Turkey's $20 Billion Trade Pitch to Merkel Envoy Is Tough Sell

(Bloomberg) -- Turkey wants Germany to help deliver a $20 billion boost in exports, with an envoy of Chancellor Angela Merkel serving as the conduit.

Turkey's $20 Billion Trade Pitch to Merkel Envoy Is Tough Sell

A request to expand Turkey’s customs union with the European Union is on the table for talks with German Economy Minister Peter Altmaier, whose visit to Ankara on Thursday is the latest signal of detente between the two NATO allies. That’s after Merkel ended a diplomatic freeze with Turkish President Recep Tayyip Erdogan in September.

A party ally of Merkel, Altmaier has the chancellor’s ear and heads the cabinet ministry in charge of credit guarantees, a tool used to boost German exports. While business ties between Germany and Turkey are reason enough to engage, he’s offered no promises on the EU trading relationship that Turkey views as key to its regional economic ambitions.

“I’ve noted that this is an important topic for our Turkish partners,” Altmaier told reporters after meeting Treasury and Finance Minister Berat Albayrak in Ankara. It’s a “difficult topic” that requires further talks and can’t be solved by Germany alone, he said.

Erdogan’s Pitch

Erdogan reached out to German business leaders during his Berlin visit. During a meeting with executives from companies such as Deutsche Bank AG and Robert Bosch GmbH, he asked for the same kind of solidarity that the euro area showed Greece during the debt crisis, four people who were at the closed-door event said.

Turkey's $20 Billion Trade Pitch to Merkel Envoy Is Tough Sell

Erdogan is seeking an expansion of German credit guarantees for exports to Turkey and increased direct investment, according to two Turkish officials. While the Economy Ministry has signaled it’s open to using its influence, Merkel’s government actually tightened conditions for Turkish export guarantees this year given a weaker economic outlook and currency risks.

While German state guarantees backed 2.1 billion euros ($2.4 billion) of business with Turkey in 2015, the amount fell to 1 billion euros in 2016 and 1.6 billion last year.

A bigger, more distant prize is expanded trade with the EU. Turkey calculates that its exports account for about half of the $170 billion in annual trade with the EU. If Europe overhauled and expanded the existing customs union, those exports could increase by as much as a quarter, or about $20 billion, according to government estimates.

German CEOs

Turkey wants Germany to use its influence in the EU to push for the removal of restrictions on its producers and service providers, according to a senior Turkish official, who asked not to be identified by name. Turkey also is unhappy that non-EU countries with free-trade deals with the bloc get access to the Turkish market without automatic reciprocal benefits, the official said.

Turkey's $20 Billion Trade Pitch to Merkel Envoy Is Tough Sell

With Erdogan pressing Saudi Arabia for answers on the death of writer Jamal Khashoggi in Istanbul, Turkey’s regional ambitions are at center stage as Altmaier begins his two-day visit. He’s accompanied by German industry leaders, including EON SE Chief Executive Officer Johannes Teyssen.

Merkel’s government has repeatedly said it’s concerned about Turkey’s stability, but ruled out financial aid. The Turkish lira has recouped more than 20 percent of its value against the dollar from a record low in August, buoyed by central-bank tightening and signs that Turkey is patching up relations with the U.S.

German anger at Erdogan’s Nazi references and crackdown on civic freedoms suggest Altmaier can only do so much. While the rhetoric has calmed since the Turkish election in June, relations remain tense.

At his private meeting with German executives, Erdogan faced open criticism, including over his handling of the economy, according to those present.

In a departure from his combative public persona, the Turkish leader addressed the concerns and asked for patience, the people said.

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