The Effects of Turkey’s Government Involvement in International Trade
International trade is the exchange of services and goods or both between nations or region. International trade has in many ways acted as a catalyst to increase growth in the global economy, and as the world becomes smaller and smaller every day because of globalization, a lot of debate has sparked on the formal procedures that relate to the basis of the trade. Geographical location, economic development, government policies/political factors and natural resources are some of the factors that affect international trade (Dunning, 1999). However, this study is going to focus on effects of Turkey’s government involvement in international trade and more specifically on Koc Holding.
Turkey is ranked as the17thlargest economy in the world and has seen a wholesale modernization of its business and economy sector. It has over 2200 firms conducting business in the region. Top export products and services include Cars and vehicles parts, raw iron, and jewelry. Its top imports also include cars, refined petroleum, gold, and petrol gas (Tokatli, & Boyaci, 1998). Founded in 1926 Koc Holding has grown to become one of the biggest companies in Turkey. Dealing in automotive, durable goods, financial, food, energy, and tourism, and defense, Koc firm has survived various political and economic turmoil down the years, but this is not to say that government policies and involvement in the trade do not affect them. Policies and actions taken by the government on international trade can affect firms involved positively or negatively. Government gets involved for two reasons that are economic (unemployment, protection of infant industry, increase industrialization and promote economic relationships with other countries) and non-economic (to maintain essential industry, sphere of influence, preserve culture and national indent)
Trade Restrictions
Like many governments, Turkey legislation is involved in imposing trade tariffs where seems necessary. Tariffs are the method used by governments to impose a tax on imported goods and services to create a more competitive business environment. It is one of the oldest techniques to protect the domestic industries from cheap imports from other trading companies. Turkey, which is a member of the European Union, enjoys the anti-dumping tariffs that were imposed on the Chinese energy- saving bulbs. This meant Koc could enjoy a larger market back at home.
Government Procurement; Non-tariff barriers – “buy national” policies
This is where the government advocates for the consumption of locally produced commodities from the country before importing. The policy comes as a benefit to the firm. The infamous Erdogan versus Koc Holding case is a proof that this policy was practicable and Koc had already been awarded the tender to build armored vehicles for the government (Dombey, 2014).
Turkey has continued to uphold high tariffs on many imported agricultural and food products irrespective of where they are from; this is an advantage to Koc Holdings as it has an interest in processed food activities.
Subsidies
Koc Holdings has also benefited from subsidies as the Turkish government grants between 5% and 20% of products’ export value in over 16 processed and agricultural products categories. The subsidy is then taken as a form tax credit and is paid for through taxes on exports of primary products
Government involvement can be advantageous as well as a disadvantageous to a firm. Koch Holdings has been affected positively and negatively by the government intervention in trade. In the energy sector, the Turkish government controls almost 80% of the gas products through the stated owned company BOTAS. This limits Koc which is also in the energy sector.
References
Dombey, D. (2014). How Erdogan Did It-And Could Blow It. Foreign Aff., 93, 29.
Dunning, J. H. (1999). Trade, location of economic activity and the multinational enterprise: a search for an eclectic approach. PJ Buckley & P. Ghauri. The internationalization of the firm, 61-79.
Tokatli, N., & Boyaci, Y. (1998). The changing retail industry and retail landscapes: the case of post-1980 Turkey. Cities, 15(5), 345-359.
