Turkey’s Leading Defense & Aerospace Technology Partner: The United Kingdom
Even though experienced a 9.9% shrunk in its economy in 2020 due to the economic fallout of the COVID-19 Coronavirus pandemic, the United Kingdom (UK) still has the 5th largest economy in the world (with £1.96 Trillion GDP, based on 2020 figures) and is a very important trade partner for Turkey. The UK is also playing a critical role in Turkey’s economy. Turkey and the UK have a trade partnership dating back centuries. In 1581, the Ottoman Empire granted the first preferential agreements, known as capitulations, to English traders. The bilateral trade volume between the countries is in favour of Turkey as Turkey has been achieving surplus in its foreign trade activities to the United Kingdom since 2001. According to 2019 data, the UK ranks 2nd among the list of countries, which Turkey exports the most goods to, and 9th in the list of countries from which Turkey imports the most from. According to data released recently by the UK Department for International Trade the value of total bilateral trade in goods and services between Turkey and the UK stand at £19.4 Billion (value of exports was £7.8 Billion and value of imports was £11.6 Billion, the value of trade volume between the UK and Turkey in 2019 was previously disclosed as £18.6 Billion by the UK Government) in 2019, which made the United Kingdom, Turkey’s second commercial partner with the highest export volume after Germany. The main products, which Turkey exports to UK, are gold, textiles, garments, electrical and non-electrical machinery, motor vehicles and parts, iron and steel products, insulated wires, cables and other electric conductors. The main imports from the UK are diesel and semi-diesel engines, automobiles, tramp iron/steel and their ignores, medicinal and pharmaceutical products to be used in treatments and protection. Ranked as the 5th biggest foreign investor inside Turkey, the UK is also one of the countries with one of the most investments in Turkey. Today more than 3.000 British companies operating in Turkey, including giants such as Unilever, Shell, BP, Vodafone, HSBC, Airbus Defense & Space (ADS), BAE Systems, Caterpillar Defense UK (CAT UK), Inmarsat, Leonardo UK, Rolls Royce and Thales UK. Some 7.600 British firms export to Turkey. The total amount of direct investments from UK to Turkey during 2002-2019 was US$11.120 Billion and during the same period Turkish investments in the UK was US$2.969 Billion.
While Turkey has been constantly increased its exports to the UK during 2009 – 2016 (from US$5.9 Billion to US$11.69 Billion), according to data released recently by the UK Department for International Trade and Turkish Ministry of Commerce the bilateral trade between the two countries has been affected by the COVID-19 pandemic and the associated lockdown measures globally during 2020 and thus experienced a decrease of some 22% or £4.3 Billion compared to 2019. But trade between the two countries has entered a recovery trend again during the first half of 2021. According to 2020 data, the UK ranks 4th among the list of countries, which Turkey exports the most goods to, and ranks 11th among the countries that Turkey imports. According UK Department for International Trade data the value of total bilateral trade in goods and services between Turkey and the UK stand at £15.1 Billion (value of exports was £6.0 Billion and value of imports was £9.1 Billion) and trade gap weigh against UK was approximately £3.1 Billion) in 2020.
According to Trade & Investment Factsheets document released by the UK Department for International Trade on July 30, 2021 and covers trade data realized between April 2020 and March 2021, total trade in goods and services (exports plus imports) between the UK and Turkey was £14.7 Billion in the four quarters to the end of Q1 2021, which represents a decrease of 24.4% or £4.7 Billion from the four quarters to the end of Q1 2020. Of this £14.7 Billion: Total UK exports to Turkey amounted to £5.6 Billion in the four quarters to the end of Q1 2021 (represents a decrease of 31.2% or £2.6 Billion compared to the four quarters to the end of Q1 2020) and total UK imports from Turkey amounted to £9.0 Billion in the four quarters to the end of Q1 2021 (a decrease of 19.5% or £2.2 billion compared to the four quarters to the end of Q1 2020). According to this document Turkey was the UK’s 18th largest trading partner in the four quarters to the end of Q1 2021 accounting for 1.3% of total UK trade. Meanwhile, according to the June 2021 Foreign Trade, Trade, Tradesmen and Cooperative Data shared by the Turkish Ministry of Commerce on July 2, 2021, the top 3 export countries for Turkish export products/top 3 countries who imported from Turkey in June 2021 are; Germany (US$1.704 Billion), USA (US$1.346 Billion) and the UK (US$1.268 Billion, represents a 25.36% increase compared to June 2020). According to data shared by the Turkish Ministry of Commerce during January 1st – June 30th of 2021 Turkey exported products with a total value of US$6.251 Billion (represents a increase of 40.31% or US$1.796 Billion compared to the same period of 2020) to the UK? However according to Turkish Ministry of Commerce data while the share of exports to the UK in overall exports was 7.5% in June 2020, it decreased to 6.4% in June 2021.
According to the data provided by the Turkish Exporters Assembly (TIM), Turkey’s exports to the UK during January 1st – July 31st of 2021 were valued at US$6.956 Billion, up by 36.5% or US$1.859 Billion from the same period in 2020. Turkish defense and aerospace exports to the UK is also in upward trend compared to 2020. According to TIM’s data, Turkey exported US$64.069 Million worth of defense and aerospace equipment to the UK in 2016, around $48.537 Million in 2017 (24% decrease from 2016), US$53.299 in 2018 (represents 9.81% increase from 2017), around US$60.604 Million in 2019 and around US$41.405 Million in 2020 (31.7% down from 2019). Turkish Defense and Aerospace Industry has managed to increase its exports with considerable figures during the first seven months of 2021. According to figures disclosed by the Turkish Exporters Assembly (TIM) on July 2, 2021 with a total of around US$25.337 Million (represents a 15.3% increase compared to the same period of 2020) in purchases, the UK ranked 9th largest recipient/importer of the Turkish Defense & Aerospace Industry during January 1st – July 31st of 2021. With US$21.486 Million UK ranked 7th in the list of the top 15 countries that imported defense and aerospace products from Turkey during January 1st – June 30th of 2021. The Turkish Defense & Aerospace Industry’s share in the country’s total exports during January 1st – July 31st of 2021 was 1.3%. According to TIM data, the Turkish Defense and Aerospace Industry realized US$$166.997 Million in defense and aerospace equipment exports in January, US$233.225 Million in February, US$$246.973 Million in March, US$302.516 Million in April, US$170.346 Million in May, US$221.750 Million in June and US$231.066 Million (represents 65.7% increase compared to July 2020 and 4.18% increase compared to previous month) in July, 2021.
Brexit & FTA
It is envisaged that creating fresh opportunities for both the UK and Turkey, the Brexit (UK’s withdrawal from the European Union) shall play a catalyst role in establishing stronger ties between Turkey and the UK and to boost Turkey-UK strategic partnership. During post-Brexit period, Turkey could become an even more strategic and economically important ally for the UK. The UK signed it’s first trade agreement (also the fifth-biggest free trade agreement the UK has negotiated after deals with Japan, Canada, Switzerland and Norway) with Turkey in December 2020. The Free Trade Agreement (FTA) that was signed between Turkey and the UK on December 29, 2020, prior to the UK’s formal withdrawal from the EU, is expected to constitute a basis for more comprehensive commercial and economic ties to be established between the two countries in the coming period and will form the backbone of the special relationship to be established between the two countries. Entered into force on January 1, 2021 the FTA covers all industrial goods and processed agricultural products. Important for both the UK and Turkey commercially and politically the FTA benefits their trade ties as it eliminates tariffs on exports and therefore prevents financial losses on them. Which means the imports and exports of specified products will not face any additional taxes. Therefore, Turkish exporters will not be financially burdened by Brexit and free trade between the two countries will be protected against all odds. According to Turkey's Former Trade Minister Ruhsar PEKCAN, without FTA, about 75% of Turkish exports to the UK would be subject to tariffs, causing the loss of about US$2.4 Billion (£1.78 Billion). Around 98% of the trade between Turkey and the UK was tariff-free under EU-Turkey Customs Union agreement signed by Turkey in 1995.
Cooperation in Defense & Aerospace Sector During Post-Brexit Period
Establishment of a fruitful and long – lasting cooperation between Turkey and the UK Defense Industries is being aimed and activities in various levels have been conducted by the authorities of two countries since 2009 for creating the environment and basis this goal. Signed during the then Prime Minister David CAMERON’s visit to Turkey in July 2010 the “2010 Strategic Partnership Document”, which sets the road map of a wide range of concrete areas of cooperation between the UK and Turkey to strengthen their partnership, has played an important role in increasing bilateral trade and investments and strengthening cooperation in various fields, including defense and security. Following the Strategic Partnership Agreement, the UK MoD increased its cooperation with Turkey through regular dialogues and technology exchange in defense and security sectors as well. Meanwhile, Turkey and the UK signed a Military Co-operation Treaty on November 23, 2011 and Security Agreement on February 25, 2016 for the further development of the mutual partnership in military and defense industry fields.
The two countries have developed strong relations in the last decade and starting from 2016 the bilateral relations between Turkey and the UK have been dragged into the strategic ground.
The outset of industrial collaboration between two NATO allies is an important component of the bilateral relationship and there is strong cooperation between Turkey and the UK, which are now both non-EU NATO nations, in the defense industry. Both the UK and Turkey see defense corporation and defense industry sector collaboration as important components of their bilateral relationship. The UK seems very committed to working together with Turkey in the defense sector to pursue collaboration between the industrial sectors of both countries. the defense and aerospace sector has been an important sector for the two countries and cooperation in this field between Turkey and the UK is believed to gain more importance and to further evolve during post-Brexit period.
The deep-rooted ties between Turkey and the UK are based on shared values and have continuously been improving through high-profile state visits and communications. In this context, on February 17, 2021 Minister of National Defense (MoND) of Turkey Hulusi AKAR and the UK Defense Secretary Ben WALLACE exchanged views on bilateral and regional defense and security relations, in addition to cooperation in the defense industry during their spoke over the phone. Within the scope of his two-day official visit to the UK in April 2021 to reaffirm the existing close cooperation between the two NATO Allies on defense and security, Turkish MoND AKAR was hosted by Defense Secretary Ben WALLACE on April 9th on board the UK’s aircraft carrier HMS Prince of Wales, docked at Her Majesty’s Naval Base Portsmouth. On board the aircraft carrier, Defense Secretary WALLACE was able to showcase the significant maritime capabilities the UK can offer to Turkey and both Defense Ministers took part in a roundtable with representatives from the UK Defense Industry. During this two-day visit Turkish and the UK Defense Ministers held fruitful discussions on how the two nations can build on their strong defense relationship in a range of areas – from NATO exercises and operations to industry co-operation and took the opportunity to discuss how the UK and Turkey could work together and with international partners to support regional security. On June 11, 2021 Turkish MoND AKAR, his UK counterpart WALLACE and Italian counterpart Lorenzo GUERINI met on Italy’s Sicily Island ahead of June 14th NATO Summit. During the tripartite talks, which took place on the HMS Queen Elizabeth aircraft carrier anchored in the Port of Augusta, Ministers AKAR, WALLACE and GUERINI discussed relations in the fields of defense and security and regional issues. Themes discussed by the Defense Ministers included the Enlarged Mediterranean and Libya. Cooperation between Italy, the UK and Turkey is essential for maritime security and stability in the Mediterranean area.
Conclusion
As the main gateway and port connecting Europe to Asia and Africa, Turkey stands out as a good candidate for the UK to cooperate not only in industry but also in defense, aerospace and security fields. Turkish and the UK defense industry companies are able to benefit from the export opportunities with the strong partnerships that will be built between the industries of the two countries and the governmental support to be provided. It should not be noted that working with the Turkish Industry would serve to the advantage of both countries and that it would provide crucial opportunities to the defense industries of the countries both in the UK and in Turkey in addition to the other markets
