The share of raw materials in exports is alarming: Opinion 

By Dr. Bader ARSLAN

Both Turkey’s exports and imports have been breaking records recently. Exports increased by 19.8% to USD 22.7bn in March, according to provisional data released by the Ministry of Commerce. Imports, on the other hand, increased by 31% to USD 31bn. The increase in exports was 20.8% and imports increased by 42.1% in the first quarter of the year. We will achieve the biggest foreign trade deficit of the last period in 2022 unless there is a counter development.

The most important reason underlying the growth of the deficit is the rise in commodity prices. Price increases in energy, metal and food products are causing a rapid increase in our imports, especially in these sectors. We see an increase in our exports for similar reasons. However, export growth is at half the rate of import growth. In March, raw material exports increased by 32.3%, consumer goods by 6.2%, and investment goods by 14.6%.

Categorizing goods as raw materials (intermediate), investment and consumption goods is a practice based on the Broad Economic Categories (BEC) classification, initiated by the United Nations in 1971 and currently in its fifth version, to harmonize the analysis of foreign trade data between countries. The higher the share of investment goods and consumer goods in the exports of a country, the more economically developed that country is expected to be. Accordingly, in principle, we can say that the share of investment and consumption goods in the exports of developed countries is higher than the share of raw materials (intermediate goods). We see that this principle is valid, with a few exceptions, such as Canada and Norway.

In 2021, the share of raw materials and intermediates in Turkey’s exports increased to 51%. On the other hand, consumer goods accounted for just 37.2% of our exports. Investment goods received an 11% share in exports in the same period. There is a similar picture in the first two months of this year. In other words, more than half of the country’s exports consist of raw materials and products in the intermediate group. 

Turkey has been exporting more raw materials and intermediates than consumer goods for 15 years. Although the shares of these two categories converged in the 2010s, the difference has started to widen against consumer goods recently. Of course, the effect of price increases in raw materials on the growth of the difference is great. However, the fact that we needed a structural change would have been true even if these increases had not occurred. 

Turkey does not just need an increase in exports. It also needs: 

• Higher exports growth than imports growth,

• More consumption and investment goods exports than raw materials and intermediates exports.

This is not a transformation that the state can achieve alone. Chambers of industry, organized industrial zones, and exporters’ unions should also be included in the process. As the general assemblies of exporters’ unions are being held these days and new union administrations are taking office, the Ministry of Commerce may make some arrangements for this broad organization to carry out more efficient and result-oriented activities.

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