also indicated that some sectors will be able to recover their losses only by the end of 2024.
The OECD's prediction points out that Turkey, along with China, South Korea and Indonesia, is among the top four countries that will recover its economy at the highest rate from the last quarter of 2019 until the last quarter of 2021.
Russia and the U.S are also likely to see a near-zero positive recovery. We are talking about a two-year period in which Japan will still be at a 1% loss, Germany will be at minus 2%, France will be at minus 2.5% and the U.K. will be at minus 7%.
In addition, the eurozone will be at minus 3%, India will be at minus 3% and Italy, South Africa and Mexico will still be at minus 4%.
So, even at the end of 2021, these countries will still not be able to compensate for the losses they suffered from the pandemic in 2020.
Thanks to mainly Asian economies, Turkey and a handful of countries in Latin America, Europe and Africa, the OECD predicts that the world economy will achieve positive growth of 4.2% in 2021 and the global GDP growth will remain at 3.7% in 2022.
Although it is not expected that any economy will experience negative growth in 2021, three out of four economies will not be able to cover their 2020 losses.
For Turkey, after 2020 finishes with a GDP growth between minus 0.2% and 0.3%, an increase of 2.9% for 2021 and 3.2% for 2022 is projected for the country.
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