Argument

America Can’t Be Trusted to Run the Global Economy

After Donald Trump’s unprovoked attack on Turkey, the world must protect itself from Washington’s economic power.

People eat and drink in a street on August 15, 2018 in Istanbul, Turkey. (Chris McGrath/Getty Images)
People eat and drink in a street on August 15, 2018 in Istanbul, Turkey. (Chris McGrath/Getty Images)

This August, Turkey’s economy became the main topic in global news coverage. The reason was a systematic attack on the Turkish economy by the biggest player in the global economic system, the United States. It was one of the most disappointing moments in the history of the alliance between Turkey and America. The administration of U.S. President Donald Trump overtly attacked the economy of a fellow NATO member through sanctions and tariffs.

While the scale of the attack resulted in exchange rate fluctuations, the incident ultimately demonstrated the strong fundamentals of the Turkish economy. It also increased Turkey’s determination to strengthen our economy through structural reforms, new trade partnerships, and the attraction of foreign investments and to take steps to rebalance the structure of the international economy so that powerful countries like the United States no longer have the power to unilaterally disrupt the economic life of others.

For more than six decades, Turkey has been at the forefront of dealing with significant threats against Western countries. In recent years, this has included the fight against terrorist organizations such as al Qaeda and the so-called Islamic State. During this period, Turkey has become a hope for millions of refugees running away from the brutal regime in Syria and the target of terrorist organizations that want to expand the war in that country to the West. In one of the most unstable regions of the world, Turkey has become an island of stability.

In adopting sanctions against Turkey, the Trump administration invoked the flimsy pretext of an ongoing legal case involving a U.S. citizen with strong links to terrorist activities targeting Turkey’s peace and stability. The effects of the U.S. decision were nevertheless dramatic, with the Turkish economy experiencing immediate fluctuations. Washington’s brazen use of economic weapons served as a wakeup call for many countries and investors around the world. It was recognized as risky not only for the future of the alliance between Turkey and the United States but also for global markets. Meanwhile, the single-handed exercise of tariffs by the United States against its trade partners in Europe, Russia, and China proved that international trade, cooperation, and stability should be secured by a stronger alliance among nations around the world and may necessitate taking countersteps to prevent catastrophic damage to the global financial system and international trade.

Amid this artificial crisis created by the United States, the Turkish government has been pleased to see promising new opportunities for the future of the international economy. Our European friends, including German Chancellor Angela Merkel and French President Emmanuel Macron, have made statements that clearly indicate they understand that Washington’s approach was dangerous and mistaken. The spirit of cooperation and solidarity between Turkey and the European Union has thus been revived, having proved critical for the political and economic well-being of both sides.

In the face of all the negative propaganda, and the attacks on its financial system, the Turkish economy has demonstrated its strength. It is important to reiterate that no economic indicators or macroeconomic data can account for the devaluation of the Turkish lira over the past month. Turkey’s financial structure and banking system have not experienced any fundamental changes during this time. The Turkish government is committed to created an investor-friendly environment, and, to accomplish this goal, has taken steps to address several economic weaknesses to prevent potential future vulnerabilities. Turkey will now coordinate and balance its monetary and fiscal policies with greater determination. Fiscal discipline, which has been the linchpin of our economy, will be strictly observed in the coming years. We are also determined to implement structural reforms in a timely manner. Indeed, we are already carrying out a series of cost-saving measures throughout the government and working to achieve more sustainable growth rates through cautionary macroeconomic measures.

As has been the case for the last 16 years under the Justice and Development Party’s successive governments, the Turkish Central Bank’s independence, effectiveness, and leading role in monetary policy will remain a priority for the government. We will continue to support the Central Bank through fiscal policies and strengthen its room for maneuver and credibility. It is also important to underline the fact that Turkey has never implemented rules that run counter to market principles; no crisis or financial assault can weaken Turkey’s commitment to those principles. We have never considered capital controls, and we will never consider it in the future. As has been confirmed by European governments, the Turkish banking system is healthy and has no foreign currency exposure. The banking sector has the capacity to manage the current volatility, and the government will not hesitate to support it whenever needed.

It is not on our agenda to go to the International Monetary Fund, contrary to what some have suggested. Turkey will continue to secure foreign currency reserves from international markets as it has until now. Our goal is to ensure that Turkey continues to attract foreign direct investment and become a center for innovation and research and development for the global economy. Turkey’s public debt-to-GDP ratio is around 28 percent. On average, this ratio is 49 percent in emerging economies and 111 percent for countries in the Organization for Economic Cooperation and Development. Moreover, the household debt-to-GDP ratio is 17 percent in Turkey—much lower than the average 36 percent in developed countries and 59 percent around the world. The total debt ratio is 137 percent in Turkey and 211 percent in emerging economies; the world average for this ratio is 318 percent. All these indicators suggest that Turkey will soon emerge stronger from its immediate troubles.

I believe that the current challenge to Turkey’s financial system provides us with a great opportunity to strengthen the structure of the global economy and our position within it. Turkey is not the only country that the United States has recently targeted with sanctions under political pretexts. This unilateralist approach threatens developed as well as developing economies. It is clearly in the interest of most countries to cooperate in resisting unilateral economic decisions by powerful actors that are motivated by narrowly defined national interests—especially at a time when the world’s economies are unprecedentedly integrated with one another.

The world faces incredibly complex challenges. Washington’s threats to the international economy and international trade are a significant subset of those challenges, and the world must collectively deal with them. Unilateral sanctions, incitement of trade wars, and haphazard use of economic weapons could potentially trigger another global economic crisis. At this critical juncture, developed and developing economies around the world need to promote strong and institutionalized cooperation to handle potential crises and financial attacks. The assault on the Turkish economy must be viewed as an example of how the senseless use of economic pressure as a political weapon poses serious global risks. By acting together with Turkey now, other countries can also help it create a common strategy to avoid artificial crises in the future.

The Turkish government will now take steps to achieve more cooperation and coordination with other countries around the world while fixing the vulnerabilities of our own economy. We will work to eliminate all types of economic risk without hesitation. Our determination presents an opportunity for deeper and more mutually beneficial economic and political cooperation. We must seize this moment and build a sustainable economic future.

Berat Albayrak is the Turkish minister of treasury and finance.

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