Despite countless political disputes and crises in recent years, economic relations between Germany and Turkey have been steadily improving. Over the years, Germany has positioned itself as Turkey’s largest trading partner and one of its largest foreign investors.
According to the German Foreign Ministry, bilateral trade between the two countries “reached a record high” at 51.6 billion euros ($56 billion) in 2022. Compared to the previous year, Turkish exports to Germany increased by 26.7 percent to 24.6 billion euros, while Turkish imports from Germany increased by a third to 27 billion euros.
Germany remains Turkey’s most important export market. The Turkish Exporters Association (TIM) estimates that Turkey exported 14.5 billion euros worth of goods to Germany through the end of October this year, mainly products for the automotive industry, textiles, food products, boilers and intermediate products made from steel and aluminum.
Turkey mainly imports machinery, vehicles, plastic products, aircraft, chemicals and medical equipment from Germany. Only Russia and China export more goods to Turkey than Germany.
Ayhan Zeytinoglu, chairman of the Istanbul-based Economic Development Foundation (IKV), said economic ties between Germany and Turkey are deep-rooted and can withstand crises: “Among Turkey’s largest trading partners, Germany is at the forefront. We have significant trade deficits with Russia and China, but we have a balanced relationship with Germany.”
Turkey has exported 14.5 billion euros worth of goods to Germany so far this year, including products for the automotive industry. Image: Murat Çetinmuhurdar/Turkish Presidential Office/Handout AA/Image Alliance
What business leaders want from Erdogan’s Berlin visit
While Turkish President Recep Tayyip Erdogan must address other pressing issues during his visit to Berlin, Turkish business representatives also urged him to address Turkey’s customs union with the European Union, and they hope Germany will use its influence to push for modernization.
Modernizing the customs union could double trade volumes to about 90 billion euros, Zeytinongul said. “I hope some steps will be taken during the president’s visit,” he said.
The customs union has been in place since 1995 and provides for the free exchange of goods between the two countries, as well as the harmonization of tariffs and regulations.
Critics calling for reform point to difficulties in arranging consultations and dispute resolution, while Turkey complains that visa restrictions on businessmen and truck drivers hinder the free movement of goods.
Exporters are also unhappy with the current situation. Bulent Aymen, vice president of the Association of Mediterranean Furniture, Paper and Forest Products Exporters (AKIB), explained that the customs union has been in place for more than 25 years and global trade has evolved in that time. “The customs union can no longer meet the needs of the economy,” Aymen said.
Aymen fears the issue will be ignored during Erdogan’s visit, “but this is a very urgent and important issue for the Turkish economy. I hope that it will at least be raised in Germany,” he added.
Turkey complains that visa restrictions on businessmen and truck drivers hinder the free movement of goods. Photo: Mustafa Kaya/Xinhua/Picture Alliance
How Turkey and Germany “need each other”
The German Chamber of Commerce Abroad (AHK) estimates that German companies will invest around 11.5 billion euros in Turkey between 2002 and 2022. This means that more than 6% of foreign investments in Turkey will come from Germany.
More than 8,000 German-owned or German-invested companies operate in Turkey, mainly in the fields of industry, retail, logistics and distribution.
Zeytinoglu believes Germany and Turkey need each other: “Turkey can benefit from Germany’s technological and financial strength, and Germany can benefit from Turkey’s geopolitical strength. With regard to the customs union, the two countries can work together to create new synergies,” he said.
Turkish business representatives have also called for Turkey to have a say in EU free trade agreements. Zeytinoglu said it would be a “big injustice” for the EU to sign free trade agreements with third countries without going through Turkey. “As part of the customs union, we should be at the negotiating table when such agreements are signed,” he said.
Because of this, Aymen said Turkey was suffering “huge losses” in foreign markets. He believes that if Turkey had joined free trade talks, Turkish companies today would be much more successful in many countries, including South Africa and Algeria.
Cooperation on renewable energy
In addition to traditional areas of trade, new business areas between the two countries have emerged in recent years, most of which relate to the energy transition from fossil fuels to renewable sources.
In 2012, the two governments launched the German-Turkish Energy Partnership, designed to enable representatives from politics, business, science and civil society to exchange views on the energy transition.
German wind turbine manufacturers such as Enercon and Nordex have large factories in Turkey.
The energy transition has opened up new opportunities for German-Turkish business partnerships. Image: Mahmut Serdar Araks/AA/picture alliance
Türkiye’s domestic economy continues to struggle
The actions and words of Turkey’s leadership have repeatedly undermined investor confidence in the country.
In June, Erdogan appointed Mehmet Simsek as the country’s economic chief, hoping to curb inflation and boost performance abroad.
Simsek is an internationally recognized financial expert and advocate of a liberal market approach. He served as finance minister from 2009 to 2015, a relatively free period for the AKP government.
Simsek is currently trying to restore confidence in Turkey, but so far, it doesn’t seem to be having much success. The Turkish lira has been falling since the country elected a new parliament in May. Just before the election, one euro was worth around 21.50 liras. It is now worth more than 31 liras.
During a panel discussion in Salzburg, Austria, in July, Simsek called on the EU to modernize the customs union, and EU Economic Commissioner Paolo Gentiloni gave an ambiguous response, revealing just how troubled Europe-Turkey relations currently are.
Mr Gentiloni said there were “difficult problems” to be solved and only time would tell “whether progress is possible”.
This article was translated from German.
