Steel Companies in a Turmoil of “Trade Wars”: A View from Turkey

Year 2020, , 6 - 23, 30.12.2020

Armağan Gözkaman , Ayfer Ustabaş , Mine M. Afacan Fındıklı

https://doi.org/10.18221/bujss.780704

Abstract

The tariffs imposed by the United States on Turkish-origin steel products in 2018 undeniably affected the strategic behavior of steel companies based in Turkey. The objective of this paper is to analyze through semi-structured interviews how the trade strategy of Turkish steel firms is affected by these tariffs. Conventional wisdom commends that corporate response of steel companies against the tariff imposition focused mostly on two main strategies: seeking alternative markets and innovation-based product diversification. Our findings suggest that, a mixture of political and economic reasons lie behind the levies -and this makes the Turkish case interesting in the overall trade wars between the U.S. and a multitude of countries, especially in the emerging-market concept.

Keywords

Trade wars, protectionism, industrial economics, political risks, competitive strategies, Turkish steel industry

References

• Alon, I. and Herbert, T.T. (2009). A Stranger in a Strange Land: Micro Political Risk And The Multinational Firm, Business Horizons 52, pp. 127-137.
• Barney, J. (1991). Firm Resources And Sustained Competitive Advantage. Journal of Management, 17, pp. 99–120.
• Becker, S. O. (2013). Endogenous Product Versus Process Innovation and A Firm’s Propensity to Export. Empirical Economics, 44(1), pp. 329-354.
• BBC News, Trade war: US hits China with new wave of tariffs, [online] https://www.bbc.com/news/business-49505781. (Accessed: 10.10.2019).
• BBC News, A quick guide to the US-China trade war. [online] https://www.bbc.com/news/business-45899310. (Accessed: 13.09.2019).
• BBC News, Trump presidency: Trudeau open to renegotiating trade, 10.11.2016 [online] https://www.bbc.com/news/world-us-canada-37932344. (Accessed: 25.10.2019).
• Bhagwati, J. N. (2002). Free Trade Today, Princeton, N.J.: Princeton University Press.
• Boata A., Islam M., Garatti A., Subran L. (2018). Trump’s Protectionism Fake News Or Old News? in Protectionism by Euler Hermes Economic Research.
• Bouët A., Laborde D. (2018). US Trade Wars in the Twenty‐First Century with Emerging Countries: Make America and its Partners Lose Again. World Econ.; 41, pp. 2276–2319.
• Caceres C, Diego A. C. and Mano R.C. (2019). IMF Working Paper, Trade Wars and Trade Deals: Estimated Effects using a Multi-Sector Model. IMF Working Paper. June 2019. [online] https://www.imf.org/~/media/Files/Publications/WP/2019/WPIEA2019143.ashx
• Capital. (2018, March 2)"Acier: les guerres commerciales ‘bonnes pour personne’, estime Moscovici". [online] https://www.capital.fr/economie-politique/acier-les-guerres-commerciales-bonnes-pour-personne-estime-moscovici-1275188. (Accessed: 10.05.2020).
• Chamber of Commerce of the United States of America. “Trade works. Tariffs don’t.”. [online] https://www.uschamber.com/tariffs. (Accessed: 10.06.2020).
• CNBC. [online] https://www.cnbc.com/2019/10/14/trump-halting-trade-negotiations-with-turkey-raising-its-steel-tariffs-to-50percent.html. (Accessed: 19.10.2019).
• Congressional Research Service, Enforcing U.S. Trade Laws: Section 301 and China, https://fas.org/sgp/crs/row/IF10708.pdf (Accessed: 20.06.2020).
• Cwik P. F. (2011). The New Neo-Mercantilism: Currency Manipulation as A Form Of Protectionism, 011 Institute of Economic Affairs. Published by Blackwell Publishing, Oxford.
• Defraigne, Jean-Christophe. (2017). Le Projet Mercantiliste de Trump : Une Tentative Pour les Firmes Américaines de Garder le Contrôle de la Chaîne de Valeur Globale Face À La Montée des Économies Émergentes et À La Chine Dans une Période de Crise Mondiale, L’Esprit du temps, Outre-Terre, N° 50, pp 31-48, [online] https://www.cairn.info/revue-outre-terre-2017-1-page-31.htm. (Accessed: 10.05.2020).
• Department of Commerce, Bureau of Industry and Security (2020, May 26). Notice of Inquiry Regarding the Exclusion Process for Section 232 Steel and Aluminum Import Tariffs and Quotas, Federal Register, Vol. 85, No. 101.
• Dikova D., Smeets R., Garretsen H, Van E. W. (2013). “Immediate Responses to Financial Crises: A Focus on U.S. MNE Subsidiaries”. International Business Review, vol. 22, no. 1.
• Dinçer, E., Heinrich Böll Stiftung, İstanbul Turkey [online] https://tr.boell.org/en/2019/05/23/trumps-trade-war-and-its-effects-where-does-turkey-stand. (Accessed: 10.05.2020).
• DW Türkçe (2018), “Türkiye çelik ithalatına kota getirdi”. [online] https://www.dw.com/tr/t%C3%BCrkiye-%C3%A7elik-ithalat%C4%B1na-kota-getirdi/a-45798773. (Accessed: 10.10.2019).
• Elliott, R., & Timulak, L. (2005). Descriptive and interpretive approaches to qualitative research. In J. Miles & P. Gilbert (Eds.), A handbook of research methods for clinical and health psychology (p. 147–159). Oxford University Press.
• Financial Times. [online] https://www.ft.com/content/d17d0de4-7842-11e9-be7d-6d846537acab. (Accessed: 19.10.2020).
• Fouda, R. A. N, (2012). Protectionism and Free Trade: A Country‘s Glory or Doom?, International Journal of Trade, Economics and Finance, Vol. 3, No. 5. pp. 351-355. Global News [online] https://globalnews.ca/news/4063058/bush-steel-tariffs-trump-trade-war/. (Accessed: 20.11.2019).
• Global Steel Trade Monitor, International Trade Administration, Steel Imports Report: United States, [online] https://www.trade.gov/steel/countries/pdfs/imports-us.pdf. (Accessed: 25.10.2019).
• Global Steel Trade Monitor, International Trade Administration, Steel Exports Report: Turkey, August 2019, [online] https://www.trade.gov/steel/countries/pdfs/exports-Turkey.pdf. (Accessed: 10.10.2019).
• Global Steel Trade Monitor, International Trade Administration, Steel Exports Report: Turkey, March 2018, [online]
• https://www.trade.gov/steel/countries/pdfs/2017/annual/exports-turkey.pdf. (Accessed: 19.10.2019).
• Guo, M., Lu L., Sheng L., Yu M. (2018). The Day After Tomorrow: Evaluating the Burden of Trump’s Trade War, Asian Economic Papers 17, p.1.
• Häggqvist, H. (2015). On the Ocean of Protectionism. The Structure of Swedish Tariffs and Trade 1780–1830. Uppsala Studies in Economic History 103.
• Helleiner, E., (2002). Economic Nationalism As a Challenge to Economic Liberalism? Lessons from the 19th Century, 46, pp. 307-329.
• Hitt, M. A., Hoskisson, R. E., & Kim, H. (1997). International Diversification: Effects on Innovation and Firm Performance in Product-Diversified Firms. Academy of Management Journal, 40(4), 767–798.
• International Trade Administration, (2019) Steel Industry Executive Summary, pp. 2-3.
• Irwin, D.A., Free Trade under Fire, (2002). Princeton, N.J.: Princeton University Press.
• Jaworski B.J, K. A. (1993). Market Orientation: Antecedents and Consequences .Journal of Marketing, 57, .52-70.
• Javalgi, R. R. G., Deligonul, S., Dixit, A., & Cavusgil, S. T. (2011). International market reentry: A review and research framework. International Business Review, 20(4), 377–393.
• Julian, C. C., Mohamad, O., MohamadZafar, i. C., and Sefnedi, S. (2014). The Market Orientation–Performance Relationship: The Empirical Link in Export Ventures. Thunderbird International Business Review , 56(1), DOI: 10.1002/tie.21598.
• Kumar, V. J. (2011). Is Market Orientation a Source of Sustainable Competitive Advantage or Simply the Cost of Competing? . Journal of Marketing, 75(1), pp. 16-30.
• Krueger, A. (2004). The Struggle to Convince the Free Trade Skeptics, IMF Survey, pp. 204–205
• Moss, T. and Colias M. (2018). "China to Ease Rules on Foreign Auto Makers, The Wall Street Journal. [online] https://www.wsj.com/articles/china-to-ease-rules-on-foreign-auto-makers-1523963345. (Accessed: 10.12.2019).
• NBC News (2017, March 17). Trump: U.S. Has Been Treated Unfairly. [online] https://www.nbcnews.com/video/trump-u-s-has-been-treated-unfairly-900556355618. (Accessed: 10.05.2020).
• OECD (2019, March 27). “OECD Steel Committee concerned about excess capacity in steel sector”. [online] https://www.oecd.org/industry/oecd-steel-committee-concerned-about-excess-capacity-in-steel-sector.htm.(Accessed: 20.10.2019).
• Office of the United States Trade Representative. “Mexico. U.S.-Mexico Trade Facts”. [online] https://ustr.gov/countries-regions/americas/mexico (Accessed: 25.10.2019).
• Office of the United States Trade Representative. “Turkey”. [online] https://ustr.gov/countries-regions/europe-middle-east/europe/turkey. (Accessed: 10.06.2020).
• Office of the United States Trade Representative US-Canada Trade Facts, [online] https://ustr.gov/countries-regions/americas/canada. (Accessed: 20.11.2019).
• Pierson B. (October 16, 2019). “U.S. prosecutors accuse Turkey's Halkbank of scheme to evade Iran sanctions”. Reuters. [online] https://www.reuters.com/article/us-usa-turkey-halkbank/u-s-prosecutors-accuse-turkeys-halkbank-of-scheme-to-evade-iran-sanctions-idUSKBN1WU2TW. (Accessed: 12.05.2020).
• Politico (2018, July 2018). [online] https://www.politico.com/story/2018/03/07/steel-tariffs-trump-bush-391426. (Accessed: 20.11.2019).
• Presidential Memorandum for the United States Trade Representative, August 14, 2017. https://www.whitehouse.gov/presidential-actions/presidential-memorandum-united-states-trade-representative/ (Accessed: 22.06.2020).
• Reuters Business News, (2019) [online] https://www.reuters.com/article/us-usa-trade-turkey/us-terminates-turkeys-preferential-trade-agreement-reduces-tariffs-on-steel-idUSKCN1SN01Z. (Accessed: 15.09.2019).
• Reuters (2019, July 17). “U.S. removing Turkey from F-35 program after its Russian missile defense purchase”. [online] https://www.reuters.com/article/us-usa-turkey-security-f35/u-s-removing-turkey-from-f-35-program-after-its-russian-missile-defense-purchase-idUSKCN1UC2GL. (Accessed: 10.05.2020).
• Robertson, C.; Chetty, S.K. (2000). A Contingency-Based Approach to Understanding Export Performance. International Business Review 9, 211–235.
• Rose, G., and Shohamb, A. (2002). Export Performance and Market Orientation: Establishing an Empirical Link. Journal of Business Research, 55(3), 217-225.
• Salvatore, Dominick, (2013). International Economics 11th edition, John Wiley and Sons, Inc.
• Shun, W. (2019). The Unwinnable Trade War. Everyone Loses in the U.S.-Chinese Clash—but Especially Americans. Foreign Affairs 99-108.
• Sullivan E., Haberman M., Ewing J. (2018, November 12). “Trump Renews Attacks on NATO and Trade Imbalances”. The New York Times. [online] https://www.nytimes.com/2018/11/12/us/politics/trump-nato-trade.html. (Accessed: 10.05.2020).
• Tavassoli, S. (2013). The Role of Product Innovation Output on Export Behavior of Firms. CSIR Electronic Working Paper Series, Paper No 5, 6.
• Teddlie, C., & Yu, F. (2007). Mixed Methods Sampling: a Typology with Examples. Journal of Mixed Methods Research, 1(1), 77-100.
• Thangamani, B. (2017). Export Market Diversification and Export Performance of Sri Lanka: a Cointegration Analysis. Asian Journal of Empirical Research,, 7(4): 75-83, DOI: 10.18488/journal.1007/2017.7.4/1007.4.75-83.
• Turkish Exporters Assembly. [online] http://www.tim.org.tr/tr/ihracat-rakamlari.html?utm_campaign=DonanimHaber&utm_medium=referral&utm_source=DonanimHaber. (Accessed: 17.09.2019).
• Türkiye Cumhuriyeti Ticaret Bakanlığı / Republic of Turkey, Ministry of Commerce (2018). Demir-çelik, demir-çelikten eşya sektör raporu. https://ticaret.gov.tr/data/5b87000813b8761450e18d7b/Demi_Celik_Demir_Celikten_Esya.pdf. (Accessed: 17.06.2020).
• Turkish Steel Exporters’Association, [online] http://www.cib.org.tr/en/statistics.html. (Accessed: 17.09.2019).
• Turkish Steel Producers Association. Accessed: 24 September 2019, [online] http://celik.org.tr/en/turkiye-celik-ureticileri-dernegi-basin-bulteni-23/. (Accessed: 24.09.2019).
• TSKB iron and steel report (2018) (bank for the development of industry Turkey) http://www.tskb.com.tr/i/assets/document/pdf/sektorel-demir-celik.pdf. (Accessed: 17.09.2019).
• Trump, D. J., And Schwartz, T. (2009). Trump: The Art of the Deal. Ballantine Books.
• Wang XA, Wan WP, Yiu DW. (2019). Product Diversification Strategy, Business Groupaffiliation, and IPO Underpricing: A Study of Chinese Firms. Strategic Entrepreneurship Journal.2019, 13:179–198.
• Weinland D. and Lockett H. (2019, September 25). “Caution Dominates China’s Financial Market Reform”. Financial Times. [online] http://www.ft.com. (Accessed: 17.06.2020).
• Wesley J Johnston, Mark P Leach, Annie H Liu, “Theory Testing Using Case Studies in Business-to-Business Research”, Industrial Marketing Management, Volume 28, Issue 3,1999,s. 206.
• Worldsteel (2018). World Steel in Figures 2018. [online] https://www.worldsteel.org/en/dam/jcr:f9359dff-9546-4d6b-bed0-996201185b12/World+Steel+in+Figures+2018.pdf
• Yayla, S., Yeniyurt,S., Uslay.C., Cavusgil, E. (2018). The Role of Market Orientation, Relational Capital, and Internationalization Speed in Foreign Market Exit and Re-Entry Decisions Under Turbulent Conditions. International Business Review 27, 1105–1115.
• Yin, R. K., (1994). Case Study Research Design and Methods: Applied Social Research and Methods Series. Second edn. Thousand Oaks, CA: Sage Publications Inc.
• Zeng, K. (2004). Trade Threats, Trade Wars, Bargaining, Retaliation, and American Coercive Diplomacy. The University of Michigan Press.
• Zuvich, D. (2019). Global Trade: The Evolving World Order. KPMG International Cooperative.