Assessment of the Determinants of Revealed Comparative Advantages in Türkiye's Manufacturing Sector in the Context of Selected European Countries

This study examines Türkiye's trade competitiveness in manufacturing sector (SITC5-8) with 21 European economies from 1996 to 2021. The Balassa index results reveal that Türkiye's strongest competitiveness is in miscellaneous manufactured articles (SITC8) and manufactured goods (SITC6). Econometric models are employed to explore the factors influencing competitiveness across sectors. According to analysis, increase in GDP of trading partners generally weakens Türkiye's position in SITC5, 7 & 8 sectors. It is seen that economies of scale arising from free trade between trading countries do not significantly increase competitiveness. Geographic proximity increases the trade competitiveness of SITC5 and SITC7 sectors and when evaluated together with GDP data, it shows that the gravity model better explains these sectors. Investment in research and development has an impact on competitiveness in SITC7, aligning with Ricardian comparative advantages. Product differentiation and impact of Linder hypothesis appear more relevant for SITC6. Trade openness of partners presents a double-edged sword, harming competitiveness in SITC 8 due to increased partner productivity, while increasing competitiveness in SITC 7. While the appreciation of the currencies of trading partners reduces the competitiveness of SITC8 due to its dependence on intermediate goods, it has no statistical impact on other sectors. Periods of Turkish Lira depreciation (1999-2001 & 2018-2021) are found to negatively impact SITC8 competitiveness, highlighting its vulnerability to import dependence.