Foreign Trade Policy

  Beginning from 1980, the Turkish Government embarked upon series of reforms which were designed to remove price controls and reduce subsidies, lessen the role of the public sector in the economy, emphasise growth in the industrial and service sectors, encourage private investments and savings, liberalise foreign trade, reduce tariffs and promote exports, ease capital transfer and exchange controls, encourage foreign investments, make the Central Bank more independent and reform the taxation system. Turkey moved towards full convertibility of the Turkish Lira by accepting the IMF agreement's related article in 1990.

Turkey's exchange and trade systems have been liberalised extensively since the 1980s as a part of the economic reforms mentioned previously. Turkey now follows an independently floating exchange rate policy under which the exchange rate is determined daily. Commercial banks, special financial institutions, change offices and the PTT are free to set their exchange rates according to existing market conditions.

Due to the implementation of the liberalisation process the Turkish economy experienced a period of high growth. Foreign trade, both in exports and imports, has grown rapidly and noteworthy changes in the structure of exports have taken place. The dominant role of agricultural products in exports has ended in favour of industrial products. Also export product composition was enriched and the volume of foreign trade increased about three-fold in that decade.

At the beginning of the 1990s, due to unfavourable political and economic conditions both inside and outside the country, Turkey's trade balance suffered. Since the Gulf Crisis with its economic embargo against Iraq, the war in Bosnia and the stagnation in the OECD countries which were the main export markets of Turkey have all impeded exports. In addition, strong domestic demand, lower customs duties and overvaluation of the Turkish lira caused a boom in imports. All these factors caused the large trade deficit of $14.2 billion in 1993.

On April 5^th 1994, the Government introduced an Economic Stabilisation and Structural Adjustment Program. In particular, the program aimed at reducing the rate of inflation, maintain the balance of foreign trade and restore stability in the foreign trade and restore stability in the foreign exchange market. As a result of the implementation of the Stabilisation Program economic activity revitalised and a growth rate of 8.1% was realised.

Foreign Trade Volume/Trade Balance

In 1995, Turkish exports reached $21.6 billion, an increase of 19.5% over 1994. Imports also recorded an annual increase of 53.4% and amounted to $35.7 billion. The increase in exports and imports together brought an increase of 38.6% in foreign trade volume which reached $57.3 billion. The export/import ratio fell from 77.8% in 1994 to 60.6% in 1995. On the other hand, the export/import ratio was 52% in 1993 and 36.8% in 1980. The foreign trade balance gave a deficit of $14.1 billion, registering a sharp increase of 172.4% in 1995 compared to 1994. In 1995 current account deficit widened to $2.3 billion. The main factor behind the increase in the current account deficit was the trade deficit and was largely offset by the traditional surplus on invisibles and transfer accounts. Tourism revenues reached $4.9% billion in 1995.

Source : State Institute of Statistics

  Exports

In the period of 1980-90 Turkey's export figures showed an average annual increase of 33%, and the value of exports increased from $2.9 billion to $12.9 billion. During the 1990-93 period, due to the unfavourable economic conditions both at home and abroad a limited increase in exports was realised. The growth rate of exports for 1992 and 1993 was 8.3% and 4.3% respectively. In 1994, as a result of the Economic Stabilisation Program which was implemented after the second quarter of the year, exports recorded an increase of 18% and reached $18.1 billion.

Since the Gulf crisis with its economic embargo against Iraq, trade relations between the two countries were seriously diminished. While Turkish exports to Iraq were $986 million in 1988, this figure slumped to $122,900 in 1995. Subsequently, Iraq's share in Turkey's exports has dropped from 8.4% to 0.56%. The war in Bosnia also affected Turkish exporters in the field of transport especially due to high freight expenses and bureaucratic difficulties regarding trade with Europe.

Turkey's export figures expanded very significantly from 1980 to 1995. The share of exports in GNP increased from 4.2% to 13%. The product composition of exports changed as well during the same period. In 1980, while the share of agricultural products was 56.7% in general exports, industrial products, and mining and quarrying products made up 36.3% and 6.8% of the total exports respectively.

Major Export Items

Source : Institute of Statistics
 

In 1995, exports of agricultural products decreased by 6.1% as compared to the previous year and their share in total exports declined to 10.7%. In mining and quarrying products, an increase of 49% was observed over 1994 and their share in total exports was registered as 1.9%. As already more than 170 countries in the world. The largest export market for Turkish products is Germany, and Turkish exports to Germany have increased since the unification of East and West Germany. Although the trade with Iraq has been suspended due to the trade embargo, Turkey's exports to other middle-Eastern and North African countries have increased overall since 1990.

Source: State Institute of Statistics

In 1995, in the total exports of Turkey, the OECD countries took a share of 61.1% with a value of $13.2 billion. Among OECD members, exports to the EU were $11.1 billion which is equal to 51.2% of total exports. Among the top ten markets for Turkey, eight of them are from the OECD group and have a share of 51.2% with a value of $11.7 billion. In this group, Germany, with its 23.3% share, is the major market for Turkey. Turkey's second largest export market is the USA with a share of 7%. Islamic countries took a share of 16.3% in 1995 with a value of $3.52 billion. Among the Islamic countries, Saudi Arabia ranks first in the list of top ten markets for Turkey. Russia, with its share of 5.7%, is the fourth largest market for Turkey.

Source: State Institute of Statistics

Imports

The Turkish import regime highlights the liberalisation of Turkish imports in line with its ommitments to complete the Customs Union with the EU, its relationship with EFTA and its obligations under GATT. Turkey laid special emphasis on its engagement to reduce the customs duties to align itself with the Common Customs Tariff. Turkey made necessary modifications in its import regime, and by January 1, 1996 the Customs Union between Turkey and EU became effective.

The basic aims of Turkish import policy since the early 1980s could be summarised as follows:

• Reduction of protectionist measures in conformity with the new GATT rules
• Reduction of bureaucratic procedures
• Securing the supply of raw materials and intermediary goods at suitable prices within certain quality standards.

During the period 1980-95 imports increased from $7.9 billion to $35.7 billion showing an approximately fivefold increase.

In 1995 Turkish imports recorded an increase of 53.5% compared to 1994 value. According to the main commodity groups, the share of investment goods was 29.4% with an increase of 52.1% over 1994, and reached $10.5 billion. The imports of raw materials attained $20.8 billion with an increase of 53% as compared to the previous year. An increase of 58.8% was recorded in the imports of consumption goods at the end of 1995 and their share in total imports was 12.4% with the value of $4.4 billion.

As for the main sectors, agriculture and mining and quarrying products share was 16.5% in 1995. In total imports the share of industrial products imports was 83.4% with an increase of 56% compared to the previous year and valued at $29.8 billion. As for agricultural products, significant increases were observed in the imports of wheat, rice, tobacco and oil seeds. The imports of industrial plants had a significant place in total imports of agricultural products with a share of 1.7%. Animal husbandry products showed an increase of 158.6% and imports of live animals increased significantly.

Among mining and quarrying products the imports of magnesite, asbestos, iron ore and mineral ores also increased significantly. The imports of fuels increased by 14.3% compared to the previous year reaching $3.2 billion. The ratio of fuels imports to total exports was 14.8% in 1995.

Imports of processed agricultural products, such as meat, fish, milk, butter, cheese, animal and vegetable oil and fats, sugar, fruit juices, canned fruit, soy beans grew significantly.

In industrial products, the imports of man-made cloths, iron and steel products, chemical industry products, textile weaving machines, radio, TV sets, electric circuit breakers, communication equipment and electrical cables, motor vehicles and spare parts all increased in 1995.

Major Import Items