A Comparative study on international competitiveness: The Example of Turkey and EU countries

The purpose of this study is to determine the effect of price-based and non-price determinants on the international competitiveness of industries classified according to the SITC technology class in Turkey against EU countries during the period 1995-2021. In line with this aim, in the first stage of the study, export levels of industries with different technological intensities in Turkey compared to EU countries were determined using the Constant Market Share Analysis. Due to the variation in export performances across industries and countries, it was determined that a uniform inference could not be made for each industry and technological intensity included in the study. According to the findings obtained from the first stage: a) Changes in countries' competitiveness largely can be shaped according to country's export growth and changes in world trade volume. In addition to, world trade volume generally increases in products with high technological intensity. One way to gain trade surplus is to increase export market share in products with increasing demand worldwide. In the second stage of the study, intra-industry trade indices were obtained to determine the importance of quality differences in foreign trade between Turkey and EU countries. According to the intra-industry trade index findings obtained at different weighting levels: b) The majority of industries involved in Turkey's foreign trade take place in intra-industry trade form. According to the intra-industry trade index obtained by industries; a significant reason for conducting foreign trade within the same industry is based on quality differences. In addition to ensuring diversity in exported products, improving quality will provide a competitive advantage in international trade. In the final stage of the study, the effects of Turkey's and EU countries' export prices, intra-industry trade indices, and technological intensities on Turkey's international competitiveness were determined through static and dynamic panel data analyses. According to the findings obtained: c) While Turkey's export price increases Turkey's competitiveness, EU countries' export prices decrease it. However, the impact of Turkey's intra-industry trade value on Turkey's competitiveness is higher compared to export price. According to the economic findings of the study Foreign trade is happening in accordance with an imperfect competition market and the products involved in foreign trade are heterogeneous. It is observed that policies contributing to the development of non-price factors may be more effective in policies aimed at achieving trade surplus than policies based on price-based factors. The expansion of the scope of the Customs Union agreement existing in Turkey and EU countries may positively contribute to the quality and product differentiation of Turkey's export products. Increased welfare through value added from foreign trade in Turkey will be achieved by focusing on quality and high-tech products in export products.