Prof. Esfender Korkmaz: Neither Trade Nor Industrial Policy!

The latest column from one of the leading left-wing economists of Turkey:

We all know the frog story…
If you place a frog into boiling water, it will try to jump out of the pot. But if you put it in lukewarm water and slowly heat it, the frog relaxes and becomes numb as the water warms. Eventually, it dies.

Every time, the authorities don’t look at imports, don’t look at the trade deficit, and instead proclaim an “export boom.” But the delayed and gradual effects of trade deficits and current account deficits are not immediately noticed. Yet during the Republican era, trade deficits not only caused currency shocks and crises but also impoverished the country and our people.

Trade Balance in the Republican Era

In the early years of the Republic, between 1923 and 1950, Turkey maintained balance in foreign trade.

Between 1950 and 1960, we continuously ran a current account deficit.

Between 1960 and 2002, during the crisis years of 1994 and 2001, we had a current account surplus due to devaluation and a decline in production. In other years, we consistently ran deficits.

In recent years, post-2003, trade deficits have increased. Since 2003, we haven’t had a trade surplus. Only in 2019, due to the pandemic reducing imports, did we record a current account surplus.

Between 2003 and January–February 2025, in a period spanning 22 years and 2 months, we have accumulated a current account deficit of $741.755 billion.

Between 2003 and January–March 2025, in a period spanning 22 years and 3 months, we have accumulated a total foreign trade deficit of $1.142 trillion.

This is why our country and people have become impoverished. Because a current account deficit means the loss of external economic value—a transfer of resources and wealth abroad.

We’re Distracted by the Interest Rate “Carrot”

They’ve handed us the carrot of interest rates. As an economic administration, as a people, as the entire media, and unfortunately including some academics, we are so preoccupied with this carrot that we fail to see the real danger. The real threat to the Turkish economy is trade deficits.

TÜİK (Turkish Statistical Institute) has announced foreign trade data for January–March 2025. Our three-month trade deficit is $20 billion. If this trend continues, we are headed toward a $80 billion trade deficit by year’s end.

Why Are We Running Such Large Trade Deficits?

Because we have no national foreign trade policy.

In just three months, our total foreign trade deficit is $20 billion. But the trade deficit with China and Russia—who together account for only 3.6% of our exports—is higher: $20.8 billion.

In contrast, we have a $4.5 billion trade surplus with the EU and the UK, to whom we export 49.6% of our goods. In short: we earn from Europe and give it to China and Russia.

We are not dependent on China or Russia. Because we don’t import technology from China. And of our imports from Russia, only 37% is comprised of oil and natural gas.

We should set limits on imports from China, and seek alternative sources for imports from Russia.

High Import Dependency in Production

Among total imports, 71.2% are raw materials and intermediate goods used in production. Imports of investment goods are low, at just 13.3%. These imports are barely enough to cover the amortization and renewal of existing investments. Consumer goods imports stand at 15.7%, whereas this was around 12% two years ago.

Turkey has no industrial policy!

To escape the trade deficit, we must reduce the share of imported inputs in production. To achieve this, we must:

• Implement import substitution policies in sectors heavily dependent on imported inputs.

• Provide strong incentives for domestic production of intermediate goods and raw materials.

• Prioritize local production in public investments and procurements.

• Increase high-tech investments and, in parallel, develop university-industry cooperation.

• Execute these initiatives within the framework of sectoral and regional development plans.

Naturally, we must first build the investment infrastructure. But following that, having the intention and starting is half the solution.

Source: Yeni Çağ Newspaper

Who is Prof. Esfender Korkmaz?

He is one of Turkey’s leading leftist thinkers.

He earned his PhD at the Faculty of Economics. In France, he conducted research on the economics of education at UNESCO. He specialized at the Institute of Finance. He worked as an assistant in the Department of Finance and Financial Theory. In 1980, he became an associate professor with his thesis titled “The Structure and Development of Taxation”. In 1988, he became a professor with his professorial thesis “The External Debt Problem in Developing Countries”. He taught finance courses at the Faculty of Economics.

He also served as an advisor to the Günaydın media group until 1988. He has written columns for Günaydın, Gölge Adam, Ekonomik Bülten, Bugün, Meydan, Gözcü, and Tercüman newspapers. He currently writes for Yeniçağ Newspaper.

From 1991 to 1997, he was Dean of the Faculty of Economics. He also served as Head of the Department of Finance in the same faculty.

He was founding president of the Kars-Ardahan-Iğdır Development Foundation (KAI Foundation), president of the Foundation for Political and Social Research (SİSAV), and president of the Istanbul University Alumni Foundation.

Between 2005 and 2010, he served as a member of the CHP Party Assembly. In the July 22, 2007 elections, he was elected as a CHP Istanbul MP and served as a member of the Parliamentary Budget and Planning Commission.