French Breakdown in Turkish Market

Rising tension between France and Turkey unleash opportunities for exporters in other manufacuring countries.

For those who are distant to world politics: There’s a political dispute between France and Turkey that will most likely disrupt French exports to Turkey, creating a gap for manufacturers exporting the goods Turkey currently purchase from France. 

Ghosts of the Past

The bill is connected with some unsettled accounts of a bitter Armenian public in France requesting compensation for their losses in The Great War of 1914. Legitimacy of Armenian claims and the tasteless story behind them are subjects of another article. In this article we are interested with the commercial results of the dispute.

French President Sarkozy -in a desperate attempt to increase his votes for a second term- accepted the Armenian side of the story as truth and pushed a bill to the lower house of French parliament threatening anyone opposing Armenian claims with a 45.000 € fine and 1 year in jail. The proposal –exposing Turkish nationals to Armenian provocations in French territory- enraged Turkish Prime Minister Tayyip Erdogan to the point of announcing a boycott for French goods in Turkish market.

Prime minister’s announcement had no immediate effect and Turkish foreign policy makers were successful in silencing Mr. Erdogan with the hope that the bill will not be approved by French Senate. Erdogan did not press on too much in order to maintain his country’s mobility on the issue and is now waiting for the French Senate’s decision.

However latest polls in France reveal that Sarkozy’s attempt was successful in increasing his votes and French President will not draw his support from the bill, ensuring that it will pass the senate. When this happen, observers expect a strong boycott backed with a hate campaign in Turkey.

Turks in France attending a demonstration next to the National Assembly in Paris

The Potential
According to UN COMTRADE Database, Turkey imported 8.176.579.003 US $ worth of goods & services from France in the year 2010. Below is the breakdown of French exports to Turkey according to main product groups.

HS Code	Description	Trade Value
87	Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof	$1,639,116,818
84	Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof	$1,341,174,510
88	Aircraft, spacecraft, and parts thereof	$833,666,352
85	Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles	$642,324,312
72	Iron and steel	$603,867,144
	Other commodities	$3,243,122,184

Automotive

As it can clearly be seen Automobiles and Automobile parts takes the lead in French exports amounting 1,639,116,818 US$. Most of the parts go to French automotive giant Renault’s production plants in Turkey, being used in the production of Clio, Clio Grand Tour, Symbol and Fluence models of the brand and then exported again to different countries including France. The brand has strong presence and a long history in Turkey which renders it immune to the effects of a boycott. Two other French automotive brands in Turkey -Peugeot and Citroen- do not enjoy the same kind of immunity against such an action and may lose some market share in case of a strong boycott campaign against French goods. However automotive market in Turkey is pretty consolidated and the lost share of French brands will be quickly absorbed by other strong brands already operating in the country. We may say that opportunities revealed in automotive will be for companies that already have a presence in Turkish market.

Machinery

Another large portion where some opportunities lie is the Machinery chapter (HS 84). Apart from manufacturing machines which Turkey imports in huge amounts from Germany, France and Italy; this chapter also includes industrial furnaces, boilers, HVAC equipment and rollers. France is currently Turkey’s 4^th biggest supplier in this chapter. Importers of these products –Turkish Small to Medium Sized Enterprises- are the strongest supporters of the current government and will most likely give a full backing to a boycott against France. Therefore exporters may expect softer resistance in product groups forming this chapter. It may be a good time for machine manufacturers in developed countries to conduct some research on the structure of Turkish machinery imports and contact with trade development organizations in Turkey on the subject. TurkishMachine Exporters Association maybe a good place to start as most of their members also import the parts they use for production.

Aircraft

TurkishAirlines (THY) is a loyal customer of AIRBUS –French based aircraft producer. Airline recorded significant growth in year 2011 and plans to purchase 20 Airbus planes in year 2012 (14 A321-200 and 6 A319-100). It cannot be said that these orders will be cancelled and the government has no right to impose a ban on these purchases. However the airline announced that it will purchase 85 more planes in near term and it is safe to assume that a government supported boycott will improve the chances of suppliers like BOEING or even BOMBARDIER in the bids for the purchase of these planes.

Infrastructure Projects

French companies in Turkey are interested with large scale infrastructure projects. Especially nuclear power plants current government plan to erect. It may be said that French companies like Areva will have hard time in persuading Turkish authorities on the quality of their services, leaving the market to Russian, Japan and US contractors that are after these projects.

Environmental technologies especially water treatment are also considered to be as a main export chapter to Turkey. Canadian, British and US trade delegations to Turkey in recent years include at least one company which operates in this industry. MED-ALLIA Latest French trade event in Istanbul, included 8 companies operating in environmental technologies. Suppliers from other countries may be interested to contact Turkish municipalities that are buying these services and make their presentations once again as they will be more than eager to switch to suppliers from other countries.  

Construction contractors in Turkey are very closely related to municipalities and central government. After all, nearly all large scale projects are coming from these resources. They will be afraid to invoke any kind of negative attention onto them and will be among the first participants of a boycott. This will cause companies like Schneider Electric, Lafarge or Onduline to have a hard time in penetrating large scale projects in Turkey. This of course is an opportunity for their competitors.

Iron & Steel

Turkey is a net importer in Waste & Scrap Steel purchasing 7.100.000.000 US$ worth of waste steel in year 2011. An important amount of Iron & Steel imports from France includes steel waste. Average import price Turkey paid for this item is 450 US$ / Ton. France exported $603,867,144 US$ worth of iron& steel products to Turkey in 2010. Current import market in this item is dominated by EU countries including France but we may expect that Russian and Ukrainian suppliers will have less difficulty in approaching Turkish market in 2012.

FMCG

France’s famous Carrefour retail chain also operates in Turkey with 243 stores. A boycott will most probably shift an important part of their business to other retail chains in Turkey.

Cosmetics market in Turkey is dominated by French brands such as L’oreal. Versace, Yves Saint Laurent or Louis Vuitton are luxury brands highly sought by Turkish consumers. These are first castles to fall in a boycott campaign. However large marketing & advertisement budgets are necessary in order to snatch a market share from these high end brands. 

Before concluding this article it must be stated that Turkish Government has no official right to impose any ban on French goods according to EU regulations accepted by Turkey. Nevertheless, a boycott successfully held in 1998 against Italy with the initiative of trade unions & associations close to the government cost Italy 1.000.000.000 US$ worth of exports in 1999. Turkish Prime Minister’s announcements and expert opinions clearly show that a similar boycott campaign is on the way for French goods in Turkey and it will be tougher and longer than the one held against Italy. Lists of French brands and companies began to appear in different internet sites with calls for boycott. Boycott against Italy only lasted for one and a half month. A boycott against France will probably take more than a year even two years as it is for certain that France will not take back the law once it is accepted by its Senate.

Political situation may mean extra workload for diplomats and politicians but opportunities are also at bay for those who are sharp enough to see them.