The freedom to trade has always been at the heart of creating wealth. As the USA was able to connect both coasts with the railroads in the 19th century, valuable goods were able to flow easily to and from anywhere the rail lines were laid. Now we may be on the edge of another rail-driven golden age of commerce, but this one is happening on the other side of the world.
A train recently left China and traveled through Kazakhstan, Azerbaijan, and Georgia. It then reached Turkey and went on to Europe via the Marmaray tunnel. That train crossed two continents and may be the start of some big changes in how Eurasia creates wealth.
The China Railway Express is connecting East Asia with Europe, and Turkey sits in a privileged position on that new trade corridor. Turkey and China have both been working on major infrastructure projects, and it appears that now the old seat of the Ottoman Empire has a new role to play in 21st-century commerce.
The Old can’t be Made New Again
Turkey was once a great global power and challenged the major European dynasties of the time. In its own backyard Turkey was absolutely unchallenged for hundreds of years, and as the recent invasion of Syria demonstrates, it is still a force that can make a meaningful impact on regional affairs.
When it comes to trade, Turkey is far less important. Even with the rise of Chinese rail service from east of Shanghai all the way to Hungary (and even further), the land that Ankara controls is only one of many client states that could act as a freight depot or transshipment point for maritime transfers.
The overall relationship that Turkey cultivates with both China and the USA are far more important to pay attention to than its geography within China’s new Eurasian distribution network.
Turkey has already ruffled some feathers in Washington D.C. when it decided to buy Russian-made S-400 missile systems, but if it becomes a Chinese proxy in the Near-East, the current sanctions that have been proposed for the nation aren’t likely to be seen as strong enough by US lawmakers.
Turkey’s Economic Issues
The Turkish economy isn’t in great shape, and the nation has seen many years of economic volatility. Turkish Lira has been making headlines for more than a year and has lost well over half its value when measured against the US dollar over the last decade.
Unfortunately for Turkey, even with a lower currency, manufacturing and exports haven’t seen much in the way of a bump. The tourism sector in the nation has been unable to capitalize on the weak currency as well, due to safety concerns, and an active war zone on the Southern border.
Some estimates see Turkish employment rising, inflation falling below 10% per year, and GDP growth rising to above 5% in 2020. Given the fact that these forecasts rely heavily on an uptick in manufacturing, as well as positive growth in Turkish agricultural production, it would be best to take them with some amount of skepticism.
A Possible Gilded Age for China, Not its Client States
There is little doubt that the investments and political alliances that the Middle Kingdom is making across Eurasia will provide China with massive rewards in the 21st century. China has built the largest manufacturing base in modern times, and now the country is looking for the best way to sell its wares on the globe’s largest landmass.
The new railway that is driving Chinese goods to all points west is a leap forward for the world’s most powerful manufacturer, and will probably unlock latent demand in many Eurasian nations. The situation is somewhat different for countries like Turkey, who offer little economic opportunity to China, with the exception of buying Chinese goods and allowing their free flow to Western nations.
Turkey’s situation is hardly unique, and China isn’t building manufacturing infrastructure with the Belt and Road Initiative (BRI, or One Belt One Road ‘OBOR’), it is building distribution infrastructure to carry its goods to market.
Like most of the nations on the new Silk Road, Turkey is a client state. It may see some economic upside from the free flow of Chinese goods through Turkish land, but the shipment of Chinese goods is unlikely to make a big impact on the flagging Turkish economy.
Perhaps the best analogy for the role that Ankara plays in the new Chinese global order is that of the ‘Last Spike’ in Promontory Summit, U.T., back on May 10, 1869. The transcontinental railroad was completed in Promontory Summit on that day, and a ceremonial golden spike was driven into the ground.
Merchants in San Francisco, New York, and Boston were the clear beneficiaries of that last spike that connected the two coasts. Promontory Summit didn’t get much out of it, but trains carrying valuable goods did pass through the area for many years to come.