Constructing Turkish commercial diplomacy : defining the divergence in experience

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T.C.

ISTANBUL COMMERCE UNIVERSITY GRADUATE SCHOOL OF FOREIGN TRADE DEPARTMENT OF COMMERCIAL DIPLOMACY

COMMERCIAL DIPLOMACY PROGRAMME

CONSTRUCTING TURKISH COMMERCIAL DIPLOMACY: DEFINING THE DIVERGENCE IN

EXPERIENCE

MA Thesis

Ahmet Buğra KARAHAN 200008691

Istanbul, 2020

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T.C.

ISTANBUL COMMERCE UNIVERSITY GRADUATE SCHOOL OF FOREIGN TRADE DEPARTMENT OF COMMERCIAL DIPLOMACY

COMMERCIAL DIPLOMACY PROGRAMME

CONSTRUCTING TURKISH COMMERCIAL DIPLOMACY: DEFINING THE DIVERGENCE IN

EXPERIENCE

MA Thesis

Ahmet Buğra KARAHAN 200008691

Advisor: Dr. Uğur Yasin ASAL

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T.C.

İSTANBUL TİCARET ÜNİVERSİTESİ DIŞ TİCARET ENSTİTÜSÜ

YÜKSEK LİSANS TEZİ ONAY FORMU

Ticari Diplomasi İngilizce Yüksek Lisans programı öğrencisi Ahmet Buğra Karahan’ın CONSTRUCTING TURKISH COMMERCIAL DIPLOMACY: DEFINING THE DIVERGENCE IN EXPERIENCE başlıklı tez çalışması, Enstitümüz Yönetim Kurulu 04.09.2020 tarih ve 166-4 sayılı kararıyla oluşturulan jüri tarafından oybirliği/oyçokluğu ile Yüksek Lisans Tezi olarak kabul edilmiştir.

UNVANI, ADI SOYADI ÜNİVERSİTE

TEZ DANIŞMANI : Dr. Uğur Yasin ASAL İstanbul Ticaret Üniversitesi

JÜRİ ÜYESİ : Dr. Vahit Ferhan BENLİ İstanbul Ticaret Üniversitesi

JÜRİ ÜYESİ : Dr. Hazal VURAL JANE İstanbul Aydın Üniversitesi

ENS.FR.Y15 06.11.2017

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Ahmet Buğra Karahan a M.A. student of ISTANBUL COMMERCE UNIVERSITY Graduate School of Foreign Trade 200008691 successfully defended the thesis entitled

“CONSTRUCTING TURKISH COMMERCIAL DIPLOMACY: DEFINING THE DIVERGENCE IN EXPERIENCE”, which he prepared after fulfilling the requirements specified in the associated legislations, before the jury whose signatures are below.

Thesis Advisor: Asst. Prof. Dr. Uğur Yasin ASAL Istanbul Commerce University

Jury Members: Asst. Prof. Dr. Uğur Yasin ASAL Istanbul Commerce University

Asst. Prof. Dr. Vahit Ferhan BENLİ Istanbul Commerce University Asst. Prof. Dr. Hazal VURAL JANE

İstanbul Aydın University

Date of Defense: 11.09.2020

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ABSTRACT

According to economic growth models, learning-by-doing is an important social aspect and it is evident that European economic development has been achieved through the acquisition and accumulation of experience for commerce and diplomacy, especially after the 15^th and 16^th centuries. This know-how accumulation ensured the establishment of the European Concert, customs unions, free trade facilities, commercial and diplomatic governing bodies, financial system etc. through continantal conflicts, colonial campaigns, trade wars, embargoes, commercial intelligence and such until the end of 19^th century.

Eventually, the economic system created by Europe has been dictated to the rest of the world. However, Ottoman Empire has never practiced the learning curve of this European economic system of exploitation based on mercantilism, colonialism and capitalism, in fact, it resisted to the penetration of this system as severe as possible. Hence, the Republic of Turkey has never possessed the experience of commercial diplomacy in European way even though it came from long established culture of diplomacy and trade governance of its own. Therefore, Turkish economic policy that follows the common practices of contemporary European practice is contrary as it’s exhausting for national resources.

Keywords: Commercial Diplomacy, Economic Diplomacy, Economic Policy, European Concert, Ottoman Empire, Republic of Turkey, Turkish Commercial Diplomacy.

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ÖZET

Modern iktisadi büyüme modelleri dikkate alındığında, tecrübe ile öğrenme kavramı günümüzde ön plana çıkmaktadır. Bu bağlamda Avrupa’nın bugün sahip olduğu iktisadi gelişmişlik düzeyinin, 15. ve 16. yüzyıllardan sonra elde edilen ticari ve diplomatik tecrübelerin bir birikimi olarak değerlendirilmesi mümkündür. Bu bilgi ve tecrübe birikiminin 19. yüzyıldan itibaren Batı’nın sahip olduğu Avrupa ittifakı, gümrük birlikleri, serbet ticaret araçları, ticari ve diplomatik idareler, finans sistemleri gibi araçların tahsis edilmesinde büyük rol oynadığı bir gerçektir. Tahsis edilen bu yapının Avrupa’da, cereyan eden muharebeler, kolonizasyon, ticaret savaşları, ambargolar, ticari istihbarat ve benzeri acı tecrübelerin sonucu olarak ortaya çıktığı da aşikardır. Tüm bu tecrübelerin ardından kendi aralarında bir ahenk elde eden Avrupa devletleri kurdukları yeni sistemi dünyanın geri kalanına dikte ederek bir bakıma küreselleştirmişlerdir. Fakat, merkantilizm, sömürgecilik ve kapitalizm temeline dayanan istismarcı ekonomik sisteme tamamen zıt bir iktisadi anlayışa sahip olan Osmanlı İmparatorluğu, Avrupa’nın sahip olduğu bu tecrübeye yabancı kalmış, hatta bu sisteme adapte olmaya şiddetle direnmiştir. Bu sebeple, her ne kadar köklü bir diplomasi ve ticaret yönetimi tarihine sahip olsa da, Avrupa’nın sahip olduğu ticari diplomasi tecrübesine uzak olarak kurulan Türkiye Cumhuriyeti’nin, Batı’ya entegrasyonu itibariyle uygulamakta olduğu ve Avrupa normlarını takip eden iktisadi politikaları çelişkiye içermekte ve milli kaynakların verimsiz şekilde sarfedilmesine sebebiyet vermektedir.

Anahtar Kelimeler: Ticari Diplomasi, Ekonomik Diplomasi, Ekonomi Politikası, Avrupa İttifakı, Osmanlı İmparatorlığu, Türkiye Cumhuriyeti, Türk Ticari Diplomasisi.

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ACKNOWLEDGEMENTS

Support and assistance of special people throughout the writing of this dissertation will always be memorable and I will always be grateful to those people who made this study possible for me.

Completion of my dissertation would not have been possible without the support and nurturing of Nuran İrem Develioğlu, who has wisely steered, tirelessly motivated, and subtly corrected me on my efforts. Her faith in me exceeded my own confidence most of the time and illuminated my path through this study. So first and foremost I wish to thank her for her encouragement and peace she provided me during the difficult times I encountered in this process.

Thanks should also go to my father, Mehmet Turan Karahan for his ambition to academic studies and knowledge. Without his aspiration, inducement and our lasting conversations, I would not be pursuing my passion on this study.

I’m extremely grateful to Aziz Toprak, whom we started off the academic journey of commercial diplomacy together. Who also has never spared his sincere support on my dissertation under all circumstances.

I would like to express my deepest appreciation to my supervisor Dr. Uğur Yasin Asal for his confidence in me. His positive guidance, understanding, feedback and support on my dissertation is priceless and I will always consider myself fortunate for being able to receive his supervision and hope to come close to his admirable cognizance.

I would also like to extend my deepest gratitude to Dr. Nazım Ekren for directing me in the area of Commercial Diplomacy, shouldering the responsibility for the commencement of this visionary field, pave the way for my studies and allowed me to benefit from his dream on the future of commercial diplomacy studies.

I would like to extend my sincere thanks to Mr. Uluç Özülker, who was so kind as to allow me to benefit from his absolute horizon during our lectures and conversations, who broadened my vision on this field of study and we cannot possibly appreciate his knowledge enough.

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LIST OF FIGURES

Figure 1: Concentration of the British Export Sector between 1815 and 1880 ... 21

Figure 2: Number of European MFN Clause Treaties as % of Potential between 1855 and 1875 ... 27

Figure 3: Average Openness (%, left scale), Protection (%, left scale) and Number of Treaties (% of potential, right scale) ... 28

Figure 5: Looms in Ottoman Empire ... 64

Figure 6: Comparative de-industrialization: textile import penetration, 19th century ... 65

Figure 7: Domestic spinning output within the 1911 borders of the Empire ... 65

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LIST OF TABLES

Table 1: Evolution of the numbers of active chambers of commerce abroad ... 37

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LIST OF ABBREVIATONS

MFN : Most Favoured Nation

OPDA : Ottoman Public Debt Administration

SME : Small and medium-sized enterprises

USA : United States of America

WTO : World Trade Organization

WWI : First World War

WWII : Second World War

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INTRODUCTION

1.1 Problematic of the Thesis

1.1.1 Purpose of the Study

This research, based on the prevailing learning-by-doing model of growth, claims that, European economic development has been achieved through experience of commerce and diplomacy. Analyzing the know-how accumulation for both concepts, through the history and practice of trade liberalism in 19^th century, the dissertation emphasizes on the crucial aspect of commercial diplomacy practice which has put the western civilization in the final form by the virtue of its journey through mercantilism, colonialism, industrialism and capitalism.

The main purpose of this research is, to point out the absence of an essential building block for Turkey’s regional and global economic policy, the cumulated experience of commercial diplomacy and free trade culture. It is anticipated that, designation of the deficiency for idiosyncratic commercial diplomacy, which withholds the country from composing an economic policy compatible to the abilities of its public and private institutions, might pave the way for Turkey’s economic development.

Therefore, this study refers to commercial diplomacy as an imperative component for reaching Turkey’s national vision inspired by the accumulated experiences of developed countries.

1.1.2 Rationale for the Study

Absence of a distinctive commercial diplomacy in Turkish economic policy hinders the political initiatives, cripples the result oriented and instructive approach for private sector to contribute Turkey’s international interests and overlooks the commercial abilities of the country. Contrariwise, it constitutes an atmosphere where efforts of policymakers, private

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sector, public organizations and entities to be scattered due to the lack of shared vision, clear goals, coordination and guidance.

1.2 Research Questions

Commercial diplomacy has been under the radar of academic researches for almost a decade now. Grow of global market is outdistanced by the increase in number of suppliers, intensifying the competition by a virtue of emergent economies. This new normal in international trade, prompt enterprises, governments and academics to seek for new doctrines for commerce. Economic aspect of diplomacy comes forward in shapes of business diplomacy, economic diplomacy, and commercial diplomacy etc. Therefore establishing a concrete diplomacy to support economic development depends on discovering previous practices and to study the experiences of other actors. Since this study focuses the analysis of missing pieces to establish a commercial diplomacy for Turkey, understanding the signification and role of commercial diplomacy, utilization of commercial diplomacy by Europe and lack of experience in Turkish history for such tools are essential. Questions presented below is hoped to help determine the structure of this study.

1. What is the commitment between economic policy and commercial diplomacy?

2. How commercial diplomacy can serve a country’s economic growth and trade?

3. How and when European economic development occurred?

4. How did the experience of commercial diplomacy accumulate in Europe?

5. Does Turkey have the same experience of commercial diplomacy as Europe?

1.3 Underpinnings of Research

 Phenomenon: Absence of required experience for building distinctive commercial Diplomacy adaptation to the economic policy of Turkey.

 Dependent Variables: Accumulated know-how for commerce and diplomacy, experience for trade liberalization.

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 Independent Variables: Institutional structure, human resources, regional power competition, demands and pressure of different interest groups, international governance system and bodies, technology assisted by trade, premeditated commercial agenda.

1.4 Hypothesis & Conjectures

European economic development has been achieved through the acquisition and accumulation of experience for commerce and diplomacy, especially in the 18^th and 19^th centuries. However, since Turkey does not possess the European experience of commercial diplomacy, Turkish economic policy, which follows common practices of contemporary European practice, is uncompetitive and exhaustive for the national resources.

1.4.1 Arguments of Hypothesis

 Europe attained its current experience of commerce mostly from mercantilism, colonialism, capitalism and liberalism trends in 18^th and 19^th centuries.

 European economic development is by-product of commercial diplomacy.

 Turkish history does not match with the European trends of current commercial diplomacy applications.

 Utilization of distinctive commercial diplomacy is crucial for Turkey’s economic development.

 Economic power can be consolidated through a successful and suitable commercial diplomacy adaptation.

 Turkey can expand its area of influence through commercial diplomacy.

1.4.2 Conjectures

 European commercial diplomacy practice has been acquired by historical developments in Atlantic.

 Commercial diplomacy is essential for competitive international trade.

 All developed economies have instrumentalized commercial diplomacy.

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 Commercial interests of European countries have shaped Western international policy.

 Turkey has been unable to institutionalize a distinct commercial diplomacy so far.

 Turkish experience with commercial diplomacy is divergent from European experience.

1.5 Research Methodology & Design

 Research on the definition and nomenclature of commercial diplomacy, history of international policy and free trade facilities of Europe in 19^th century, Some European applications of commercial diplomacy in 19^th century.

 Research on Turkish perception and experience with commerce in 19^th century.

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THEORETICAL FRAMEWORK

2.1 Theoretical Framework of the Study

Further economic development is in the agenda of any country today, whether developed or developing. In order to reach further development, economic growth is a must. Among classical models regarding economic growth; learning-by-doing became prominent by its social aspects in 1950’s by Solow, Johansen and Arrow (Solow, 1957) (Johansen, 1959) (Arrow, 1962). It has been further developed by Robert E. Lucas. Simple summary of the model as in the shape, which will be used in this study, would be; in closed economies, experience of manufacturing a specific product accumulates over time and by attempts.

Therefore, as human capital is invested, the knowledge to produce better and cheaper products accumulates as well (Lucas, 1988). Paul Rommer who researches further on this process and its effect on growth, defines this process of learning by doing as ¨painfully slow progress¨ (Romer, 1994) .

Bo Södersen, evolves the model for growth which focuses on the accumulated knowledge in companies and adapts the model into the growth of countries through history. According to his adaptation; the main reason for the development of Europe after 15^th and 16^th centuries against a scientifically superior Islamic world and a technically superior China is the process of learning. This learning according to Södersen, has started by maritime technology and trade. Through time, maritime technology endogenously developed while trade fostered the acquisition and need of knowledge that improved trading methods further. As a result, market size has grown and dependently, trade volume has multiplied.

The acquisition of new knowledge triggered the establishment of new institutions, which in turn, made a catalyst effect on trade multiplication. This increase in the market and trade volume required a legal system for trade, which has been established by British after 200 years of trial and error (Södersen, 1993).

Therefore, Södersen reached two conclusions; first; economic development for the West is achieved through trade which is built on the knowledge acquisition, in other words,

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learning-by-doing. So, international trade means exchange of knowledge. Second; the amount of knowledge that a nation possess is determinant in that nation’s per capita income (Södersen, 1993). Lamoreaux, Raff & Temin also points out the learning as ¨the new experience¨ in economic growth and refer to the importance of analyzing the history for understanding social and cultural environments of the day, to comprehend the experiences alongside with classical economic analyses (Lamoreaux, Raff, & Temin, 1999).

As Huub Ruël remarked in his book, Making Trade Missions Work; ¨Trade and diplomacy have helped turn civilizations into great economic powers¨ As greatest civilizations in the history have risen by trade but only if trade is supported by successful diplomacy, we can say that, interdependency of trade and diplomacy have proven itself historically (Huub, Lee, & Visser, 2013).

Since trade and diplomacy are inseparable for development goals, growth and prosperity of nations are the virtue of successful commercial diplomacy adaptation. Furthermore, according to learning-by-doing model, knowledge accumulation for trade is crucial in development of economies. Thus, this study attributes the current economic development of western world to the experience gained through centuries of commercial diplomacy practice. Accordingly, endeavor to indicate the crucial experience deficiency of Turkey on contemporary commercial diplomacy practice; which has been shaped by Europeans in their own experience and perception. Thus, analyzing the historical development of European commercial diplomacy becomes crucial. The said analysis will be covering the free trade journey of Europe, led by Britain in 19^th century. To specify a point of origin, Congress of Vienna has been chosen, since it is the milestone for multilateral discussions and agreements paid regard to common interests of a group of states.

Because of the Congress of Vienna, 1815 was the year when the foundations of international governance have been laid. Also by the virtues of mercantilism, trade wars, industrialization, and fall of colonies, Europe has entered the era of free trade.

Liberalization movements in trade shaped the politic and diplomatic approaches of European countries, which accumulated into a diplomatic know-how. The goal was to gain

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hegemony by the hand of free trade. However, Ottoman Empire was stranger to these concepts and therefore there was no quest for political support among interest groups due to its political and economic vision alongside with its condition. Thus, the Republic of Turkey has never been able to reflect on such inclinations according to the lack of accumulated knowledge on commercial diplomacy. On the contrary, the newborn republic has illustrated deliberative protectionist approach towards trade activities, attempting to protect its vulnerable economy from imported goods via barriers of any kind, even decades after Europe’s unpleasant interruption of free trade episode by the World War.

Eventually, Europe has achieved its current state on trade policies and commercial diplomacy, built on its experience and struggle for free trade, while Turkey has conducted its commercial activities based on reaction rather than planned actions. Hence, it is anticipated that, comprehension of the historical background of free trade facilities in Europe and its absence in Turkish experience would assist the adaptation of more successful and convenient commercial diplomacy to Turkish politics which would address Turkey’s drawback on this issue and can be an opportunity to build its economic policy based upon its own learning-by-doing practice.

2.2 Theoretical Framework of Commercial Diplomacy

2.2.1 Economic Policy

According to Nicola Acocella; economic policy is the discipline that studies public economic action, which formed by the examination of social, institutional and governmental choices. Any discipline that contains the actions of an economic agent, guided by economic analysis is the field of economic policy. Economic policy acts as a guide to public behavior through philosophy, political science, law, statistics, econometrics etc. Therefore, economic policy is the discipline of economic analysis, which studies the behavior of any economic agent with the contribution of a variety of disciplines (Acocella, 2005). According to the theory of Tinbergen and Theil; economic policy is a tool for policymakers to reach political objectives through the model of the economy (Acocella, Bartolomeo, & Hallet, 2013). Economic policy aims to solve the policy problem; “resulting

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from the interaction of a policy objective, representing some abstract policymaker’s desires, with a policy model representing the feasible outcomes of policy actions” (Preston &

Pagan, 1982) (Acocella, Bartolomeo, & Hallet, 2013).

2.2.2 Economic Diplomacy

Berridge and James, in their work of reference; A Dictionary of Diplomacy, presents two definitions for economic diplomacy. Firstly, they refer it as; ¨diplomacy concerned with economic policy questions, including the work of delegations to conferences sponsored by bodies such as the World Trade Organization¨. The other definition they offer is; diplomacy that utilize economic resources with the objective of particular foreign policy objective.

Economic diplomacy sometimes referred as ‘economic statecraft’ (Berridge & James, 2003). In addition to Berridge and James’s definition, Saner and Yiu adds aspects of monitoring and reporting on economic policies of other countries as well as advising their government about how to act in deference (Saner & Yiu).

Economic diplomacy, therefore; is a bilateral, regional and multilateral dimensional governance discipline for countries on how to establish and maintain the external relations in pursue of national gain in the economic fields. Economic diplomacy is conducted by governmental institutions; however, the addressee of the economic diplomacy can be non- governmental institutions as well (Rana, 2007).

2.2.3 Commercial Diplomacy

Definition from Berridge and James’ A Dictionary of Diplomacy of commercial diplomacy is; ¨The work of diplomatic missions in support of the home country’s business and finance sectors. Distinct from although obviously closely related to economic diplomacy, it is now common for commercial diplomacy to include the promotion of inward and outward investment, as well as trade¨ (Berridge & James, 2003).

Before addressing other definitions of commercial diplomacy, it is important to mention the

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are highly correlative and resembles one another, therefore often confused. Economic diplomacy usually related to the issues regarding economic policy while the area of commercial diplomacy is more specific. Commercial diplomacy deals with policymaking and business support activities (Ruël, 2019). In addition, commercial diplomacy also describes the work of diplomatic missions. Furthermore, on intelligence side, commercial diplomacy contains information gathering about export and investment opportunities (Saner

& Yiu). According to Evan H. Potter, economic diplomacy and commercial diplomacy ¨are irrevocably intertwined: commercial diplomacy aims to exploit comparative advantages and capitalize on the international opportunities created by economic diplomacy and the evolution of markets¨ (Potter, 2004). It should also be added that commercial diplomacy also diverges from economic diplomacy by the actors, as an addition to economic diplomacy, commercial diplomacy can also be conducted by private sector, as it will be mentioned further.

Narray and Kostecki defines commercial diplomacy as ¨a government service to the business community¨ (Narray & Kostecki, 2007); Narray then evolves the definition as; ¨ an activity conducted by state representatives with diplomatic status in view of business promotion between a home and a host country¨ (Naray, 2008). Commercial diplomacy can be applied by head of state, a representative, a minister or a diplomat. Narray also clarifies the objectives of business promotion referring to Kotabe and Czinkota’s definition; ¨to help increase job opportunities and tax revenues for the states, and indirectly reduce the nation's trade deficit¨ (Kotabe & Czinkota, 1992). Therefore, governments gravitate towards commercial diplomacy to increase competitiveness of the country (Naray, 2008).

However, Donna Lee and Huub Ruël indicates that definition of commercial diplomacy should be broader than the traditional definition which limits commercial diplomacy as an activity just related to public officials, delegates, representatives and government departments. Lee and Ruël extends the definition as; the international relations work that conduct commercial relations to satisfy the interests of public and private sector in the global economy using diplomatic channels and processes. According to their definition, activities related to commercial diplomacy is managed by networks created by nation states

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and business actors that work in systematic internal and external environments with the goal of answering the public and private interests. These networks usually contain different governmental institutions such as ministries of foreign affairs, commerce, finance, industry as well as chambers of commerce, embassies, consulates and private business environments (Lee, 2004) (Ruël, 2019) (Lee & Ruël, 2012).

Thus, relation between diplomacy and commerce is subject to attraction in defining commercial diplomacy. Diplomacy is an activity in pursuit of national interests by the use of tools such as intelligence, lobbying, advocacy and negotiation. In the pursuit of commercial interests, commercial diplomacy contains all the activities related to diplomacy while specifically focusing on negotiation around commercial deals. However, one important aspect of commercial diplomacy is its multi-stakeholder feature, which involves both public and private actors (Huub, Lee, & Visser, 2013).

2.2.4 Trade Diplomacy

According to Kostecki and Narray, commercial diplomacy includes trade diplomacy;

commercial diplomacy’s activities related to trade policy-making is referred as trade diplomacy. The difference of commercial diplomacy however is, business-support activities (Narray & Kostecki, 2007). The main difference in a nutshell is the difference between commerce and trade, therefore¨, commercial diplomacy is trade and investment diplomacy […] ¨ (Chikhladze & Rusadze, 2019).

2.2.5 Business Diplomacy and Corporate Diplomacy

Business diplomacy and corporate diplomacy distinct from other types of diplomacy with its nature of being the diplomatic function related to multinational enterprises. Naturally, these types of diplomacy ingenerated after multinational companies arose. Corporate diplomacy is mainly related to cultural barriers of business unit and the corporate culture.

Business diplomacy however, focuses to the improvement of eligibility of external conditions for business activities (Saner & Yiu).

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2.2.6 Summary of the Chapter

In brief; Commercial diplomacy is a tool to actualize the economic policy therefore it is an inseparable piece of it and since the era of globalization has overtook the days of self- contained countries through commerce and free trade, one can say that commercial diplomacy is the chief component of economic policy of at least last two centuries. This definition of commercial diplomacy has been suggested by Chikhladze and Rusadze, in their own words; ¨Commercial diplomacy is one of the means of implementing foreign economic policy of the state in the areas of trade and investment. It can be realized at the micro and macro levels¨ (Chikhladze & Rusadze, 2019).

Even though their definition claims that commercial diplomacy is a tool of foreign economic policy, this study regards to it as a tool of both domestic and foreign economic policy. Because one of the goals of commercial diplomacy is to minimize barriers regarding Chikhladze and Rusadze and again as they have address in their study; increase the competitiveness and to promote businesses -which has already been stated by Narray before- and therefore to satisfy the needs of public and private sectors (Naray, 2008) (Lee, 2004). For this reason; possessing a successful domestic economic policy and confident private sector to discover the said needs and to design the conditions, which would give a chance to prepare the legal infrastructure for public and take a chance on the competition of private sector is crucial. Consequently, domestic economic policy needs a tool for aforementioned arrangements, which is; the domestic aspect of commercial diplomacy (Chikhladze & Rusadze, 2019).

Another conclusion should be made referring to the similarities of economic diplomacy and commercial diplomacy; even though both addresses economic policy problems and deals with policy making alongside gathering intelligence; commercial diplomacy, as also stated above, deals with import and export as well as business support activities. Commercial diplomacy intends on exploitation of comparative advantage and opportunities supplied by economic diplomacy. Even though all aspects of diplomacy tackle with change, commercial diplomacy distinctly tackles with the evolution of markets. Since European

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experience of commerce in 19^th century will be analyzed, this study refers to commercial diplomacy as the main diplomatic activity in the next chapter instead of economic diplomacy due to the differences indicated.

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ORIGINS OF FREE TRADE

It is indisputable that European peninsula has opened the era for intercontinental trade especially with its colonization campaign and with the fall of colonies, introduced the concept of liberalization in the continent. Therefore, it would be fair to claim that, European practice of commerce and diplomacy has laid the foundations of international trade in modern terms as we know today. Thus, it is crucial to analyze the history of free trade in Europe.

The analysis of free trade history of Europe has a deep-rooted past and follows a multifactorial development; therefore, this study shall focus on the history of free trade in 19^th century. It should be stated that this study establishes the Congress of Vienna as the origins of modern free trade, which has ultimately constituted the contemporary concept of commercial diplomacy.

3.1 Establishment of the European Concert

There is a consensus among the intelligentsia about what Congress of Vienna resembles for the European politics through reshaping the perception of boundaries, raising the question about necessity of the struggle for land and mutilating the description of power. It is indeed a turning point for conventional approaches to international politics as reformist ideas started to come into the light. The shift from Balance of power theory to the concert system or system of equilibrium and governance is the most important touchstone among them and 1815 could be registered as the expiration date for the use of balance of power theory in international politics.

Paul Schroeder phrases this shift as follows; ¨… any balance of power interpretation of the Vienna settlement is misleading and wrong. Its essential power relations were hegemonic, not balanced, and a hegemonic distribution of power, along with other factors, made the system work. A move away from eighteenth-century balance of power politics to a different kind of politics was an essential element in the revolutionary transformation of European international politics achieved in 1813-1815¨ (Schroeder, 1992).

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Balance of power is a theory that aims the survival of states as independent entities by pursuing power in the anarchical global system. States would kneel before more powerful states’ ambitions through losing their security and prosperity. Existing anarchy forced states to seek and maximize power in any means necessary to retain their autonomy, security and survival against their adversaries. Therefore¨, competition for power becomes a natural state of affairs in international politics¨ (Fortmann, Paul, & James J. , 2004), where “power of one state is balanced by the power of others¨ (Schroeder, 1992) .

Balance of power system, due to its nature, promotes the anarchy through the absence of a high authority to regulate the use of power by the states. This ¨anarchical international system¨ based upon the power struggle was conducive to continuous wars especially within Europe (Jervis, 1992). Balance of power theorists have claimed that the system was promoting peace through establishing equilibrium by preventing one dominating force to outcompete others. However, most recent response of the system to France in Napoleonic Wars was quite lagged due to its nature and therefore brought great suffering and destruction to Europe. Moreover, Since the balance of power system regarded war as a means of preventing the breakdown of the system itself, Europe has seen many ¨wars were fought in the name of balance of power against Charles V, Louis XIV, and Napoleon […] ¨ (Gulick, 1967).

This dramatic change in the perception of international politics was triggered by Napoleonic Wars. One can claim that it was the last straw that breaks the camel's back.

Admittedly an international system to bring stability and peace to the continent required a major war “whose aftermath would provide the opportunity for the victorious states to rearrange the territorial distribution such that it creates the set of interlocking spheres of influence” (Slantchev, 2005). The bitter experience of being dragged into an everlasting and destructive war as a continent, forced European powers to constitute a regulative body which would provide the hegemonic distribution of power in Schroeder’s words (Schroeder, 1992). New approaches that would help them avoid sweeping wars rose as a necessity, which enabled the abandonment of the normal practices of diplomacy.

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Concert of Europe was equilibrium, where the cooperative behavior of its principal members was sustained with incentives created by the territorial settlement they designed at Vienna. To the extent that the Powers could credibly commit to upholding the system and preserve these interlocking interests, the equilibrium was self-enforcing (Slantchev, 2005).

Statesmen gathered in Congress of Vienna had one common ground in principle, which was to avoid prolonged wars such as they experienced with the Napoleon’s conquest. Their shared goal in Vienna was already a breakthrough for international politics and conventional diplomacy practices, since the congress itself was the very foundations of a unified, higher body to regulate the relations between states. Common practices of 18^th century were being abandoned. However, as Schroeder states; Statesmen in Vienna had three main problems to reach their ultimate goal, which were; how to ensure the common security for all the powers in the continent; how to secure Europe from external threats; and how to secure the sovereignty of small states from the influence and desires of great powers (Schroeder, 1986). These main problems show us how “European Family” choose to rely on “adjudication, mediation, and reconciliation more than weighing power” to ensure the common security through creating “balance of rights” for the family members; how they lean on “moral, legal, and political means” to secure the existence of powerless small-states instead of power balance (Schroeder, 1992); by transforming small states “to serve as buffers and spheres of influence”; and last but not least, how they ‘fenced off' the European state system from the extra-European world” (Schroeder, 1986).

Henry Kissinger remarks the difference that Congress of Vienna brought to the perception of balance and equilibrium to the world politics. Referring to the balance of power system before Congress of Vienna, he claims that; in an international order where one power is totally satisfied, it is inevitable that all others would have to be totally dissatisfied, which eventually lead the system into revolution. However, he also claims that ¨an international settlement, which is accepted and not imposed, will always, appear somewhat unjust to any one of its components. Paradoxically, the generality of this dissatisfaction is a condition of stability. The foundation of a stable orders is the relative security-and therefore the relative insecurity- of its members¨ (Kissinger, 1964).

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Robert Jervis extends Henry Kissinger’s theory of stabilization derived from relative insecurity by stating that; the Congress of Vienna ensured a Prisoner’s Dilemma situation within European powers, stating that the dilemma itself forced states to think more thoroughly and depend on others judgment while trying to control its own actions to not threaten others, in order not be threatened. Which created a system where great powers not only concern about their own interests, also considers others interests as well (Jervis, 1992).

The Congress of Vienna was a success in its own nature, able to avert inter-state conflicts in Europe for almost 40 years. However, in addition to its pioneering nature, there was another factor that distinguish it from the treaty of Versailles, that the major powers of Europe, including the defeated one was satisfied with the results and “and had more to lose than to gain by undermining that beneficial arrangement” in a case where defeated power does not find the settlement beneficial enough, regaining its losses by force becomes natural (Slantchev, 2005).

3.2 The History of Free Trade Facilities and Triggers in Europe

3.2.1 Unilateral Liberalization of Commerce: Repeal of the Corn Laws

Commercial policies and trade itself has been largely shaped by the mercantilism and colonial trade during the 18^th century Europe. Western European powers created supply by the cheap raw materials from their colonies and the demand from nonproducing colonial population together with growing urban population from their homeland. However, the loss of colonial trade routes during the Napoleonic Wars shake the commercial practices and compelled colonial powers to adjust their economic policies according to this new normal.

Goods and raw materials they used to easily access was now subject to trade negotiations.

Furthermore, long lasted wars until 1815 brought to an end to the era of ¨strong outward orientation¨. Besides, drastic population movements caused by the sea blockage from British Navy shifted industry from coastal cities to inland cities (O'Rourke & Williamson, 2001).

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Congress of Vienna marked the end of the dragged-on conflicts for European Continent.

Economies adjusted to war, blockage and interruption of trade, challenged by the abrupt changes of economic dynamics in the continent. Import protection for agriculture arose – for Britain, in the name of Corn Laws in 1815- to protect the sector from dramatic decrease of agricultural prices, which took the control of economic policy from the merchants and gave it to the landowners once again (Irwin, 1993). These dramatic changes in economic circumstances were surely going to require wisely designed commercial diplomacy to cope with.

In 1815, British parliament enacted Corn Laws to compensate the loss of agricultural sector, which enjoyed the high prices during the Napoleonic wars. Corn Laws prohibited the import of corn when the price is lower than 80 shillings per quarter (Schonhardt-Bailey, 2006). Even though Corn Laws of 1815 was highly protectionist, Britain was conscious of the importance of foreign markets for its industrialized economy. Therefore, during the following years of 1815, Britain showed an ineffective endeavor to shape markets for its trade within Europe. In 1823, attempts of Board of Trade with the Reciprocity of Duties Act for concluding commercial treaties with foreign governments failed to remove the prohibitions or reduce the tariffs. In 1836 Britain proposed to lift the duties on timber for Prussia by the condition for reducing tariffs on British textiles, but this attempt has also failed when Prussia asked for the reduction of Corn Laws. Britain’s commercial diplomacy has failed during 1830’s and 1840’s since British policymakers were unwilling to tolerate the access of foreign countries to British market. This failure until 1840 eventually forced Britain to initiate unilateral tariff reforms, which ultimately lead her to the repeal of Corn Laws in 1846 (Irwin, 1993).

Prime Minister Robert Peel’s 1846 Corn Law Statement in the House of Commons reveals Britain’s attempt on liberalizing European Countries; ¨I have no guarantee to give you that other countries will immediately follow our example. I give you that advantage in the argument. Wearied with our long and unavailing efforts to enter into satisfactory commercial treaties with other nations, we have resolved at length to consult our own interests, and not to punish those other countries for the wrong they do us in continuing

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their high duties upon the importation of our products and manufactures, by continuing high duties ourselves, encouraging unlawful trade¨ (Irwin, 1993) (UKPOL.CO.UK, 2015).

There is a strong literature suggesting that repeal of Corn Laws in 1846 is the point of origin for trade liberalization. But the question arise at this point is; what made Britain’s administration to take such bold decision on switching into unilateral liberal economy while predominant commercial policy of the rest of the world was protection for the agriculture and industry by import prohibitions and tariff barriers.

However, British protectionism was not as severe as it seems before the repeal of Corn Laws (Imlah, 1958) (Conybeare, 2002), even though, repeal of Corn Laws was not Britain’s first unilateral liberalization initiative. Britain, previously, allowed skilled workers to emigrate in 1825 (which was banned since 1719), lift the ban on export of machinery in 1842 (which was banned since 1774), lift the export tax on wool, reduced the tax on grains in 1845 (O'Rourke & Williamson, 2001). To put it more precisely; ¨the number of items subject to import duties was reduced from 750 to 520 and by 1860, there were only 48 dutiable items¨ (Conybeare, 2002) (Kenwood, Lougheed, & Graff, 2013).

Regardless, Corn Laws was seen as an obstacle before further industrialization. Therefore, the Anti-Corn Law League, which has been founded by a group of Manchester’s manufacturing elite, led by British politician Richard Cobden to abolish the Corn Laws has recognized as ¨the first modern pressure group to emerge in Britain¨ (Schonhardt-Bailey, 1991) Manchester was the center of export-oriented manufacturers who were stressed by the crisis in British trade and collapse of the industry in late 1830’s, therefore manufacturing elite have poured their wealth -brought by the industrial revolution- into the cause of repeal (Clark G. K., 1951).

British domestic equilibria are subject to analysis when goal is to understand the origins of commercial diplomacy practices. Reform Bill of 1832 stood on the junction for the commercial policy, which made the repeal possible. According to O’Rourke, Reform bill of 1832 symbolized the ¨growing power of urban interests¨ and with it took effect, power

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Kindleberger also indicates that, power shifted from the landed aristocracy to the bourgeois, from the land and country to the factory and city. However, he claims that the repeal of Corn Laws was more than mere victory of aristocratic class over bourgeois; he points out that conditions were fit for claiming the opportunity to take one step further.

Firstly, in his words; ¨bulk of revenue was produced by taxes on a few items- largely colonial products such as tea, coffee, sugar, tobacco, and wine and spirits- and that others produced too little revenue to be worth the trouble […] others were so high as to be prohibitory or encouraged smuggling and reduced revenue. When Peel was converted to free trade, it was necessary to reintroduce the income tax before he could proceed with repeal of 605 duties between 1841 and 1846, and reductions in 1035 others¨ (Kindleberger, 1975).

Circumstances of the country and economic conjecture were in favor of the Anti-Corn league, however, even though manufacturer bourgeois in cities was gaining numbers because of accelerating industrialization and initial phases of globalization, landed aristocracy was still the prominent group in Britain. So how textile manufacturers from Manchester achieved such dramatic change less than a decade? The answer to that question may lay in the interest groups theory.

Interest groups, according to David Truman, emerge because the relational balance between a group and other components of society is disturbed and requires stabilization. To simply put, interest groups develop as the diversification in society increases. As an example, that fits our case; division of labor differentiates by the virtue of required skills, as technological and economic changes arise. Accordingly, related groups would organize in associations, which then would become political interest groups (Truman, 1951) (Berry, 1978). Interest groups require, according to Robert Salisbury’s theory of exchange, an organizer for the success of the organization. In his words; ¨interest group origins […] as exchange relationships between entrepreneurs/organizers, who invest capital in a set of benefits, which they offer to prospective members at a price-membership¨ (Salisbury, 1969). Finally, interest groups according to Mancur Olson; required to be smaller in order to achieve its goals since individuals in smaller groups would work collectively to achieve the common

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goal unlike larger groups. Otherwise there has to be coercion or a pressure element to force the individuals in larger groups to work collectively. It is more likely that a smaller group would be able to gain political power. Furthermore, costs for lobbying are lower, compared to larger groups and individuals benefit more in smaller groups where the act of an individual matters (Olson, 1965) (Poczta-Wajda, 2013).

So according to Truman’s theory of disturbance, there has to be a disturbance in the society, which was present in 1830’s Britain as proletariat was growing occurred by the migration to cities due to the industrialization. Thus, political interest group of Anti-Corn Law League has emerged. The qualified organizer in Salisbury’s exchange theory who should convince the potential elements of the interest group was present; as Richard Cobden was in lead. The shape of the interest group required, according to Mancur Olson’s theory of groups, was also present; even though it was growing fast, industrialist bourgeois was still considered as a minority against landowners in Britain and while it outgrew, the coercive factor of political economy came from the government; the rivalry between Britain and the Zollverein.

Schonhardt-Bailey’s views which also refers to the theory of interest groups supports the theory further and indicates two interpretations regarding Britain’s domestic economic and political forces which led to the repeal of Corn Laws; first one implies that the interests of land owners and industrialists were against each other for the free trade issue, eventually industrialists won. The other interpretation implies that; the rising importance of industrialization in 1830’s steered landowners to invest in non-agricultural areas. These diversified landowners’ interests and interests of industry have therefore overlapped, which accumulated the votes, necessary to repeal the Corn Laws. This diversification and capital flow to production can be observed by the decreasing concentration of British exports starting from 1830’s in Figure: 1 (in 1846, 154 new categories of export recorded comparing to 1825) which was a response to industrial developments in Continental European economies that enabled them to compete Britain.

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Figure 1: Concentration of the British Export Sector between 1815 and 1880

Source: (Schonhardt-Bailey, 1991) (Mitchell, 1988)

The question that Schonardt-Bailey aims to answer has already attempted to be answered by J. A. Thomas in the same terms decades ago; he points the impracticability of the repeal as; ¨Not, indeed, that either of the two great parties in the House of Commons favoured an anti-Corn Law policy¨. However he also refers to one important change, Reform Bill of 1832, which has given the opportunity of representation to the claims of industrial and landed interest groups. Therefore, by implying the manufacturing class he adds; ¨the interests of that class coincided with those of an ever-growing body of consumers¨ besides he claims that the idea of consuming public has been mobilized by the actions of Anti Corn Law League (Thomas, 1929).

William Aydelotte, rejects the argument that landowners opposed repeal of Corn Laws and majority of the businessmen supported it. According to him, the repeal was not the victory of manufacturer bourgeois rather, a ¨holding operation¨ by landowners, which he mentions as ¨a concession by the aristocracy¨, or ¨timely retreat¨ which has delayed some forthcoming chapters of this inevitable radical alteration, which would constitute a bigger danger for the interests of, landed aristocracy. By this means landed classes, without sacrificing any real economic advantage, retained control of political power¨ (Aydelotte,

50 55 60 65 70 75 80 85

1815 1820 1825 1830 1835 1840 1845 1850 1855 1860 1865 1870 1875 1880

Higher Concentration

Index of Concentration

Lower Concentration

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1967). This is a solid example for commercial diplomacy applied by a private group rather than public one, in order to claim its future interests, landed aristocracy makes concessions to its agricultural gains for the time in the House of Commons.

Kindleberger moves the argument even forward and claims that the repeal of Corn Laws was ammunition in the hands of state rather than a freedom case of manufacturing elite against the landowners’ reign over the economy. The main target of the repeal according to Kindleberger, was Zollverein -which was the German customs union established in 1834 led by Prussia that created a free-trade area throughout the Germanic states- political economists in the Board of Trade aim at diverting Germany to invest more in agriculture and to retain the progress in manufacturing. He quotes from John Bowring’s letter of August 28, 1839 to Lord Palmerston; ¨It is obvious however that in the Zollverein the manufacturing interest is greatly strengthened and will become stronger from year to year unless counteracted by a system of concessions, conditional upon the gradual lowering of tariffs. The present state of things will not be tenable…¨ (Bowring, 1840) and also Bowring’s testimony before the in 1840 where he confesses that the export prohibitions and import duties applied by Britain ¨have created an unnecessary rivalry¨, without these legislation, many of its current rival ¨countries never would have been dreamed of being manufacturers¨. In the view of such information, Kindleberger asserts that; ¨the repeal of Corn Laws was motivated by "free trade imperialism," the desire to gain a monopoly of trade with the world in manufactured goods¨ (Kindleberger, 1975).

Concerning the term of free trade imperialism, Gallagher and Robinson’s work of reference; The Imperialism of Free Trade should be concerned. According the Gallagher and Robinson; as regions will not be able to reach same level of economic integration, it cannot be expected from all regions to hold same type of political control; therefore Britain practiced different imperialist actions to different geographical regions. As an example;

¨mercantilist techniques of formal empire¨ has been applied to India in the second half of 19^th century while ¨informal techniques of free trade¨ was being applied in Latin America for the same purposes. Therefore, Gallagher and Robinson calls the British Empire in 19^th

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¨the interrelation of Britain’s economic and political arms; how political action aided the growth of commercial supremacy, and how this supremacy in turn strengthened political influence¨ (Gallagher & Robinson, 1953).

Cain and Hopkins carry Gallagher and Robinson’s work by portraying more pessimistic framework of British Economy during and right after the Napoleonic Wars. They remark that British export trade has failed to act as an engine of growth, monopolist position in textile industry has been lost to Continental Europe and British industry suffered from excess capacity which pushed the prices down alongside with increased demand of import, in turn, trade gap widened. The failure of Britain to effectively prohibit the export of machinery and migration of skilled labor accelerated the loss of country’s advantageous position in the power of competition for manufacturing. They claim that the decision for the Corn Laws in 1815 was due to the administration’s reliance for the agricultural growth to be sufficient enough for compensating the increase in Britain’s population. Thus, the goal was to provide enough food for its workforce in industry depending on its self-sufficiency in the pursuit for its commercial imperialism. However, by 1820, British policymakers realized that pursuing agricultural self-sufficiency is a dream, considering rapid population growth, which would soon require to exchange wheat imports with non-industrial economies to increase the exports and industrial employment. Consequently, Tory government looked upon the modifications for import barriers, prohibitions and Navigation Laws for switching into free trade, which would cut the costs and increase the number of potential markets for British goods to deal with over-seas competition and domestic unrest.

In Cain and Hopkins’ own words; ¨ the ultimate hope was that Britain's acceptance of free trade would persuade her competitors in Europe and the United States to shift factors back into agriculture by offering them the attractive bait of an open British market¨ (Cain &

Hopkins, 1980).

Finally, views of James & Lake quite similar to Gallagher & Robinson’s and Cain &

Hopkins’s; they too asserted the claim that; British allowances in trade was ¨made for the possibly unwitting nature of hegemony¨. Definitive aim of British statesman was to overthrow the competitiveness of the economies of United States, Continental Europe and

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specifically German Zollverein under Prussian leadership. However, there is one additional aspect of James and Lakes’ view, which is the British policymakers’ awareness for the potential effects of the repeal upon its rivals and they intended to use these arguments in the call for political support (James & Lake , 1989). This theory makes inroads into the Political Support Model for Tariff Making, which is a crucial commercial diplomacy element since 19^th century. Political Support Model for Tariff Making will be addressed below.

As a conclusion for the statements above, it is clear that Britain’s quest for free trade was much more than the enlightenment of its policymakers and fellow citizens; the whole concept of liberal trade blow was a tool of commercial diplomacy, in search for spreading British hegemony and to pursue its mercantilist, imperialist policies, tailored in the shape of contemporary norms, brought by the Congress of Vienna in large. Lastly, we can summarize Britain’s commercial diplomacy for the first half of 19^th century by Cain &

Hopkins’s own words; ¨Free trade was seen by spokesmen for industry as a means of bringing Britain's major rivals, as well as "backward" areas and newly settled countries¨

(Cain & Hopkins, 1980).

3.2.2 Reciprocal Liberalization of Commerce: The Cobden–Chevalier Treaty

Repeal of the Corn Laws was not much of a hit through Europe in the following decade.

Tariffs on foodstuffs and some raw materials were generally low, but there were still solid import barriers against British products such as iron, steel and textiles in the European countries for protecting their local industries. British practice however was different; tariffs were brought down and prohibitions lift up for most of the goods but some luxury articles like tobacco, coffee, wines, spirits, silk and sugar (Lampe, 2009). Thereby, Britain found itself standing alone on the side of liberal trade because, first of all, such daring transformation was hard to adopt in such short notice for Europeans, and ¨when they spoke free trade, they stammered¨ (Accominotti & Flandreau, 2008). Moreover, Europeans hesitated to take action because of the suspicion that reducing trade barriers would be

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out of ammunition yet; free trade, embraced by the continent was waiting for another initiative, a reciprocal attempt rather than a unilateral one; The Cobden–Chevalier Treaty or the Anglo-French Commercial Treaty of 1860. Which was, in Douglas Irwin’s words; ¨a treaty that heralded the beginning of a liberal international trading order which lasted until the outbreak of World War I in 1914 ¨ (Irwin, 1993).

The beginning of the liberal trade or not, Cobden-Chevalier Treaty, without question, is a milestone for the liberal trade. The most important aspect of the treaty was the utilization of unconditional Most Favored Nation clause (MFN Clause) which guarantees that both sides would extend the concessions granted to any third party by either side. The Cobden–

Chevalier Treaty meant replacement for all import prohibitions with duties for France;

reduction of duties for fancy goods, admission of many French manufactures as duty free and abolition of export duty of coal for Britain. These MFN clauses were to be inserted into a great majority of treaties followed by Cobden-Chevalier, generalizing bilateral concessions for all (O'Rourke & Williamson, 2001). That ¨tailor-made liberalization¨

achieved by this treaty was something that Britain’s unilateral attempts couldn’t and wouldn’t achieve by its own (Lampe, 2009).

The Cobden-Chevalier Treaty was coherent with Britain’s free trade policy, however it represents a special status in France’s commercial liberalization, because that was the first treaty where France concluded liberal outcomes with a European power (Rohlfing, 2008).

The question however arises in that point, why this initiative worked well while Britain’s former attempts to conclude commercial treaties with foreign governments failed, such as the attempt to reduce timber duties with Prussia in 1836? Political context of the period was definitive for this conclusion since France was having a political crisis with Austria- Hungary regarding the unification of Italy and in need of support in Europe. Britain was in need of ensuring political aspirations of Napoleon III. Moreover, an important French economist who was also a free trade supporter, Michael Chevalier lobbied for a trade agreement with Richard Cobden since he noticed British desire to establish close ties with Napoleon III. Together with Cobden’s strong ties in the government and Napoleon III’s notion, negotiations have begun (Rohlfing, 2008).

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Chevalier’s agility to comprehend the political ambiguity and taking the advantage to achieve his liberal trade desires for France, perfectly corresponds to some features of commercial diplomacy, such as capitalizing international opportunities created by evolution in markets. Furthermore, Cobden’s advises to Napoleon III regarding required concessions to be demanded by France to counter the domestic opposition, also abides with commercial diplomacy features like, satisfying interests of the public and using diplomatic channels and processes. Besides, as a whole, backstage of Cobden-Chevalier treaty also accommodate itself with the multi-stakeholder feature of commercial diplomacy by shifting away from diplomats on negotiations. Finally, French experience here to benefit from Britain’s knowledge through Richard Cobden that is accumulated until the repeal of Corn Laws and beyond.

Another view for France’s compliance is that because of its domestic equilibrium, French policymakers ¨ decided to push the liberalization agenda toward the diplomatic arena¨

(Accominotti & Flandreau, 2008). Whatever the triggers and risks was, both Britain and France approached the initiative ¨as a way of defusing tensions and improving diplomatic relations, and an agreement was quickly reached¨ (Irwin, 1993).

Anglo-French Treaty of 1860 has also an important role for European continent itself, even though, either the treaty is the origin of trade liberalization in Europe or not, is still a matter of debate; its position as the kick-starter of institutionalization of commercial organizations is a common view among economists (Bairoch, 1989). The term, origin for institutionalization of commercial organizations, fits The Cobden-Chevalier Treaty since it triggered a series of bilateral agreements among European countries, which would be called

¨the network of Cobden-Chevalier treaties¨ or simply the treaty network in the literature (Bairoch, 1989). It is suggested that the reason of European participation in bilateral trade agreements in haste was due to the ¨fear of trade diversion¨ and this process which later to be called as ¨free trade epidemic¨ can be seen from the Figure 2 (Accominotti & Flandreau, 2008).

Constructing Turkish commercial diplomacy : defining the divergence in experience

T.C.

ISTANBUL COMMERCE UNIVERSITY GRADUATE SCHOOL OF FOREIGN TRADE DEPARTMENT OF COMMERCIAL DIPLOMACY

COMMERCIAL DIPLOMACY PROGRAMME

CONSTRUCTING TURKISH COMMERCIAL DIPLOMACY: DEFINING THE DIVERGENCE IN

EXPERIENCE

MA Thesis

Ahmet Buğra KARAHAN 200008691

Istanbul, 2020

T.C.

ISTANBUL COMMERCE UNIVERSITY GRADUATE SCHOOL OF FOREIGN TRADE DEPARTMENT OF COMMERCIAL DIPLOMACY

COMMERCIAL DIPLOMACY PROGRAMME

CONSTRUCTING TURKISH COMMERCIAL DIPLOMACY: DEFINING THE DIVERGENCE IN

EXPERIENCE

MA Thesis

Ahmet Buğra KARAHAN 200008691

Advisor: Dr. Uğur Yasin ASAL

T.C.

İSTANBUL TİCARET ÜNİVERSİTESİ DIŞ TİCARET ENSTİTÜSÜ

ABSTRACT

ÖZET

ACKNOWLEDGEMENTS

TABLE OF CONTENTS

LIST OF FIGURES

LIST OF TABLES

LIST OF ABBREVIATONS

INTRODUCTION

THEORETICAL FRAMEWORK

ORIGINS OF FREE TRADE