Turkey in G-20: Toward a New Global Economic Order

The SETA Foundation at Washington DC, Ali Vural Ak Center for Global Islamic Studies, and Center for Global Studies at George Mason University Present

Event Summary

Peter Mandaville: What is the Turkish perspective on G-20?

Ibrahim Turhan: Up until the Asian crisis in the late 1990s, we had been accustomed to crises but it was different this time around given the global impact of the crisis.The G-20 was established as a way for the developed economies to contain the effects of crises in the less developed economies. The realization that we needed a new financial architecture was voiced by the IMF and the G-20 was established. With the most recent crisis as the US has been at the epicenter of the crisis, the G-20 was reinvented. The developed countries’ concern shifted from simply “containing the periphery” to “sharing the burden”. We have had “international” institutions but not truly “global” ones. “It is not easy to transition to the new reality.” With the emerging economic powers, the center is shifting from the core to the periphery. The G-20 can be the platform to discuss and adjust to this new reality.

Turkey is the 17th largest economy and set to become the 16th next year according to the unofficial numbers. You may consider Turkey as part of the South. But Turkey’s ties are mainly to the North. Turkey is the only south & east country with most of its ties to the North. The growing young population is an important asset as well as the 11% economic growth rate, which has surpassed even China this year. Instead of strengthening the South-South relations only, Turkey can playa unique role by contributing to North-South cooperation.

There are risks, however, such as growth and interest rate differentials, which may cause capital flows to go towards emerging markets. Emerging markets may not be able to absorb these flows. Emerging economies may devaluate their currencies to make up for the adverse effects of distortion in capital flows in and out. Advanced economies have been consumers and importers during the last decade while the emerging economic markets have been heavily dependent on exports. If emerging economies are given more institutional power in international organizations, they may be more inclined to balance their exports and imports. We are in a situation where the developed economies do not want to give up their some of their power in institutions such as the G-20 and emerging economies are blaming them for this, refusing to cooperate on global financial issues.

Peter Mandaville: Turkey’s ties are diversifying and the country is establishing more linkages to India, China, and the Middle East. What is Turkey’s geo-economic posture?

Ibrahim Turhan: Two thirds of Turkish trade was with the EU and US until the most recent economic crisis. The crisis led Turkish exporters to other markets such as the Middle East, Africa, and Latin America. Trade relations with India and China are still relatively new. Turkey traded a mere 8% with its immediate neighbors until this government came to power in the early 2000s. Before then, we considered most of our neighbors enemies (Greece, Russia, Armenia, Iran etc.) We almost declared war on Syria at the time. Over the past decade, however, things have changed. We are in a position to have offered financial support to Greece during their most recent financial troubles. Turkey is the only country who can speak to all parties in Iraq. Our economic and political relations with Russia, Iran, Syria, Greece have all improved immensely. In our relations with our neighbors, we advise them to adopt good financial practices. Turkey learned through crisis the importance of good governance, transparence, accountability. We strongly believe in the importance of these. Many countries in the region are trying to replicate Turkey’s example; Turkey can be a role model as a success story.

Audience: Could Washington and Ankara cooperate on the Chinese currency “manipulation” in my view?

Ibrahim Turhan: The Turkish market is impacted by the Chinese goods just like other countries. China is not a democratic country, thus making it difficult to predict its behavior. China isn’t going to allow appreciation of the currency in the short term. Asking China to allow currency appreciation without offering them something is not going to work in the foreseeable future. As I mentioned earlier, the global financial system needs to address the concerns of the emerging economies by giving them more representation when it asks them to adopt certain financial practices. In that sense, emerging markets have responsibilities but they also need to be given more representation. In the global economic system, we need to balance “competition” with “cooperation”. Overspending, stretching natural resources, global hunger, and destroying the environment are the main problems caused by everyone collectively. Instead of blaming one another about who cause these problems more and who should take the first steps, we need to cooperate now, not later.

Cemil Aydin: Is there a North-North versus South-South opposition in G-20? How can they cooperate?

Ibrahim Turhan: There are no set block really and there are disagreements between the US and the EU on certain issues just as there are disagreements between countries of the South. For example, Turkey and Brazil’s relations increased South-South cooperation but they do not always agree since their economic models are different. Turkey can be a catalyzer between North and South, instead of strengthening South-South, which may pose the danger of “creating a club within the club.”

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