Turkey WT/TPR/S/125
Page 13
II. TRADE AND INVESTMENT REGIMES
(1) GENERAL FRAMEWORK
1. Turkey's overall institutional framework, as regards trade policy formulation, is broadly
unchanged since its previous TPR in 1998.1  In general, policies are formulated and implemented by
means of laws.  Draft laws are presented to the Council of Ministers by the relevant Minister. After
being signed by all the Ministers, the bills are submitted to the single-chamber Parliament (theTurkish Grand National Assembly) for  approval.  Members of Parliament can also present draft laws
to the Turkish Grand National Assembly. Bills are first forwarded for assessment to the standing sub-
commissions of the Parliament, together with non-governmental organizations (NGOs) and other
relevant experts and authorities. After the Parliament's approval, the bills are signed by the President;
the laws enter into force upon publication in the Official Gazette . Decisions with respect to policy
proposals can also be made by means of decrees.
2  The Council of Ministers, led by the Prime
Minister, has the main executive power;  it may make decisions on a vast area of issues in order to
fulfil its function. Decisions of the Council of Ministers become decrees upon publication in the
Official Gazette .3
2. The Undersecretariat of the Prime Ministry for Foreign Trade (UFT) continues to formulate,
administer, and coordinate Turkey's foreign trade policies. Depending on the nature of the issue, the
UFT consults with relevant ministries and other institutions that also take part directly or indirectly in
foreign trade policy formulation and/or its implementation. These include:  the Ministry of Foreign
Affairs; the Ministry of Industry and Trade; the Mini stry of Finance; the Ministry of Agriculture and
Rural Affairs; the Ministry of Health; the Ministry of Culture and Tourism; the Ministry of Energy
and Natural Resources; the Ministry of Environment and Forestry; the Undersecretariat of Treasury;
the Undersecretariat of State Planning Organization; the Undersecretariat of Customs; the CentralBank of Turkey; the Turkish Patent Institute; the Competition Authority; the Public Procurement
Authority;  the Banking Regulation and Supervision Agency (BRSA); and the Export Credit Bank of
Turkey (Turk Eximbank). Since its previous TPR, Turkey has undertaken a sectoral reform process,
whereby many independent regulatory bodies have been established in addition to the BRSA.  These
include the Telecommunications Authority;  the Energy Market Regulatory Authority;  the SugarBoard;  the Tobacco, Tobacco Products and Alcoholic Beverages Market Regulatory Authority;  and
the Public Procurement Agency.
3. The private sector and NGOs pr ovide inputs to trade policy formulation by communicating
their views either directly to the UFT or throug h the Union of Chambers and Commodity Exchanges
of Turkey (TOBB), the Turkish Industrialists' and Businessmen's Association (TUSIAD), and the
Foreign Economic Relations Board (DEIK), as well as individual and local chambers of commerce,
and exporters' associations. Consultation is sometimes held with universities and research institutes,
such as the Economic and Development Foundation (IKV), the Foreign Trade Association of Turkey
(TURKTRADE), and the Export Promotion Centre (IGEME).  The Undersecretariat of Foreign Trade
conducts periodic reviews and assessments of trade policies. In this context, the export and importregimes and legislation on standardization for foreign trade are reviewed annually and updated as
necessary.  The views of the private sector, includ ing NGOs, are customarily taken into consideration
throughout the process (although this is not legally required).
                                                     
1 Turkey's overall institutional framework is described in detail in WTO (1998).
2 A decree is a decision of the Council of Ministers published in the Official Gazette .
3 The import and export regimes, safeguard measures, surveillance for imports, administration of
quotas and tariff quotas, and the prevention of unfair competition on imports have all been regulated through
decrees.WT/TPR/S/125 Trade Policy Review
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4. A profound change has been observed in the legislative and institutional investment
framework of Turkey with the adoption of the 2003 Foreign Direct Investment Law. The
Undersecretariat of Treasury, through the Genera l Directorate of Foreign Investment (GDFI), is
responsible for foreign direct investment matters in Turkey (section (5)).
(2) LAWS AND REGULATIONS
5. The WTO Agreements, and Turkey's current and future trade relations with the European
Union (EU) are the main factors influencing the Turkish trading system. Since its last TPR, Turkey
has continued to progressively align its trade regime on that of the EU, and domestic legislation has
been amended to reflect both its EU and WTO commitments (Table II.1). This, in turn, is likely to
provide improved and more secure conditions to its trading partners.
6. The main legislation relating to  international trade is the Foreign Trade Regulations Law
(No. 2976 of 1984). The Law provides for the development and regulation of foreign trade, including
export promotion, as well as the imposition or removal of "additional financial obligations" on foreign
trade transactions.
7. In general, investment in Turkey is regulated by the Commercial Code.  Foreign investment,
in particular, is governed by the Foreign Direct Investment Law (No. 4875 of 2003), and theCommuniqué Concerning the Law.  FDI is generally free of restrictions in accordance with these
regulations; however, some sectors are regulated through sector-specific acts, such as the Banks Act,
the Fishing Law, and the Civil Aviation Law (section (5)).
8. The hierarchy of legal instruments in Turkey  is: the Constitution, international agreements
duly put into effect, laws, decrees having force of law, regulations, implementing regulations,
decisions of Council of Ministers, and other administrative Acts such as circulars.  International
agreements, including the WTO Agreements, duly put into effect carry the force of law in Turkey.Their provisions would apply in the case of any inconsistencies between them and domestic law,
which has to be amended to reflect Turkey's international commitments.
Table II.1
Trade-related legislation in Turkey, 2003
Area Legislation Entry into force
Foreign trade;  including export promotion, and
"additional financial obligations" on foreign
trade transactionsForeign Trade Regulations Law (No. 2976 of 1984) 1984
Customs Customs Law (No. 4458 of 2000) 2000
Import regulations Import Regime Decree (No. 7606 of 1995)
Quota and Tariff Quota Administration Decree (No. 6814 of1995)1995
1995
Export regulations Law on Measures to be taken by the Government Relating to
Taxes for the Purpose of Promoting Exports (No. 261 of 1963)Export Regime Decree (No. 7623 of 1995)Export Regulation ( Official Gazette No. 22515 of 1996)
Inward Processing Regime Decree (No. 13819 of 1999)
Outward Processing Regime Decree (No. 674 of 2000)1963
1996
1996
2000
2000
Government procurement Public Procurement Law (No. 4734 of 2002)
Public Procurement Contracts Law (No. 4735 of 2002)2002
2002
State aid State Aid for Investments Decree  (No. 4367 of 2002)
State Aid for the Investment of SMEs Decree  (No. 1822 of 2000)
State Aid on Exports Decree (No. 6401 of 1994)2002
2001
1994
Regional investment incentives Organized Industrial Zones Law (No. 4562 of 2000)
Industrial Zones Law (No. 4737 of 2002)2000
2002
Table II.1 (cont'd)Turkey WT/TPR/S/125
Page 15
Area Legislation Entry into force
Subsidies Adopting the Agreement on Interpretation and Application of
Articles IV, XVI, and XXIII of the GATT (subsidies code) Decree
(No. 9155 of 1985)1985
Free-trade zones Free Zones Law (No. 3218 of 1985) 1985
Technical standards and regulations Technical Regulations and Standardization for Foreign Trade
Decree (No. 7794 of 1996)1996
General product safety The Framework Law (4703) Relating to the Preparation and
Implementation of the Technical Legislation on the Products,
which transposes the Directive of General Product Safety92/59/EEC of the EU2002
Sanitary and phytosanitary measures Sanitary Law (No. 1593 of 1930)
Agricultural Quarantine Law (No. 6968 of 1957)Production, Consumption and Control of Foods Decree (No. 560of 1995)
Turkish Foods Codex Regulation  ( Official Gazette No. 23172
(bis) of 1997)The Law on Animal Health and Officers (No. 3285 of 1986)Fisheries Law (No:1380 of 1971); amended by Law No. 3288 of1986
Fisheries Regulation (No: 22223 of 1995)1930
19571995
1997
1986
1971
1995
Anti-dumping and countervailing measures Law on the Prevention of Unfair Competition on Imports
(No. 4412 of 1999)
Decree on the Prevention of Unfair Competition on Imports
(No. 23861 of 1999)Regulation on the Prevention of Unfair Competition on Imports(No. 23861 of 1999 and Addendum No.24743 of 2002)1999
1999
1999
Safeguard measures Decree No. 95/6814 on Safeguard Measures and Surveillance for
Imports and the Administration of Quotas and Tariff Quotas(Official Gazette No. 22300 of 1 June 1995)
Implementing Regulation on Safeguard Measures and
Surveillance for Imports ( Official Gazette No. 22300 of 1 June
1995)1995
1995
Competition The Act on the Protection of Competition (No. 4054 of 1994) 1994
Intellectual property rights Turkish Patent Institute Decree (No. 544 of 1994)
Protection of Patent Rights Decree (No. 551 of 1995)Protection of Trade Mark Rights Decree (No. 556 of 1995)Protection of Industrial Designs Decree (No. 554 of 1995)
Protection of Geographical Indications Decree (No. 555 of 1995)
Intellectual and Artistic Works Law  (No. 5846 of 1951; amended
by Law No. 4110 of 1995 and Law No. 4630 of 2001 )Additional Penalty Provisions to the Decrees No. 551, 554, 555,and 556 (Law No. 4128 of 1995)Amendment of the Transition Period of Patent Protection ofPharmaceutical and Veterinary Products and Processes Decree
(No. 566 of 1995)1994
199519951995
1995
1951
1995
1995
Consumer protection The Law No. 4822 of 2003 Amending the Law on the Protection
of Consumers No. 4077 of 20012003
Foreign investment Foreign Direct Investment Law (No. 4875 of 2003) 2003
Company establishment The Law No. 4884 Amending Turkish Commercial Law, Tax
Procedure Code, Stamp Tax Code, Business Law and Insurance
Law2003
Agriculture Seed Law (No. 308 of 1963)
Decree on Seed Imports (No. 8231 of 1984)
Decree on Customs Tax Exemption On Seed Imports (No. 4190 of1999)Communiqué on Chemical Fertilizers Used in Agriculture(No. 24708 of 2002)Communiqué on Production, Import, Export, Marketing, AndControl of Organic, Orgonomineral And Microbial Fertilizers And
Soil Regulators Used in Agriculture (No. 25087 of 2003)1963
1984
1999
2002
2003
Mining and energy Mining Law (No. 3213 of 1985)
Electricity Market Law (No. 4628 of 2001)Natural Gas Market Law (No. 4646 of 2001)1985
20012001
Table II.1 (cont'd)WT/TPR/S/125 Trade Policy Review
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Area Legislation Entry into force
Telecommunications Telegraph and Telephone Law
Law Amending Telegraph and Telephone Law (No. 4000 of 1994)
Law Amending Telegraph and Telephone Law (No. 4107 of 1995)Law Amending Telegraph and Telephone Law (No. 4161 of 1996)Telecommunications Law Amending Telegraph and TelephoneLaw  (No. 4502 of 2000)Law Amending Telegraph and Telephone Law (No. 4673 of 2001)Telecommunication Services RegulationCommuniqué on Principles and Procedures Regarding the
Granting of 2
nd Type Telecommunications License and General
AuthorizationLaw Amending Establishment and Broadcast of Radio TVs Law
(No. 4756 of 2002)1924
1994
199519962000
2001
20012002
2002
Financial services Banks Act (No. 4389 of 1999) (Amended by Law No. 4491 of
1999, Law No. 4672 of 2001, Law No.4743 of 2002)
Capital Market Law (No. 2499  of 1981, amended in 1992 by Law
No. 3794, and in 1999 by Law No. 4487)Insurance Supervision Law (No. 7397 of  1959, amended by
Statutory Decree No. 539 in 1994)1999
1981
1959
Transport Turkish Commercial Law (No. 6762 of  1956)
Cabotage Law (No. 815  of 1926)
Public Law on Turkish Civil Aviation (No. 2920  of  1983).
Article 25 was changed on 19.04.2001 by Law No. 4647
Ports Law (No. 168 of 1925)Turkish International Ship Register (No. 4490 of 1999)Regulation on Commercial Air Transport Operations (No. SHY-6A of 1984 amended by Regulation No. 24362 of 03.04.2001)Regulation on Airport Construction, Operation and Certificiation(SHY-14 A), issued by Regulation No. 24755 of 14.05.2002Regulation on Airport Groundhandling (SHY-22), issued by
Regulation No. 22741 of 28.08.1996 was amended on 19.09.19991956
19261983
1925
19991984
2002
1999
Tourism Tourism Encouragement Law (No. 2634 of 1982)
Law on Travel Agencies and Association of Travel Agencies
(No. 1618 of 1972)1982
1972
Source: Information provided by the Turkish authorities.
(3) P OLICY OBJECTIVES
9. The main factor in shaping Turkey’s foreign trade policy has been the Customs Union with
the EU. At the Helsinki European Council held on 10-11 December 1999, Turkey was officiallyrecognized as a candidate State.  In return, Turkey was required to align its legislative framework with
the whole EU acquis communautaire .  The Accession Partnership was revised by the European
Council on 14 April 2003.  In this regard, after approval of the Accession Partnership by the European
Council on 8 March 2001, the Turkish Government announced its second National Programme for the
Adoption of the Acquis (NPAA) on 24 July 2003 (section (4)(ii)(a)).
10. At the national level, an export-oriented, technology-intensive production structure, with
emphasis on generating high value-added manufactured and services products, is one of the basic
objectives stipulated in Turkey's long-term strategy for the period 2001-23, prepared by the
Undersecretariat of State Planning Organizatio n (SPO) and approved by the Parliament on
27 June 2000. The strategy aims to support export-oriented activities, particularly of small andmedium size enterprises (SMEs) by, inter alia , providing credit, guarantee, and insurance mechanisms
through the Turk Eximbank; further harmonizing foreign investment legislation with EU norms;
reducing bureaucratic procedures for exporters;  and improving basic infrastructure.
11. Turkey's long-term strategy also contains the eighth five-year development plan for the period
2001-05. Some of the main trade-related strategies to be pursued during this period are: enhancing thecompetitiveness of the economy by reducing direct state intervention through the privatization of
public enterprises; promoting foreign direct investme nt by amending the legislation in line with theTurkey WT/TPR/S/125
Page 17
EU’s legal framework and reducing the bureaucracy; making efficient use of subsidies, in accordance
with the relevant WTO rules; continuing the indus trialization policy with emphasis on technology-
intensive activities; financing exports by providing sufficient resources through the Turk Eximbank;
contributing to the efficiency of free zones via the improvement of infrastructure; and fostering trade
relations with the Caucasian region, Central Asia, and the Middle East.4
(4) T RADE AGREEMENTS
12. Turkey participates in several regional trade arrangements where the Customs Union with the
EU is its priority. According to the Association Council Decision No. 1/95, dated 6 March 1995,
which provides the Customs Union with the EU (Customs Union Decision-CUD), Turkey is
progressively aligning its preferential regime with that of the EU.  Turkey also has a free trade
agreement with EFTA and is part of the Euro-Mediterranean Partnership aiming at establishing a freetrade area in the region by 2010.  It is working to conclude a set of bilateral trade agreements with
southern Mediterranean countries.  Turkey also participates in the Economic Cooperation
Organisation and the Black Sea Economic Cooperation.  Turkey's membership in several
arrangements makes its trade regime complex and difficult to manage. Future trade agreements could
further complicate its trade regime and detract from multilateral efforts, given the limited resourcesavailable.
(i) WTO
13. Turkey became an original Member of the WTO on 26 March 1995.
5 Since its last TPR,
Turkey has amended its domestic legislation on intellectual property rights and telecommunications,
and enacted new legislation on, inter alia , customs, anti-dumping and countervailing measures,
standards and technical regulations, banking,  energy, and government procurement to comply with its
obligations under the EU acquis  communautaire  and the WTO Agreements.
14. Turkey accords at least MFN treatment to all its trading partners.6  Turkey is not a signatory
to the Plurilateral Agreements that resulted fro m the Uruguay Round; it is an observer to the
Plurilateral Agreements on Government Procurement and Trade in Civil Aircraft; and party to the
Information Technology Agreement (ITA). Turkey ’s most recent WTO notifications are listed in
Table II.2.
Table II.2
Turkey's selected notification requirements to the WTO, as of September 2003
WTO AgreementDescription of
requirementPeriodicity Most recent notification Comment
Agriculture (Article 18.2) Domestic support Annual G/AG/N/TUR/14
30 May 2002Domestic support commitments
for 2001
Agriculture (Articles 10 and18.2)Export subsidies Annual G/AG/N/TUR/13
16 August 2001Export subsidies commitments
for 2000
Agriculture (Article 18.2) Green box
measuresAnnual Turkey has not notified any
measures
Table II.2 (cont'd)
                                                     
4 Undersecretariat of State Planning Organization (2001) .
5 The full text of the Agreement establishing the WTO was published in the Official Gazette  No. 22213
dated 25 February 1995 (see WTO document G/TBT/2/Add.33, 18 June 1997).
6 In the context of the accession of the Republic of Armenia to the WTO, Turkey invoked Article XIII
(Non-Application of Multilateral Trade Agreements between particular Members) of the Marrakesh AgreementEstablishing the WTO (see WTO document WT/L/501, 3 December 2002).WT/TPR/S/125 Trade Policy Review
Page 18
WTO AgreementDescription of
requirementPeriodicity Most recent notification Comment
Implementation of
Article VI of the GATT
1994 (Article 18.5)Laws, Decrees, and
RegulationsOnce, then
changesG/ADP/N/1/TUR/3
17 April 2000
G/ADP/N/1/TUR/3/Suppl1
7 May 2002Copies of the relevant legislation
Implementation of
Article VI of the GATT1994 (Article 16.4)Anti-dumping
actions takenSemi-annual G/ADP/N/98/TUR
27 January 2003Anti-dumping actions taken
during 1 July-31 December 2002
Implementation of
Article VI of the GATT
1994 (Article 16.5)Competent
authoritiesOnce, then
changesG/ADP/N/14/Add.9
30 September 1999
Import LicensingProcedures (Article 7.3)Questionnaire on
import licensing
proceduresAnnual G/LIC/N/3/TUR/4
21 September 2001
Import LicensingProcedures (Articles 1.4(a)
and 8.2(b))Laws and
regulationsOnce, then
changesG/LIC/N/1/TUR/3
13 October 1999Copies of the relevant legislation
Rules of Origin (Article 5
and Annex (II(4))Non-preferential
and preferential
rules of originWithin 90
days of the
AgreementG/RO/N/28
30 May 2000
Sanitary and PhytosanitaryMeasures (Article 7,
Annex B)SPS to be notified
promptlyOnce, then
changesG/SPS/N/TUR/3
30 May 2000Lifting import ban on, inter alia ,
eggs, egg products, milk, and
milk products
Sanitary and Phytosanitary
Measures (Annex B, para. 3)Enquiry points Ad hoc G/SPS/ENQ/14
30 October 2002
Safeguards (Article 12.5) Suspension of
concessions and
other obligations
under Article 2.Ad hoc G/SG/N/12/TUR/2
G/SG/N/12/TUR/3
28 April 2003Turkey proposes to suspend
substantially equivalent
concessions to Jordan on pasta
and sanitary ware products
Safeguards (Article 12.5) Suspension of
concessions andother obligations
under Article 2.8Ad hoc G/SG/N/12/TUR/1
12 December 2002Turkey proposes to suspend
substantially equivalentconcessions to the EU on some
steel products
Safeguards (Article 12.6) Laws and
RegulationsOnce, then
changesG/SG/N/1/TUR/2/Rev.1
11 July 1997Copies of the relevant laws
Subsidies and
Countervailing Measures(Article 25.1) and GATT
1994 (Article XVI:1)Specific subsidies Annual G/SCM/N/71/TUR
25 October 2001New and full notification
Subsidies and
Countervailing Measures
(Article 25.11)Countervailing
measures takenSemi-annual G/SCM/N/35/Add.1/Rev.1
18 October 2002No countervailing actions during
1 July- 31 December 1997
Subsidies and
Countervailing Measures
(Article 25.12)Competent
authorityAd hoc G/SCM/N/18/Add.9
30 September 1999
Subsidies and
Countervailing Measures
(Article 32.6)Laws and
RegulationsOnce, then
changesG/SCM/N/1/TUR/3
17 April 2000
G/SCM/N/1/TUR/3/Supp.17 May 2002Copies of the relevant acts
Technical Barriers to Trade
(Article 2)Technical
regulationsAd hoc G/TBT/Notif.98.232, 233,
234, and 274May-June 1998Notifications concerning
refrigerators and cultivatedmushrooms
Technical Barriers to Trade(Articles 10.1 and 10.3)Enquiry point Once, then
changesG/TBT/ENQ/11
April 1998
Technical Barriers to Trade(Article 15.2)Laws and
regulationsOnce, then
changesG/TBT/2/Add.33
June 1991Notification about the duty and
responsibility of UFT as the
Enquiry Point under the TBT
Agreement in the context of
technical regulations and
conformity assessment
Table II.2 (cont'd)Turkey WT/TPR/S/125
Page 19
WTO AgreementDescription of
requirementPeriodicity Most recent notification Comment
Technical Barriers to Trade
(Annex 3(c))Acceptance of
codeOnce, then
changesG/TBT/CS/N/35
March 1996Notification about the
responsibility of Turkish
Standards Institute as the Enquiry
Point for Standards under the
TBT Agreement
Textiles and Clothing(Articles 2.6 and  2.7(b))First integration Once G/TMB/N/44
April 1997A list of products to be integrated
in Stage I was provided
Textiles and Clothing
(Articles 2.8(a) and 2.11)Second integration Once G/TMB/N/228/Corr.1
16 April 1997G/TMB/N/228/Add.2
29 August 1997A list of products to be integrated
in Stage II was provided
Textiles and Clothing
(Articles 2.8(a) and 2.11)Third integration Once G/TMB/N/364
5 January 2001A list of products to be integrated
in Stage III was provided
Textiles and Clothing
(Article 6.1)Transitional
safeguardsOnce G/TMB/N/18
6 March 1995Turkey retains the right to use the
safeguard provision  of Article 6
GATT 1994
(Article XVII:4(a) and
Understanding on theinterpretation of
Article XVII:1)State trading
enterprisesAnnual G/STR/N/7,8/TUR
18 March 2003State-trading activities of Tekel
and Turkish Red Crescent (TRCS)
during 1998-01.
GATT 1994 (Article VII)
Customs ValuationImplementation
and administrationAd hoc G/VAL/N/2/TUR/1
25 April 2001Information on implementation
and administration of the
Agreement
GATT 1994 (Article VII -22.2) Customs ValuationLaws and
regulationsOnce, then
changesG/VAL/N/1/TUR/2
18 May 2000Customs valuation provisions of
the new Turkish Customs Law
GATS (Article III:4 or IV:2) Enquiry point Once, then
changesS/ENQ/23
25 September 1996
TRIPS Checklist of issues
on enforcementNot specified IP/N/6/TUR/1
17 May 2000Responses from Turkey
TRIPS (Article 69) Contact point Once, then
changesIP/N/Rev.2/Add.2
January 1997
TRIPS (Article 63.2) Laws and
RegulationsOnce, then
changesIP/N/1/TUR/2
3 July 2000Copies of the new laws and
regulations
Quantitative Restrictions
(Decision of the Council forTrade in Goods (G/L/59)Notification
procedures for
quantitative
restrictionsEvery two
years, from
31 January
1996G/MA/NTM/QR/1/Add.7
16 June 2000Changes in Turkey's quantitative
restrictions
Source: WTO documents.
15. Turkey attaches great importance to the Doha Development Agenda (DDA).  Its main
interests in the DDA are a fair, competitive, and predictable trading environment that would stem
from future multilateral reductions of tariffs, simplification of tariff structures, and elimination of non-
tariff barriers; future extension of the scope of protection of geographical indications to products otherthan wines and spirits; and an equitable agricultural trading environment.  In line with Prime Ministry
Circular No. 2002/39, of 13 September 2002, various technical committees and working groups have
been established to follow up issues related to the DDA and to determine the strategy to be pursued by
Turkey in multilateral negotiations.  In terms of the on-going WTO negotiations on agriculture,
Turkey is of the view that further tariff reductions can be considered provided that the developedcountries substantially reduce or eliminate their export subsidies and domestic support.  Special and
differential treatment should also be reflected in  all the negotiation issues.  In general, Turkey is
following with attention the position of the EU  in the WTO negotiations, particularly on non-WT/TPR/S/125 Trade Policy Review
Page 20
agricultural products, since any further reductions by the EU would affect subsectors of the Turkish
economy.7
16. Turkey has been involved in 12 cases under the WTO dispute settlement mechanism, to date.
Seven consultations have been requested regarding Turkey's trade measures; three involved
quantitative restrictions on imports of textile and clothing products.  Turkey has been the complainant
in two cases (against Egypt and South Africa).  In the case against Egypt, concerning the definitiveanti-dumping measures on rebar from Turkey, the parties to the dispute agreed on the reasonable
period of time to implement the DSB recommendations and rulings.  With respect to South Africa,
Turkey requested formal consultations on 15 April 2003 regarding the definitive anti-dumping duty
on Turkish imports of blanketing in roll form.  Turkey has also participated in WTO disputes as a
third party, one against the United States on "definitive safeguard measures on certain steel products";and another against Argentina on "definitive anti-dumping measures on imports of ceramic floor tiles
from Italy".  On 2 May 2003, Turkey communicated its desire to join the consultations requested by
the United States and Australia regarding "the protection of trademarks and geographical indications
for agricultural products and foodstuffs in the EC".
8
Table II.3
WTO dispute settlement cases involving Turkey, 1995-03
Dispute Raised by/against Actions Outcome
Restrictions on imports of
textile and clothing
productsHong Kong,
China/TurkeyConsultations requested on 12 February 1996,
under GATT Articles XI, XIII and XXIV as well as
WTO ATC Article 2 (WT/DS29/1).Pending consultation
Restrictions on imports of
textile and clothing
productsIndia/Turkey Consultation requested on 21 March 1996, under
GATT Articles XI, XIII and XXIV as well as WTO
ATC Article 2 (WT/DS34/1).  Establishment ofpanel requested on 2 February 1998 (WT/DS34/2).
DSB agreed to establish a panel on 13 March 1998
(WT/DSB/M/43).  Panel report adopted on19 November 1999 (WT/DS34/11).  Appellate
Body Report adopted on 19 November 1999
(WT/DS34/11).Notification of mutually
agreed solution on
6 July 2001
(WT/DS34/14)
Restrictions on imports oftextile and clothing
productsThailand/Turkey Consultation requested on 20 June 1996, under
GATT Articles I, II, XI, XIII and XXIV as well as
WTO ATC Article 2 (WT/DS47/1).Pending consultation
Taxation of foreign film
revenuesUnited States/Turkey Consultation requested on 12 June 1996, under
GATT Article III (WT/DS43/1).  Establishment of
a panel requested on 10 January 1997(WT/DS43/2).  DSB agreed to establish a panel on
25 February 1997 (WT/DS.M/29).Notification of mutually
agreed solution on
24 July 1997
(WT/DS43/3)
Anti-dumping duty on steeland iron pipe fittingsBrazil/Turkey Consultation requested on 9 October 2000, under
GATT Article XXIII and 17 of the Anti-Dumping
Agreement (WT/DS208/1).Pending consultation
Definitive anti-dumping
measures on steel rebar
from TurkeyTurkey/Egypt Consultation requested on 6 November 2000, under
GATT Article XXIII and 17.3 of the Anti-Dumping
Agreement (WT/DS211/1).  Establishment of a
panel requested on 3 May 2001 (WT/DS211/2) and11 May 2001 (WT/DS211/2/Corr.1).  DSB agreed
to establish a panel on 20 June 2001
(WT/DSB/M/106).  Panel report adopted on 1
October 2002 (WT/DS211/5).Parties notified DSB
meeting of
29 August 2003 that
matter would no longer
be pursued with the DSB
Table II.3 (cont'd)
                                                     
7 In this regard, a work programme that foresees close cooperation with the Turkish private sector is in
place.
8 WTO documents WT/DS174/16 and WT/DS290/9, 7 May 2003.Turkey WT/TPR/S/125
Page 21
Dispute Raised by/against Actions Outcome
Certain import procedures
for fresh fruitEcuador/Turkey Consultation requested on 31 August 2001, under
GATT Article XXII, Article 11of the SPS
Agreement, Article 6 of the Import Licensing
Agreement, Article 19 of the Agreement onAgriculture, and GATS Article XXII
(WT/DS237/1).  Establishment of panel requested
on 13 June 2002 (WT/DS237/3).  DSB agreed toestablish a panel on 29 July 2002
(WT/DSB/M/130).Notification of mutually
agreed solution on
29 October 2002(WT/DS237/4)
Import ban on pet foodfrom HungaryHungary/Turkey Consultation requested on 3 May 2002, under
GATT Article XXIII, Article II of the SPSAgreement, and Article 19 of the Agreement on
Agriculture (WT/DS256/1).Pending consultation
Definitive anti-dumping
measures on  blanketing
from TurkeyTurkey/South Africa Consultation requested on 9 April 2003, under
GATT Article XXIII and Article 17 of the Anti-
Dumping Agreement (WT/DS288/1).Pending consultation
Definitive safeguard
measures on imports of
certain steel productsEC/US Third party participation requested on 4 June 2002,
under DSU Article 10.  (WT/DS248/15,
WT/DS249/9, WT/DS251/10, WT/DS252/8,
WT/DS253/8, WT/DS254/8, WT/DS258/12,
WT/DS259/11).Participation in Panel
(on 30 October 2002)
Definitive anti-dumping
measures on imports ofceramic floor tiles from
ItalyEC/Argentina Third party participation requested on
17 November 2000 (WT/DS189/4).Argentina implemented
the DSB'srecommendations and
rulings (WT/DS189/8 of7 May 2002)
Protection of trademarksand geographical
indications for agricultural
products and foodstuffsUS/EC (174)
Australia/EC (290)Third party participation requested on 2 May 2003,
under DSU Article 4.11. (WT/DS174/16 andWT/DS290/9).Pending consultation
Source: WTO Secretariat.
(ii) Regional agreements
(a) The Customs Union with the European Union
17. The Customs Union (CU) between Turkey and the EC entered into force on 1 January 1996
under Decision No. 1/95 of the Turkey-EC Association Council (CUD), which is the main decision-making body of the association.  The CUD provides for free trade in, and a common external tariff
(CET) on, industrial goods and the industrial component of processed agricultural goods
9; there is no
firm timetable for the integration of agriculture.  However, the free movement of agricultural goods is
set as a common objective. In 2002, 95% of Turkey's merchandise imports originated in the EU, and
97% of its exports to the EU were subject to  the CU regime.  The CUD also covers TRIPS,
competition policies, commercial policies, customs provisions, and technical barriers to trade.
Moreover, in 2000, the two parties began negotiations with the aim of reaching agreements on trade inservices and government procurement.  After three rounds, the negotiations have been halted since
December 2001.  The talks are planned to resume in autumn 2003.  The negotiations on services and
government procurement are conducted in parallel sessions with the understanding that nothing is
agreed until everything is agreed on both issues.
                                                     
9 During a transition period that ended on 1 January  2001, Turkey had maintained rates of protection
above those specified in the CET for certain "sensitive" products, equivalent to 290 items at the HS twelve-digitlevel (passenger cars with engines smaller than 2,000 cm
3, bicycles, leather cases and bags, footwear and their
parts, furniture, chinaware and ceramic ware, iron and st eel wires and ropes not electrically insulated, and paper
or paperboard sacks and bags for cement fertilizers).WT/TPR/S/125 Trade Policy Review
Page 22
18. The scope of the CUD excludes Turkey from some of the crucial aspects of the EU's common
market: the common agricultural policy (CAP);  and moves towards a single currency. Unlike
countries in the European Economic Area (EEA), Turkey may also be subject to anti-dumping and
countervailing measures by the EU.10  Since the Helsinki European Council in December 1999, when
Turkey was declared a candidate, these issues are being addressed in the perspective of accession.11
19. The association relation between Turkey and the EU commenced in 1963, with the Ankara
Treaty, which provided for several stages to enable Turkey to prepare itself for full membership.  The
timetable of the current CU was set by an Additional Protocol of 1973.  The EC eliminated all
customs duties and equivalent measures unilaterally on the entry into force of the Protocol.  A
transition stage of 22 years was set for Turkey.  As of 1 January 1996, the parties established the CU
in accordance with the 6 January 1995 Turkey-EU CUD. Turkey has already adopted a wide range ofEU trade and trade-related legislation on manufactured goods (Table AII.1). Turkey has eliminated
tariffs and levies on imports of non-agricultural pr oducts originating in the EU, and it applies the EU's
CET on imports of these products from third countries.  This has led to a substantial reduction of its
tariffs on these imports.  In the view of the EU, Turkey should, inter alia :  (i) focus further efforts on
aligning legislation on the customs aspects of control of dual-use goods, counterfeits and piratedgoods, and cultural goods;  (ii) work more on free zones and customs procedures with economic
impact
12;  (iii) align tariff preferences, as free-trade agreements have not yet been concluded with all
of the EU FTA partners;  (iv) harmonize activities in sectors such as foodstuffs, pharmaceuticals, and
cosmetics, and improve the functioning of various bodies (standardization, accreditation, and
conformity assessment);  (v) adopt competition impl ementing rules;  (vi) strengthen the enforcement
of intellectual property rights;  and (vii) adjust state monopolies of a commercial character to ensure
non-discrimination in market access between EC and Turkish operators.13
20. At the Copenhagen European Council of December 2002, it was agreed that "if the European
Council in December 2004, on the basis of a report and a recommendation from the Commission,
decides that Turkey fulfils the Copenhagen political criteria14, the European Union will open
accession negotiations with Turkey without delay".
21. The CUD has strengthened the already strong trade relations between Turkey and the EU
(Chart II.1). Total bilateral trade increased from US$27.9 billion in 1995 to US$41.6 billion in 2002.
The EU has become Turkey's main trading partner, while Turkey has become the tenth largest trading
partner of the EU.  During 1995-00, Turkey experienced an increasing  trade deficit with the EU
which started to narrow in 2001. Imports from the EU rose from US$16.8 billion in 1995 to
                                                     
10 An anti-dumping investigation was initiated by the EU on imports of hot rolled coils from Turkey
(among others) in December 2001. The investigation on imports of welded tubes and pipes (iron and non-alloysteel) led to the imposition of provisional duties in March 2002. European Commission (2002) .
11 See WTO (1998) for details on the CUD's requirements from Turkey.
12 Concerning free zones, studies examining the differences between the EU acquis  and Turkish
continue.  Republic of Turkey (2001).
13 European Commission (2002) .  According to the Turkish authorities, the requirements in the text
relate to the Copenhagen economic criteria, and are not a prerequisite for the opening of accession negotiations.
14 The political and economic criteria for accession to be met by the candidate countries to the EU, as
laid down by the Copenhagen European Council in June 1993, are: "stability of institutions guaranteeingdemocracy, the rule of law, human rights and respect for and protection of minorities; the existence of afunctioning market economy, as well as the ability to cope with competitive pressures and market forces within
the Union; and the ability to take on the obligations of membership, including adherence to the aims of political,
economic and monetary union." The candidate country's ability to assume the obligations of EU membership,that is, the legal and institutional framework, is known as the acquis , and consists of 29 negotiating chapters. In
this regard, in March 2001, Turkey adopted the Turkish National Programme for the Adoption of the Acquis(NPAA). European Commission (2002) .Turkey WT/TPR/S/125
Page 23
US$23.3  billion in 2002, while exports to the EU went up from US$11 billion to US$18.3  billion in
the same period. The textiles and clothing subsector has the largest share in Turkey's exports to the
EU, accounting for 47% of total exports in 2002;  fo llowed by agricultural and processed agricultural
goods, motor vehicles, and electrical goods.  Main imports from the EU are chemical products, power
engineering machinery, and transport equipment.
22. A new EU regulation concerning pre-accession financial assistance for Turkey entered into
force in December 2001. This new regulatory framework is aimed at ensuring an accession-driven
approach to the EC's financial cooperation with Turkey, and accelerating the process of
disbursements.  As for all candidate countries, financial assistance has to focus on the priorities
identified in the Accession Partnership and the NPAA.15  The new system has led to an upturn in
tendering and contracting in 2002 compared with previous years. Turkey also benefits from EuropeanInvestment Bank (EIB) assistance.
16  In total, Turkey received loan financing worth €544.5 million
from 1992 to 1999. During 2000-02, the total allocation for Turkey was €1,506 million, of which
€750 million has been disbursed.
(b) Free-trade agreement with the European Free Trade Association (EFTA)
23. The free-trade agreement between Turkey and the EFTA entered into force on 1 April 1992
(September 1992 for Iceland).17 The agreement covers:  industrial products (within HS chapters 25 to
97);  fish;  and processed agricultural products, with the exception of nine agriculture-based tariff
items at the HS six-digit level, including mannitol, sorbitol, casein, and egg and milk albumin and
dextrin.  In 2002, some 99% of Turkey's merchandise imports from EFTA and  90% of its exports to
EFTA were covered by the free-trade agreement. The agreement also covers intellectual property,
competition, state aid, and anti-dumping.
24. The agreement is based on an asymmetrical model similar to Turkey's agreement with the EU.
Since 1 January 1993, Turkey has granted imports from EFTA countries the same customs duty
treatment as imports from the EU as regards industrial products. For fish and fishery products,  Turkey
has provided better treatment to EFTA countries compared with the EU. Trade in processed
agricultural goods follows the same system as between Turkey and the EU, i.e. the Mass Housing
Fund (MHF) levy on agricultural components of pr ocessed agricultural goods was reduced on 1
January 1999 to achieve "target agricultural components". On 1 April 1992, EFTA countries
abolished all customs duties on imports and any charges having equivalent effect on products from
Turkey, except on textiles and apparel goods.  For textiles and apparel products, tariffs were
eliminated on 1 January 1996.
                                                     
15 Technical assistance and investment are being provided. For example, following the 2001 economic
crisis in Turkey, support has been provided, in particular to SMEs. European Commission (2002) .
16 In 2001, around €375 million was granted by the EIB for four major investment projects.
European Commission (2002) .
17 EFTA comprises Iceland, Liechtenstein, Norway, and Switzerland.WT/TPR/S/125 Trade Policy Review
Page 24
0.010.020.030.040.050.060.070.080.090.0100.0
0.02.04.06.08.010.012.014.016.018.020.00.010.020.030.040.050.060.070.080.090.0100.0
1980 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 20020.05.010.015.020.025.0Chart II.1
Turke y's trade with EU , EFTA , and ECO partners , 1980-02
(a) Exports to EU, EFTA and ECO
Per cent of Turkey's total merchandise exports
(b) Imports from EU, EFTA and ECO
Per cent of Turkey's total merchandise imports
Note:
Source:Austria, Finland and Sweden are included in the EU(15) for the whole period.   
Data for ECO before 1992 consisted of only Iran and Pakistan.  UNSD, Comtrade database;  and information 
provided b y the Turkish authorities.ECO EU(15) EFTA Right hand scale: Left hand scale:Turkey WT/TPR/S/125
Page 25
(c) Euro-Mediterranean Partnership
25. In November 1995, the EU and 12 Mediterranean partners embarked on the Euro-
Mediterranean Partnership18, a political, economic, and social programme aimed at creating "an area
of shared prosperity", including a Euro-Mediterranean Free-Trade Area by 2010. This is to be
achieved through the Euro-Mediterranean Association Agreements negotiated between the EU and its
Mediterranean partners, together with the Free Trade Agreements among the Mediterranean partners.Turkey has concluded a bilateral Free Trade Agreement with Israel, and is in the process of
negotiating with its other non-EC Mediterranean partners to fulfil its obligations under the Euro-
Mediterranean Partnership.
(d) Economic Cooperation Organization (ECO)
26. Economic Cooperation Organization (ECO) is an inter-governmental regional organization
established in 1985 by Iran, Pakistan, and Turkey for the purpose of sustainable socio-economic
development of the member states. ECO is the su ccessor organization of Regional Cooperation for
Development (RCD), active from 1964 to 1979. In 1992, the Organization was expanded to include
seven new members:  Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan,
Turkmenistan, and Uzbekistan. ECO has embarked on several projects in priority sectors ofcooperation, including energy, trade, transportation, agriculture, and drug control.
27. Trade liberalization is an important area in ECO.  On 6 March 2000, the Framework
Agreement on ECO Trade was signed to enhance trade relations among the members through the
formulation of an agreement aimed at liberalizing regional trade.  After three years of preparations,
the ECO Trade Agreement (ECOTA) was finalized and signed between Afghanistan, Iran, Pakistan,
Tajikistan, and Turkey on 17 July 2003. The Agreement foresees the reduction of tariffs (by not less
than 10% per year) to a maximum of 15% within  a maximum period of eight years.  ECOTA has
binding provisions on, inter alia , state monopolies, state aid, protection of intellectual property rights,
dumping and anti-dumping measures.
(e) Black Sea Economic Cooperation (BSEC)
28. The Black Sea Economic Cooperation (BSEC) ai ms to improve and diversify economic and
trade relations among its eleven members.
19  Although the BSEC provides for cooperation in various
fields, it does not as yet provide for preferential tariff concessions.  The areas of cooperation include
banking and finance, and exchange of statistical data and economic information regarding energy,
transport, telecommunications, trade and industry, agriculture and agro-industry, environmental
protection, tourism, and science and technology.  In this context, the Black Sea Trade and
Development Bank became operational in 1999.  On 7 February 1997, a declaration of intent for theestablishment of a BSEC free-trade area was adopted.  The declaration envisages examination of the
ways and means for the progressive establishment of such an area, taking into account each country's
existing and future links with the EU.  Recently, in the Working Group on Trade, two projects were
launched: one, proposed by Turkey, is to eliminate non-tariff barriers on regional trade and the other
is to harmonize trade documents in the region.
                                                     
18 The Euro-Mediterranean Partnership was launched in Barcelona, hence it is also called the
"Barcelona Process". The 12 Mediterranean Partners are: Morocco, Algeria, Tunisia, Cyprus, Egypt, Lebanon,
Syria, Palestine, Jordan, Malta, Israel, and Turkey.  At a later stage, it is also envisaged to include EFTA andCentral and Eastern European candidates for EU enlargement as part of the Euro-Mediterranean free-trade area.
19 The BSEC Declaration was signed on 25 June 1992. The member countries are: Albania, Armenia,
Azerbaijan, Bulgaria, Georgia, Greece, Moldavia, Roma nia, the Russian Federation, Turkey, and Ukraine.WT/TPR/S/125 Trade Policy Review
Page 26
(iii) Bilateral agreements
29. Turkey has signed bilateral trade agreements with 14 countries in the framework of aligning
its trade regime on the EU’s in the context of the CU  (Table II.4). Since Turkey's last TPR, bilateral
agreements have entered into force with:  Czech Republic, Slovak Republic, Estonia, Latvia,
Slovenia, Bulgaria, Poland, the Republic of Macedonia, Croatia, and Bosnia Herzegovina.  The trade
agreements have a standard model based on the preferences of each party with the EU;  bilateral tradehas been liberalized on industrial goods at the end of a transition period, and mutual concessions are
granted on selected agricultural and processed agricultural goods.  Turkey’s free-trade agreements
with Lithuania, Hungary, Estonia, Czech Republic, Slovak Republic, Poland, Slovenia, and Latvia
will expire when these countries become EU members on 1 May 2004.  As of that date, these
countries will be included in the CU. Negotiations with Morocco, Egypt, Faroe Islands, Palestine,Lebanon, Albania, and Tunisia are in progress, while draft texts have been forwarded to Jordan,
Malta, South Africa, Algeria, Syria, Serbia-Montenegro, and Mexico.
Table II.4
Turkey's bilateral trade agreements, 2003
CountryDate of
agreementEntry into
forceMajor Turkish exports and imports
covered by the agreementa Other areas of cooperation
Israel 14/3/1996 1/5/1997 Phased reduction of tariffs on industrial
goods; complete elimination on industrial
goods on 1/1/2000
Hungaryb8/1/1997 1/4/1998 Phased reduction of tariffs on industrial
goods; complete elimination on industrial
goods on 1/1/2001
Romania 29/4/1997 1/2/1998 Phased reduction of tariffs on industrial
goods; complete elimination on industrial
goods on 1/1/2002All agreements include provisions on
right of establishment and supply of
services, internal taxation, structural
adjustment, dumping, statemonopolies, rules of origin,
payments, rules of competition, state
aid, balance-of-payments difficulties,protection of intellectual property,
and government procurement
Czech Republicb3/10/1997 1/9/1998 Phased reduction of tariffs on industrial
goods, complete elimination on industrial
goods on 1/1/2001
Slovak Republicb20/10/1997 1/9/1998 Phased reduction of tariffs on industrial
goods;  complete elimination on industrial
goods on 1/1/2001
Lithuaniab2/6/1997 1/3/1998 Phased reduction of tariffs on industrial
goods;  complete elimination on industrial
goods on 1/1/2001
Estoniab3/6/1997 1/7/1998 Tariffs on industrial goods will be abolished
by the entry into force of the Agreement
Latviab16/6/1998 1/7/2000 Tariffs on industrial goods will be abolished
by the entry into force of the Agreement
(reduction of tariffs on limited number of
textile products on 1/1/2000)
Sloveniab5/5/1998 1/6/2000 Phased reduction of tariffs on industrial
goods;  complete elimination on industrial
goods on 1/1/2001
Bulgaria 11/7/1998 1/1/1999 Phased reduction on industrial goods;
complete elimination on industrial goods on1/1/2002
Polandb4/10/1999 1/5/2000 Phased reduction of tariffs on industrial
goods;  complete elimination on industrialgoods on 1/1/2002
Macedonia (FYRof)7/9/1999 1/9/2000 Phased reduction of tariffs on industrial
goods;  complete elimination on industrialgoods by 1/1/2008
Table II.4 (con'td)Turkey WT/TPR/S/125
Page 27
CountryDate of
agreementEntry into
forceMajor Turkish exports and imports
covered by the agreementa Other areas of cooperation
Croatia 13/3/2002 1/7/2003 Phased reduction of tariffs on industrial
goods;  complete elimination on industrialgoods by 1/1/2007
Bosnia-Herzegovina3/7/2002 1/7/2003 Phased reduction of tariffs on industrial
goods;  complete elimination on industrial
goods by 1/1/2007
a See Table III.2 for details on the relevant rules of origin, and Table III.5 for  the coverage and the preferential margin.
b Turkey’s trade agreements with these countries will expire when they become EU members on 1 May 2004. As of that date, 
these countries will be included in the Customs Union.
Source : Information provided by the Turkish authorities.
(iv) Other preferential trade arrangements
30. A Memorandum of Understanding (MOU) to establish the Southeast Europe Electricity
Regulatory Forum (SEEERF), a regional electricity market, was signed by the countries of South East
Europe in November 2002.  It emphasizes, inter alia , the need to establish a basis for the free
movement of goods and services in the region's ener gy sector.  The basic aim of the MOU is  to first,
bring the national practices, legislation, and structures of the parties into line with the EU Internal
Electricity Market Directive (96/92).  After this phase, it is envisaged that the natural gas sector will
be included in the process;  the last phase is the full incorporation of energy into the European internalmarket.  This overall objective is expected to be realized by 2006.
31. As part of the CUD with the EU, Turkey has to align itself with the EU’s preferences under
the Generalized System of Preferences (GSP). Turkey still has to adjust its GSP regime to the EU's
changes to the scope and implementation procedures of its GSP scheme as from 1 January 2002.
20 As
the CUD does not cover agricultural products, these are exempted from the GSP regime, andpreferences are granted for selected industrial g oods. While adopting EU's GSP, Turkey has given
preferences to raw materials and semi-finished goods.
21  Preferences on 2,884 twelve-digit tariff lines
are classified according to the "sensitivity" of the products.  Duties on non-sensitive products are fully
eliminated, while those on sensitive products are reduced (most of the products under HS chapters 28,
29, and HS sub-headings 8540.11, 8540.12.00, 94.05 are defined as sensitive in accordance with theEU's practices).  The reduction is by a flat rate of 3.5 percentage points of the MFN duty rate.  In
addition, where preferential rates under the EU's GSP scheme (applicable from 31 December 2001),
provide a tariff reduction of more than 3.5 percentage points for the sensitive products, these higher
rates will apply.  Duties are eliminated for the leas t developed countries. In line with the EU, Turkey
grants preferential treatment to selected countries and territories classified as developing countries.Beneficiary countries are announced annually in the Annexes of Turkey's Import Regime.  Turkey is
committed to extending the scope of the GSP system gradually, in line with its internal economic
conditions.  Discussions are on-going with the EU to establish a timetable.
32. Turkish exports receive preferential treatment under the GSP schemes of Australia, Canada,
Japan, New Zealand, the Russian Federation, and the United States.  Under the preference extendedby the Russian Federation imports from Turkey are subject to tariffs at 75% of MFN rates on all
products except those on a negative list;  the United States extends duty-free treatment on 744
products.
                                                     
20 Turkey reserved the right to suspend the GSP treatment under certain circumstances different from
those set by the EU.
21 Those items correspond to approximately 2,884 tariff lines (HS 12-digit level), i.e. about 15% of
total tariff lines. The products concerned refer to, inter alia , HS Chapters 28,29,37,38,82,84, and 85.WT/TPR/S/125 Trade Policy Review
Page 28
33. Turkey is not a member of the Agreement on the Global System of Trade Preferences (GSTP)
among developing countries.
(5) I NVESTMENT FRAMEWORK
34. The institutional and legislative framework governing investment in Turkey has been changed
significantly with the adoption of the Foreig n Direct Investment Law No. 4875 in 2003.  The
authorities have also been implementing measures to improve the business and investment climate: anInvestor Relations Office was established in 2001, within the Undersecretariat of Treasury  to act as a
focal point for two-way communication with investors.  However, a number of sectors are subject to
FDI restrictions (Table II.5).
35. Key features of the new Foreign Direct Investment Law include:  (i) freedom to invest by
dropping all former FDI-related screening, approval, share transfer, and minimum capitalrequirements;  (ii) reassurance of existing guarantees of rights to foreign investors in one document;
(iii) adoption of international standards for defini tions of "foreign investor" (broadened to include
Turks living abroad and international organizations), and "foreign direct investment" (broadened to
include all possible types of assets); and (iv) a policy shift from ex-ante control to a promotion and
facilitation approach, with minimal ex-post monitoring, to continuously improve an investor-friendlyclimate for growth and development.  The new law guarantees national treatment and investor rights.
All companies established with a foreign capital contribution and under the rules of the Turkish
Commercial Code (existing and newly established foreign companies) are regarded as Turkish
companies. Therefore, equal treatment, both in rights  and responsibilities as stated in the Constitution
and other laws, is applicable to all such companies.
22
Table II.5
Sectors subject to foreign direct investment restrictions, 2003
Sectors where foreign
investment is restrictedLegal sourceRestriction
Broadcasting Establishment and Broadcasting of Radio
and Television Law No. 3984No more than 25% equity participation by foreigners.
Aviation Civil Aviation Law No. 2920
SHY-6A (Regulation on Commercial AirTransport Operations)
SHY-22 (Regulation on Airport
Groundhandling)No more than 49% equity participation by foreigners.  Licences to operate
airlines are only granted to locally incorporated companies whosemanagement is under the control of Turkish citizens and majority of voting
shares are owned by Turkish citizens.  Airlines, of which majority of shares
are controlled by foreigners, are not permitted to carry passengers from one
national airport to another.
Maritime transportation Cabotage Act No. 815, Turkish
Commercial Code No. 6762No more than 49% equity participation by foreigners.  Cabotage is reserved to
national flag carriers.  Registration of commercial ships is granted only tolocally incorporated companies whose management is under the control ofTurkish citizens, and majority of voting shares are owned by Turkish citizens.
Port services Cabotage Act No. 815, Turkish
Commercial Code No. 6762, PrivatizationLaw No. 4046No more than 49% equity participation by foreigners.  Only Turkish citizens,
and companies that are majority owned by Turkish citizens, which aremanaged and represented by Turkish citizens with a majority, and majorityvoting is held by Turkish citizens, may exercise the rights related to the ports.
Fish-processing Fishing Law No. 1380, Bylaw on Fishing
Products No. 6710, Turkish CommercialCode No. 6762No more than 49% equity participation by foreigners.  Foreign-owned
enterprises may engage in fish processing, bur cannot obtain a fishing licence.
Fishing vessels may not register in Turkey unless owned by Turkish nationals
or by companies of which majority of voting shares are owned by Turkish
citizens.
Table II.5 (cont'd)
                                                     
22 This includes national treatment, a guarantee against expropriation without compensation, transfer of
proceeds, access to real estate, the right  to expatriate personnel, and access to international arbitr ation or to any
other means of dispute settlement.Turkey WT/TPR/S/125
Page 29
Sectors where foreign
investment is restrictedLegal sourceRestriction
Telecommunications
Services provided under
concession agreementsTelecommunications Services Regulation No more than 49% equity participation by foreigners.  A "Concession
Agreement" is used when authorisation involves the allocation of scarceresources such as frequency, satellite position and numbering, and grantingparticular or special rights and obligations to each operator is necessary;  orwhen the service in question has to be offered by a limited number ofoperators.  Also a concession presupposes a nation-wide network.  GSMoperators are authorized by signing concession agreements.
Accounting, auditing and
book-keeping servicesLaw No. 3568 on Accountancy, Financial
Advisory and Certified Financial Advisory
Services dated 1989Special permission required.  Foreign financial advisors that are the citizens of
countries which have officially codified the principles of the profession offinancial advisory may, under reciprocal conditions, be authorized by theapproval of the Prime Minister upon the proposal of  the Ministry of Finance,provided that these persons have the qualifications required for the Turkishfinancial advisors and have rights to perform similar services in their owncountries.
Financial sector Banks Act No.  4389 amended by Law
No.4491, 4672 and 4743, Capital Market
Law No. 2499 amended by Laws No. 3794
and 4487 and the relevant Communiqués,Financial Leasing Law No. 3226,Insurance Supervision Law No. 7397 andamended by Statutory Decree No. 539 of
1994.Special permission required.  Permission to establish a bank, which has to be
founded in the form of a joint-stock company, or to open the first branch of a
foreign bank in Turkey, shall be given by a decision taken by the Banking
Regulation and Supervision Board.   Only intermediary institutions (includingbanks) established in Turkey and authorized by the Capital Market Board  canperform securities activities;  however, banks cannot trade in the IstanbulStock Exchange (ISE) equities market.  Mutual funds may be founded only byauthorized banks, insurance companies, non-bank securities intermediaries;and pension funds by private pension companies established in Turkey.  Themajority of the members of the board of directors of an investment companymust be Turkish nationals.  Portfolio management and investment advisoryservices may be performed by non-bank securities intermediaries, non-deposittaking banks and portfolio management companies established in Turkey.  Ininsurance, foreign commercial presence or presence of foreign natural personsregarding services auxiliary to insurance is permitted only for consultancy and
risk-management services.  Establishment of an insurance or reinsurance
company and opening a branch of a foreign insurance or reinsurance companyin Turkey are subject to prior permission of the Ministry of State,  to whichthe Undersecretariat of Treasury is attached.  Those measures regarding
special permission are applied equally to domestic and foreign investors.
Petroleum Petroleum Law No. 6326 Special permission required.  Foreign enterprises may invest in marketing and
sales activities without restriction.  They may invest in exploration andexploration activities provided they are not controlled or owned by a foreignState (this restriction may be lifted by the Council of Ministers).  Petroleumrelated activities can be carried our through locally incorporated stockcompanies or Turkish branches of stock companies incorporated abroad.  Forinvestment in refining, transportation through pipelines and storage, approvalby the Council of Ministers is required.
Mining Mining Law No. 3213 Special permission required.  Foreign nationals and companies may invest
only through locally incorporated companies.
Real-estate trading Title deeds Law No. 2644 No foreign investment allowed.  Foreign legal and real persons in Turkey can
acquire land in accordance with the mutuality principle;  however, acquisition
of land over 30 hectares is due to the permission of the Council of Ministers.
Fishing Fishing Law No. 1380, Bylaw on Fishing
Products No. 6710, Turkish CommercialCode No. 6762No foreign investment allowed.  Foreign-owned enterprises may engage in
fish processing, bur cannot obtain a fishing licence.  Fishing vessels may notregister in Turkey unless owned by Turkish nationals or by companies ofwhich majority of voting shares are owned by Turkish citizens.
Source: Information provided by the Turkish authorities.
36. In December 2001, a Coordination Committee for the Improvement of the Investment
Environment (CCIIE) was appointed to review the entire legal framework on investment, under the
guidance of the Minister of State Responsible for Economy. As a result of this work, the companyestablishment procedure, which  took almost two and a half months and required excessive
documentation and approval from several authorities, has been simplified and streamlined. The
legislation to reduce the duration of registration to one day, and the number of required documents,
was approved by the Parliament on 12 June 2002 and published in the
 Official Gazette  on
17 June 2003.  The Law on International Arbitration (No. 4686), enacted in July  2001, provides forsolution through international arbitration of conflicts arising from public service concession contracts
where any foreign element is involved.WT/TPR/S/125 Trade Policy Review
Page 30
37. A company can be 100% foreign owned in almost all sectors of the Turkish economy. The
exceptions are:  (i) broadcasting, where foreign shareholders' equity participation is restricted to 25%;
and (ii) aviation, maritime transportation, ports, fish-processing and telecommunications services
provided under concession agreements, where it is restricted to 49%.  Acquisitions of over 30 hectares
by foreigners are subject to permission from the Council of Ministers.  Establishments in the financial,
petroleum, and mining sectors require special permission, according to appropriate laws (Table II.5).
38. A variety of schemes provide incentives to investors; they are equally available to foreign and
domestic investors, and include tariff and duty exemptions, investment allowances, and subsidized
credits (Chapter III(2)(ii)(f) and III(3)(iv)).  There are no special incentives available only to foreign
or national investors. Outward foreign direct investment in excess of US$5 million requires
permission by the Undersecretariat of Treasury.23
39. Turkey has signed 66 bilateral agreements (up from 53 in June 1998) for the promotion and
protection of foreign direct investment, with:  Al bania, Algeria, Argentina, Austria, Azerbaijan,
Bangladesh, Belarus, Bosnia-Herzegovina, Belgium, Bulgaria, Chile, China, Croatia, Cuba,
the Czech Republic, Denmark, Egypt, Ethiopia, Estonia, Finland, Georgia, Germany, Greece,
Hungary, India, Indonesia, Iran, Is rael, Italy, Japan, Jordan, Kazakh stan, Kuwait, Kyrgyzstan, Latvia,
Lithuania, Macedonia, Malaysia, Moldova, Mongolia, Morocco, the Netherlands, Nigeria, Pakistan,
Philippines, Poland, Portugal,  Qatar,  Republic of Korea, Romania, Russian Federation, Serbia and
Montenegro, Slovakia, South Africa, Spain, Sudan, Sweden, Switzerland, Tajikistan, Tunisia,
Turkmenistan, Ukraine, the United Kingdom, the United States, Uzbekistan, and Yemen.
40. Since 1987, Turkey has been a member of the International Centre for Settlement of
Investment Disputes and the Multilateral Investme nt Guarantee Agency.  Since 1991, Turkey has also
been a member of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards24,
and of the European Convention on International Commercial Arbitrations.25
                                                     
23 European Commission (2002) .
24 Approved by Law No. 3731 of 21 May 1991.
25 Approved by Law No. 3730 of 21 May 1991.