Turkey - Italy Economic Relations In a Nutshell
Relations of Turkey and Italy date back to the times of the Ottoman Empire that had close relationships with Italian city-states such as Genoa and Venice. Today, Turkey and Italy are two strategic partners with shared history and values in the Mediterranean region.
Turkey and Italy have enjoyed solid commercial and political relations by now, and further developments are likely to take place in every aspect of relations between Turkey and Italy considering the increasing level of trade between countries, considerable growth in tourism, and a significant number of bilateral and multilateral contracts entered by and between countries.
Italy is currently Turkey's 4th partner in the volume of trade. Main trade areas between countries include energy, defense industry, tourism, infrastructure, automotive, and chemicals. Total trade volume between Turkey and Italy reached 20.8 billion USD in 2018, 10.2 billion USD of which corresponds to exports from Italy to Turkey and 10.6 billion USD of which constitutes exports from Turkey to Italy (1) The main items of Turkey's exports to Italy consist of passenger motor vehicles, motor vehicles for good transport, fresh or dried fruits. In contrast, the primary items of Turkey's imports from Italy are parts and accessories for motor vehicles, petroleum oils, yachts, and other vessels.
Moreover, Italian companies have had a strong presence in Turkey with their number exceeding 1.500 as of 2020, and have been successfully contributing to the significant energy and infrastructure projects in Turkey. The total amount of Italian direct investment in Turkey exceeded 4,5 billion Dollars as of 2018, and Turkey had attracted almost $1 billion foreign direct investment (FDI) from Italy in 2020.
Turkey is one of the most favoured tourist destinations for Italian citizens. Around 377.000 tourists from Italy visited Turkey in 2019. Italy is also one of the most popular destinations globally for Turkish citizens, considering 220.000 Turkish tourists visiting Italy in 2019. (2) It is also important to note that the Italian consulate in Istanbul issued the fifth-highest number of Schengen visas of all Italian missions worldwide. (3)
Turkey and Italy have acted as allies in the international area and consolidated such a powerful alliance with bilateral and multilateral contracts determining certain aspects of the commercial and political cooperation between the countries. It is also worth mentioning that Italy has always been positioned as supporting the membership of Turkey in the European Union. European Union-Turkey Customs Union has remarkably promoted the level of trade between Italy and Turkey.
We aim to address material aspects of commercial and political relations between Italy and Turkey in our Article to provide our readers with a framework for comprehending the strategical partnership of two allies.
Economic and Commercial Relations Between Turkey and Italy
I. Trade Volume Between Countries
For the last 20 years, the value of overall trade between Italy and Turkey has been rising. Back in 2000, Turkey's trade with Italy consisted of 1.8 billion USD worth of exports and 4.3 billion USD worth of imports. By 2018, Italian exports had surged to 9.6 billion US dollars and imports to 10.1 billion.
The four types of products that Turkey exported to Italy in the most significant numbers in 2019 were road vehicles, iron and steel,; textile yarn, fabric, constructed articles, and related products; and fruits and vegetables. Indeed, these four types of products corresponded to 54% of Turkey's total exports to Italy. The commodities Turkey imported from Italy the same year were general industrial machinery and equipment and machine parts; road vehicles; machinery for specialized industries; and power-generating machinery and equipment, comprising 31% of Turkey's imports from Italy. According to a report published by the Turkish Exporters Assembly (TIM), Turkey exported 4,729 differently coded products in 2018, worth 168 billion US dollars. Italy imported 5,255 differently coded products in the same year, valued at 501 billion US dollars. (4)
Italy has been one of the top five destinations for Turkish merchandise in the last ten years. Italy was the fourth most popular destination for Turkish exports, standing behind Germany, the United Kingdom and Iraq in 2019. On the other hand, exports to Italy maintained a consistent trend between 4% to 8% of Turkey's overall export volume in the past 20 years.
The latest figures of February 2021 published by TUIK demonstrate that Italy remains its position as Turkey's top-five trade partner, both in imports and exports. The largest volume of imports was made to Germany and it was followed by United Kingdom with 965 Million USD, United States with 917 Million USD and Italy with 833 Million USD. The largest volume of exports, on the other hand, was made to China with 2 billion 241 million USD followed by Russia with 1 billion 706 million USD, Germany with 1 billion 701 million USD and İtaly with 931 million USD.
II. Establishment of Joint Economic and Trade Commission (JETCO)
Italy and Turkey also established the Joint Economic and Trade Commission (JETCO) for promoting the strategic partnership and boosting trade and investment flow between Italy and Turkey. Istanbul hosted the first JETCO meeting in 2017 in which investments, supports to enterprises, obstacles to trade, collaborations in the fields of science and technology, tourism and culture were discussed as main topics and the JETCO Protocol was signed at the end of the meeting by the former Minister of Economy of Republic of Turkey, Nihat Zeybekçi and the former Minister of Economy of Italy Carlo Calenda.
The second JETCO meeting, on the other hand, was held virtually due to the COVID-19 outbreak by the Minister of Commerce of Republic of Turkey, Ruhsar Pekcan and the Ministry of Foreign Affairs of Italy Luigi Di Maio in December 2020. During her speech in the virtual meeting, Pekcan declared Turkey's ambition to increase its bilateral trade volume with Italy, which was around $20 billion back then to $30 billion as quickly as possible. Underlining that there is a balanced bilateral trade with Italy, Pekcan stressed that the country is one of the most important trade partners of Turkey and the fact that it ranks third in the country's exports and fourth in the imports demonstrates the strategic importance of Italy and the value Ankara attaches to commercial relations with Rome. Minister Di Maio also stressed the opportunity provided with JETCO to strengthen the traditional economic and trade relations with a meaningful partner like Turkey and to protect the interests of Italian companies operating in Turkey and also drew attention to the importance of focusing on strengthening industrial and economic-trade synergies, particularly in the transport and energy infrastructure sector; on increasing the flow of bilateral investments; on improving access to the Turkish market for Italian goods and on promoting future collaborations on third markets for a fully economic partnership between Turkey and Italy.
Considering the increasing volume of trade and establishment of JETCO, it is beyond doubt that Italy and Turkey are determined to take concrete steps to improve bilateral commercial relations in the future.
III. Customs Union between the European Union and Turkey
The European Union–Turkey Customs Union is a trade agreement between the European Union (EU) and Turkey that came into effect on 31 December 1995 to implement a customs union between the EU Countries and Turkey. According to the Customs Union, goods may travel between the two entities without any customs restrictions. However, the Customs Union does not cover essential economic areas such as agriculture services or public procurement.
Custom Union is of great importance in Turkey's economic relations with the EU and its Member States as it allows Turkey in the EU's internal market of goods by means of trading Turkish manufactured products in the EU without any custom duties, tariffs or quota. Accordingly, the outstanding level of trade between Italy and Turkey is also a consequence of the Customs Union between the EU and Turkey.
The Italian consulate in Istanbul issued the fifth highest number of Schengen visas of all Italian missions worldwide in 2018, after the Italian missions in Moscow, Beijing, Shanghai and Guangzhou. Furthermore, the Italian consulate in Istanbul had the third-highest number of visa applications lodged across all missions in Turkey that issue Schengen visas, after the German and French consulates in Istanbul. Turkey is one of the most preferred touristical destination for Italian citizens, around 377.000 tourists from Italy visited Turkey in 2019. Italy also is one of the most popular destinations in the world for Turkish citizens, considering 220.000 Turkish tourists visiting Italy in 2019.
V. Italian Companies Established in Turkey
Investments by Italy in Turkey date back to 1960s when KOÇ Holding established Tofaş in partnership with Italy's Fiat Group. Today, a great number of Turkish companies with Italian partners and Italian companies
Today the number of Turkish companies with Italian partners and Italian companies exceeds 1.500 and their areas of activities include various sectors including but not limited to agriculture (Barilla, Ferrero), banking (Banca Intesa, Banca Generali, Banca di Roma, UniCredit, Yapı Kredi), communication (Telecom Italia Mobile), defence (Leonardo), electronics (Omron Electronics), infrastructure.
Collaborations between Italian and Turkish companies are also great examples of the presence of Italian companies in Turkey. For instance, Pininfarina has designed the Traffic Control Tower at Istanbul's new airport and Turkey's "first indigenously manufactured automobile." Moreover, the Astaldi Group was part of the consortium that handled construction of Istanbul's third bridge across the Bosporus, namely the Yavuz Sultan Selim Bridge. Astaldi also built the 116-km part of the Anatolian motorway between Gümüşova and Gerede and a section of the Istanbul underground system and invested 100 million EUR in the Milas-Bodrum Airport.
VI. Bilateral and Multilateral Treaties between Turkey and Italy
Bilateral and multilateral treaties between Turkey and Italy constitute a substantial part of political relations between two countries. Some of the most significant bilateral treaties between Turkey and Italy and their outcomes may be listed as follows:
- Agreement Between the Republic of Turkey and the Republic of Italy For The Avoidance of Double Taxation With Respect to Taxes On Income And The Prevention of Fiscal Evasion: Implementation of this Double Taxation Treaty avoids imposing double taxation on individuals and entities that engage in bilateral transactions between two countries.
- Cultural Agreement: This Agreement is signed on 17 July 1951 in Ankara for cooperation of cultures of Turkey and Italy.
- Treaty on Encouragement and Protection of Investment between Turkey and Italy: This Treaty aims to promote and protect investments between Turkey and Italy.
Some of the multilateral treaties and organisations that both Turkey and Italy attended may also be listed as follows:
- The New York Convention the Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Having been one of the key instruments in international arbitration. The New York Convention applies to the recognition and enforcement of foreign arbitral awards and the referral by a court to arbitration. The Convention requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states.
- The North Atlantic Treaty Organization (NATO): NATO is an international alliance that consists of 30 member states from North America and Europe and was established at the signing of the North Atlantic Treaty on 4 April 1949. Article Five of the treaty provides that if an armed attack occurs against one of the member states, it shall be considered an attack against all members, and other members shall assist the attacked member, with armed forces if necessary.
- The World Trade Organization (WTO): The WTO is the world's largest international economic organization, with 164 member states representing over 96% of global trade and global GDP.
- The United Nations Economic Commission for Europe (ECE or UNECE): The UNECE is one of the five regional commissions under the jurisdiction of the United Nations Economic and Social Council. It was established with the purpose to promote economic cooperation and integrations among its member states. The commission is composed of 56 member states, most of which are based in Europe, and a few outside of Europe.
- The Convention on Common Transit: This Convention is a treaty between the countries of the European Union and many other countries for standard procedures for international transit of goods, thus simplifying or eliminating much of the paperwork typically associated with moving goods across international borders. As of August 2020, the countries of the convention were the 27 EU member states, the four European Free Trade Association member states, the Republic of North Macedonia, Serbia, and Turkey.
- United Nations (UN) is an intergovernmental organization that aims to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a center for harmonizing the actions of governments. It is the largest, most familiar, most internationally represented and most powerful intergovernmental organization globally. The UN is headquartered on international territory in New York City, with its other main offices in Geneva, Nairobi, Vienna, and The Hague.
- The Organisation for Economic Co-operation and Development (OECD): OECD is an intergovernmental economic organization with 37 member countries, founded in 1961 to stimulate economic progress and world trade. It is a forum of countries describing themselves as committed to democracy and the market economy, providing a platform to compare policy experiences, seek answers to common problems, identify good practices, and coordinate domestic and international policies of its members.
- The G20 (the Group of Twenty): The G20 is an international forum for the governments and central bank governors from 19 countries and the European Union (EU). Founded in 1999 to discuss policy pertaining to the promotion of international financial stability, the G20 has expanded its agenda since 2008 and heads of government or heads of state, as well as finance ministers, foreign ministers and think tanks, have periodically conferred at summits ever since. It seeks to address issues that go beyond the responsibilities of any one.
(1) Calculations based on datasets are accessed from the TUIK and the World Integrated Trade Solution (WITS): World Bank, Italy Export in thousand US$ all countries between 2000 and 2018
(2) Turkish Ministry of Culture and Tourism - Directorate-General of Investments and Enterprises, 2019 Yılı Genel Turizm İstatistikleri [General Tourism Statistics for 2019], February 2020.
(3) European Commission Migration and Home Affairs website: “Visa Statistics for Consulates, 2019”, under Complete Statistics on Short-Stay Visas by the Schengen States.
(4) Calculations based on datasets made available by TUIK [https://www.tuik.gov.tr/]