What is Turkey Foreign Trade Policy? | LegaMart Articles
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What is Turkey Foreign Trade Policy?

Introduction

We often hear the term “foreign policy”. While the meaning of this term is unfamiliar to many, foreign policy plays a vital role in every country. This article will consider the meaning and importance of foreign policy. It will also discuss Turkey’s foreign trade policy and identify key terms relating to foreign affairs. 

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What is a Foreign Policy?

This is a strategy that the government of a country adopts in dealing with other countries. A foreign affairs policy protects the interests of the nation and its citizens. Foreign policies usually include important matters like trade and defence. For instance, matters such as total imports, exports, customs duties, and tariffs. Trade in this context refers to international trade.

Turkey foreign trade policy considers the interest of the country and its citizens. It tries to ensure access to better opportunities in international trade.

Foreign Policy of Turkey

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The Turkish Foreign Policy aims to protect Turkey’s interests in the regional and global environment. It also tries to provide conditions for sustainable peace and development. The country’s foreign policy is based on the goal of achieving “Peace at Home, Peace in the World”, as set out by Atatürk. Turkey uses several political, economic, humanitarian, and cultural tools to achieve its objectives. It maintains close ties with countries in the Middle East, North Africa, and other regions.

The number of exports and imports in Turkey reached 49 per cent of GNP by 1985. By 1994 this fell to 42 per cent of GNP. The turning point came after 1980 when there was a gradual liberalization of the import regime.

Turkey’s export performance since 1980 has been intriguing. Turkey’s trade mostly involves the Organisation for Economic Co-operation and Development (OECD) members. It conducts trade transactions with European Union Countries. During the 20th Century, it suffered from a shortage of foreign exchange. After the Crisis of the 1950s, Turkey received assistance from an OECD consortium. In 1970, there was devaluation, and in 1973, the continuous increase in the price of oil worsened inflation. The country tried a series of reform packages, but none seemed to work. In 1979 its creditors had to reschedule fourteen billion dollars in debt in an arrangement that delayed principal repayments for an extra five years.

The policy package, which was introduced after 1980, enabled growth to resume, largely by improving the balance of trade. 

Turkey shifted its emphasis on trade policy from strictly limiting imports to actively encouraging exports after 1980. In March 1985, it signed the General Agreement on Tariffs and Trade (GATT). This made the country commit to abolishing most export subsidies over three years. In 1993, Turkey consolidated and reduced most import charges due to its commitments under the GATT agreement. 

In the middle of 2016, Turkey’s international relations marked a turning point in its foreign policy. Turkey pursues a western-oriented foreign policy. As a result, it uses its global diplomatic network. The country’s foreign policy consists of a bridge between tradition and the future. Turkey utilizes political, economic, humanitarian, and cultural tools to achieve its foreign policy objectives. 

Turkey has reinvented relations with its Middle East neighbours in the past decade. This has been achieved through improved economic ties and better relations with governments and citizens, including offering visa-free regimes. The above has given Turkey’s policy an advantageous edge compared to other powers, which are perceived as putting goals and political stability ahead of the fate and goodwill of the ordinary people.

What Trade Agreements does Turkey have? 

An trade agreement signed with a pen and dollars

Establishing the Customs Union (CU) with the European Union (EU) has been a significant development. Since the adoption of liberalization measures in the 1980s and Turkey’s accession to the EU, there has been an improvement in Turkey’s foreign trade policy. 

The Turkish government has signed various preferential trade agreements. A preferential trade agreement is a pact between different countries. This agreement reduces the taxes on some goods participating countries import and export.

The Turkish government signed a PTA agreement with the EFTA countries in 1991. The aim was to improve trade relations and economic cooperation between the parties. By the end of 2006, Turkey had concluded 21 preferential trade agreements.

In the 1980s, the Turkish economy underwent a series of trade reforms. 

The Turkish government signed a trade agreement with the United Kingdom in 2020. The agreement covers preferential tariffs for trade in goods, customs, and trade facilitation. It also covers intellectual property, competition, trade remedies, and dispute settlement. This is another foreign trade policy by the Turkish government.

Individuals who import and export goods must prove their origin to enjoy these rates.

As a result of this agreement, Turkey has experienced significant export growth. The EU’s total imports from Turkey were worth €62.6 billion in 2020.

In 2000, Turkey and the United States entered into an Open Skies Air Transport Agreement. The purpose was to create a wide range of air transport services between the two countries. This agreement increased Turkish Airlines’ shares in the US market. This was announced by the Directorate General of Civil Aviation. 

Does Turkey have Free Trade Agreements?

Turkey is a party to the General Agreement on Tariffs and Trade (GATT). It is also a founding member of the World Trade Organization (WTO). As a result, it conducts Free Trade Agreements in line with the GATT. The Turkey-European Union Customs Union agreement is the legal basis of Turkey’s FTAs. According to the World Bank, Turkey has been on a decades-long path toward membership in the European Union.

The Turkey-EU customs union eliminated customs duties and other restrictions. As a result, Turkey opened its internal market to EU and third-country competition while securing free access to the EU market.

International trade plays a critical role in Turkey’s economy. Export remains a significant source of revenue for the country.

The decision no. 1/95 of the EC-Turkey Association council, obliges Turkey to adopt the EU Common Customs Tariff. German companies use the customs union with Turkey to produce intermediate goods in the country. After this is done, they re-import them for further processing in Germany.

A new free trade agreement between the European Free Trade Association and Turkey entered into force in October 2021. The agreement covers industrial, fish, marine, and processed agricultural products. 

Turkey is currently building new comprehensive FTAs. This is to increase its total exports and strengthen the industry’s competitiveness. It is also meant to reduce unfair competition and attract foreign capital. The foregoing shows that more efforts are being put into Turkey’s foreign trade policy. 

Challenges in Turkey Foreign Trade Policy

Only Turkey has a secular, multi-party, free-market-oriented government among the world’s fifty-four Muslim-majority governments. Through this strategy, Turkey is dedicated to strengthening connections with the United States and Europe, with whom it shares values. Whatever administration is in power, Turkey’s foreign  policy remains fundamentally consistent.

After adopting an export-oriented strategy and trade liberalization policies, Turkey has become an offensive exporting country, with industrial items accounting for about 92 percent of total exports in 2010, up from 36.6 percent in 1980.

Persistent Trade Imbalances

The difficulty is the creation of chronic trade imbalances, which have an impact on the country’s current account deficits. The trade imbalance is not a new phenomenon, but it has been a feature of Turkey’s trade operations since the conclusion of World War II, totalling more than 70 billion dollars in 2010.

Sectoral Composition of Exports

The issue is the sectoral composition of exports. There has also been a consistent increase in the technology-intensiveness of manufacturers, with a tendency to decrease low-technology items and increase medium-technology ones. However, the proportion of high-tech items remained stable.

Increasing competitive pressures caused Turkey to fall into the middle-income country trap in international trade. Low-wage countries are challenging low-technology manufacturing due to further liberalization of world trade under the influence of multilateral and regional liberalization.

The Turkish manufacturing industry’s export composition demonstrates that the percentage of high-tech product exports is smaller than in many other developed and major emerging nations.

Trends in Turkish Exports

The concentration of exports and imports by nation and product determines trade performance and sustainability. After 1980, when Turkey succeeded in geographically diversifying its exports, the nation’s concentration of exports witnessed a favorable downward movement. The trend looked to be more optimistic, particularly after 2001. The geographical variety of exports was comforting as Turkey began to seek alternate markets to replace those of the EU.

Turkey’s exports have increasingly been concentrated on an ever-shrinking variety of items, even though a sustained rise in exports can only be accomplished through product diversity.

Competitiveness in Global Market

Global trends compel all governments to adopt new tactics to adapt to changing conditions and an increasingly competitive environment. When exporters could follow global economic directions and forward their exports into new markets, the Turkish export industry’s adaption capabilities were excellent.

Solutions to the Challenges Facing Turkey Foreign Trade policy

A turkey national flag

There is a need for cooperation and alignment between the European Union and Turkey. There should be cooperation driven by mutual interests. There should also be confidence-building measures to address the relationship’s lack of trust. It is essential to build a functional rule-based institutional framework for EU-Turkey relations. 

If you are unclear about your country’s foreign policy or how it affects your business’s capital accumulation, you should visit the LegaMart lawyers’ directory. We have qualified lawyers who are always ready to advise you on foreign exchange issues, Turkish export control, trade liberalization, customs declaration, and other protectionist measures. All you have to do is fill out an inquiry, sit back and relax while we connect you with an appropriate lawyer. You can also ask questions on our community page, and we’ll respond promptly.

Frequently Asked Question

Why is foreign policy important?

Foreign policy is important because it helps countries maintain diplomatic relations. It also helps a state interact with other states by setting objectives and activities. Furthermore, it helps governments to devise strategies, guidelines, methods, and agreements. These agreements assist them in dealing in the international arena. Finally, it also protects the territorial integrity of a country, as well as citizens’ interests.

Does Turkey have restrictions on the exportation of certain products?

According to the official gazette, the Turkish government has imposed export restrictions on certain agricultural products. The purpose is to stabilize domestic prices and ensure adequate supplies. However, the Turkish Statistical Institute reported that imports and exports increased in January 2022. This shows that these restrictions do not have much negative impact.

Conclusion

From the above, one can understand that foreign policies are very important. Foreign policy enables a country to reduce non-tariff barriers. It also protects the country’s interests. To develop an effective foreign policy, a country may have to conduct economic research. Adopting a good foreign policy for a country like Turkey will lead to favourable trade reform. A good foreign policy will also greatly impact the Turkish lira. While the country has put much effort into its foreign policies, more effort is still required. These efforts should be put towards resolving the issues Turkey has with some EU member states. 

Turkey is a business-friendly environment in the Middle East. However, you must consider its foreign policies before engaging in any transaction. LegaMart can connect you to a qualified lawyer. The Legamart team consists of qualified professionals who handle different kinds of transactions. If you want to know more about Turkey’s foreign trade policy or understand Turkey’s export and economy, kindly contact us. We will assist you in your international trade transactions. Our team will also inform you of the necessary provisions you have to make for your business.

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