The recent announcement by Israeli Finance Minister Bezalel Smotrich to scrap the free trade agreement with Turkiye and impose a 100 percent tariff on imports from the country has sparked concerns about the future of regional trade. The move, aimed at reducing Israel’s dependence on Turkiye, is yet to be finalized and requires Cabinet approval.
Historically, trade ties between Israel and Turkiye have remained strong despite political disagreements. However, Turkiye’s decision to halt exports to Israel in response to the conflict in Gaza has strained relations. The move was met with public backlash in Turkiye, especially ahead of the local elections, prompting the government to impose trade restrictions on 54 products exported to Israel.
The free trade agreement between Turkiye and Israel, established in the mid-1990s, has been beneficial for both countries. Israel imports a variety of goods from Turkiye, including steel, iron, motor vehicles, electrical devices, and textiles, while Turkiye purchases chemicals and metals from Israel. The recent trade tensions have raised concerns about the economic impact on both nations.
Experts believe that the decision to cancel the free trade agreement could have serious short-term economic consequences for both countries. While some see it as a political move to gain popularity domestically, others warn of the potential risks involved. The cancellation of the agreement until President Recep Tayyip Erdogan steps down raises questions about the future of trade relations between the two nations.
In response to Israel’s decision, Turkiye has announced its intention to join South Africa’s genocide case against Israel at the International Court of Justice. Israel, on the other hand, has filed a complaint against Turkiye with the Organization for Economic Cooperation and Development. The escalating tensions between the two countries have raised concerns about the long-term implications for regional trade.
Sinan Ulgen, director of the Istanbul-based think-tank EDAM, believes that Israel’s decision is a response to Turkiye’s earlier trade embargo. The economic impact of the cancellation of the free trade agreement could be significant, particularly on critical products imported from Turkiye such as construction materials. This could lead to an increase in prices and inflation in Israel.
Despite the trade restrictions, Turkish products could still reach Israel indirectly through third countries. However, alternative trade routes may be longer, more complex, and costlier. The future of trade relations between Turkiye and Israel remains uncertain, with both countries facing economic challenges as a result of the escalating tensions.
In conclusion, the decision to cancel the free trade agreement between Turkiye and Israel has raised concerns about the future of regional trade. The economic consequences of this move could be significant for both countries, with potential impacts on prices and inflation. As tensions continue to rise, the long-term implications for trade relations between Turkiye and Israel remain uncertain.