A comparative investigation of the price competitiveness of Turkish and Southeast Asian exports in the European Union market, 1990-1997

The relative concentration with respect to export markets and products makes export receipts of Turkey vulnerable to fluctuations in the demand conditions. Given that most of the Turkish exports face intense competition from close substitutes produced in other countries, avoiding large fluctuations in export receipts, and maintenance/growth of market shares in such major export destinations as the EU market often require price competition. This paper investigates the significance and nature of price competition between Turkish and Southeast Asian exporters of selected manufacturing products in the EU market where this competition is particularly stiff. For this purpose, we estimate a model that posits that the relative market shares of Turkish and Southeast Asian exporters in the EU markets for commodities we consider are related to the prices of imports from respective countries. Our analysis concentrates on "textiles and garments," a leading export category that brings in a considerable part of Turkey's export receipts, and "technology-intensive products," which has recently become an export category of increasing significance for Turkey. Our results indicate that price competition plays a significant role in explaining the EU market shares of Turkish and Southeast Asian exporters and provide useful information on the magnitudes of relative price elasticities. Furthermore, they provide grounds for an evaluation of the possible contributions of Turkey's geographic proximity to the EU market, and the Turkey-EU Customs Union agreement to the price competitiveness of Turkish products against their Southeast Asian competitors.