29 products from ‘producer-driven’ networks increased 178 percent in 2000-04, while those from ‘buyer-driven’ networks increased by a very respectable 50 percent. As a result, the composition of network exports has been undergoing significant evolution, with their share in all networks’ exports increasing from 11 percent in 1990-96 to 23 percent in 2000 and 38 percent in 2004.

This section examines in more detail Turkey’s place in evolving division of labor driven regionally by EU Eastern Enlargement Project. It assesses participation of Turkish firms in global chains organized around the EU-15 but also increasingly encompassing some recent EU entrants, mainly Hungary and to a lesser extent the Czech Republic that are becoming regional intermediaries in ‘producer-driven’ networks (Kaminski 2005).

# **A** _. Participation in ‘buyer-driven’ value chains in comparative perspective_

‘Buyer-driven’ commodity chains tend to exist in industries in which large retailers, branded marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically in developing or transition economies. This pattern has become common in labor-intensive, consumer goods sectors, such as apparel, footwear, etc. Our focus will be on three ‘buyer-driven’ chains: textiles and clothing (T&C); footwear; and furniture. The latter differs especially from T&C value chains, as it involves operations that tend to be more diversified and complex requiring larger local input of skills and investment in capital assets. Similarly to clothing and footwear, furniture producers operating in a global value chain supply products according to specification provided by large multinational retailers. They also tend to be locally owned, albeit not always,<sup>14</sup> but the relationship between supplier and multinational retailer frequently reflects larger complexity of tasks involved. In consequence, their relationship is based on a more long-term mutual commitment, which is less sensitive to the rise in labor costs and creates more opportunities for spillovers.

Clothing and, to a lesser extent, footwear and furniture have been the quintessential engines of growth for many EU-8 and other European economies during the initial stages of transition. They have accounted for a significant share of value added and manufacturing employment, with consequential implications for poverty reduction. With increasing wages in successful reformers, many of outward processing operations in the clothing sector have been shifting to economies less advanced in the transformation process to take advantage of lower labor costs in other countries in Central and South East Europe through the 1990s. The dates when their share in exports of manufactures peaked indicates the end of T&C as engines of export growth. In contrast to Bulgaria and Romania as well as other SEE-4 economies, where T&C shares peaked only in the second half of the 1990s and early 2000s, Turkey followed the pattern of EU-8, with their share peaking in the early 1990s (Table 16).

Despite a similar time profile, the share of T&C products in Turkish exports peaked at a much higher level than in the EU-8 economies and consequently still accounts—despite a very significant contraction of 16 percentage points—for a much larger share of the total export than in EU-8 exports. It is lower, however, than in exports originating in Bulgaria and Romania. Exports from these two countries had positive growth rates in 1995-04. Neither Turkey nor any EU-8 had positive growth rates of T&C exports during this period. Among EU-8 economies Latvia has the largest share of T&C chain products in its total exports.

> 14  Turkey and Romania stand out. Firms with foreign capital are present in Turkey’s clothing industries. For instance, four firms specializing in wearing apparel (excluding knit) account for 89 percent of total capital stock of this sector and 212 firms producing ready made garments account for 71 percent (MIT 2004, p. 46). Foreign-owned firms, mainly Italian, tower the Romanian apparel and garment sector (Kaminski and Ng 2004).