Economic trade on the rise between Turkey and Israel

The frayed diplomatic relationship between Israel and Turkey does not seem to be damaging trade ties between the two Eastern Mediterranean states. But it does create a deepening public shadow.

Antagonistic government statements, currently the norm, provide glimpses into diplomatic crisis after diplomatic crisis. Yet shared commercial interests are creating a foundation upon which to build relationships between the two states.

Sponsored by Turkey’s Mediterranean Exporters Association (AKIB), a semi-government organization, the virtual trade mission is taking the place of a physical mission due to the coronavirus pandemic.

Israeli supermarket chains such Rami Levy and Baladi and food importer Neto Group, are among those holding virtual meetings with Turkish exporters. By the end of the virtual mission later this month, organizers expect some 50 one-on-one video meetings to take place.

“We are in the age of virtual meetings and business must go on,” Mehmet Ali Erkan, AKIB’s general secretary, told The Media Line. He noted that in a previous digital conference, organized by Ankara’s consulate in Israel, “We introduced a major supermarket to a grain company producing some macaroni and grain products.”

Historically, Israel runs a trade deficit with Turkey, except for 2013 and 2014 when the Jewish state had small trade surpluses. Since then, the value of Turkish exports has been more than twice that of its imports from Israel.

In 2019, Israel’s exports to Turkey were led by chemical products with almost a 50% share, followed by plastics (12%) and fuel (9%), the Israel Export Institute’s figures show.

Imports from Turkey were more varied, with no one sector dominating. Israel’s largest imports from Turkey by sector were vehicles (18%) and iron and steel (16%), followed by plastics (7%), machinery (6%) and cement (5%).

Bilateral trade in 2018 reached $6.2 billion before dropping to $5.5 billion in 2019, according to figures from the Geneva-based International Trade Centre, a joint United Nations and World Trade Organization agency.

This makes Turkey Israel’s sixth-largest trade partner, notes Menashe Carmon, a former longtime chairman of the Israel-Turkey Business Council and owner of an import-export business.

Carmon is convinced that businesses in Israel and Turkey complement each other and offer a large potential for trade. The current commerce between the countries represents between 2% and 3% of Israel’s total trade, he says.

“The potential is real. The two countries are near each other, have convenient pricing, enable quick product delivery and provide good quality goods,” Carmon told The Media Line. Yet for him, not enough is being done.

“Israel is not developing its trade value with Turkey. We could be sending sophisticated goods like software, medical devices and agriculture. The potential is there. Turkey should account for 10 to 15% of Israel’s total trade volume,” he exclaims.
The problem is political friction between the governments, not the businesspeople, states Carmon.

“Sure, commerce between the two countries is accepted,” he told The Media Line laconically. However, several geopolitical crises and their ramifications threaten the situation.

“Both countries have used these for domestic political purposes. This has gone on for too long. In the past, a crisis had a beginning and an end. I don’t see an end,” he says.

Lamenting the situation, Carmon told The Media Line, “For many in Israel, Turkey is no longer a potential business partner, and vice versa.”

Echoing these comments, Dr. Hay Eytan Cohen Yanarocak, an expert on contemporary Turkey at Tel Aviv University’s Moshe Dayan Center for Middle Eastern and African Studies, tells The Media Line that Turkish-Israeli political relations are at a low point.
“Flags wave in the respective embassies. It is a sign of existence [of diplomatic relations], but not much else,” the Turkish-born academic remarked.

According to him, because US-Turkish relations are in a bad state, and because Israel is seen as an extension of the United States in the Middle East, he does not see any improvement in Israeli-Turkish political relations in the near future.

Erkan views these difficulties a bit differently. His colleagues in southern Turkey conduct business around the region, including in war-torn Iraq and Syria. His work with them to develop business in war zones that lack a functioning economic infrastructure allows him to see doing business with Israel in a different light.

“Well, we are living in a difficult region, so we will face these ups and downs. That is one of the reasons why we are trying to carry out all these trade missions, so we can create some common interest between people so we don’t have to fight some silly stuff,” he told The Media Line.

As for Israel and Turkey’s cold diplomatic relationship, Erkan told The Media Line, “Israel has always been a good market for us. Even with the political troubles, business is running. Business hasn’t been affected.”

Echoing Erkan’s optimistic outlook, Adiv Baruch, chairman of the Israel Export Institute, is upbeat.

“Turkey is a country whose diplomatic relationship with Israel is completely disconnected from its economic relationship. Trade is stable and active. We have $5 billion in bilateral trade,” he told The Media Line.

As a veteran entrepreneur, Baruch sees opportunities where others see difficulties.

“We have an opportunity for economic and business communities to create an economy of peace,” Baruch notes. “We have created an export infrastructure around the world to generate platforms for bilateral trade without governmental involvement.

“Turkey is a great example. Business leaders build trust and understand the added value from this business structure. We continue to generate business despite lacking diplomatic backing,” Baruch states.

However, 2020 may not be the year that this bears fruit.

Says Baruch, “The COVID-19 pandemic is slowing trade. There is a correlation between global trade and Israeli exports. We expect global trade to slow down by 10-15%, particularly as each country looks to its own local suppliers to provide goods during the coronavirus pandemic. We expect that Israeli exports will also slow down by 10-15% in 2020.”

The pandemic hit the chemicals sector harshly. Price levels decreased, leading to a drop in revenues. Erkan told The Media Line, “It has nothing to do with Israel or with Turkey; it is all over the world.”

Still, he remains upbeat. Despite a large drop in exports from March through May due to the pandemic, sales in June through September have more than compensated for the earlier fall in the sector’s sales.

“Turkey’s exports to Israel seem not to have been affected by the pandemic. During the first nine months of 2020, Turkey’s exports to Israel amounted to $3.2 billion, almost the same as last year’s export volume in the same period,” he says.
As for Turkish food and beverage exporters to Israel, sales are up.

For the first nine months of 2020, dried fruit sales increased by 64% over the same period in 2019, whereas fisheries products grew by more than 36% and cereals and legumes jumped by almost 18%. Even fruit and vegetable exports rose by over 25%.
Erkan told The Media Line, “This is the first time ASHIB is organizing a virtual trade mission and they decided to start with Israel. It shows the importance attached to the Israeli market.

“Another virtual trade mission, in the furniture industry, is expected to take place in November,” he adds.

“Meetings are held online and for the participants, it is quite a new experience. We do not know how long the pandemic will last, but both Turkish and Israeli businesspeople seem to adjust quite fast to the new business order,” Erkan says.
Can politicians do the same? That remains an open question.

Arab Observer