Abstract:

The purpose of this paper is to analyse the competitive performance of the Turkish Manufacturing Sector after the Custom Union Agreement with the EU and to determine whether or not the pattern of comparative advantage for Turkey has undergone a structural shift over the period 1996-2006. Then we examine if Turkey’s pattern of comparative advantage is related with industry-level productivity differentials or with differences in factor endowments. The manufacturing sector was chosen because the Custom Union covers all industrial goods but does not address agricultural products (except processed agricultural products), service or public procurement. The Revealed Comparative Advantages (RCA) index and Vollrath’s competitiveness indices are used to identify whether or not Turkey has a comparative advantage in any particular product group. In the calculating of these indices, the manufacturing industry is divided into four groups according to intensity of technology: high-tech industries, medium-to-high-tech industries, medium-to-low-tech industries and low-tech industries. It is known that a Custom Union can, in theory, have significant dynamic effects, such as increased competition, stimulation of technical change and investment. There are a number of studies where RCA has been used to investigate the competitiveness of Turkish exports. This study differs from others in terms of the classification of manufacturing sectors according to their technological characteristics. In the 20th century, technological change became recognized as the most important source of economic growth. According to RCA and Vollrath’s indices, Turkey has a comparative advantage in a few low-tech and medium-to-low-tech industries while it has a comparative disadvantage in high-technological products againstEU. Therefore, we can say that the Custom Union has not played an important role in effecting changes in trade patterns and comparative advantages in the Turkish manufacturing sector.

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