37 Indeed, Turkey’s performance stands out. Together with Hungary, Czech Republic, Slovak Republic, Slovenia, Estonia and Poland, Turkey has been identified in a recent World Bank study (WB 2006) as one of the seven “High Performers” among European and Central Asian countries in ‘producer-driven’ network trade. These countries share one major characteristic: the share of exports of ‘producer-driven’ networks in exports of manufactures, excluding chemicals, exceeded 20 percent in 2003. Turkey’s share of 22.5 percent puts it on a par with Slovenia and well above levels in other EU candidate countries. Except for Slovenia, the most developed economy among EU-8, exports of parts and exports of final products in High Performers grew at average rates exceeding 15 percent per year in 1995-2003. As a result, the share of Turkey in total ‘producer-driven’ networks’ exports of EU-8 and EU candidate countries increased from 9 percent in 2000 to 13 percent in 2003. This share in automotive exports is slightly higher amounting to 15 percent in 2003 up from 10 percent in 2000.

# **_D._** _Concluding observations_

While ‘buyer-driven’ network exports still accounted for 62 percent of all network exports in 2004, their share rather dramatically declined form almost 90 percent in 1995-97 and 75 percent in 2000. Moreover, the share of T&C products in ‘buyer-driven’ network exports slightly fell because of the increased industrial activity within the furniture network.

Overall, there was a clear shift towards specialization in higher valued added ‘producerdriven’ networks. The value of their aggregate networks more than quadrupled increasing 340 percent while that of ‘buyer-driven’ exports increased 76 percent in 2004 over 2000. Exports of other parts and electro-engineering products more than doubled. The major driver of change, overall, has been automotive network, but strongly supported by the expansion in exports of ICT network final products.

The comparison with other High Performers in ‘producer-driven’ network trade in the region indicates the room for further expansion. Despite the impressive export performance over 2000-04, Turkey’s total ‘producer-driven’ network exports were equivalent in 2004 of 51 percent of Hungary’s exports, 73 percent of Czech, 85 percent of Poland’s and 119 percent of Slovak exports.

# **6. Conclusions**

Turkey’s recent fast export expansion appears to be based on solid ground. It is geographically diversified; driven by skilled labor-intensive higher value added products with medium to high technology content; based on the entry of Turkish firms into supply chains of automotive and ICT networks; and supported by fast growth of unskilled labor and low techintensive products. The shift towards higher value added exports has been taking place because differentials in fast growth rates have been in their favor. This has not been due to either slow down or collapse of unskilled labor-intensive exports but to a stronger push in other exports.

The available evidence looks like an economic success story in the making, even if the story is far from over. Export expansion owes a lot to improved policy environment and domestic liberalization. It is rather telling that the recent expansion has coincided with the implementation of most provisions of the EU-Turkey Customs Union Agreement, the completion of the removal of tariffs on trade in industrial products among Pan-European parties to the Pan-European Cumulation of Origin Agreement and improved macroeconomic stability after the 2001 crisis. The Pan European Cumulation of Origin Agreement together with elimination of tariffs in the Pan-European area have set the groundwork for the growth of intra-industry and network trade.

The shift towards products requiring more capital, a better-trained labor force and more sophisticated technologies and participation in international ‘producer-driven’ networks has three important consequences.