REVEALED COMPARATIVE ADVANTAGE AND COMPETITIVENESSOF THE TURKISH MANUFACTURINGSECTOR IN THE EUROPEANMARKET

The purpose of this paper is to analyse the competitive performance of theTurkish Manufacturing Sector after theCustom Union Agreement with the EUand to determine whether or not the pattern of comparative advantage for Turkeyhas undergone a structural shift over the period 1996-2006. Then we examine ifTurkey’s pattern of comparative advantage is related with industry-levelproductivity differentials or with differences in factor endowments. Themanufacturing sector was chosen becausethe Custom Union covers all industrialgoods but does not address agricultural products (except processed agriculturalproducts), service or public procurement.The Revealed Comparative Advantages(RCA) index and Vollrath’s competitivenessindices are used to identify whetheror not Turkey has a comparative advantage in any particularproduct group. In thecalculating of these indices, the manufacturing industry is divided into four groupsaccording to intensity of technology: high-tech industries, medium-to-high-techindustries, medium-to-low-tech industriesand low-tech industries. It is knownthat a Custom Union can, in theory, havesignificant dynamic effects, such asincreased competition, stimulation of technical change and investment. There area number of studies where RCA has been used to investigate the competitivenessof Turkish exports. This study differs fromothers in terms ofthe classification ofmanufacturing sectors according to their technological characteristics. In the 20th century, technological change became recognized as the mostimportant source of economic growth. According to RCA and Vollrath’s indices,Turkey has a comparative advantage ina few low-tech and medium-to-low-techindustries while it has a comparative disadvantage in high-technological productsagainstEU. Therefore, we can say that the Custom Union has not played animportant role in effecting changes intrade patterns and comparative advantagesin the Turkish manufacturing sector