FOREIGN TRADE POLICY

It is known that the sale of goods and services is not the single and chief objective of the state in foreign trade. Its fundamental objective is to “expand operating range of domestic currency in conformity with external demand for domestic goods and services and turn domestic currency into convertible monetary unit outside the country”.

For this reason, when countries export goods and services they demand their own currency to pay for exports. However, underdeveloped and developing countries including ours accept “hard currency” instead of demanding their national one. In addition, this is called a trade. It is pumping over the domestic resources to other countries.

This point may be explained on the following example. Let us assume that in the US there is demand for our wheat. If we demand the Turkish liras as equivalent payment, to purchase the Turkish liras the US will have to sell some of its goods and services to us. Let us say that these goods are computers. The US receiving YTL 1,000 per computer shall pay us YTL 1,000 and receive one ton of wheat. As a result, Turkey acquires a computer for itself, and the US receives wheat.

Let us assume that the US pays us USD 1,000 for wheat. Suppose we hold this money in the Central Bank or in the form of financial transactions in the market. Then the US acquires for itself our wheat for papers, which have no “value except for cost of issue”, and pump over our income to itself. This is true for our country at present. It could be more or less fine, if all American dollars wandering around the world were secured by goods and services. However, they are not.

Despite the fact that the US trade deficit amounts to USD 600 billion per year, the reason why the US still stands on its feet is that it buys imports by means of its own money. If a country does not demand its domestic currency as equivalent payment for its export and receives, for instance, the US dollars, which, in addition, circulate in its domestic market, then this country receives for the products sold the US dollars that, in fact, have no equivalent.