Lower prices, increased market efficiencies—a proverbial win-win situation. The global ecosystem of international trade has been one of the key components of a relatively prosperous post-World War II era.
Washington DC – As American Founding Father Benjamin Franklin said in 1774, “No nation was ever ruined by trade, even seemingly the most disadvantageous.”
But markets, technology and national moods change. Morocco and Turkey currently find themselves in a free trade reset, perhaps a trend that will grow as the trading system matures.
Structural and evolving economic challenges like high unemployment in particular sectors and increased automation in manufacturing are combining with political factors to shake up the collective wealth of nations.
Morocco and Turkey signed their free trade agreement (FTA) in 2004 with its terms coming into effect in January 2006.
Moroccan Trade and Industry Minister Moulay Hafid Elalamy tweeted on Jan. 15 the need for a comprehensive restart between the two nations: “We agreed to … review the conditions of the FTA for more balanced trade.”
He said that Morocco currently loses $2 billion annually in its trade relationship with Turkey and that it was “necessary for us to defend our interests when the job creation market and Moroccan businessmen are affected.”
Morocco’s yearly trade deficit—about $21 billion—has been steadily rising, up 5% during the first half of 2019 alone.
Claims of product dumping and trade barriers are common in global trade disputes today.
The World Trade Organization (WTO) has issued 350 comprehensive dispute rulings over two decades.
But Morocco’s latest push to review its trade agreements is a mix of domestic concerns (Moroccan business federations have made their concerns known on a variety of trade issues), a reimagining of regional trade relationships in an increasingly digital era and a robust effort to leverage Morocco’s hefty role as both an investment destination and as a foreign investor.
No more a junior partner in the Mediterranean region. And GDP growth across Africa in 2019 (3.8%) outpaced the global average.
It’s reasonable for Moroccan workers to expect political leaders to vigorously defend Moroccan jobs and employment sectors even when various market forces conspire to erode cherished sectors of the economy.
Trade agreements, seemingly, are like steam engines, requiring constant calibration and adjustment of various regulators to insure performance.
Minister Elalamy perhaps found inspiration in Donald Trump’s realpolitik worldview on trade.
In May 2018 Oval Office interview, the American president lamented the damage done to America’s economy by misguided trade agreements: “Other countries have become very spoiled because they always got 100 percent of whatever they wanted from the United States. But we can’t allow that to happen anymore.”
Despite Donald Trump’s over-the-top rhetoric and exaggerated claims on trade his views resonate with significant numbers of Americans who work in manufacturing sectors.
On trade, Trump has delivered on two promises: a new umbrella free trade agreement with Canada and Mexico (USMCA) that has now passed both chambers of Congress. Reworking the 1993 NAFTA deal was a top priority for Trump.
Additionally, last week, Trump and Chinese Vice Premier Liu He signed a limited new bilateral trade agreement that may lead to $200 billion in new Chinese purchases of American agricultural products, financial services and manufactured goods. A trade war pause but with many issues still unresolved.
A Turkish trade delegation visited Morocco on Jan. 15. Beyond a technical evaluation of the current trade agreement (a standard review process that is part of the agreement) the two nations will explore potential new business opportunities.
A Morocco-Turkey joint statement advocated measures to ensure that trade practices were “more balanced, more important and good quality.” Last year, two-way trade between Turkey and Morocco was valued at roughly $3 billion. But, as always, there are winners and losers in international trade.
Textiles and clothing apparel, for example, are not only important economic sectors in both Morocco and Turkey they also hold significant cultural importance.
It’s clear that there are a lot of apparel and textile products (and producers) looking for markets in the world as well as many challenges, from a denim supply glut in India to an increasing reliance on sewbots (automated sewing and garment manufacturing).
One international textile trade industry group ranks Turkey as the sixth largest apparel and clothing supplier in the world. Morocco’s textile and apparel industry represents roughly 15% of the kingdom’s gross domestic product, employing nearly 200,000 people.
Both Morocco and Turkey are working on changes before a self-imposed Jan. 30 deadline arrives.
Morocco is looking to increase the quality of the two-way trade relationship with Turkey, from deeper investments that can bolster Morocco’s domestic sourcing firms and suppliers in the automobile and aerospace manufacturing sectors to increased collaboration in financial services.
By GDP, Turkey’s economy is notably larger than Morocco’s but both nations face unemployment challenges, especially Turkey where the unemployment rate is 14%. Increasing foreign direct investment in Morocco is a priority, too, for Rabat following a decline in 2019.
In a post-NAFTA and pre-Brexit global system, the advice of American investment titan Warren Buffett is relevant for political leaders looking to maximize the benefits of long-standing free trade agreements: “In the business world, the rear-view mirror is always clearer than the windshield.”
The views expressed in this article are the author’s own and do not necessarily reflect Morocco World News’ editorial views.
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