the trade structure between turkey and norway

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_Index


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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/


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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.


15/15

15

REFERENCES

U.s. department of state. (18 J). Retrieved fromhttp://www.state.gov/r/pa/ei/bgn/3421.htm

Us department of state. (2011, MAY 13). Retrieved fromhttp://www.state.gov/r/pa/ei/bgn/3432.htm

Central intelligence agency. (2011, November 15). Retrieved from

https://www.cia.gov/library/publications/the-world-factbook/geos/no.html

Cia: The world factbook. (2011, November 15). Retrieved from

https://www.cia.gov/library/publications/the-world-factbook/geos/tu.html

(2010). Retrieved January 23, 2012 from

http://http://www.oecd.org/document/11/0,3746,fr_2649_37401_48818251_1_

1_1_37401,00.html


http://hdr.undp.org/en/media/HDR_2011_EN_Table1.pdf


http://data.worldbank.org/indicator/SL.TLF.CACT.FE.ZS


http://www.imf.org/external/pubs/ft/survey/so/2007/car0726a.htm

Global Competitiveness Report 2004-2005, Retrieved

fromhttp://www.ieseinsight.com/casos/Study_0035.pdf


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the trade structure between turkey and norway

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