Impact of the free trade agreements on Turkey's foreign trade: A panel data analysis

Developing countries sign free trade agreements (FTA) in order to develop their foreign trade, to reach new markets, and to diversify their export structures. For these purposes, Turkey has signed FTAs with various countries from 1990s and has been planning to new FTAs for the future. In this study, it has been examined the impact of these FTAs on Turkey's foreign trade volume. In the study, the effect of FTAs which signed with 16 countries on Turkey's foreign trade has been analysed econometrically. Correlation between variables of Turkey's foreign trade, GDP, GDP per capita, exchange rate, distance, common frontier, common religion, and FTA has been estimated by pooled regression model. Data employed consists the period of 2000-2012 annually. Moreover, in the study, scope of analysis has been extended by including necessary variables in order to reveal the impact of 2008 crisis and that Turkey and the countries signing FTAs, which have common frontier and common religion with Turkey, on Turkey's foreign trade. Emprical analysis show that there is a significant relationship between Turkey's foreign trade and FTAs, which provide advantages i.e. bilateral tariff discount to the parties and also that FTAs increases Turkey's foreign trade volume. In this context, Turkey should activate current FTAs, try to complete FTAs which is on the process, and get started to the works for new FTAs with the countries which is not started this process yet, as soon as possible.