Trade and tourism between Turkey and Greece

by Dimitris Tsarouhas & Nüve Yazgan (2018): Trade, non-state actors and conflict: evidence from Greece and Turkey (Cambridge Review of International Affairs)

Abstract To what extent does growing trade lessen the probability of inter-state conflict? This paper addresses this question by using the curiously under-studied dyadic relationship between Greece and Turkey. Measuring trade and foreign direct investment (FDI) volumes as well as tourism flows and by use of elite interviews with key actors from both countries, we find that economic relations have become stronger and more diverse over time, non-state actors now featuring prominently in deepening interaction. Such developments, however, fail to translate into conflict resolution at the political level. To account for these findings, we use a New Liberal approach, arguing that this helps us explain both enhanced plurality in bilateral economic exchange and the incompatibility of the two countries' respective conceptions regarding legitimate national borders.

[excerpts from the study, for the full text use the link below]

To clarify our use of concepts, when referring to ‘non-state actors’ we mean non-traditional foreign policy actors. These encompass civil society, local actors (for example mayors) and the business elite (investors and associations). Using insights from conflict–trade interdependence approaches as well as ideational liberalism, we argue that improving economic interactions can coexist with ‘frozen’ political relations and an inability to overcome long-standing political differences. This results from the ‘mixed preferences’ characterizing the set of outcomes Greece and Turkey strive for. Concretely, we argue that the post-1999 rapprochement and increasing economic ties have led to more coordination and information exchange to avoid fatal accidents and the possibility of conflict but have not changed the expected distribution of benefits to be derived from full-fledged political dialogue. Secondly, and equally importantly, the expectation of a ‘spill-over’ effect from growing economic ties to political bonds is not consistent with ideational liberalism, to the extent that national conceptions of legitimate borders are incompatible, and powerful social groups in both states contribute to a zero-sum game on that issue.

In what follows, we begin with a review of the literature on Greek–Turkish relations and add a brief note on our methodological approach. We then proceed to explain our theoretical standpoint, before providing a brief overview of the current state of Greek–Turkish relations. The following section demonstrates our empirical data by examining cross-border trade, FDI volumes and tourism flows (We deliberately excluded the energy field from our analysis as this mostly concerns hard security issues as well as geopolitics. It also involves a variety of international actors which are beyond the scope of this study). The next part then links those outcomes to bilateral political problems and applies our theoretical framework to explain the observed outcomes, while the conclusion summarizes the main argument.

Greek–Turkish relations: an inconclusive literature
Most studies on Greek–Turkish relations emphasize bilateral political conflict over the Aegean Sea and the Cyprus issue (Aydin and Ifantis 2004; Bahcheli 1990; Couloumbis and Ifantis 2002; Ifantis 2005). Considering bilateral developments over the last decades, far too little attention has been paid to the potential impact of increasing economic ties between the two countries. The recent, yet important, changing dynamics that are giving shape to contemporary Greek–Turkish relations have often been understudied, despite their consequences for the overall shape of this crucial bilateral relationship in a volatile region. [...]

Finally, bilateral economic interactions of recent years have heightened the need to adopt a political economy approach (Papadopoulos 2008; Kutlay 2009; Tsarouhas 2009). Papadopoulos (2008) argues that economic relations alone are not likely to change the two states’ foreign policies and claims that economic relations would be more useful if they could develop in parallel with Turkey’s EU accession process, a prospect that is now redundant. Tsarouhas (2009) adopts a version of interdependence theory and examines Greek–Turkish relations, finding that compared with the pre-1999 era the likelihood of military conflict has decreased and non-state actors can play a more active role in bilateral relations. However, his use of institutionalist IR to explain findings anticipated further improvement in bilateral politics ties, which have not materialized. These studies highlight the significance of economic interactions but remain at an overtly general level of analysis by not breaking down economic interactions
into discrete categories and identifying the dynamics behind them. Moreover, events over the last few years have added new complexities and necessitate a fresh look at recent data, not least in the context of the Greek economic crisis and the diminishing impact of the EU as an ‘external anchor’ in tying Turkish foreign policy priorities to those anticipated by Greece until recently.

One of the most important challenges to realist and institutionalist accounts has come from those scholars who adopt, implicitly or explicitly, a constructivist framework. Drawing from a variety of sources and from the point of view of political history or nationalism studies, they contend that the crux of the problem in Greek–Turkish relations is persistent mutual distrust cultivated through practices associated with the demonization of the ‘other’ and an educational curriculum that reinforces national stereotypes at the expense of facts-based dialogue (Volkan and Itzkowitz 1994; Millas 2009). This thesis has a lot of merit, and anyone familiar with the school curricula of the two states would hardly find evidence to the contrary. We argue, however, that combining trade–conflict interdependence approaches and ideational liberal insights can both engage with the specific economic dynamics of the two countries’ relationship and at the same time apply a rationalist framework of analysis that incorporates ideational elements to explain state behaviour. This, we argue, is true in our case study but could potentially be applicable to other dyadic relations between states, whether one endorses the critique against mainstream constructivism’s adaptation of liberal tools (Sterling-Folker 2000). Simply put, our contribution seeks to demonstrate that the failure to match improving economic relations with the resolution of bilateral political problems can be adequately accounted for from a liberal IR framework linking state–society relations, state preferences and foreign policy behaviour.