The possible effect of transatlantic trade and investment partnership agreement on Turkey's foreign trade: A counter-factual analysis

The 2008 global crisis has caused long-term economic losses in EU countries, especially in the USA. These negative developments have brought forward the necessity of a comprehensive trade agreement between the USA and the EU. If this agreement, planned under the name of Transatlantic Trade and Investment Partnership (TTIP), is signed, it will be the largest and most comprehensive bilateral trade agreement ever accepted and the common market to be created by the agreement will cover one third of the world trade. It is estimated that TTIP will have significant impacts not only on the USA and EU, which are parties to the agreement, but also on the economies of third countries with the income/substitution and value chain effects it will create. In this study, under the assumption that the TTIP agreement has entered into force, the potential effects on Turkey's industry and sub-industry based foreign trade are examined. The effects of TTIP are determined by using the panel data set that covers the years 2000-2016 of 52 countries and structural gravity models are estimated to allow counterfactual analysis. Empirical findings suggest that there may be a fall in foreign trade of Turkey with USA, the EU and the third group countries in majority of the sub-industries. However, the fall in trade experienced with the US and the EU might be at lower levels compared to the fall that will be experienced with the by third countries. In addition, other findings point to an increase in intra-industry trade with the EU and the USA.