The close economic relations between Turkey and Germany are on solid foundations and have continued to thrive regardless of the political issues between the two countries. Along with the rapid increase in European trade with the East since the second half of the 19th century, Turkish-German trade has also grown significantly. Mutual German-Turkish interests in the construction of the Baghdad railway from the Haydarpaşa district of Istanbul and the last German kaiser (emperor) and king of Prussia, William II’s visit to Istanbul in 1898 played an important role in the expansion of bilateral economic relations. In memory of this visit, William II offered a fountain to the Sultan and to Istanbul. The fountain, known as the German fountain and located in front of the tomb of Sultan Ahmed I in Sultanahmet Square in Istanbul today, was made in Germany and then brought to Istanbul.
With the acceptance by the Ottoman Empire of two German sea cruisers under its protection in 1914, the Ottoman Empire entered World War I alongside Germany and Austria-Hungary, and this union strengthened the links between the two states. So much so that the defeat of the Ottoman Empire was attributed to the defeat of Germany.
As Germany tried to recover after World War I, Adolf Hitler appeared on the political scene and in 1933 the National Socialist dictatorship was introduced in the country. Many German academics fled to Turkey to survive, which strengthened the ties between the two countries in science and economics.
Historicity and strategy
Another cornerstone of economic relations between Turkey and Germany is Turkey’s request for partnership in 1959 to the European Economic Community (EEC), of which Germany is one of the six founding members.
This treaty, also known as the Ankara Agreement, also forms the legal basis for relations between Turkey and the European Union. The agreement is designed as a partnership agreement that will be valid until Turkey’s conditions for membership of the EEC are met. However, trade relations between Turkey and Germany continued to improve, given Turkey’s compliance with the EEC. A labor transfer agreement was signed between the two countries on October 30, 1961, in response to job demands from Germany, which had launched the recovery initiatives after World War II. Hundreds of thousands of Turks who went to Germany as “guest workers” settled in the country over time, established their own businesses and eventually provided employment opportunities. These companies make a significant contribution to economic growth and create jobs for hundreds of thousands of people in Germany.
With the reunification of Germany at the end of the Cold War, relations with Turkey evolved into a different dimension. Parties that have developed a culture of cooperation in the military, economic and security fields through NATO, the EU Free Trade Agreement and the Organization for Security and Cooperation in Europe (OSCE), respectively, now favor joint ventures in different sectors. Tourism is another important dimension of economic relations between the two countries. In 2020, around 70% fewer tourists visited Turkey due to the effects of the global pandemic. However, in 2019, German tourists were the third largest group visiting Turkey, accounting for 1.1 million people. Thanks to these historical and economic ties, Turkey and Germany – as two important partners – play an important role in the region. These historic economic ties inspire cooperation.
Over 74,000 foreign companies from 182 countries operate in Turkey, and the country has the largest manufacturing industry in West Asia. It has become a production hub for the region with its export capacity, its production and adaptation potential, and carries out most of its trade with Western Europe.
Germany, France and Italy rank first in foreign trade, while the Netherlands, Austria and United Kingdom rank first in domestic investment in Turkey. The Netherlands has the highest stock of foreign direct investment in Turkey, while Germany ranks fifth with $ 14.5 billion (TL 140.73 billion). Turkey, on the other hand, has an investment stock of $ 2.7 billion in Germany. While Berlin has invested in the manufacturing, energy and financial sectors, Ankara’s investments are concentrated in industry. However, over 80,000 Turkish-born entrepreneurs in Germany form an economy worth over $ 52 billion. In Turkey, more than 7,200 German companies represent almost 10% of the total of foreign companies. With a similar share in Turkey’s total foreign investment stock, Germany appears willing to increase its investment in green energy. Likewise, Ankara is also turning to renewable energies in its investments in the energy sector. The fact that the two countries consider the green economy to be important indicates a possibility of cooperation in the current sector.
The importance of investments between the two countries is closely linked to the process of expanding foreign trade relations. With Germany’s requirements for product supply chain, cost advantages and transportation infrastructure, Turkey accounts for exports worth $ 7.5 billion from the country. While Germany’s investments in Turkey offer employment opportunities to more than 70,000 people. In addition, Turkey, which is one of the major holiday destinations for German tourists, welcomes millions of tourists. The scope of the investment relationship is not limited to the two countries only. The Ankara and Berlin administrations are also leading collaborations on investments in other countries.
Especially in Africa, economic cooperation can further contribute to the development of the continent. In the region, Turkey and Germany have investment stocks of $ 8 billion and $ 13 billion, respectively. Investments in Africa, which are at a low level compared to other countries, can help bring bilateral cooperation to the international level. Medium- and long-term projects, investments and aid involving all parties can significantly contribute to achieving the external balance desired by the continent.
Foreign trade course
In 2020, Turkish exports to Germany totaled $ 14.85 billion, making Germany the country’s top export destination. Exported products are listed as textiles ($ 3.15 billion), vehicles and parts ($ 2.38 billion), machinery and boilers ($ 2.21 billion), iron and steel ($ 719 million) and others. Turkish imports from Germany amount to $ 20.64 billion, and it is Berlin’s second largest import partner. Imported products are machinery and boilers ($ 4 billion), vehicles and parts ($ 3.93 billion), machinery and electrical equipment ($ 1.82 billion), plastics and products (1, $ 41 billion), etc. Compared to previous years, we can see that foreign trade has reached a more balanced structure but has not yet reached the desired level.
What it should look like
Despite the political differences, it is reasonable to conclude that economic relations have continued to develop and have become an important factor between the two countries. In particular, all parties are negotiating and open to cooperation in areas such as controlling refugee flows and maintaining stability in West Asia.
As with investments, Turkey’s expansion of foreign trade with Germany and its approach with a new concept, despite the shortcomings of the customs union, would help balance. Foreign investments and projects, constituting another pillar of Turkish-German cooperation, occupy an important place. The Turkish-German partnership could reveal a new approach, especially in regions like Latin America and Africa.
Foreign investments and projects, which are another pillar of Turkish-German cooperation, occupy an important place. Particularly in regions such as Latin America and Africa, the Turkish-German partnership can bring new opportunities and approaches. For Turkey, Latin America is an untapped region in terms of foreign trade, investment and opportunities. On the other hand, due to its population and economic potential, Germany has been active in the region for many years. Turkey’s position in Africa and West Asia also offers opportunities for German-Turkish joint ventures in this regard.
The two countries have extensive experience in carrying out joint ventures. The joint presence of Turkish-German companies in Turkey and Germany and the creation of jobs reflect this experience. Considering German investments in Turkey, it is not difficult to expand cooperation in different areas. The dialogue between the parties, especially on refugees, opens up opportunities for cooperation. The experience of development initiatives in Germany and Turkey can also lead to historical processes in underdeveloped and developing regions. As a result, Turkish-German cooperation can bring many opportunities to regions such as West Asia, Africa and Latin America. In addition, common foreign trade, investments, projects and initiatives show the existence of the current cooperation infrastructure.
* Editor-in-chief at TRT Deutsch
** Researcher at the Foundation for Political, Economic and Social Research (SETA)