TEPAV research says:

. Turkey failed to accompany the rest of the world in the recovery in exports

. There is a shift of axis away from EU market toward other markets

. Market share of Turkey drops despite the depreciation of lira while market share of China increases despite the appreciation of its currency"

ANKARA- TEPAV emphasized that Turkey could not accompany the rest of the world in the recovery in exports after the crisis and stated that Turkey's exports shifted away from EU market.

Policy Note entitled: 'Export Losses in the EU Market' by Assoc. Prof. Ümit Özlale, TEPAV Training and Research Institute for Public Policy Director, and Ayşegül Dinççağ, Research Associate, is published.

Turkey lagged behind

The note said that 2008 global crisis had a deep impact on Turkey's export performance and that several problems including the problem of export finance, due to the lack of a comprehensive national export strategy, left Turkey behind the world in the process of recovery from the crisis. Underlining that in October 2008 - September 2009 period, Turkey's and world's exports contracted year-on-year by 26 and 27 percent, respectively, the note maintained: "Another point as striking as the parallel contraction in exports over the crisis period is that Turkey failed to accompany the rest of the world in the recovery in exports that came to place as of the last quarter of 2009. In this period, world exports elevated by 27 percent whereas exports of Turkey rose only by 7 percent."

Shift of axis

TEPAV policy note stressed that regional composition of exports in which the share of the EU dropped from 48 to 46 percent while that of Middle East, Asia and North Africa increased from 2008 to 2009. The note continued:

"A reason for this change is that the share of the EU market dropped in general in the world trade as well as the efforts of Turkey's government to diversify export markets as a response to the contraction in the EU market. Another factor which does not get the deserved attention is that multinational firms or domestic firms doing business with multinational firms alter their specialization strategies shifting their production away from EU market. In this respect, it can be concluded that a shift of axis away from EU market to other markets occurred in consequence of corporate strategies redefined during the globalization process."

The Usual Suspect: Exchange Rate

The note also addressed the argument that Turkish lira is too valuable that it affects foreign trade balances adversely. The report maintained that Turkish lira depreciated in real terms against other currencies from the last quarter of 2008 to the first quarter of 2009 and despite the appreciation in the following periods, TL could not yet achieve the pre-crisis value, the note argued:

"The argument that exchange rate dynamics had an effect on the exports to the EU is not supported for the period covering the pre- and post-crisis episodes. That Turkey, Taiwan and Korea, the currencies of which depreciated, faced reductions in market share while China, Indonesia and Singapore increased their market share despite the appreciation of their currencies implies that export performance is also affected by structural factors other than exchange rate dynamics. This indicates, measures focusing not only on exchange rate policy must be devised to tackle the export losses."