Good evening. It is a pleasure to be here tonight to share perspectives on U.S.-Turkish relations, in particular our trade and investment ties, and to offer some ideas for how we can strengthen them.
Before I begin, I would like to thank the Büyük Kulüp for inviting me and my colleagues to hold this important and timely conversation. Given the high value the United States places on its friendship with Turkey, we’re grateful for opportunities to interact with audiences like this one, made up of distinguished representatives of Turkish business, government, and academic institutions. Speaking of my colleagues, allow me to introduce Manoj Desai, from the Foreign Commercial Service, and Eddie Ebert, from the consulate’s economic section. They are experts in their respective fields, so when we move into the question-and-answer portion of this evening they’re the ones whose perspectives on those topics you should rely on most.
The title I gave Derya Bey for this talk was deliberately broad. It’s my hope that offering a few comments on the state of affairs between our two nations will provide a better starting point for discussion than going overboard in scope or detail during my prepared remarks. To start with, then, I think we would all agree that deep strategic and diplomatic ties have historically served as the foundation of the U.S.-Turkey relationship. For over six decades we have worked together in the NATO alliance, fighting side by side from Korea to Kosovo to Kabul, to meet security challenges through collective defense. Of course, those commitments are as important today as ever, especially with the rise of the so-called Islamic State right on Turkey’s borders. This evolving threat requires flexibility, resolve and constant consultation, for President Obama’s goal of “degrading and eventually destroying” ISIL will not be easily or quickly reached.
Nurturing the partnership necessary to defeat this menace will no doubt be item #1 on the agenda of Ambassador John Bass, who as you know arrived in Ankara last weekend. The very close working relationship he developed with Secretary Kerry over the past eighteen months as executive secretary of the State Department will be a tremendous asset in contributing to Washington’s internal policy discussions and coordination with Turkey and other regional allies. But please know that irrespective of whether an ambassador or a chargé d’affaires is sitting in Ankara, the lines of communication between our capitals are open and clear at all levels. President Erdoğan in his first two months in office has had numerous conversations in person and by telephone with President Obama, most recently less than a week ago, and I’m certain all of you took note when both Defense Secretary Hagel and Secretary Kerry visited Ankara within a few days of each other early last month. It’s safe to say that the club of countries around the world getting that level of attention from the U.S. Government is a pretty small and exclusive one.
However, we do both our nations a disservice by focusing solely on security and defense ties as a measure of the bilateral relationship’s health. Our status as democracies gives us points in common and issues to discuss and work together on. Reactions to the Gezi events and the December 17 allegations, for instance, highlighted some areas of divergence in interpretation and expectations. But they also underscored the importance of ordinary citizens’ holding their governments accountable to the highest standards of transparency, justice and respectful inclusiveness. Every nation inevitably falls short of these ideals, as the tensions and clashes in Ferguson, Missouri, not long ago have reminded us with regard to America’s struggles with racial equality. The gaze of the outside world, uncomfortable though it may be, fosters healing and progress in such cases. Acting as a loyal friend, the U.S. therefore does not shy away from speaking up about developments of concern in Turkey, whether in real time through official spokespeople or in annual reports on human rights, religious freedoms and other issues.
In so doing we hope that such comments, like those from the European Union in the context of Turkey’s candidacy for membership, are taken in the spirit in which they are made: as reminders that we all must strive to uphold universal rights and values. Our statements come not out of any sense of superiority but rather the conviction that other goals such as economic prosperity are often unattainable and ultimately meaningless if not constructed on a bedrock of democracy and the rule of law. That is why, during his visit to Ankara in 2009, President Obama noted, “Democracies cannot be static – they must move forward.” He added, “Freedom of religion and expression lead to a strong and vibrant civil society that only strengthens the state, which is why steps like reopening the Halki Seminary will send such an important signal inside Turkey and beyond.” It is clear that solutions even to Turkey’s sensitive unfinished business involving ethnic, religious and ideological minorities are not out of reach when the political will is there, as we have seen from the commendable solution process initiative toward the Kurds.
Indeed, it is only by making full participation in society and equality before the law a reality for all Turkey’s citizens that the ambitious 2023 economic goals become possible. Democracy plays a vital economic role in helping people to learn from one another through public discussion and the free flow of ideas, empowering citizens to unleash their potential and protecting them as they innovate, invest, and develop. Ambassador Bass has already made it clear that the United States is committed to being Turkey’s partner in this process every step of the way. President Obama has done the same ever since his 2009 visit to Turkey, when he advocated not just reinforcing democracy but also raising bilateral economic ties on a par with our strategic partnership. The visit last month by Commerce Secretary Pritzker and members of the President’s Export Council testifies to our determination to seize every possible opportunity to move the trade and investment relationship in the right direction.
Turkey’s democratic progress over the past decade has coincided with strong growth, tripling the size of its economy. U.S. exports to Turkey also tripled in the last decade. In 2013 Turkey recorded its highest-ever level of exports to the United States, at $6.7 billion. But for all the growth in bilateral trade, to about $18 billion in total last year, Turkey still ranks as only our 34th largest partner. We can and should do much better than this.
At the government-to-government level, we have a number of tools in place for moving our economic relationship forward. The EPC—short for the “Economic Partnership Commission”—is a working-level dialogue that addresses technical concerns and procedural challenges. Since 1999 our bilateral Trade and Investment Framework Agreement, or “TIFA,” has provided a forum for addressing market access, capacity-building and other important matters.
The Framework for Strategic Economic and Commercial Cooperation—or “FSECC” for short—helps align priorities and advance mutual objectives. In recent FSECC meetings in Washington, we made progress on a range of issues, including:
- strengthening intellectual property protections,
- growing the relationship between our automotive industries; and,
- developing closer relationships between U.S. and Turkish entrepreneurs.
We also agreed to a number of recommendations proposed by the U.S.-Turkey Business Council—a group made up of an equal number of U.S. and Turkish firms.
Finally, our newest forum for engagement is the High-Level Committee, or HLC, established in 2013 by President Obama and then-Prime Minister Erdoğan to discuss the U.S.-EU Transatlantic Trade and Investment Partnership, or “T-TIP.” We believe integrating two of the world’s biggest economies will be truly transformative, with benefits for everyone. The HLC is intended to help keep Turkish leaders updated on T-TIP’s progress, as well as to assess its potential effects on U.S.-Turkey trade.
We’re well aware this agreement will have a have a major impact on Turkey, both good and bad. Turkey’s concerns are absolutely legitimate, given its customs union obligations—which is why we continue to strongly support Turkey’s accession to the EU.
That notwithstanding, the blunt truth is we’re not in a position right now—either structurally or politically—to have free trade discussions beyond those we’re already in. Until they’re finished, both T-TIP and the Trans-Pacific Partnership will occupy the U.S. Government’s efforts and attention for the foreseeable future. And there’s no intent to add other countries to the mix of these complex multilateral negotiations.
To be honest it is unlikely that we’ll see any substantive agreement with the EU on T-TIP in the next two years or more, especially when you factor in Senate approval and implementation. This gives us time to prepare here, but it is in everyone’s interest that we use this time productively.
We see further economic reform as crucial to Turkey’s positioning itself to maximize the rewards and minimize the disruptions arising from T-TIP. A surge of reforms – many prompted by the hope of joining the European Union – spurred Turkey’s economic growth since 2002. The admirable ambition to become a top-ten economy by the republic’s 100th anniversary offers renewed incentive not to let the pace of reform slacken.
Turkey’s continued progress toward EU accession, or an expanded EU customs union agreement, clearly is key here. As I just mentioned, much of Turkey’s success to date has been driven by pre-accession reforms. We still believe in this roadmap, and we are looking to Turkish business and opinion leaders like you to voice their ongoing support for the reform agenda.
Turkey also needs to protect its “brand.” This country has tremendous potential. But we share many of the concerns voiced by investors when Turkish leaders make allegations about conspiracies led by foreign businesses, “lobbies,” and others supposedly intent on keeping Turkey down. Such statements cause investors to hesitate and do unnecessary harm to Turkey’s standing.
After all, there’s stiff competition out there. Other major economies are working hard to stay on top, or aspiring to reach top-ten status themselves, so standing still means moving backward. Reducing Turkey’s current-account deficit, reining in inflation, and keeping in place the country’s strong financial and banking policies will go a long way toward improving Turkey’s investment climate. To move forward, Turkey must continue to attract Foreign Direct Investment, build high value-added industries, and address the current account deficit by saving more and borrowing less. Moreover, Turkey will have to reduce its reliance on consumer spending and construction if it’s to become a top-ten economy and avoid the so-called “middle income trap.”
In all of this the United States wants to be Turkey’s partner, working with leaders in government and the private sector as they seek to have this nation’s citizens share in T-TIP’s rewards. We realize this isn’t the FTA Turkey wants. But until we can begin that conversation, we intend to use the High-Level Committee to explore ways to grow economic ties—and to ensure that Turkey is not excluded from T-TIP’s benefits. In the last Committee meeting, the participants agreed to establish sub-cabinet working groups that would communicate on a more frequent basis about expanding trade and investment.
As Secretary of Commerce Pritzker noted during her recent visit, if we are serious about elevating the economic dimension of our bilateral relationship, we must be honest with each other that additional measures must be taken. American businesses see great opportunities here, but they still suffer from a lack of access to Turkish markets. Too often, U.S. companies come to the U.S. Government with concerns about a wide variety of barriers to entry. Three such challenges are:
- Greater transparency in government procurement;
- Commercial offsets; and,
- Hurdles in obtaining Good Manufacturing Practices certification.
We are working to address these barriers through the FSECC and other bilateral mechanisms. However, I want to emphasize that the conditions we aspire to create are not just for the benefit of American businesses. As Turkey opens its markets to more trade, greater competition and increased transparency, strengthening its position as a crossroads between west and east and a hub for commerce among nations, its businesses and people will enjoy the benefits too. And this is a two-way street. Turkish business leaders stressed to Secretary Pritzker and her delegation that we must do better at finding ways to make the U.S. market, already the biggest and most open in the world, more accessible and understandable to Turkish firms hoping to do business there. We agree and will be looking for opportunities to do so going forward.
I have spoken long enough; it’s my colleagues’ turn to add their views before we get to your comments and questions. But before concluding I must return to my earlier remarks about regional stability and express my admiration for this country’s exceptionally courageous and generous response to the more than one million Syrian refugees who have sought safety and protection here. The Syria crisis has vast implications for Turkey’s security, economy, politics and society. It has highlighted the need for us to be able to work together, and we are finding new ways all the time to do just that. For that reason I am optimistic about the prospects for our bilateral ties. And I believe closer cooperation between our two nations will not only bolster our bottom lines; it will also create a more secure, stable, and prosperous region in the years to come.
Thank you again for the opportunity to speak with you this evening.