COUNTDOWN - CNBC-E / November 4, 2004

Host: We will talk with Mr. Adnan Nas, the Chairman of the Turkish-American Business Association about the expectations in relation to the Turkish-American economic and trade relations during the second Bush rule. Good morning, Mr. Adnan, welcome to our program.

Adnan Nas: Good morning.

Host: We will talk about the expectations between two countries in relation to economic and trade relations during the new rule. Your forecasts here will be significant for us. First of all we would like to get a general evaluation from you on the subject matter. How will the second ruling of Bush be? In particular, what are your expectations regarding certain issues related to Turkey?

Adnan Nas: Now let's start with Turkey. We all look at ourselves before anything else. For Turkey, whomever out of the president candidates wins the elections will not cause any immediate impact on Turkey. As a matter of fact, the regional foreign policy in the USA is set by a coalition of definite powers. It does not only depend on the president himself. There will be some differences in terms of details or style that may arise in the medium term. For this reason, the only thing that makes a difference for Turkey when Bush was selected is that we know about Bush's policies and this is the case for the large portion of the USA. Because these known policies will remain applicable, I may give it as a positive factor: There is not any factor of uncertainty in the short term.

Host: If Kerry is elected as the president, there would be more uncertainties.

Adnan Nas: Of course. First you know that he would take up his office by the end of January.  On the one hand, Bush would remain in the office as the former president until the end of January and on the other hand, there would be another question on everyone's mind about the things the new president would do. Now this factor of uncertainty is eliminated. This was also applicable to Turkey. Also there is a plus point for Turkey: The fact that Mr. Kerry signaled off that he would pursue largely different policies even for the sake of winning more votes; the fact that, though he never clearly uttered that he would withdraw from Iraq, he would consult more with Europe almost hinted about some changes that would yield risk in terms of Turkish interests in Iraq and in the region. In this respect, probably in the short term, Bush promises a more soothing short-term future because he is at least known. On the other hand, if we go back to your first question, presidents are more likely to pursue softer policies during their second term in a different way when compared to the first one. The reason is the fact that there is no third term. As the word goes, the time for playing for the audience is over. Therefore, they have now the chance to pursue more realistic policies by making use of feedback they have received during the first term. As a matter of fact, Bush probably signaled off such a tendency during his first speech yesterday. He hinted to the word that he would pursue a more transparent policy during which he will be open to more dialogue. In this sense, a dose of optimism may be expected. This is the positive side.

Host: Let's remind us of some economic and trade relations between America and Turkey. In 1995, America declared Turkey as one of the ten largest markets in the world. However, there was no much development expected in the trade relations in spite of this fact. The Turkey-USA Economic Partnership Commission was set up in 2002 and even this failed to boost the strategic partnership to the expected level in terms of economic relations between the two countries. Again during the same period, certain efforts took a start for forming High Quality Industrial Zones which allow for the duty-free export of some products to America. Meanwhile, let's look at the trade volume and trade figures we have with America, and let me tell you about them. The export in 2003 was 3.8 billion dollars while the imports are around 3.5 billion dollars. Total trade volume has exceeded 7.3 billion dollars. During the initial nine months of 2004, the exports reached 3.6 million dollars while the imports reached 3.6 million dollars. Total trade volume was 7.2 billion dollars. I reported on these figures and made people remember these things. Mr. Adnan, before I ask you about the details in relation to these figures, what is your expectations regarding the economy management during the four years? Let us have your thoughts in this respect.

Adnan Nas: Let's start about the economy of America in near future. If you give me a minute, I will give you some indicators about America.

Host: Yes, please.

Adnan Nas: The inflation rate in America has risen from 1.8 to 2.4 in 2004 during the two-years term. The inflation expected for 2005 is around 2.6. These figures are really insignificant for us but this means a serious increase for America. This also has a positive aspect on growth. The growth has increased from 3% to 4% in 2003. It is expected that the growth will slow down a little bit in 2005 but it will not go below 3.5% which is not so bad if you think about it. The unemployment was at a serious level; it was around 6% and it is expected that it will go down to 5.5% in terms of the end of this year. They project to pull it down to 5.4%. They are not very dramatic falls but these still signify huge problems. The current deficit will remain at the same level. They will try to pull down the budget deficit to 4.5% while it currently hovers around 5%. Now America is a country that sustains twin deficits. The twin-deficit concept is very problematic in our country but it is not a big problem in a country as big as America. Why? Because it imports with its own funds. It is a big advantage that the dollar is an international currency. The main problem in America seems to be unemployment. They have already maintained a good trend in growth. There is a non-inflationist growth. How do they achieve a non-inflationist growth? When you look at its roots, its reasons, one can see a model much largely based on outsourcing, but which largely depends on consumption. America mostly pulls it off with a chain of production outsourced to cheap countries to a large extent so as to make production cheaper. Therefore, the economic growth is up but we cannot see its effects on employment. Bush will have to struggle a little bit at that point. As far as I know, they have not disclosed a specific policy in this respect. Another problem of the America's economic policy is the low interest rates. Low interest rates boost the exports on the one hand; but it is also controversial as to how to sustain the low interest rates. This is largely determined by the FED. The FED has already said that it would go for an interest raising policy, even though it will be gradually. But how much gradual or aggressive this increase will be depends on oil prices and the China factor as well as on whether or not this growth is inflationist or not.

Host: Mr. Adnan, we heard your political thoughts in general terms. Then we briefly talked about Bush's economic policies during the last four years, and the expectations in the near future. If you wish, now let's put Turkey in focus in relation to the expectations. What do you see in the horizon in particular about the trade relations with Turkey within the frame of these generally expected policies of America? What are your expectations?

Adnan Nas: You know there was much talk on this subject. The strategic partnership with America is a little bit exaggerated. We have always been their ally in military terms but strategic partnership is a different thing. As a matter of fact, the fact that while the American investments in the world reach 3 trillion dollars on a global scale, its investments in our country correspond only to one thousandth of that figure speaks for itself. This simply shows that the strategic partnership is not significant in commercial terms. There is a favorable development recently. Our foreign trade volume which is equal to 6 billion dollars per year has exceeded 7 billion dollars as you can see from the figure you have just told us. It is well on its way towards 8 billion dollars. In fact, these figures are still very small in potential terms because if we are boasting to be among the ten emerging countries, then why does this not find its way through actual figures? According to me, the duties are rather on our shoulders in this respect. Our strategic shortfall in general terms also shows itself here, too. As is the case virtually with every area, we have to focus on relations with America and trade very strategically. We have to look at it more analytically. Where do the things go wrong? What can we do at what point? We have to take our stand. We had undergone a crisis period in political terms following the March 1 note and that vacuum is still in its place because have not determined our common areas of strategic interest. Meanwhile, there is the talk about the European Union. We are in an era where the policies are re-shaped. This is also applicable for the economy. For instance, Qualified Industrial Zones. We have displayed an approach with a psychology of a poor brother expecting help from the rich elder brother. We have to be more strategic. When we suggest one thing, this should mean something for the other party. We will be able to put on the agenda the Qualified Industrial Zones with a new angle. I think that we will be able to find out a new way that will yield added value for Turkey and will impose flexibility for the policies of Turkey in the Middle East as well as in the tensions in the Middle East. We have to add  more detail and we have to focus more on working out right combinations towards more value added, more hi-tech products on the product basis.  The 2005 quotas are on the agenda. They say that there is a probability that it may go beyond 2006, rather 2007. For this reason, we should refrain ourselves from focusing more on the quota issue. We have to ensure that going beyond the quotas, the Turkish and American societies and businessmen should know each other. We have always assumed that the relations at governmental level would suffice.

Host: We have one more minute, Mr. Adnan. What do you have in your future plans as an association?

Adnan Nas: There is an issue which we deem to be very important. We think that the nature of the trade is somehow different from that of politics to a large extent. You cannot better the politics with trade. In trade relations the parties should first make a profit and should know each other. For this reason, we have analyzed and are still analyzing why Turkish companies focusing on that approach fail to cooperate with all foreign companies, particularly with American ones. We made some diagnoses. We will carry out our guiding duty in order to make Turkish companies more adaptable and harmonized to international cooperation in terms of specific standards. We will schedule out very serious programs with other non-governmental organizations and state bodies, particularly, with the Union of Chambers. We will hold workshops. We have a very important training tasks. We will make the American side come together with Turkish side on more economic platforms. We will carry out our efforts not only at the level of general committees and wishes but also at the level of those businessmen who are not afraid of assuming risks. We will reinforce our such efforts with social and cultural aspect. But the American society and private sector should know the Turkish society and private sector more closely. This is where what we have fallen short so far.

Host: Thank you for your attendance and your thoughts about your future projects as an Association which you have shared with us. Mr. Adnan Nas, the Chairman of Turkish-American Business Association was our guest.