Nowadays, textile and garment sectors are anxious because of the Free Trade Agreement (FTA), which will be finalized and signed with Pakistan. The reason of this anxiety is that Pakistan has a FTA with China as well and if Pakistan brings China's cheap textiles and garment products to Turkey, Turkish producers will have great difficulties. Turkish textile and garment manufacturers, who rely on the quality of their products, think that the price advantage will make competition more difficult.
The inability of the World Trade Organization (WTO) regimes to meet today's needs and the inadequacy of multilateral trading arrangements for new market initiatives directs countries to engage in bilateral and regional trade agreements. The Free Trade Agreements (FTA) signed in this framework strengthen economic ties between developed and developing countries. On the other hand, Turkey is obliged to undertake the common trade policy of the EU because of the Customs Union with the European Union (EU). Turkey should zero the customs taxes for the countries that the EU has signed FTA. However, the customs duties applied to Turkey in exports to the same countries remain constant.
There are FTAs Between Turkey and 19 countries
The FTAs that Turkey signed with 19 countries (EFTA, Israel, Macedonia, Bosnia and Herzegovina, Palestine, Tunisia, Morocco, Syria, Egypt, Albania, Georgia, Montenegro, Serbia, Chile, Jordan, Malaysia, Mauritius, South Korea, Malaysia and Moldova) are still in force today. On the other hand; FTAs signed with Lebanon, Kosovo, Faroe Islands and Singapore will enter force after the completion of internal approval processes. The FTA to be signed with Ghana is expected to be signed soon. In addition, the negotiations with 9 countries (Ukraine, Peru, Colombia, Ecuador, Mexico, Japan, Sudan, Djibouti, Qatar) are under way within the scope of the FTA negotiations officially started with 16 countries / groups, and the works are being carried out in order to accelerate the process with other countries (Congo Democratic Republic, Cameroon, Chad, Seychelles, Gulf Cooperation Council, Libya, MERCOSUR) in the negotiation process.
Turkey has also made an attempt to start FTA negotiations with 10 countries (USA, Canada, Thailand, India, Indonesia, Vietnam, Central American Community, African Caribbean Pacific, Algeria and South Africa).
Why Does the FTA With Pakistan Worry Turkish Textile Sector?
Textile and garment producers are worried about the FTA to be signed with Pakistan after the signing of the FTA Framework Agreement in Islamabad on March 22, 2016. In January-November period of 2016, Turkey's imports from Pakistan amounted to $ 128 million. In the same year, foreign trade deficit of textile and raw materials with Pakistan was about 100 million USD. Following a possible FTA, the volume of import from Pakistan in textile and garment products will increase very quickly. It is stated by industry professionals that the gap between Pakistan and Turkey will be wider, and that the Turkish textile sector, which has overcome the year 2016, will be negatively affected from this agreement.
Before the additional tax started to be imposed in 2011, Pakistan was receiving a share of 11 percent in Turkey's textile imports. After the additional tax launched in 2011, the share of imports in total import volume decreased by 4 %. The signing of the FTA between Turkey and Pakistan would mean the abolition of protection measures taken through the imposition of additional taxes.
In addition to this, another important issue is that Pakistan has a FTA with many Far Eastern countries, especially China. After the FTA to be signed with Turkey, Chinese and Bangladeshi products will be able to be offered to Turkey via Pakistan.
"For The Protection of The Sector, It Is Necessary to Be Cautious About The FTA to be Signed With Pakistan."
TMMOB Chamber of Textile Engineers (TMO) stated that they think that the Turkish textile sector, which could partially be protected thanks to the additional tax imposed in 2011, will come to harm after the FTA planned is signed. Chairman of TMO, Emre Fidan said that: “Turkish Textile Industry has been supported for many years and has managed to gain world-wide prestige in every part of the supply chain. Currently the share of the Turkish Garment and Leather sector in the global textile market is around 4 percent, and maintaining and expanding this share is necessary for strengthening the fragile economic structure that we are in. Our sector, which constitutes approximately 20 percent of our exports and has contributed to the preservation of the social structure by employing a large number of people, should be cautious about the FTA to be signed with Pakistan.”
"Import Would Be Affected in Cotton and Denim Fabric Sector"
Emphasizing that Turkey and Pakistan have a rooted brotherhood, Chairman of İTHİB (Istanbul Textile and Raw Materials Exporters' Association), İsmail Gülle evaluated the impact of FTA on the imports and the domestic textile producers and he stated that: "Turkey and Pakistan are two friendly and brotherly countries. First of all, it is necessary to mention this. On the other hand, these two friendly and brotherly countries are unfortunately rivals in the textile and garment sectors at the same time. According to the data of 2015, Pakistan has a share of 2.6 percent with an export volume of $ 8.3 billion in world textile and raw materials exports. While Turkey is the 8th largest exporter of the world in textile, Pakistan ranks 10th. At the same time, Pakistan, a major cotton producer, has a potential to create competition for domestic producers and exporters in the domestic market, as well as important export markets such as the EU countries, especially in cotton fabrics, denim fabrics and home textiles. For this reason, if an FTA is signed between our country and Pakistan, it is likely that Pakistan will increase its potential as a competitor and create import pressure especially in the cotton sector and denim fabric sector.”
Stating that the export of textile and raw materials to Pakistan declined by 6.3 percent in the period of January-November of 2016 compared to the same period of the previous year and amounted to 29 million dollars, Gülle said that the import from Pakistan decreased by 4.5 and amounted to 128 million dollars in the same period. Gülle continued his evaluation as such: "In January-November 2016, our foreign trade deficit with Pakistan was about 100 million dollars in the fields of the textile and raw materials. The planned FTA with Pakistan will open the gap further. The Turkish textile industry, which had a difficult year in 2016, will be further adversely affected. For this reason, as the Turkish textile sector representatives, we express our concerns about the potential negative effects of this agreement at all possible occasions with our Government and our Ministry.”
Stating that they shared their concerns by holding meetings with all Exporter's Associations and TOBB Turkey Textile Industry Assembly in December and January, Gülle said that: "We hope that these worries will be considered.".
"EU Customs Union Needs Revision"
The textile and garment manufacturers are expressing their reactions on every platform, but if the FTA with Pakistan enters into force, the additional measures can be in question for the textile and garment manufacturers. Sharing his suggestions in order to prevent the negative effect of this situation for the textile and garment sector, Gülle said that: "The most effective measure that can be taken is to ensure that the sector most prone to damage is determined and not included into the scope of the agreement, or that the privilege of the customs tax is kept at a lower level, by qualifying as a sensitive product. In addition, the FTA should be regulated to allow for anti-dumping or other safeguard measures against increased import volume.”
Referring to the fact that the measures to be taken in the field of textile are also limited since Pakistan is a textile country, Gülle continued his words as follows: "Almost all of the export products of Pakistan consist of textile products. Therefore, we can foresee that the FTA to be signed with Pakistan will adversely affect our country's textile sector in any case. We conveyed these negative effects of the FTA to be signed with Pakistan on a number of occasions to our Ministry of Economy. In addition, we stated to the government via the Ministry of Economy that the FTA, in case that it is signed, should include safeguard measures to prevent any damage to our domestic industry.”
In terms of the textile sector, the problem is not limited to the FTA that will be signed with Pakistan. The FTAs that the EU, with which we have a Customs Union, signs with the third countries cause difficulties for the sector. Stating that the Customs Union established with the EU has integrated the Turkish textile sector in the competitive system in Europe and has helped it gain a remarkable position in the global textile trade, Gülle said that the fact that Turkey still is not a EU member state makes this process difficult.
Chairman Gülle continued as such: “Since Turkey is not a member state of EU, it cannot have a say in the shaping and implementation of the trade policies of EU. This situation has reached to an unacceptable level in our country and our sector which adopted the trade policies of the EU through the customs union. For instance, Algeria, Mexico and South Africa have FTAs with the EU but do not lean to signing FTAs with Turkey but their products can enter Turkey duty-free via the European Union. Such situations are accompanied by really serious problems. Thus, the current Customs Union does not answer the needs of today and makes the condition of the sector even more difficult. In this respect, there is a need for a comprehensive revision in the Customs Union.”
Adding that the revision of the Customs Union with the EU will also strengthen the European textile industry in overcoming the current problems, Gülle stated that “As the Turkish textile sector, we will be able to be more supportive in the struggle within the EU to prevent our sectors to be matters of negotiation. If we can affect the FTAs that the EU will sign in this way, both we and the European textile industry will turn out to be profitable.”
Turkish Textile Sector is Not Anxious About Quality
The quality of the Turkish textile and garment products appeals to the purchasers from all around the world. Gülle stated that the signing of FTA with Pakistan and Customs Union agreements with the EU will not affect the quality of the local manufacturers but create a serious competition in terms of price at the beginning. Gülle shared his assessment: “What makes our sector anxious about Pakistan is not the competitiveness or quality of Pakistan textile industry. In this respect, our sector is not anxious. However, price issue is worrisome because production costs of our country and the EU countries are much higher than those in Pakistan. Price-based competition works at the beginning but later, consumers will prefer quality to cheap products. Turkish textile products appeal purchasers from all over the world thanks to its design and quality. Our sector reached this level in a highly competitive environment and thus, more competition will make our sector even stronger from now on.”
Lastly, Gülle underlined that differences and advantages of the sector should be emphasized before public and consumers to minimize the adverse impacts to result from the signing of the FTA with Pakistan.
