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7/29/2019 the trade structure between turkey and norway
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ECON 353
INTRODUCTION TO INTERNATIONAL ECONOMICS I
TERM PROJECT
The Trade Structure Between Turkey and Norway
TAHA SANTALU
1723436
23 January 2012
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KINGDOM OF NORWAY
Official language: Norwegian (Bokmal and Nynorsk) Demonym: Norwegians
Area: 385,199 sq. km (water 7.0 %) Population: 4,885,240 (2010) Density: 12.5/ sq. km
Annual population growth rate: 1.3 %
Capital: Oslo (population: 599,230) Other cities: Bergen (260,392), Trondheim (173,486)
Terrain: Rugged with high plateaus, steep fjords, mountains and fertile valleys.
Climate: Temperate along the coast, colder inland.
GDP (nominal 2010): $412,989,604,299 GDP Per Capita (nominal 2010): $84,538.2
GDP PPP (2010): $277,941 million GDP per capita PPP (2010): $53,738 Annual GDP growth rate: 2.9 % (2010)
Unemployment (2010): 3.4 % Gini(2008): 25.8 (low) (5th)
HDI (2011): 0.943 (very high) (1st) Exchange Rate: $1=5.8861 Kroner (December 2011)
Education: 10 years compulsory Literacy: 100 %
Current Account Balance (2010): 53,243 US$ Current Acc. Bal. per GDP (2010): 12.4%
Work force (2011, 2.6 million): Legislators, senior officials, and managers 6%; professionals 13%; technicians and
associate professionals 25.3%; clerks 6.8%; service workers and market sales workers 24%; agricultural, forestry, and fishery
workers 2.2%;craft and related trades workers 10.2%; plant and machine operators and assemblers 7.1%; other occupations
and unspecified 5.2%.
Natural resources: Petroleum, natural gas, iron ore, copper, lead, zinc, titanium, pyrites, nickel, fish, timber, hydropower.
Agriculture: Products--dairy, livestock, grain (barley, oats, wheat), potatoes and other vegetables, fruits and berries, furs,
wool, pork, beef, veal, fish.
Industry: Types--petroleum and gas, food processing, shipbuilding, pulp and paper products, aluminum, ferroalloys, iron
and steel, nickel, zinc, nitrogen, fertilizers, petrochemicals, hydroelectric power, refinery products, timber, mining, textiles,
fishing, transport equipment, electronics.
GDP by activity (2010): Oil and gas 22%; general government 16%; manufacturing, mining, electricity, building and
construction 15%; value added tax (VAT), etc. 11%; commodities, vehicle repairs, etc. 7%; communication and transport
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4%; agriculture, forestry, and fishing 1%; other services (commercial, housing, financial, private health/education, hotel and
catering, etc.) 24%.
Trade (2010): Exports (f.o.b.)--$178 billion. Major markets--U.K. 27%, Netherlands 12%, Germany 11%, Sweden 7%,
France 6%, U.S. 5%. Imports (f.o.b.)--$122 billion. Major suppliers--Sweden 14%, Germany 12.3%, China 8.4%, Denmark
6.1%, U.K. 5.9%, U.S. 5.2%.
REPUBLIC OF TURKEY
Official language: Turkish Demonym: Turkish
Area: 783,562 sq. km (water 1.3 %) Population: 72,752,325 (2010) Density: 92.84/ sq. km
Annual population growth rate: 1.235 %
Capital: Ankara (population: 4.77 million) Other cities: Istanbul (13,255,685), Izmir (3.949 million)
Terrain:Narrow coastal plain surrounds Anatolia, an inland plateau becomes increasingly rugged as it progresses
eastward. Turkey includes one of the more earthquake-prone areas of the world.
Climate: Temperate in the coastal regions, relatively rainy in Black Sea Region, and a continental climate in central regions.
GDP (nominal 2010): $734,364,471,760 GDP Per Capita (nominal 2010): $10,094.03
GDP PPP (2010): 1,115,994 million US$ GDP per capita PPP (2010): $12,300 Annual GDP growth rate: 8.2%(2010)
Unemployment (2010): 12 % Gini(2008): 39.7 (64th)
HDI (2011): 0.699 (high) (92nd) Exchange Rate: $1=1.89 Turkish Lira (December 2011)
Education: 8 years compulsory Literacy: 91 %
Current Account Balance (2010): -48,445 million US$ Current Acc. Bal. per GDP (2010): -6.6 %
Work force(27.43 million) : By occupation--services 47.1%; agriculture 26.5%; industry 18.9%; and construction 7.5%.
Natural resources: Coal, chromium, mercury, copper, boron, oil, gold.Agriculture (9.3% of GDP) : Major products (CIA World Factbook)--tobacco, cotton, grain, olives, sugar beets, hazelnuts,
pulse, citrus; livestock. Provides about 26.5% of jobs (2011) and 3.5% of exports (Jan.-July 2011).
Industry (25.6% of GDP): Major growth sector, types--automotive, electronics, food processing, textiles, basic metals,
chemicals, and petrochemicals. Provides about 18.9% of jobs and 93.8% of exports.GDP by activity: Agriculture 9.6 %, industry 26.6 %, services 63.8 %.
Trade: Exports (merchandise)--(2005) $73.5 billion; (2006) $85.5 billion; (2007) $107.2 billion; (2008) $132 billion;
(2009) $102.1 billion; (2010) $113.9 billion. Export types(Turkish Statistical Institute, 2011)--textiles and apparel, industrial
machinery, iron and steel, electronics, petroleum products, and motor vehicles. Imports (merchandise)--(2005) $116.8 billion;
(2006) $139.6 billion; (2007) $170.1 billion; (2008) $201.8 billion; (2009) $140.4 billion; (2010) $185.9 billion. Import
types--chemicals, petroleum, machinery, motor vehicles, electronics, iron, steel, plastics, precious metals. Major partners--Germany, U.S., Italy, France, Russia, Japan, China, Iran, Iraq, U.K.
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i. INTRODUCTION
The aim of this report is to show the trade structure between Turkey and Norway.
Before starting, general profiles of the countries have been given in order to develop a rough
idea about the countries and their economies. The report consists of two main sections.
Firstly, the social and economic structures of the countries are shown through a multiple
comparison method with the variables of GDP, GDP per capita, population and some other
relevant indicators of geographical and economic determinants in order to demonstrate the
bilateral trade role of Turkey and Norway. Secondly, commodity groups that are exported and
imported between these two countries are analyzed both in a current and historical manner, in
order to understand the historical evolution of the trade and the current trade pattern that
dominates. In this section, also the types of sectors where exports and imports are specialized
and how these are changing through time are discussed. The report is concluded with making
some analogies and connections between the trade structure of the given countries and the
trade models that prevail.
ii. SOCIAL AND ECONOMIC STRUCTURES OF COUNTRIES
Norway, with its population of 4.85 million on the northern flank of Europe, is today
one of the most wealthy nations in the world, both measured as GDP per capita and in capital
stock. The country has a very high standard of living compared with other European
countries, and a strongly integrated welfare system. On the United Nation Human
Development Index, Norway has been among the three top countries for several years, and in
some years the very top nation. Huge stocks of natural resources combined with a skilledlabor force and the adoption of new technology made Norway a prosperous country during
the nineteenth and twentieth century. On the other hand, Turkey with a relatively high
population of 72.7 million, is located at southeast of Europe and has a modest income and
capital stock. Turkey and Norway differ vastly in the social and economic senses. There is a
huge gap almost in every variable when a comparison is made. From here on till the next
section a comparison of some important elements is made between the two countries.
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Location has been a great determinant in the state of countries. Lying in the Arctic
circle has given some disadvantages to Norway. These disadvantages show themselves mostly
when the agriculture of Norway is checked. Since two-thirds of the country is tundra, rock, or
snowfields, and one-quarter is forested, there is only a limited amount of cultivated land in
Norway and good agricultural land is rare. Nevertheless, the advantages that location has
bestowed upon Norway can not be dismissed. Norway's economic growth has been fueled by
an abundance of natural resources, including petroleum exploration and production,
hydroelectric power, and fisheries. The mountains of Norway are rich in minerals; there are
deposits of iron ore, copper, titanium, coal, zinc, lead, nickel, and pyrites, and large offshore
reserves of petroleum and natural gas (CIA World Factbook). Whats more, close proximity
to important export markets in Europe has facilitated Norway's development into one of the
richest countries. The flipside of the coin is not as bright as the other one. Turkey's location at
the crossroads of Europe and Asia, makes it a country of significant geostrategic importance
and and a country with important future prospects of becoming an economic power.However,currently Turkey is a only a large country with relatively few natural resources. Turkey's most
important minerals are chromite, bauxite, and copper. Still, minerals together with mining
activities do not contribute to the GDP of the country more than 4%. Setting aside these
negative facts, thanks to the high proportion of the arable lands, Turkey has become an
important producer and exporter of agricultural commodities on world markets and is
estimated to be the worlds 7th-largest agricultural producer. Although the economicimportance of agricultural sector relative to the industrial and service sectors has been
declining, agriculture still remains a key part of Turkeys society, employing about one
quarter of the workforce and generating most of income and employment in rural areas.
(OECD-Evaluation of Agricultural Policy Reforms in Turkey).
Nominal GDPs of Norway and Turkey as of 2010 were respectively,
$412,989,604,299and $734,364,471,760 as reported by the US Department of State. As the
magnitude and populations of the countries are considered, it becomes possible to see that
Norway proportionally makes a better use of its resources compared to Turkey. As a proof for
this, GDP per capita or the purchasing power parity (PPP) which is obtained through the
value of all final goods and services produced within a country in a given year divided by the
average population for the same year, indicates quite a disparity between the countries in the
sense of standard of living. Again according to the US Department of State, Norway is one of
the world's richest countries in per capita terms with $53,738 per capita GDP, thereby being
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way ahead of Turkey which has a modest $12,300 per capita GDP. It is easy to see that
Turkeys high population, 72,752,325 compared to Norways 4,885,240 (CIA World
Factbook), has a great role in this difference between purchasing power parities.
When it comes to the the current account balances of the two countries in order to
measure the natures of countries foreign trades, Norway has a positive $53 243 000 000
balance compared to Turkeys negative $48 445 000 000 according to the data of World
Trade Organization. This means a current account surplus for Norway and also is equivalent
to %12.4 of Norways GDP (Trade balance per GDP). While this current account surplus
increases Norways net foreign assets by the corresponding amount, the current account
deficit which is -%6.6 of GDP of Turkey implies a paralleled reduction of the net foreign
assets of Turkey.
Profiles of people in both countries also differ vastly. Human capital in each nation,
which is the stock of competencies, knowledge and personality attributes embodied in the
ability to perform labor so as to produce economic value, is measured by HumanDevelopment Index (HDI). It is the combination of "Life Expectancy Index", "Education
Index" and "Income Index". The Life expectancy index reveals the standard of health of the
population in the country; education index reveals the educational standard and the literacy
ratio of the population; and the income index reveals the standard of living of the population.
The Human Development Index (2011) that was released by United Nations Development
Programme makes it clear that Norway with 0.943 (very high human development) HDI
topped the list and thus was crowned as the worlds best place to live. Turkey in the same list
was ranked 92nd with an index of 0.699 (high human development), nonetheless, generated
the largest HDI improvement in the region of Eastern Europe and Central Asia. These
increments in HDI indexes mean that in both countries there is a higher rate of human capital
formation and economic development in response to higher standard of education and health.
Whats more, per capita incomes of the nations also increase.
Norway has a 2.6 million labor force with a participation rate of 71.8%. Female labor
force participation rate is 63% and sectoral distribution of the labor force of the country is
agriculture 2.9%, industry 21.1%, and services 76%. (worldbank). Thanks to its human
capital, Norway enjoys a highly skilled labor force, however, in recent years labor costs in
Norway have increased faster than in its major trading partners, thereby eroding its industrial
competitiveness. On the other hand, Turkey has a labor force of 27.43 million people as
http://en.wikipedia.org/wiki/Life_Expectancy_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Education_Indexhttp://en.wikipedia.org/wiki/Life_Expectancy_Index7/29/2019 the trade structure between turkey and norway
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services, agriculture and industry sectors have respectively 47.1%, 26.5%, 18.9% shares in
that labor force. The labor force participation rate in the country is 50%. This 50% is however
a little tricky considering the fact that it is extremely lopsided because female labor force
participation rate is only 21.6% (Turkstat). In addition to this, Turkey has some of the highest
labor taxes and tightest regulations among members of the Organization for Economic
Cooperation and Development, says the IMF Survey Magazine (2007). This has resulted in
high unemployment (10%), low labor force participation (50%), and a large informal sector
(employing about one-half of all workers). The large informal sector eats into tax revenue. It
also lowers productivity by preventing companies from taking full advantage of economies of
scale (informal firms must remain small to avoid detection) and by restricting their access to
capital and suppliers (formal sector businesses are reluctant to engage informal ones).
The technological readiness of countries is both an important factor in the and result of
their wealth. Todays world judges progress by the technological advancement achieved by
their country It is true, since technology makes life simpler and also provides access to things
that are things that help people achieve a better lifestyle. It also reflects the political and
economic stability of the nation. As this is the case, according to the World Economic
Forums Global Competitiveness Report 2004-2005, which published the technology index
that was created with such indicators as countries spending on R&D, the creativity ofcountries scientific community, personal computer and internet penetration rates, Norway
with a 5.17 index ranked worlds 9th most technologically-oriented country where US topped
the list with a 6.24 index. Turkey was placed at 51st with an index of 4.1 barely above the
weighted average 4.0.
In terms of capital stock accumulations as stated by Indexmundi: the latest value for
gross capital formation (current US$) in Norway was $88,069,210,000 as of 2010. The annual
% growth of gross capital formation in Norway was 8.50 and gross capital formation was
equal to 21.32% of the Norwegian GDP. On the other hand, the latest value for gross fixed
capital formation (current US$) in Turkey was $137,644,000,000 as of 2010. This gross fixed
capital formation grew 29.94% and equalled to 18.74% of Turkish GDP.
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iii. COMMODITY GROUPS THAT ARE EXPORTED AND IMPORTED
Bilateral trade between Turkey and Norway
Sources : ITC calculations based onUN COMTRADEstatistics.
Unit : US Dollar thousand
Product
codeProduct label
Turkey's exports to Norway
Value
in 2001
Value
in 2002
Value
in 2003
Value
in 2004
Value
in 2005
Value
in 2006
Value
in 2007
Value
in 2008
Value
in 2009
Value in 2010
and share in
total exports
TOTAL All products 70,291 114,554 171,420 206,258 245,165 260,896 375,340 391,201 384,284343,778
100%
'08
Edible fruit,
nuts, peel of
citrus fruit,
melons
3,445 3,319 3,446 5,540 8,855 6,193 6,570 6,174 6,0938,419
2.44%
'19
Cereal, flour,
starch, milkpreparations
and products
178 214 544 1,800 2,196 2,544 2,314 2,861 3,377 2,8830.83%
'20
Vegetable,
fruit, nut, etc
food
preparations
3,882 4,187 4,357 6,867 7,747 4,766 3,855 4,999 7,0416,272
1.82%
'26Ores, slag
and ash5,323 1,554 0 0 0 19 6,929 6,850 0
5,945
1.72%
'27
Mineral
fuels, oils,
distillation
products, etc
91 43 69 247 211 99 1,306 2,602 13,9185,374
1.66%
'39
Plastics and
articles
thereof
707 685 1,496 2,276 3,743 3,128 3,122 4,020 5,6924,461
1.29%
'40 Rubber and
articles
142 347 785 1,082 1,186 1,223 2,116 3,244 2,4373,560
1.03%
http://comtrade.un.org/http://comtrade.un.org/http://comtrade.un.org/http://comtrade.un.org/7/29/2019 the trade structure between turkey and norway
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thereof
'57
Carpets and
other textile
floor
coverings
529 550 458 378 546 785 1,230 2,370 2,6964,456
1.29%
'61
Articles of
apparel,
accessories,
knit or
crochet
19,808 22,428 34,372 36,215 40,811 36,186 54,574 49,562 46,43552,902
15.38%
'62
Articles of
apparel,
accessories,
not knit orcrochet
13,699 12,378 16,482 18,757 21,410 17,459 19,066 23,245 19,15922,681
6.59%
'63
Other made
textile
articles, sets,
5,227 4,731 4,996 6,766 7,603 7,909 9,138 10,640 7,5039,859
2.86%
'69Ceramic
products1,636 1,710 2,083 2,755 2,916 3,836 4,835 5,514 3,970
3,654
1.06%
'73Articles of
iron or steel580 885 4,555 3,747 6,747 3,124 8,563 6,567 5,576
5,931
1.72%
'74
Copper and
articles
thereof
171 378 1,105 1,449 1,160 1,336 3,920 2,521 2,2744,168
1.21%
'76
Aluminium
and articles
thereof
1,349 1,194 1,727 1,884 2,980 2,701 3,528 4,845 3,4934,078
1.18%
'84
Machinery,
nuclear
reactors,
boilers, etc
889 1,383 1,577 2,210 4,276 9,438 14,091 10,576 10,66223,378
6.80%
'85
Electrical,
electronic
equipment
2,833 5,794 8,822 12,615 19,561 21,132 24,128 19,461 11,74712,065
3.50%
'87
Vehicles
other than
railway,
tramway
3,179 13,144 34,947 73,238 68,050 71,033 79,443 70,193 51,45463,198
18.38%
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'89
Ships, boats
and other
floating
structures
0 30,890 34,635 3,641 24,516 49,977 102,062 125,360 158,64671,055
20.66%
'94
Furniture,lighting,
signs,
prefabricated
buildings
419 557 1,109 1,550 1,255 1,813 2,495 4,111 3,8884,411
1.28%
Product
codeProduct label
Norway's imports from Turkey
Value
in 2001
Value
in 2002
Value
in 2003
Value
in 2004
Value
in 2005
Value
in 2006
Value
in 2007
Value
in 2008
Value
in 2009Value in 2010
TOTAL All products 115,593 176,995 257,619 351,827 441,113 426,797 582,687 591,249 556,232 553,161
Product
codeProduct label
Norway's exports to Turkey
Value
in 2001
Value
in 2002
Value
in 2003
Value
in 2004
Value
in 2005
Value
in 2006
Value
in 2007
Value
in 2008
Value
in 2009Value in 2010
TOTAL All products 209,829 307,602 396,596 401,111 323,206 495,405 383,748 394,462 683,443 524,166
Product
code Product label
Turkey's imports from Norway
Value
in 2001
Value
in 2002
Value
in 2003
Value
in 2004
Value
in 2005
Value
in 2006
Value
in 2007
Value
in 2008
Value
in 2009
Value in 2010
and share in
total imports
TOTAL All products 251,388 341,730 423,183 495,367 374,203 496,458 495,568 622,659 771,594828,588
100%
'03
Fish,
crustaceans,
molluscs, aquatic
invertebrates
6,971 8,634 10,976 23,212 25,694 31,281 41,171 51,483 51,81678,937
8.98%
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nes
'15
Animal,vegetable
fats and oils,
cleavage
products, etc
275 79 373 1,288 1,062 6,112 9,511 16,369 16,97819,399
2.20%
'25
Salt, sulphur,
earth, stone,
plaster, lime and
cement
399 923 1,489 1,292 2,882 2,781 2,366 2,663 2,4682,236
0.25%
'27
Mineral fuels,
oils, distillation
products, etc
158,911 155,922 243,854 243,879 173,735 262,023 216,668 268,456 367,884334,861
38.11%
'28
Inorganic
chemicals,
precious metal
compound,
isotopes
1,411 2,742 1,596 2,555 2,927 2,992 2,943 4,221 4,6768,529
0.97%
'30Pharmaceutical
products498 593 308 477 1,962 4,327 3,605 6,654 6,809
8,292
0.94%
'32
Tanning, dyeing
extracts, tannins,
derivs,pigmentsetc
422 782 1,442 1,657 2,421 1,901 2,425 2,075 2,8192,347
0.26%
'38
Miscellaneous
chemical
products
358 487 744 1,922 2,996 1,892 1,805 6,519 2,3763,507
0.39%
'39Plastics and
articles thereof10,095 12,204 13,067 18,450 13,201 18,939 17,792 21,807 27,634
41,530
4.72%
'41
Raw hides and
skins (other than
furskins) and
leather
5,242 5,511 4,049 3,414 3,348 2,653 3,304 347 4792,065
0.23%
'47
Pulp of wood,
fibrous cellulosic
material, waste
etc
450 176 454 973 1,273 66 0 0 268,183
0.93%
'48Paper &
paperboard,
articles of pulp,
7,064 10,868 17,109 11,399 10,547 11,628 17,332 21,812 8,97614,385
1.63%
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paper and board
'72 Iron and steel 4,934 8,499 9,401 11,066 15,089 11,801 10,034 19,384 11,53422,882
2.60%
'75Nickel and
articles thereof54 254 1,973 4,510 4,889 1,174 27,711 15,969 4,020
7,387
0.84%
'76Aluminium and
articles thereof20,598 43,814 57,439 55,285 43,142 37,768 29,413 38,492 140,083
198,999
22.64%
'84
Machinery,
nuclear reactors,
boilers, etc
8,336 14,273 15,031 25,138 34,681 53,140 63,175 83,322 78,29237,904
4.31%
'85
Electrical,
electronic
equipment
4,065 11,845 4,999 7,943 11,297 13,302 11,811 23,361 13,280 11,5251.31%
'87
Vehicles other
than railway,
tramway
77 153 115 305 669 861 1,177 2,077 7,7082,396
0.27%
'89
Ships, boats and
other floating
structures
451 25,170 20,173 48,438 3,564 2,849 6,123 13,188 751,732
0.19%
'90
Optical, photo,
technical,
medical, etc
apparatus
2,268 3,136 3,229 4,331 6,458 7,234 9,898 7,134 6,0847,399
0.84%
Note: Norways only total export to and imports from Turkey values have been provided.
Considering the fact that Turkeys exports are Norways imports, providing only Turkeys exports and
imports are sufficient.
As a developing country Turkey increases its share in the world trade and therefore,
she also has much more willingness to trade with Norway, too. This is obvious from the
increasing number of imports from and exports to Norway. It is seen from the data provided
above that the commodities that Turkey exports to Norway have a large spectrum while
Norway exports to Turkey mostly petrol related commodities, aluminium and articles and
fisheries. Since Norway is naturally well endowed and is rich with minerals and fisheries, it isconcluded that Norway uses its natural advantages extensively and its export regime towards
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Turkey is mostly based on them. For some commodity groups, imports from Turkey
constitute more than 25 percent of total imports of Norway from Turkey. These commodity
groups are apparels and accessories, in other words textiles. These commodity groups
represent industries in which Turkey as the labor abundant country compared to Norway, has
a comparative advantage in terms of low labor costs. Vehicles other than railway and
tramway, coupled with ships and boats are also Turkeys important export commodities to
Norway although they belong to capital intensive industries. In the general sense Turkeys
export commodities mainly have been steady and have not seen much volatilities in their
shares except for the Ships, boats and other floating structures commodity group, which has
become a main export of Turkey to Norway in the last years. Norway has consistently been
one of Turkeys main suppliers of mineral fuels, oils, distillation products, etc. For some
different types of minerals and aluminium articles, also fisheries (despite lying on a
peninsula), it is seen that Turkey is heavily dependent on Norway, considering their high
shares in Turkeys total imports of respective commodity groups. Thus, for the Norways
exports to Turkey case, trade pattern reveals comparative advantages due to resource
abundance. This exports regime makes Norway quite sensitive to global business cycles.
Among the commodity groups that are classified above in the data, those with product
codes 27, 39, 76, 84, 85, 87 and 89 are common goods that are traded among Turkey andNorway bilaterally. 27, 39, 76 and 84 which respectively are mineral fuels, oils, distillation
products, plastics and articles thereof, aluminium and articles thereof, and machinery,
nuclear reactors, boilers, are those commodity groups which obtained through either capital
intensive industries or natural resource abundant industries and there are a great differences
between the amounts that Turkey imports from and exports to Norway. Norway dominates in
these commodities. Whats more, the volatility in these numbers is also intriguing due to the
fact that natural resources naturally are quite sensitive to global business cycles as stated
above. Number 85 which represents the trade of electrical, electronic equipments"
demonstrates a draw between countries although it is also a capital intensive product group
and it would be expected that Norway dominated it. Numbers 87 and 89 are however a far cry
from the theoretical predictions. Vehicles other thanrailway and tramway (87) and ships,
boats and other floating structures (89) are heavily capital intensive industry products,
anyhow, Turkey has a major edge to Norway in those commodity groups trades.
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iv. CONCLUSION
The trade between Turkey and Norway shows many characters from very diverse
theories. The Heckscher-Ohlin approach focuses on factor endowments and natural resources.
In this sense Norway is the capital-abundant country and Turkey is the labor-abundant
country. So Heckscher-Ohlin theorem predicts that Norways export bundle will be consisting
of capital-intensive goods while Turkey will be exporting labor-intensive goods. As this
should be the case, when Turkeys exports to Norway are given a closer look, i t is seen that
more than 60 percent of these exports are actually capital intensive goods, although Norways
exports to Turkey mostly are also capital-intensive goods. Thats why, the trade data
regretfully do not fully satisfy the predictions of Heckscher-Ohlin approach despite the fact
that Norways exports to Turkey are mostly in line with H-O model. This, practically has to
do with almost all the assumptions of Heckscher-Ohlin model. There is a huge technological
difference between Turkey and Norway as it was discussed in the section ii. Tastes and
preferences are not the same in both the countries and there exist huge transportation costs
considering the distance between the countries. Furthermore, characteristics of specializationare not as predictable as they are in the traditional theories due to the fact that economies of
scale are realized and some market imperfections exist in many industries. In a same manner,
with steadily increasing wages from globally converging factor prices, it is likely that inter-
industry trade be at least partially substituted by intra-industry trade. Since intra-industry trade
is most prevalent for manufactred goods, when the data are checked, it becomes a little bit
clearer why there are some inconsistencies between the abundant factors and the exported
goods. For example, as it was stated in the third section, electrical, electronic equipments,
vehicles other than railway and tramway and ships, boats and other floating structures are
manufactured goods and therefore scale economies and product differentiation are important
in their production and trade. As this is the case, it had turned out that these three commodity
groups were export goods of Turkey rather than Norways. Thats why, intra-industry trade
can be useful in reflecting the complexity of the trade pattern between these two countries.
7/29/2019 the trade structure between turkey and norway
15/15
15
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