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Hello.
I have a very distinguished guest with me, Asli Ay.
Asli Ay is the Founding Partner of US Policy Metrics.
Welcome Asli.
Thank you Melike.
Asli you are here for a very important topic that closely affects our country, Turkey.
This is a trade agreement that concerns Turkey and USA and European Union, right?
Now if we are to review Turkey's and your position here, you are
the owner, one of the partners of a company that provides
consulting services to many high-level managers of hedge funds in USA,
New York and Washington D.C.
Right.
That is why this topic is one of your personal projects.
You address this issue and you want to give important messages.
Asli, can you please explain to us what point we are at,
what are we doing, when we talk about Turkey's commercial agreement?
Of course.
At the moment America is strategically promoting two important trade agreements in parallel.
One of these agreements is the Transatlantic Trade and Investment Partnership, TTIP,
This is a trade agreement made between the United States and the European Union, which entails a deep integration.
The other agreement is the Trans-Pacific Partnership agreement- or let's call it TTP,
which the United States is marketing with the 12 countries on the coast of the Pacific Ocean.
The strategic importance of these two agreements is different as far as the United States is concerned.
The goal of the TPP is to enchain countries who are in particular wary of the hegemony of China and its military strength,
and who are concerned that it might pose a security risk for them,
to the United States, commercially, economically, and of course, a little symbolically.
If I need to simplify it a little more, actually this strategic objective is to exclude China.
The strategic importance and strategic meaning of this and the trade agreement entered into with the European Union is very different.
The United States is attempting to come together with the other developed countries which are similar to it the most
and prepare a new trade agreement.
This agreement will touch on points which no other trade agreement has contained until now.
These points are the ones known as intellectual property rights matters, matters related to the reduction of agricultural subsidies,
the matter of giving access to the contracts coming from the public or state sector to foreign investors or
the foreign organizations who are interested in them.
Matters such as the pharmaceutical sector.
That is to say, matters which have never been included in trade agreements until now;
a trade agreement which covers every subject except the tariffs.
If the United States can come together with the European Union and execute this agreement,
they then want to market this to the rest of the world as a standard format.
Therefore, the strategic importance and meaning of these two agreements is different.
So, what is the importance of this for Turkey?
Yes, for Turkey. What is its importance for and effect on Turkey?
And if Turkey does not play a role here, or misses this opportunity, what will it lose?
Of course, if this agreement between the United States and the European Union gets signed - and it will do in all probability,
we can talk about that later.
Sorry, when is it expected?
The Obama government is planning to enter into these agreements by the end of 2014.
It is a very close date.
A very close date - that is to say by the November 2014 elections.
As you know, in the United States there will be mid-term elections in November 2014.
This is quite a difficult target, but it is still important that they have set such a target.
This is in either first or second place in their list of priorities.
If we are to come back to the matter at hand now,
when this TTIP agreement between the United States and Europe is signed
all countries which have extensive commercial relationships with the United States and Europe
will be affected negatively. As they are part of the North Atlantic trade agreement, Canada and Mexico
are the largest trading partners.
They are the largest trading partners as they are the partners in NAFTA, while in Europe, countries such as Norway, Switzerland and Turkey
as well as countries like Australia who have close commercial with both of the large trading areas, for instance.
Why? Because these countries have a trade diversion problem,
I mean, Turkey will open its own market to American companies and products,
and also have to compete with American companies in the European market at the same time.
Therefore, this will have a significant effect on these countries; and this includes Turkey.
As you know, Turkey is part of a customs union agreement with Europe since the 1990's.
One of the conditions of this agreement is that Turkey cannot enter into a free trade agreement
with any other country other than those with whom the European Union is in discussions or negotiations,
or other third countries.
That means that Turkey could have entered into a parallel agreement with the United States,
I will talk about that.
Or it will have to opt out of this agreement.
Now, Turkey have made a formal application to both the United States and to Europe.
They have said that they want to negotiate in parallel on this table, but they have been declined.
This answer was given officially.
And the answer was "no".
Why?
Why? That is because the topics being discussed here are quite complicated; they are matters related to regulations,
that is to say rules, agreements and organizational matters.
And at that time Turkey was declined due to various different political and strategic matters.
In future, what can Turkey do to minimize the negative impact on itself?
Yes, I think the most important thing here is what the Turkish government and the senior representatives learn from this message, and their actions,
and what the business world,
what the business world, the private sector and our government learns from this is that.
Yes. A new option has became available around eight hours ago.
If you ask me what Turkey can do, I believe this is the only option they have at the moment.
That is; this example has come from the Japan and TPP negotiations.
I want to just very briefly explain what it is, and how Turkey can adapt this for itself, and implement it.
That is what I wanted to say - as a model.
They can acquire this as a model, as a template model.
Very good.
The TPP - that is the Trans-Pacific Partnership agreements - negotiations actually began with a group which did not include
Japan, and Japan were not a part of that group.
Very interesting.
And those agreements were progressing, but as there were certain security concerns between Japan and
China -
yes there are always concerns there ...
When there were concerns there, Japan turned to the United States and said that it also wanted to be included in the TPP agreement.
And as many points had been agreed upon by that time, and as both sides
did not want to go back to the beginning and re-negotiate all of these matters, they brought out a new legal
clause. And they called this docking; I don't know the Turkish word for this, so I am going to use the word docking.
We can describe this very briefly.
It means that Japan were added to this agreement in the middle - from the middle of the process, and it was said that
"alright, Japan, very good; you are participating in this, but you have to agree to all of the matters we have reached agreement on until now."
A conditional addition -
Conditional addition is a good term. You have to agree to these and in the negotiations from now on
you will be with us, and at the end, when this agreement is ratified by the parliaments and congress,
you will be deemed to have been docked on to, that is to say conditionally added on to this agreement.
This is a clause which has not been in any other trade agreement until now.
Yes, it is something never seen before.
Now, what is the importance of this for Turkey?
Let me put it this way - if such a legal clause is added to the TTIP agreement for Turkey during that agreement,
it will have the right to make an application to the United States and to Europe, together with all of the other countries, such as
Norway, Canada, Mexico and Sweden.
This is very important, how can we do it?
So what does this mean, let's explain again.
The United States and Europe will carry out all of the negotiations, and then they will add on a chapter to the agreement,
and they will say that countries who are happy to abide by all of the conditions of this agreement
will have the right to be added to this TTIP, under these conditions.
So all that is needed is a little paragraph, what does Turkey need to do in order to get there?
What is required for the paragraph? First of all discussions with the United States Congress, the United States government
and Europe need to begin at the highest level.
One of the things it will need to do here is to establish a consortium, a partnership.
So, here we will need to put all of the other countries, who, like Turkey, are going to be included, into the same consortium.
That is because, the more friends and partners you have with you when holding discussions with the United States and Europe,
the more seriously and carefully they will listen to you.
Does it require lobbying?
Of course, certainly.
Have you already presented this to TUSIAD or to the council of ministers, or are you planning to do it?
I am planning on something like this and really want it, I have mentioned this to some of our ministers in private meetings.
It has already been done; yes this is very important.
TUSIAD has made contact with many very important people in Washington DC, but
I don't think they have spoken specifically about the subject of docking, because that is still very new.
It has not been mentioned yet.
This is a hot topic and I think not many people know about it.
To do this, lobbying is of course necessary.
First of all you need to understand the topic, the legal and technical details.
This clause should in no way contradict with Turkey's Customs Union agreement.
And later on, there will need to be certain state-level agreements,
and certain parallel discussions held with other countries so that everyone is in the same boat with these countries;
we will all face losses because of this agreement, and therefore we are all in the same boat, and therefore
I believe that we all need to lobby together.
That is because, the bigger the economic block you are when you go to the table, the more influence you have over Europe and the United States during your discussions.
That is what I was going to say, like the Americans always say;
we need to face them not as a minority, but as a majority.
I am holding here a wonderful three-page article you have written, Asli Ay.
Here you are talking about what is Turkey's argument?
If you like we can close on that, or if you have any other messages.
That is because this is a message which has been introduced and presented for the first time, and it needs to very significantly be examined, analyzed,
and the timing must be determined correctly; the right place at the right time.
Yes, that's right. I want to talk about the timing before our arguments.
This TTIP agreement can be concluded within the upcoming eleven months.
Yes, that's right; eleven months.
It may not be concluded, but let us say we are talking about a time frame of between eleven to eighteen months.
This, and if you take into account the priorities of governments, geo-strategic problems,
wars, and security matters which may lead to a loss of concentration,
effectively, in all probability, we probably have just four to five months for our lobbying activities.
And that is why this train is about to leave the station.
We need to act very fast.
We need to act very fast, we need to know what we want strategically;
We need to put that across.
We need to put it across, and we need to lobby on certain points.
that is to say, it will not be enough just to go to the United States government together, and
tell them we want to develop our commercial relationship.
We need to go with much more specific and much more pronounced requests.
That will simplify the process too.
That is the first thing; so now, what are the arguments of Turkey in this approach?
I think that Turkey has extremely powerful arguments.
And that is this: we said that the United States and Europe are now attempting to write the new trading constitution of the world.
Yes.
Now, in this procedure, the higher the number of very significant economies you can include in this agreement,
the stronger your constitution will be born; the stronger and better it will start.
It will be a new baby.
That is why, a country like Turkey, which is currently the 17th largest economy in the world, with 50% of it open to trade,
and which is a young, and developing economy on the edge of Europe, which has been completely integrated with the world economy,
and which has an extremely young and important population, included in this
would be extremely suited to the economic interests of the United States and of Europe
and, therefore, this should never be forgotten.
That is to say, Turkey should not act like a dwarf.
Turkey has a giant economy.
And it is an extremely fast growing economy.
It is also in situated in an amazing location, geopolitically speaking.
Of course, this is the second issue. This is what is suited to the economic benefits of the United States and of Europe.
So, we are in the same boat as the Americans. We need to remind them of that; there is no need to explain and no need to convince.
We need to remind them.
And the second issue is this; this is more of a geo-strategic issue.
At the moment a fault line has opened in the world; that is to say, the tectonic plates are moving, which means...
I don't know, whether you are following this?
For instance, this contest between the European Union and Russia regarding the Ukraine, and their desire to
draw it to themselves has created a very interesting line, and that is
independent, free countries on the one hand, who are democratic, based on the free market economy, focusing on the growth of the private sector,
and developing countries - which Europe and the United States are a part of, as well as some Latin American countries also;
while on the other hand there are countries such as Russia and the Middle Eastern countries, which have a second system of government, which is autocratic,
with closed economies, and which are very backward in terms of their development and humanitarian and cultural values.
Just as it was during the Cold war, Turkey is once again on that line, this is funny, no not funny, it's ironic.
It should actually be added to that platform.
With regard to that platform; that is to say we,
As Bloomberg International, actually made a very interesting comparison regarding Ukraine;
I think that Soros was also monitoring and supporting this;
Of course, this is an extremely important matter.
Ukraine is actually a very interesting example.
Of course, Russia is forcing all of the old Turkish republics to participate in its own trading region,
it has drawn Armenia and Georgia towards itself; that is to say, despite the fact that it wants to come together with the whole of Europe,
it is forcing Georgia to choose its side - indeed if you remember, there was a small war on this issue 2-3 years ago.
These are very important issues. It is forcing the Ukraine to choose its side.
Turkey must absolutely be on the right side during this historical crossroads.
And the right side is, of course, the block where independent, free governments, countries and
people are living.
Therefore, this is very important in the geo-strategic sense.
And the last point is that - and I am saying this in third place, but I think it is a very important detail -
we need to remind this to our American and European friends.
When Turkey became integrated in Europe with the customs union agreement in the 1990s
the Turkish economy went through a serious transformation.
It was restructured, and we brought in new regulations, new rules, and entered
a very competitive environment, and the Turkish economy displayed great success
in adapting to this I think.
That is to say, holdings re-organized, everyone concentrated in areas where they could be competitive,
companies from all over Turkey, which we didn't know, and we had never heard about -
from Gaziantep, Kayseri, Diyarbakır - came together and were successful, and Turkey
established an unbelievably successful export strategy, leading to it competing extremely successfully with
European countries and European companies.
Therefore, we have experienced such a different re-organization and such a large trade agreement, and
we have achieved a very successful result.
What does that mean? We can say to our American and European friends, "look,
Turkey wants to both do this, and we also have the capacity to do this as much as we want."
The momentum has been achieved.
We have done this before, and we can carry out all of these new re-organizations in Turkey.
We both want it, and we can do it, because we have experience with it.
Both our business world knows it, and our government knows it, and it is the most natural thing for us to be with you
with this TTIP agreement; an we need to present the message that it is both an economically and geo-strategically important step.
Ok, the last 10 seconds; we have come to the end of our time.
Very nice messages have been presented, indeed; this personal project of yours actually shows
a project that Turkey needs to focus on very carefully, and where it actually needs to use the time very efficiently;
it is an opportunity that must not be missed - in fact I do not even want to call it a project -
this is a joint agreement, and it needs to benefit from this.
Absolutely.
If you have any other comments, let us add those as well,
and I would like to say that I am very proud and very happy that you gave this message in this way, and that I have been a part of this.
Thank you very much Melike, you're very kind.
There is only one thing I can add; and that is this:
in the near future - in the coming six to eight months, the policies of the American Central Bank will change,
and countries like Turkey, which have very high deficits are under a very great risk at the moment;
and most probably, the growth rates of Turkey will decrease.
The Turkish economy had already slowed down, but it will decrease.
Therefore, in order for Turkey to be able to draw foreign investment, it needs something like this trade agreement;
it needs great economic ideas such as being added on to TTIP.
Just as the customs union agreement at the end of the 1990s
was one of the most significant economic transformations of Turkey,
and I consider the new policies which came with the Erdoğan government as being the second big step;
and this one will be the third big step.
We need to be very careful; we need to be very determined,
and we need to approach it in an extremely clever and extremely friendly manner to our American and European friends;
and we need to explain the importance of this for them extremely effectively; and we need to do this
in the next 11 months.
Absolutely; thank you very much for this analysis on this subject.
Thank you.
And I would also like to thank you again for giving these messages to Turkey together on Bloomberg HT.
I am back to you again in Istanbul.