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Is a Turkish-Japanese trade agreement imminent?

Japan and Turkey have been experiencing an acceleration in trade relations thanks to an economic partnership agreement between the two and, as the Turkish and Japanese ministers emphasized, it is expected that trade between these countries will increase considerably.
The milestones of the Turkish-Japanese trade relations are the visit of Genichiro Fukuchi and Mokurai Shimaji, members of the Iwakura Delegation, to İstanbul in 1873, the proposal of Japanese Foreign Affairs Minister Munenori Terashima establishing diplomatic relations between Japan and Turkey in 1875, the decision to improve relations by signing the Japan-Ottoman Treaty of Friendship, negotiations after signing the Japan-Ottoman Treaty of Friendship in 1893, the establishment of the Japan-Turkey Foreign Trade Association within the Osaka Chamber of Commerce in 1925, the immediate opening of the Japanese Embassy in İstanbul in March 1925, the Near East Foreign Trade Conference in İstanbul in May 1928 upon the proposal of the Japan-Turkey Foreign Trade Association and the signing of the Japan-Turkey Commerce and Navigation Treaty in October 1930. The two are making plans for multifaceted actions — despite the fact that they have been late in acting — in 2010.

We can say that Turkish-Japanese relations took a step in the right direction in the early days of the Turkish Republic. The proof of this is the Japan Trade Exhibition that was open from 1928 to 1937 in İstanbul. According to research into this exhibition, it virtually started trade relations.

Turkish-Japanese relations started to liven up with the Treaty of Lausanne in 1923. Japan appointed Ambassador Yûkichi Obata to Turkey in 1925. Obata, thinking that economic relations would accelerate political relations, decided to hold an exhibition to promote Japanese goods in Turkey. Today the same idea prevails; policy falls behind economy in the global power struggle.

Today we may claim that economic relations have not developed since the Japanese Trade Exhibition in Karaköy in 1925. Turkey and Japan have been trying to change the situation in accordance with their regional-global targets in recent years.

Japanese investments: Signal flares

Some emphasis on the importance of economic cooperation between two countries was laid out in the recently held 18th Turkish-Japanese Business Council Meeting. The statement of Turkish State Minister Zafer Çağlayan, who said one cannot claim that the 120-year-old friendship between Turkey and Japan was based on trade, was remarkable.

Japan is the fourth biggest exporter and fourth biggest importer in the world. Though the foreign trade volume of Japan was more than $1.5 trillion in 2008, Turkey claimed a foreign trade volume with Japan of only $4 billion, even when relations peaked. This figure decreased to about $2.5 billion in 2009, owing to the global economic crisis. We see from the 2010 data that the figures follow an upward trend but this is not sufficient because:

 Turkey’s share in Japan’s imports is only three per 1,000, about $2.5 billion, despite exports of more than half a trillion.

 Turkey has a 1 percent share in the worldwide merchandise trade. The import share of Turkey from Japan is 2 percent. This is relatively good figure, compared to the trade volume.

A Turkish-Japanese Business Council meeting stressed that Japan should look toward Turkey more. The following issues were evaluated and emphasized in this meeting:

 Turkey will make energy investments totaling more than $100 billion in 10 years. This is one of the reasons Japanese authorities visited Turkey.

 Turkey told Toshiba, who wants to invest in energy, that it is possible but there will be competition from other companies.

 Negotiations with Japan bore their first fruit as Mayekawa Inc., which has six cooling system factories across the world, decided to shut down its Belgium factory and re-open it in Turkey.

 Japan imports $62 billion worth of food per year. Turkey is a significant actor in this field, but it is still not at the desired level.

 Japanese companies with turnover of $300-500 billion stated that they did not know Turkey well enough, so it is important that Turkish companies make themselves known.

 Turkey has become an important actor in the world and is Europe’s nearest supply center.

 In this sense it is suggested that Japan may benefit from the advantages of Turkey. It may penetrate the markets of the Caucasus, the Middle East, Africa and Europe via Turkey, and also make use of the young Turkish labor force, as it cannot enter into these markets. Turkish and Japanese firms may cooperate in Third World countries.

 The free trade agreements Turkey signed with various countries may also provide an advantage for Japan. Japanese companies may benefit from research and development support in Turkey. They may be exempt from customs duty in their exports to Europe and have the opportunity to cooperate with Third World countries.

 Turkish and Japanese companies need not limit their business to Turkey and Japan, as they may cooperate to invest in the infrastructure, transportation and energy of the M. East, Central Asia, the Black Sea, Africa, the Gulf and countries neighboring Turkey. Iraq may be a significant cooperation domain with Japan because it is now being restructured at a cost of hundreds of billions of dollars. Africa is also being restructured. That Europe cannot produce any more may be an advantage.

 The two countries must cooperate in R&D and innovation. The companies of Japan, a highly industrialized country, may utilize R&D and investment support in Turkey in a period when these processes are globalized.

 A strong Turkish-Japanese economic partnership may cooperate to switch to a low-carbon economy. Turkish and Japanese companies may also cooperate in energy efficiency, adapting environmentally friendly technologies to the industry and developing new technologies in this field (there is an investment opportunity of at least $90 billion within 10 to 15 years), all of which will provide new business opportunities.

 The two distant neighbors of Asia may draw the multidimensional map of bilateral economic relations through common sense. They may establish a new economic partnership supporting the economic relations by new generation cooperation mechanisms.

‘We see Turkey as a stepping-stone’

Tadahiro Matsushita, the deputy minister of economy, trade and industry of Japan, said a free trade agreement “absolutely” must be signed between two countries to strengthen bilateral relations. He stated that groundwork must be done to finalize it. He also added that they needed the young population that Turkey has, this meeting was important for Japan and they had to rise up to meet expectations. In his words, “two countries can join forces and connect the world,” he recalled that geographical distance today has the ability, as it did in the past, to interconnect the nations through trade.

The idea, uttered by Nippon Keidanren Japan-Turkey Joint Economic Committee Chairman Sadao Umeda, “we see Turkey as a stepping stone” came to the fore. The Foreign Economic Relations Board (DEİK) Turkish-Japanese Business Council Chairman Tuncay Özilhan, who hosted the meeting, said relations in the finance sector are expected to increase. “They were unable to get a large enough share from the Japanese investments, so they plan to carry out new efforts in this field,” he added. Mehmet Sami, the deputy chairman and a member of the Ata Investment Board, emphasized the points where the trade policies of Japan and Turkey might merge.

Global development plans

In November prominent Japanese companies in the energy sector negotiated with Turkish companies on marketing, sales and partnership issues. These bilateral negotiations were organized by the İstanbul Chamber of Commerce (İTO) and Japan External Trade Organization (JETRO). The prominent companies, such as Mitsubishi Heavy Industries, the Mitsubishi Corporation, the ITOCHU Corporation, Kawasaki Heavy Industries, Daikin Industries, Foam Dearing, JP Steel Plantech, Hitachi Plant Technologies and Mayekawa Manufacturing introduced their technology to Turkish companies.

Another attempt within last three months involved executives of the Takeda Pharmaceutical Company, which is the largest in Japan and 15th biggest in the world, meeting the press in İstanbul and explaining that they had started sales and marketing activities in Turkey, which they see as a key developing market. This company, which produces in China, Ireland and Italy, sells its products via worldwide marketing offices and has two R&D offices in England. It aims to get a share in the Turkish market and sell its four medicines. What attracts the companies to Turkey is that the medical sector is growing quickly, making Turkey a fast-growing European market. Japanese companies show interest in the Turkish pharmaceutical industry — though the European market, with a 4.40 percent growth rate, has been saturated.

In the Turkish-Japanese Business Council meeting I talked to Toyota Automotive Turkey CEO Orhan Özer about the market targets and new developments of Toyota Turkey, which was founded in 1990. He highlighted that “Toyota Turkey is the exporting leader of Turkey thanks to its export income of $2.5 billion. With its 1.2 billion euro total investment since its foundation, it is one of the biggest manufacturing plants.” The plant in Sakarya provides 20 percent of Toyota’s production in Europe, he added, saying that Toyota Turkey aims to be among the top 10 companies in the world and top three in Europe in 2015 through its 2 million car production, 1.5 million of which will be exported.

Aeon Group, the biggest retail chain in Japan with its $59 billion turnover, met 44 Turkish exporters in İzmir during a bilateral business interview, gaining wide press coverage. The Japanese authorities stressed that Turkey might be an alternative market, owing to issues in quality with China and the fact that there are some remarkable companies in the Aegean region. Another indicator for increasing mutual commercial ties are that authorities from the Japanese Ministry of Agriculture came to Turkey in July for a research visit and Japan in August liberalized the importation of Turkish grapefruit.

We need to know the following information in order to understand Japanese-Turkish cooperation in the energy sector. Middle Eastern oil is of vital importance for Japan as they import 80-90 percent of it from these countries. It also imports 23 percent of its natural gas from this region. ( Japan, seeking an alternative for energy resources in the Middle East, turned to hydrocarbon rich Russia, Iran, North Africa and Central Asian countries. Therefore, Japan worked on energy security and potential alternative projects with Russia, Iran and Libya. The Russian-Japanese project is the Taishet-Nakhodka Oil Pipeline. The second project is Azadegan between Japan and Iran.

Though the INPEX Corporation, which designed the project, was pressured by the US because of Iran’s nuclear program, it did not withdraw from the project, knowing it was profitable. Besides, Japan knew there were many Chinese and Indian companies waiting to go into the region if Japan withdrew from the project. In any case the Japanese did not want to lose such a profitable project to their biggest competitors in energy import. Recall that aforementioned INPEX and ITOCHU companies have a 3.4 percent and 2.5 percent share, respectively, in the Baku-Tbilisi-Ceyhan project. The Japan Bank for International Cooperation (JBIC) assigned $580 million worth of credit for construction of the Baku-Tbilisi-Ceyhan Oil Pipeline in 2004.

Japan is one of the countries that could prove trade is universal. It inspired this notion from European universalism. Immanuel Wallerstein, a distinguished social scientist of our age, points out establishments that might gain power, as he states next the 25 to 50 years will witness the conflict of “universal universalism,” in which the world system will not depend on a certain center (European-Western Universalism). Following the proclamation of 2010 as Japan Year in Turkey, both countries may find new places in investment fields through acceleration of mutual relations in trade.
By Assistant Professor Göknur Akçadağ, an instructor at Yıldız Technical University, department of humanities and social sciences, Istanbul.

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Posted by on Dec 19 2010 Filed under Analysts & Editorial, Asian Defence News, Turkish Energy News, Turkish Foreign Policy News. You can follow any responses to this entry through the RSS 2.0. Both comments and pings are currently closed.

1 Comment for “Is a Turkish-Japanese trade agreement imminent?”

  1. ssm

    Cok guzel gozlemler hocam, tesekkur ederiz.

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