WORLD TRADE
ORGANIZATIONWT/TPR/M/44
9 December 1998
(98-4951)
Trade Policy Review Body
12-13 October 1998
TRADE POLICY REVIEW
TURKEY
Minutes of Meeting
Chairperson:  H.E. Mr. Ali Said Mchumo (Tanzania)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON      3
II. OPENING STATEMENT BY THE REPRESENTATIVE OF TURKEY      4
III. STATEMENT BY THE FIRST DISCUSSANT      7
IV. STATEMENT BY THE SECOND DISCUSSANT      9
V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY    12
VI. REPLIES BY THE REPRESENTATIVE OF TURKEY AND ADDITIONAL
COMMENTS    18
VII. CONCLUDING REMARKS BY THE CHAIRPERSON    28WT/TPR/M/44
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The Chairperson (H. E. Mr. Ali Said Mchumo), introducing the second Trade Policy Review of
Turkey, welcomed the delegation from Turkey, led by Dr. A. Yavuz Ege as well as Ambassador Balkan,
the discussants (H. E. Mr. Nobutoshi Akao, Japan and Mr. Carlos Antonio da Rocha Paranhos, Brazil)
and members of the Trade Policy Review Body.  The discussion was to be based on two documents,
which had already been circulated, the report by the Government, WT/TPR/G/44 and that by theSecretariat, WT/TPR/S/44.  Australia;  Canada;  H ong Kong, China;  Japan;  Korea;  New Zealand;
Norway;  Switzerland and the United States had submitted questions in advance.WT/TPR/M/44
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF TURKEY
2. The representative of Turkey welcomed the Review and said that Turkey attached great
importance to the mechanism since it led to greater transparency in, and understanding of, the Members'
trade policies and practices.  Turkey had updated its legislation in a number of trade-related fields in
compliance with its commitments under WTO as well as in accordance with the customs union between
Turkey and the European Union (EU).  Turkey would continue to pursue trade liberalization within theWTO framework.
Economic developments
3. The 1980s was a  period of rapid change in the Turkish economy with high rates of growth and
industrialization. However, in the early 1990s, the UN embargo on Iraq, the Gulf war, and the national
election atmosphere resulted in growing fiscal and trade deficits, rising inflation, and investment
deficiencies.  A series of negative developments, such as rising interest rates, stagnation in the credit
markets, foreign exchange volatility, an unanticipated inventory build-up and the resulting contraction indomestic demand, led the Government to introduce a stabilization and structural adjustment programme
in April 1994.
4. The economy responded positively to the austerity package. The private sector played the
dominant role in the swift recovery: the economy grew  by 8.0% in 1995, compared with a contraction of
6.1% in 1994.  Along with increased capacity utilization rates and sharp rises in industrial production, theeconomy experienced continued high growth in 1996 and 1997.  However, inflation remained high.
5. In 1998, the Government devised a three-year programme to rebalance the economy and reduce
inflation.  Inflation (wholesale price) was targeted  to be reduced from over 90% at end-1997 to 35% by
end-1999.  To this end, it would continue to follow a tight fiscal policy to generate an adequate primary
balance, forward indexation of public sector wages and agricultural support prices, a supportive monetarypolicy, and further structural reforms.  In this regard, the Treasury had ceased to borrow from the Central
Bank.  Moreover, privatization had been stepped up; forty-six enterprises were earmarked for
privatization and revenue was targeted at US$5 billion in 1998.  In the area of social security, the
Government would continue its efforts towards a co nsensus for reforms, including increases in the
minimum retirement age and minimum contribution period, and an expansion of the reference period forcalculating pension benefits, coupled with an increase in the ceiling on wages subject to contributions.
6. Measures had also been taken to strengthen the financial sector.  The effectiveness of supervision
had been increased through more stringent enforcement of capital adequacy requirements and of the
ceiling on banks' net open foreign exchange positions.  The calculation of capital base and risk weighted
assets had been changed, keeping the prudential ratio of 8% as laid out by the Bank of International
Settlement.  Also, the net open foreign exchange position of banks had been reduced to 30% of the capital
base, from 50%.  A new draft law had been presented to the Cabinet covering all financial institutions,except those acting in capital markets.  It was aimed at harmonizing the legislation with international
standards and increasing the effectiveness of supervision.
External position and trade policy relations
7. The external position was one of the strengths of the economy.  Turkey had maintained relatively
balanced accounts throughout two decades of strong economic growth and increased openness to trade.Turkey’s combined exports and imports of goods and services amounted to 50% of GDP in 1997, up from
14% in 1978.  A current account deficit of about 2.3% of GDP was mainly attributable to services and
transfers, while the trade deficit stood at nearly 10% of GDP in 1997.  However, the recent crises in EastWT/TPR/M/44
Page 5
Asia and the Russian Federation had had a certain negative impact on Turkey’s external balances.
Nevertheless, the shuttle trade between Turkey and Russia was expected to rebound and offset the
decrease in official exports.  The East Asia crisis, on the other hand, had resulted in a 45% drop in
Turkish exports to the region.
8. Turkey's foreign trade system was based on the principles of free and fair trade.  Of particular
importance were the obligations to be fulfilled under the WTO and the relations with the EU.  Within the
wider WTO framework, the customs union had been th e main determinant in formulating trade policies.
The steps that Turkey had taken, or would take, in compliance with its customs union commitments were
parallel vis-à-vis the WTO.  This had facilitated Turkey’s implementation of the provisions of the
Uruguay Round Final Act.
Specific trade policy measures
9. In compliance with the Marrakesh Protocol Turkey had provided tariff reductions in its Uruguay
Round Schedule for industrial goods.  Moreover, Turkey participated in the WTO InformationTechnology Agreement (ITA) and contributed to the Integrated Initiatives for Least-Developed Countries'
Trade Development.  Within the ITA, Turkey was committed to eliminating tariffs on 561 products by the
year 2000.  Turkey had also eliminated tariffs on 555 products originating from 50 least-developed
countries and reduced the tariff rate on coffee as of  1 January 1998.
10. On anti-dumping, Turkey had enacted the Legislation on Prevention of Unfair Competition in
Importation, in 1989, and had been applying this in line with the rules of the GATT.  The WTO
Anti-Dumping Agreement had the same force of law as national legislation.  In order to reflect the WTO
Anti-Dumping Agreement in national legislation, a new law had been submitted to the Parliament.
11. Although Turkey had a five year transition period, it had adopted legislation for patents,
trade marks, industrial designs and geographical indications in June 1995; the legislation was not onlycompatible with TRIPS standards, but also contained more effective provisions.  On the other hand,
Turkey was updating its legislation in the field of copyrights; a law had been drafted to amend the
existing law, and approval by the Parliament was expected soon.  As of 1 January 1997, Turkey had also
disinvoked Article XVIII of GATT 1994.
12. On customs tariffs, Turkey had adopted the EU common external tariff on imports from third
countries in January 1996.  The customs union initially covered industrial and processed agricultural
products.  As of January 1996, Turkey’s average rate of  protection for imports of industrial products had
dropped from 5.9% to zero for products originating in the EU and EFTA partners, and from 18% to 5.6%
for products originating in third countries.  Concerning processed agricultural products, the parties had
agreed on a system in which Turkey would differentiate between the agricultural and industrial
components of applicable duties; Turkey had abolished protection on the latter component.
13. The application of the customs union between Turkey and the EU had evolved beyond the
classical concept of a customs union.  In accordance with Article XXIV of GATT 1994, harmonization
with the EU commercial policy included: surveillance and safeguard measures on imports; management
of quantitative restrictions and tariff quotas; prevention of dumped or subsidized imports; surveillance
and safeguard measures on imports originating in certain third countries; protection of Turkey’s rights
against unfair commercial practices; and standardization and conformity assessment in foreign trade.  Inorder to avoid any possibility of trade diversion, Turkey had undertaken to align its policies with the
preferential trade agreements between the EU and third countries within a period of five years.  In thisWT/TPR/M/44
Page 6
respect, Turkey had signed free-trade agreements with Israel, Hungary, Romania, Bulgaria, Latvia,
Slovenia, Lithuania, Estonia, and the Czech and Slovak Republics.  Similarly, in order to comply with the
commercial policy of the EU in the textiles and cl othing sector, Turkey had harmonized its legislation
with the quota and surveillance measures applied on textiles and clothing products by the EU.
14. The main export arrangements adopted by Turkey were the Council Regulation on Common
Rules in Exports and the Council Decision on Officially Supported Export Credits.
15. In the approximation of its legislation to EU competition policy, Turkey had acceded to
international treaties on the protection of intellectual, industrial and commercial property;  adapted to EU
competition rules; and harmonized its state aid in line with the EU.  In this context, Turkey had put into
force a law on the protection of competition, a law on the protection of consumers, and decrees on
patents, copyrights, trade marks and industrial design s.  Moreover, the Decree on State Aid in Exports had
entered into force, covering R&D;  the environment;  market research;  training activities;  exhibitions
and promotion activities abroad;  export refunds on agricultural products;  and other subsidies compatiblewith Turkey’s obligations under international agreements.
16. To ensure the proper functioning of the customs union, the Regime on Standardization in Foreign
Trade had entered into force.  This was aimed at controlling the practices of standardization and
conformity assessment under a single legislation, ensuring transparency, conducting these practices in
conformity with Turkey's commitments under the TBT Agreement, and increasing the efficiency of the
system of quality control.WT/TPR/M/44
Page 7
III. STATEMENT BY THE FIRST DISCUSSANT
Economic developments
17. The first discussant noted that Turkey's large budget deficit was one of the main factors behind its
high inflation rates.  Such public imbalances increased the cost of private investment and were
detrimental to the economy.  Markets in private secu rities had been constrained by the heavy financing
needs of the public sector; government paper accounted for 97% of new issues of securities in 1996.Extreme inflation and high interest rates also had a negative impact on the economy as well as on the
income distribution.  He wondered how Turkey intende d to maintain solid economic growth despite these
serious macroeconomic imbalances and unfavourable international economic circumstances notably in
Russia.  In particular, he asked how the inflation target of  50% by the end of 1998 would be achieved. In
this regard, he pointed out that full implementation of the recently announced policy (Memorandum of
Economic Policies) was indispensable for the stabilization of the economy.
18. On the external front, the current account deficit had been kept at a manageable level owing to
tourism and to workers remittances.  However, the trade deficit was widening.  Another aspect of
Turkey's trade was the large amount of unrecorded trade (shuttle trade) taking place with the former
Soviet Union and Eastern Europe.  He asked how Turkey estimated the impact of the shuttle trade on its
economy, and whether there were any attempts to turn it into formal trade.
19. Turning to the global financial crisis, he noted that during the first half of 1998 exports to EU
countries had slightly increased, whereas exports to Asian countries and Russia had declined by 46% and
15%, respectively.  He asked how the impact of the economic crisis would affect Turkey's economy and
trade.
Economic and trade policy regime
20. Turkey had actively participated in the sectoral negotiations on ITA, basic telecommunications
and financial services.  Turkey was also expected to play an active role in the ongoing work on
investment, competition and electronic commerce, and to make further contributions to the multilateral
trading system in the forthcoming round.
21. With regard to the customs union between Turkey and the EU, he noted that Turkey had
eliminated customs duties in mutual trade; reduced duties on third-country products by the adoption of theEU common external tariff; eliminated quantitative restrictions on industrial goods; and harmonized its
other commercial regulations with those of the EU.  However, Turkey had introduced new quantitative
restrictions on textiles, which were being formally examined into in the context of the ongoing WTO
dispute.  Concerns had also been raised in the Committee on Regional Trade Agreements on the exclusion
of agriculture from the coverage of the customs union.  In terms of trade volume, 85% of Turkey's exports
to the EU were covered by the customs union in 1996.  Such exclusion may not be consistent with
Article XXIV:8 of GATT 1994, which stipulated that duties and other restrictive regulations of commercewere to be eliminated with respect to "substantially all trade" between the parties.  Consideration of the
coverage, both in terms of trade volume and tariff lines, was necessary, as parties should not
automatically conclude that the coverage was consistent with GATT XXIV:8 by taking advantage of the
ambiguity or lack of clarity of Article XXIV.  He asked for further elaboration on the issue of excluding
agriculture and on the relationship of Turkey's agricultural policies with the EU common agriculturalpolicy.WT/TPR/M/44
Page 8
22. About half of Turkey's exports in 1997 were dest ined for the EU and more than half of Turkey's
foreign direct investment inflow came from the EU.  Given such a dependence on the EU economy, he
hoped that  the customs union would not create any trade diversion effects on third countries.
23. Privatization in areas such as energy, telecommunications and air transport, had been
implemented, or was scheduled for implementation by the end of 1999.  It would yield a reduced budget
deficit, but a more important result of privatization was effective management and competition.  In lightof the delays in the programme, he asked whether there was any prospect of completion on schedule.  In
this regard, he also asked for further information on the regulatory framework for telecommunications
and energy.
24. Regarding investment policy, Turkey had put into effect a new law in 1995, which simplified and
streamlined its foreign investment policies.  On the other hand, the continued imbalances at the
macroeconomic level had restrained foreign investment.  In light of the remaining restrictions on foreign
direct investment, he enquired about the authorities' intentions on deregulation.
Manufacturing
25. Recent economic developments in Turkey had been led by industry and services.  State-economic
enterprises had played an important role in manufacturing production, notably in heavy industries, but
privatization was important to achieve further growth.  Moreover, foreign direct investment was well
below Turkey's potential.  Since the first Review, Turkey had reduced its border measures, includingtariffs.  However, there remained some tariff peaks in food, beverages and tobacco products, and some
tariff escalation in the textile, clothing and leather industries.
26. Although Turkey had not notified any trade-related investment measures to the WTO under the
TRIMs Agreement, foreign investors in the automobile sector had, without being legally bound, agreed to
incorporate a certain share of local content into their production.  While local-content requirements mightresult in immediate profits for the domestic industry, they would also insulate it from international
competition, thereby hindering further development of  the industry.  Furthermore, consumers would be
obliged to purchase finished products that were more expensive than on a competitive market.  He
questioned whether these firms had agreed to this type of provision without interference from the
authorities concerned.  He also asked about the Govern ment's intention to review this scheme in the spirit
of the TRIMs Agreement and in light of the further development of the industry.
Services
27. Several reforms had been introduced in the banking sector since the financial crisis of early 1994.
However, as had been indicated in the Secretariat report as well by the IMF, certain areas in the financial
sector needed attention.  In this regard, he noted as an example that the reserve and liquidity requirements
imposed costs on the banks and acted as a tax on financial intermediation.  He asked whether there were
any plans for further reforms in the banking sector.
28. Turkey had liberalized its services trade regime through the Uruguay Round as well as through
the succeeding sectoral negotiations.  As a result of the negotiations on financial services, Turkey had
improved its commitment, including the elimination of residential requirements for branch managers of
insurance and reinsurance companies.  In September 1998, Turkey had completed its domestic procedures
to accept the Fifth Protocol of the GATS.  Nevertheless, many of the main services sectors remainedrestricted to foreign investors.  Liberalization of certain services would encourage competition in the
sector itself, thus allowing consumers to enjoy high-quality and low-price services.  It would also
stimulate other areas of economic activity which used such services as an infrastructure.  In this regard, he
encouraged Turkey to participate actively in the coming services negotiations and invited its contribution
in the context of the information exchange programme being conducted by the Council for Trade inServices.WT/TPR/M/44
Page 9
IV. STATEMENT BY THE SECOND DISCUSSANT
29. The second discussant noted that Turkey had implemented a wide range of reforms within the
framework of the customs union between Turkey and the EU.  Turkey had eliminated tariffs on
manufactured imports originating in the EU, and adop ted the EU common external tariff for manufactures
and processed agricultural products.  It had also aligned itself to the EU’s preferential trade regime with
the Baltic and Eastern European countries.  Turkey had enacted a wide range of trade measures and tradelegislation, seeking to apply many elements of th e EU acquis communautaire in the areas of customs
provision, duty concessions, export credits, competition policy, sanitary and phytosanitary measures,
intellectual property rights, and standards.  However, Turkey had, until 2001 to implement the customs
union decision (CUD) in full.
30. The CUD had given a new impetus to the liberalization process in Turkey, taking it beyond its
Uruguay Round commitments.  In addition to improved market access, the Decision had also brought a
more secure trading environment for third countries.  The reforms were perceived as "locked in" by theagreement.  Since January 1996, Turkey had been appl ying the same rules of origin as the EU with
respect to imports from third countries, in terms of both preferential and non-preferential rules.
31. Although the customs union provided for an overall liberalization, some new measures had been
introduced since Turkey's previous Review.  Exampl es included import quotas on textiles and clothing,
and tariff quotas on some agricultural and processed products.  Moreover, the already heavily supportedagricultural sector had in recent years received increased assistance, while the manufacturing sector had
been exposed to greater competition.
32. He noted that the value of Turkey's so-called shuttle trade, estimated at between 25% and 50% of
total exports of goods, had caused some concern.   He asked about the significance of the shuttle trade.
Specific trade policy measures33. On tariffs, he noted that Turkey had implemente d significant reforms since its previous Review.
First, the average level of border taxation had been cut by more than half from 27% in 1993 to 13%
in 1998.  Second, the MHF levy had been almost elim inated, thus simplifying taxes payable on imports
and improving transparency.  In 1998 the levy covered 3% of the tariff lines, compared with 87% in 1993.
However, as for many other developing countries, there was an increasing difference between the averageMFN applied tariff and bound rates.  In this regard, he asked whether Turkey intended to re-bind the
tariffs at the levels of the EU.  Moreover, substantial tariff dispersion remained, as well as a large number
of tariff rates.  He asked if Turkey intended to cut this high dispersion.  Tariff protection in the agriculture
sector constituted a significant barrier to imports.  The average MFN tariff increased from 35% in 1993 to
43% in 1998.  Food, beverages and tobacco were also characterized by strong tariff escalation.  He asked
why the tariff had increased.
34. Import certificates were abolished in 1996.  However, a number of goods remained subject to
import licensing. Examples included telecommunication equipment, machinery, motor vehicles,
transmission apparatus, chemical and civil aircraft related products.  Since manufactured goods were
covered by the custom union, he asked whether Turkey had any plans to abolish the import licensing
system.  Moreover, Turkey had introduced import quotas on certain textile and clothing products as a
requirement for harmonization of its import policy with th at of the EU.  He asked for the justification for
this measure.WT/TPR/M/44
Page 10
35. Turning to anti-dumping, he noted that Turkey was not obliged under the customs union with the
EU to adopt the EU’s anti-dumping measures, and the two parties retained their mutual rights in this area.
He asked if Turkey was planning to incorporate the EU anti-dumping regime.  He also asked about the
consistency of the customs union with the WTO rules with regard to textile quotas and the anti-dumping
system.  Finally, he asked when the amendment to the 1989 law would be enacted.
36. Since January 1996 Turkey had been applying the same rules of origin as the EU with respect to
imports from third countries, in terms of both preferential and non preferential rules.  In this regard, he
requested an estimate of the trade diversion related to the adoption of this measure.
Measures directly affecting exports
37. Turkey had progressively modified its incentive system provided to exporters.  While many direct
export subsidy programmes had been eliminated, exporters could now rely more heavily on a wide range
of indirect support measures (including duty concessions, and export finance, insurance, guarantee and
promotion programmes).  Within the framework of the CUD, the OECD Consensus principles on
officially supported export credits had been adopted.  In this regard, he asked whether the Turk
Eximbank's negative net operating cash flows associated with its export and credit guarantee programmes
could be considered a subsidy.
Other trade and trade-related measures
38. The complex system of tax exemptions and concessional credit forming the state aid programme
was costly (equivalent to 2.3% of GDP in 1994) and induced a misallocation of resources.  Studies
indicated that the incentives had largely failed to achieve their objectives of stimulating and re-orienting
investment; some even created a bias toward capital-intensive production.  He asked for a clarification of
the rationale for maintaining the system, and whether Turkey had notified it to the WTO.
39. Since its previous Review, Turkey had made substantial progress in its intellectual property rights
regime. New laws (covering patents, trade marks, industrial designs, geographical indications and
copyright) as well as the adoption of a number of important international conventions governing
intellectual property rights and advance implementation of the TRIPS Agreement, had given Turkey a
modern legal framework for the protection of intellectual property rights.  Notwithstanding these
improvements, some WTO Members were concerned about the weaknesses in enforcement of the regime.He also noted that in the area of competition, the enforcement capacity lagged behind the legislative
process, and was interested in hearing what measures Turkey was taking to overcome the need for
staffing, training, and improved awareness of the new legal provisions.
40. In the area of government procurement, the Secretariat report noted that some construction work
up to a certain amount may be procured by the concerned Ministry using the so-called "force account
commission" procedure.  He asked if this article could be used as an escape clause from the normal
procurement procedures.
41. In the automobile sector, foreign investors had accepted as a “gentlemen’s agreement”, to
incorporate a certain share of local content.  He wondered how the measure related to the TRIMs
Agreement.WT/TPR/M/44
Page 11
Agriculture
42. Agriculture was still an important sector in the Turkish economy, accounting for 14% of GDP,
21% of exports and 50% of the labour force (1997).  However, since the previous Review, the already
heavily supported agriculture sector had received increased assistance, while the manufacturing sector
had been exposed to greater competition.  The policy imbalance could be a tax not only on consumer
welfare but also implicitly on services and manufacturing that compete with agriculture for productionfactors.  He asked about the rationale behind such protection, and the Government's plans to reform the
sector.  He also asked for an estimate of the amount of agricultural trade excluded from the custom union
with the EU.WT/TPR/M/44
Page 12
V. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
43. Members commended Turkey for its implementation of far-reaching structural and legislative
reforms, since its previous Review, which had taken place as a result of the customs union with the EU as
well as the application of Uruguay Round provisions.  These reforms had contributed to the economy's
sound annual average growth of almost 8% in the past three years, and had led to improved market access
and a more secure trading environment for all investors and traders.  Members thanked the Governmentand the Secretariat for their reports.  Members also looked forward to receiving replies to their advanced
written questions.
44. The representative of the United States commended Turkey for its contribution to the recent trade
negotiations;  she hoped that the new agreements would provide improved access to the Turkish market
for Turkey's trading partners.  In turn, she expected Turkey to benefit substantially from these liberalizing
agreements and through the expanded the scope and strength of trade rules under the WTO.
45. She welcomed the Government's recognition in its report that "intellectual property protection
was one of the core factors to ensure fair compet ition in the global economy."  As indicated in the
Secretariat report, Turkey had taken a number of important actions to remedy deficiencies in its regime to
protect intellectual property.  Nonetheless, enforcement of existing intellectual property laws and full
compliance of Turkey's copyright and patent laws wi th its TRIPS obligations remained serious problems.
She asked for information on the status of amendments to bring all intellectual property laws into fullcompliance with WTO Agreement on TRIPS.
46. While the general opening of the industrial sector since the last Review was laudable, she was
concerned by an increasing trend toward agricultural protectionism and intervention in agricultural
markets.  A major concern was Turkey's import ban on cattle and meat products.  This measure appeared
to be inconsistent with Turkey's obligations under the SPS Agreement, and she urged Turkey to eliminatethe ban.
47. While Turkey's entry into a customs union with the EU had contributed to tariff liberalization in
the industrial sector, she remained concerned that new barriers to third parties had been erected in some
important sectors.  Moreover, the CUD, and other free -trade agreements to which Turkey was a party, did
not seem to offer much benefit to the agriculture sector, which was substantially excluded from theagreements.
48. The representative of New Zealand was pleased to note the reduction of Turkey's average MFN
tariff since 1993, as well as the implementation of other trade-related reforms implemented since the last
Review, including simplification of customs procedures, establishment of a competition authority, and the
enactment of intellectual property legislation.  However, agriculture remained heavily supported, tariff
protection had increased, and there remained in place temporary bans on the importation of meat and live
animals.  He encouraged Turkey to extend its on going reform process to the agriculture sector.
49. The representative of Norway welcomed the reduction in tariffs on industrial products over the
past five years and the reduction in the use of anti-dumping measures since 1995.  In this context the
importance of the customs union was recognized.  On import licensing, she asked if the Government had
any plans to abolish the system.  She also asked what actions were necessary, from a Turkish point of
view, for the customs union with the EU to facilitate MFN based trade liberalization and to avoiddiscrimination towards third parties.  She noted that as an applicant for EU membership, Turkey may
become part of the EU internal market.  In this regard, she requested information on the structure to be set
up in order to facilitate standardization requirements.  While she welcomed Turkey's observer status inWT/TPR/M/44
Page 13
the Agreement on Government Procurement, she wondered whether Turkey was planning to become a
member.
50. The representative of Canada believed that Turkey's overall prospects remained promising as a
result of its customs union with the EU and increasingly important role as a gateway to the emerging
markets of central Asia.  However, Canada was conc erned that tariff quotas continued to exist and that
full harmonization of Turkey's tariff regime with th at of the EU had yet to be achieved.  In addition,
Canada supported the Secretariats' view that the efficiency of the Turkish economy would benefit from
swift privatization and reform of the financial sector.  Canada expressed support for Turkey's efforts to
implement key structural reforms, including reform of the social security system and the build-operate-
transfer legislation, and the removal of obstacles to investment, such as in the mining sector.  Canada
believed that such reforms were essential in order to improve the climate for foreign investment.
51. The representative of Australia noted that regional trade integration would be the key element in
Turkey's future trade agenda.  She noted with concer n that Turkey still maintained rates of protection
above the EU common external tariff for "sensitive" industrial products.  She also noted that there was no
timeframe or even commitment for the free movement of agricultural products, including the agricultural
component of processed foods.  Turkey's free-trade agreements with ten countries other than the EU also
did not allow for free trade in agriculture.  Given the importance of agriculture to Turkey's economy, she
asked why this sector had repeatedly been set aside.  She also asked how the omission of agriculture fromTurkey's regional trade agreements sat with the WTO requirement that restrictions be removed on
"substantially all trade" between the parties to regional agreements.
52. She was concerned about the increased support to agriculture since the last Review and enquired
about the prospects for reversing this trend.  She also asked about Turkey's intention regarding
tariffication of agricultural products in the multilateral trade negotiations due to start in 2000.  Moreover,she wondered why the Turkish Grains Board (TMO) in 1998 paid up to twice world market prices for
barley, and at the same time had significantly increased its stockpile.  She noted that imports of wine and
beer were restricted and wondered why domestically produced alcoholic beverages were given favourable
treatment.
53. With regard to Turkey's import ban on live animals and meat, she asked for the scientific
justification of the measure, its consistency with Turkey's SPS obligations, and when the ban would be
removed.
54. The representative of Hong Kong, China noted that bilateral trade between Hong Kong, China
and Turkey were generally smooth.  However, Hong Kong, China was a third party in a dispute
settlement case concerning Turkey's restrictions  on imports of textile and clothing products.  He
encouraged Turkey to reduce or eliminate its various additional levies and charges on imports
(e.g. defence industry support fund, petroleum consumption tax and environmental fund).  He also hopedthat Turkey's integration with the EU woul d not result in additional trade barriers.
55. The representative of the Republic of Korea hoped that Turkey's continued reform efforts would
bear fruits in the near future.  Progress in privatization, by speeding up the judicial review of assets sales,
permitting international arbitration, and establishi ng an appropriate regulatory framework for the
telecommunications and energy sectors, would help to finance debt and infrastructure constructions, andto attract foreign direct investors.WT/TPR/M/44
Page 14
56. On government procurement, he pointed out that certain foreigners were granted unequal
treatment; tendering restrictions set by the Turkish Electricity and Power Generation Corporation (TEAS)
restricted the origin of input to a limited number of countries.  He hoped that Turkey would review such
treatment, which was contrary to the principle of non-discrimination.
57. Another issue of concern was the imposition by Turkey since 1992 of a 12% anti-dumping duty
on Korean lead-acid electric accumulators.  Since Turkish law did not specify the duration of provisionalor definitive duties or a periodic review, no reviews had been conducted to determine whether the said
product was still "dumped".  He hoped that Turkey would remedy the situation.
58. While he welcomed Turkey's streamlining and modernization of its customs procedures, he noted
that customs clearance procedures remained lengthy and sometimes burdensome, especially in the case of
imports of textiles.
59. The representative of Japan welcomed Turkey's adoption of the EU common external tariff,
thereby reducing tariffs on imports from third countries.  However, he noted with concern that Turkey
automatically applied quantitative restrictions on imports of textile and clothing products;  this was
inconsistent with Article 2:4 of the Agreement on Textiles and Clothing, as well as Articles XI and
Article XXIV:5a of GATT 1994.  He requested Turkey to review this measure.  He was also concerned
about the exclusion of agriculture from the customs union.  With reference to Turkey's high dependence
on the EU (47% of Turkey's merchandise exports were  destined to the EU and 51% of its merchandise
imports were from the EU in 1997) he asked about Turkey's plans for diversifying its exports and imports.
60. Under Turkey's government procurement regime, permission was required from the authorities to
transport imported goods under foreign flags.  The Japanese industry had raised concerns about the
complicated procedures to acquire permission.
61. He noted that foreign investors in the automobile  sector agreed, as a "gentlemen's agreement", to
a certain share of local content.  He asked for clarif ication of the term gentlemen's agreement, and of the
measure's consistency with Turkey's WTO obligations.
62. While he welcomed Turkey's services commitments, Japan had some concerns as spelled out in
its advance written questions.  In this regard, he encouraged Turkey to make further commitments and to
review its MFN exemptions.  Finally, he noted that th e new national tariff system needed to be simplified.
63. The representative of the European Union noted the privileged relationship between the EU and
Turkey and the substantial degree of alignment of their respective external trade policies in the framework
of the CUD.  The Decision had reshaped Turkey's trade policy in a comprehensive manner.  Examples of
measures with a clear positive impact were: a substantial reduction of tariffs on most non-agricultural
imports, thereby increasing access to the Turkish market in a way which by far outweighed the effect of
the introduction of import quotas; the virtual elimination of the MHF levy; the setting up of a modern
legal framework for the protection of intellectual property rights; the simplification and streamlining ofcustoms documentation requirements, notably through alignment of Turkey's customs declaration on the
format of the EU Single Administrative Docu ment (SAD); and the adoption of the full acquis
communautaire in the field of competition rules to be implemented and enforced by an independent
Competition Authority.
64. He noted that areas of concern tended to correspond to those sectors or aspects of economic
policy not covered by the customs union.  With regard to agriculture, the EU and Turkey had concluded a
separate agreement consisting of reciprocal concessions, which had entered into force on 1 January 1998.
The implementation of this agreement was nevertheless hampered by Turkey's import ban on live animalsWT/TPR/M/44
Page 15
and meat.  The measure had no serious justification and constituted a non-tariff barrier to trade.  On
services, he noted that exploratory talks had been initiated, with a view to a preferential agreement in
conformity with Article V of the GATS.
65. Referring to the Secretariat report, he noted his concern in relation to Turkey's inflation and
macroeconomic imbalances.  He encouraged Turkey to make progress in the implementation of key
structural reforms so as to ensure the sustainability of its growth and external trade performances.
66. The representative of the Czech Republic said that access to the Turkish market had improved as
a result of the wide ranging reforms undertaken with in the framework of the customs union with the EU.
This positive development supported the view that multilateralism and regionalism could be mutually
supportive provided they were put on a solid foundation.  He was confident that the free-trade agreement
between the Czech Republic and Turkey perfectly filled this criteria and that the agreement would
strengthen significantly relations between the two countries.  He noted that a number of tax concessions
were contingent upon export performance, while another incentive was dependent upon the use ofdomestically sourced goods.  In this regard, he asked about the consistency of these measures with
Turkey's WTO obligations.  Turning to government procurement, he asked about the Government's
intention to harmonize its policies with those of the EU.  Finally, all vehicles sold on the Turkish market
were subject to various domestic taxes levied at a wide range of specific rates, he asked whether there was
any intention to apply flat rates irrespective of the technical parameters of vehicles.
67. The representative of Hungary welcomed the customs union decision concluded by Turkey and
the EU, which not only had improved and made more secure the market access conditions for third
countries to most sectors of the Turkish market but the accompanying legislative reforms were improving
the business environment in general.  He complimen ted Turkey for nearly halving the average level of
border taxation on manufacturing imports and stressed the prime importance of the virtual elimination ofMHF levies in this respect.  He noted that the adoption of many elements of the acquis communautaire in
the area of customs regulations had made customs proceedings faster and more transparent.  While he
appreciated the elimination of some export incentive schemes, further steps could be taken to improve
transparency, efficiency and WTO compatibility of state aid schemes.  He noted with concern that the
liberalization process did not cover all sectors eq ually, with agriculture lagging far behind.  On
agriculture, he also expressed serious concern regarding the import ban on certain products of the bovine
sector.
68. Pointing out that Turkey is a very important trading partner for Hungary, he expressed hope that
the free-trade agreement between th e two countries, which entered into force on 1 April 1998, will give
fresh impetus to the further development of trade ties .  He stated that the free-trade agreement was fully
consistent with Article XXIV of the GATT.
69. While noting the effects of the global financial crisis on Turkey, he expressed appreciation for
Turkey's resistance to domestic pressures for increased protection especially in the steel and textile
sectors.  He urged the Government to continue this policy.
70. The representative of India welcomed Turkey's avowed commitment to usher in a liberal foreign
trade system based on the principles of free and fair competition, non-discrimination and elimination of
barriers to trade.  However, she urged Turkey to intensify its effort to achieve macroeconomic stabilityand to eliminate residual impediments to growth.WT/TPR/M/44
Page 16
71. Referring to the Secretariat report, she noted that the increase in exports from the EU as a result
of the customs union had been substantially higher than the corresponding increase in exports from
Turkey to the EU.  Similarly, there had been some adverse trade balances with some of Turkey's other
major trading partners.  In this regard, she was concerned about the possibility of trade diversion.
72. While several of the trade-related aspects of th e CUD would be examined in other WTO fora, she
outlined some areas of concern.  First, the consistency of Turkey's imposition of quantitative restrictionson imports of certain textile and clothing products with Turkey's WTO obligations.  Second, Turkey had
introduced a wide range of trade and related measures based on the acquis communautaire, including
sanitary and phytosanitary measures.  Many of the EU's SPS measures and standards, such as those on
aflatoxin levels in food products and on levels of benzoic acid in imported shrimp, were already under
discussion in the SPS Committee as being either more stringent than international standards or
discriminatory in nature.
73. According to the Secretariat's report, the current trend of increasing support in the agricultural
sector was contrary to the liberalization seen elsewhere in the economy, and the producer subsidies had
nearly doubled by 1997 (in U.S. dollar terms) from the 1994 levels.  She asked for further clarifications of
these issues.
74. The representative of Thailand noted that Turkey's trade and economic policies had, for the most
part, evolved in a positive direction.  While noting the wide range of reforms already undertaken, he
hoped that Turkey would continue to ensure that preferential access to its markets would be provided to
all countries granted EU preferential access.
75. Notwithstanding the headway made in eliminat ing many export incentive programmes, Turkey
still relied heavily on a wide range of measures to assist its exporters, including duty concessions, export
finance and other means of assistance, some of which might have elements of subsidies.
76. On anti-dumping, Thailand hoped that Turkey would continue to exercise prudent and sound
judgment when considering the possible use of anti-dumping actions.
77. A number of products were still subject to import licensing.  He asked whether the system was
categorized as an automatic or a non-automatic impor t licensing scheme, and about its consistency with
Turkey's WTO obligations.
78. He noted with concern that Turkey had not been able to pave the way for greater liberalization in
the agriculture sector.  Against the backdrop of the upcoming multilateral negotiations in agriculture, he
hoped that Turkey would refine its policies accordingly.  He also requested further information on the
non-alignment of its agriculture policy with that of the EU.
79. Finally, he questioned the consistency of Turkey's quantitative restrictions on imports of textile
and clothing products with its WTO obligations.  In th is regard, he noted that, with due respect to the
on-going panel proceedings, the formation of a customs union should not be interpreted nor construed insuch a way that would give WTO Members the right to introduce or to extend restrictive measures.  He
suggested that a temporary certificate of origin system on textile products not originating in Turkey could
be an alternative to quantitative restrictions.
80. The representative of Pakistan noted that as a result of a wide range of structural reforms, the
Turkish economy had achieved a high growth path, as  evidenced by an average GNP growth of 7.7%
between 1995 and 1997.  He was concerned, however, that the Turkish economy was still characterizedWT/TPR/M/44
Page 17
by a large fiscal deficit and a high rate of inflation.  He expected that through pursuit of outward looking
economic policies Turkey would be able to rectify some of these structural imbalances.
81. The representative of Poland said that the substantial trade imbalance between its country and
Turkey would be addressed through the free-trade agreement between their countries.  On exports, she
noted that Turkey had reduced the number of export subsidy programmes.  In this regard, she asked
whether Turkey maintained any subsidies to textile and clothing exports, and applied any measure toprevent double invoicing and depreciation of customs value of exports.  Finally, she wondered whether
Turkey's ban on live animals had any relationship with Turkey's preferential tariffs on these products.
82. The representative of Romania said that, mainly due to the implementation of the customs union
with the EU, liberalization has expanded bey ond Turkey's Uruguay Round commitments.  While
commending Turkey for not having introduced any new anti-dumping measures since 1995, he noted with
concern that a large number of measures remained in force.
83. The representative of Morocco was pleased with the preferences extended by Turkey to
least-developed countries, as well as the removal of several export subsidy programmes.  She noted with
concern that agriculture continued to enjoy high support.  She hoped that Turkey would not introduced
any new anti-dumping measures.
84. The representative of Egypt encouraged Turkey to continue its reform programme.  He stated
that, since agriculture accounted for the largest component of the economy, this sector should be given
special consideration.WT/TPR/M/44
Page 18
VI. REPLIES BY THE REPRESESENTATIVE OF TURKEY AND ADDITIONAL
COMMENTS
85. Replies by the representative of Turkey were divided into four main themes: (i) economic
background, (ii) trade and investment regime, (iii) specific trade measures, and (iv) sectoral issues.  The
representative of Turkey provided replies in the context of the meeting and undertook to supply further
written replies within one month.
(i) Economic background
Macroeconomic performance and steps to increase stability
86. Macroeconomic developments in 1998 had confirmed that the three-year stabilization programme
was capable of protecting the Turkish economy from external shocks while fighting inflation.  On the
fiscal side, data for the first eight months of 1998 indicated that the annual targets would be achieved.
Moreover, the tax reform would increase revenues and ease the pressure on domestic financial markets.
Considering price developments, increases in wholesale prices were 39.8% in January-September 1998compared to 60.9% in the same period of 1997.  Public sector prices increased by 28% and private
manufacturing prices by 40.3%.  Thus, the perception of "freezing the public sector prices" did not
correctly reflect the situation in Turkey.  The end- year inflation rate was expected to be about 50%.
87. The observed slow-down in GNP growth (to an esti mated 4.5% in 1998) was a result of fiscal and
income policies implemented within the context of the current programme. Contraction of  domesticdemand was the main contributor to the deceleration in economic activity.  However, international
developments had also adversely affected the economy.
88. Data for the first half of 1998 had shown a slight increase in the trade deficit; exports increased
by 1.8% and reached US$15 billion, while impor ts increased by 3.1%, to reach US$27 billion.
Furthermore, data for January-May showed that the incr ease in the volume in exports was higher than the
increase in the volume of imports.   However, the slight deterioration in the trade deficit was more than
offset by increased workers’ remittances and other invisible revenues.  The current account deficit
(including shuttle trade) for the first half of 1998 had declined to US$1.5 billion compared to
US$2.3 billion of the previous year.
Effects of the global financial crisis89. In response to questions on the effects of the current crisis, he noted that it had had only a slightly
adverse effect on exports;  Turkey’s exports to the Asian region were limited both in volume and
commodity base.  Moreover, since exports to the Russian Federation - a much more important trade
partner for Turkey - were mostly basic commodities such as food and textile products, the negative effect
on Turkey of the devaluation of the rouble was expected to be limited.  The turmoil in financial markets
and the subsequent capital outflows from developing countries, had had little effect beyond a rise in
Turkey's interest rate.  In this regard, he also noted that Turkey had always been able to fulfil its foreign
debt obligations.
90. The first discussant, while appreciating Turkey's strong economic growth, noted that the
Government had had some difficulties in keeping up with its macroeconomic targets.  For example,
public sector wages had increased more than expected and the implementation of the tax reform had been
advanced by six months.  In addition, he doubted whet her Turkey could meet its inflation target.  The
crisis in Russia might also affect Turkey adversely.WT/TPR/M/44
Page 19
91. The second discussant asked about the importance of workers' remittances and other invisible
revenues as well as the contribution of shuttle trade.
92. In reply, the representative of Turkey said that until the end of September wholesale prices had
developed almost as envisaged by the stabilization programme.  The implementation of the tax reform
had been delayed because of domestic procedures, but part of the reform package would be implemented
as of 1 January 1999.  Regarding the effects of the Russian crisis, he noted that both exports and importswere affected, but the overall effect on shuttle trade was expected to be positive.  Data for the first half
of 1998 showed favourable developments in other services items, as well as workers' remittances, which
had contributed to an improved current account balance.
(ii) Trade and investment regime
Regional trade agreements
93. The Ankara Agreement of 1963 foresaw the establishment of a customs union between Turkey
and the EU covering all sectors of the economy. Therefore, in principle, agricultural products werecovered by the customs union.  During the negotiations of the CUD, however, parties had agreed to
postpone the free movement of agricultural products until Turkey adopted the EU's commercial policy.
Nevertheless, Article 24 of the Decision declared the parties intention to move towards the free movement
of agricultural products.  Pending the attainment of this objective, which required the adaptation of
Turkish agricultural policy to the common agricultural policy, the parties had committed themselves toimprove market access conditions; preferences granted in trade in agricultural products already accounted
for a large portion of total agricultural trade as a result of a separate Decision of the Association Council
which entered into force on 1 January 1998.  With its implementation, approximately 93% of Turkey's
exports to the EU benefited from preferences.
94. In 1997, Turkey's agricultural exports to the EU amounted to US$1.5 billion;  total exports to the
EU were US$12.3 billion.  In the same year, imports of agricultural products from the EU were
US$622 million out of total imports from the EU of  US$25 billion.  Hence, the share of agricultural
products in total bilateral trade was 5.7% in 1997, and therefore the criteria of "substantially all trade", set
forth in Article XXIV of GATT 1994, had been met.  He  also noted that here was an ongoing discussion
in the WTO Committee on Regional Trade Agreements on what "substantially all trade" meant.
95. Regarding Turkey's free-trade agreements, he stated that these covered a number of agricultural
and processed agricultural products.  Also, parties had agreed to develop their commercial relations by
expanding the scope over time.
Common application of anti-dumping measur es, technical regulations and standards
96. On the question of adopting the EU's standards,  this was an indispensable part of Turkey's
obligations for achieving the proper functioning of the customs union.  EU SPS measures and standards
would be adopted gradually by Turkey when the related products were put into free circulation.
97. Regarding the common application of anti-dumpi ng measures, he noted that the CUD provided
for harmonization of policies and practices on protection of competition and prevention of unfair trade
practices which affected the functioning of the customs union.  A process of harmonization had already
been initiated and once completed, identical policies would be applied to third countries.  Meanwhile, the
parties were required to coordinate their actions towards third countries.WT/TPR/M/44
Page 20
Sensitive products
98. As of 1 January 1996 (in accordance with Article 19 of the Additional Protocol to the Ankara
Agreement and Decision No. 2/95 of the Association Council) imports of a limited number of products
were subject to higher duties than the common external tariff.  However, Turkey had declared its intention
(Article 15 of the CUD) of gradua l alignment to the common external tariff by 1 January 2001.  On the
other hand, Turkey believed that Article XXIV of GATT 1994 gave Turkey the right to finalize freecirculation for these products after the customs union, which constituted only a very limited and
negligible share with respect to the "substantially all trade" requirement.
Free movement of labour and capital
99. Although free movement of labour and capital were taken into consideration by the Ankara
Agreement and the Additional Protocol, a timetable had not yet been agreed.
Provisions in the free-trade agreements on the right of establishment and the supply of services
100. The provisions of the bilateral trade agreements signed between Turkey and its trading partners
laid down the intentions to develop and broaden their cooperation in the field of the right of establishment
and the supply of services.  Parties would notify if they entered into any preferential arrangement within
the scope of Article V of GATS.
Quotas on textile and clothing
101. Textile products accounted for over 40% of Turkey's exports to the EU.  Therefore, since
Article XXIV of GATT 1994 stipulated that a customs union must cover "substantially all trade", the
customs union between Turkey and the EU covered textile s.  In order to ensure free circulation, Turkey
had had to adopt an external commercial policy in that  sector identical to that of the EU with the entry
into force of the CUD; as of 1 January 1996 Turkey applied the EU's textile and clothing arrangements.
As to the compatibility of the extension of EU system of quotas to the whole territory of the customsunion, Turkey believed that Article XXIV did not exclude quantitative restrictions from the concept of
"other regulations of commerce", which was still under the examination by the WTO Committee on
Regional Trade Agreements.
102. Regarding the suggestion of a certificate of origin system, he noted that border checks for
certificate of origin corresponded with a free-trade area arrangements but not with a customs union.  Thissystem would exclude textile and clothing products from the customs union.  Therefore, the criteria of
"substantially all trade" set forth in Article XXIV of GATT 1994 would not be met.
One-sided increase of exports within the customs union
103. The representative noted that exports from the EU had increased significantly as a consequence of
the sharp reduction in Turkey's border protection in January 1996.  However, he expected that trade with
the EU would reach a more balanced level over time.
Preferential arrangements104. In reply to the questions on Turkey's preferential arrangements the representative said that the
CUD obliged Turkey to sign parallel agreements with  countries that had free-trade agreements with the
EU by 1 January 2001.  Most of the preferential arrangements were reciprocal and notifications were
made in accordance with Turkey's WTO obligations.WT/TPR/M/44
Page 21
Rules of origin
105. Turkish rules of origin, either preferential or non-preferential, had been harmonized with those of
EU.  Moreover, Turkey moved apply the "Pan European Cumulation System" as of 1 January 1999.  He
assured Members that the adoption of EU rules of origin for third countries did not have a negative effect
on commerce between Turkey and third countries.
BSEC106. The representative clarified that the Black Sea Economic Cooperation (BSEC) did not cover tariff
preferences.  In addition, Turkey had not extended any preferential non-tariff measure in favor of BSEC
members.
Privatization of state-owned enterprises
107. Turkey had embarked on a plan to privatize a large part of its public sector in 1984, but due to
legal and organizational factors progress had until recently been slow.  However, the new Government
had accelerated privatization:  forty-six enterprises had been slated for privatization in a variety of sectors,
including textiles, petro-chemicals, oil and oil refining, agro-industries, shipping and ship building,
maritime, airlines, tourism, iron and steel, pulp and paper industry, insurance, mining and banking and
some real estate.  As of September 1998, US$1.8 billion had been realized compared to the annual target
of US$5 billion.
Foreign direct investment108. Turkey's foreign direct investment regime, which was mainly formulated by Law No. 6224 on the
Encouragement of Foreign Capital of 1954, was based on the principle of national treatment.  Almost all
sectors open to private domestic investors were open to foreign participation.  However, some other
legislative arrangements regulated specific sectors such as broadcasting, aviation, maritime transportation,
fish-processing, petroleum, and mining; the aim was to ensure national security, public order and health,and professional standards.  These latter restrictions had been declared by Turkey during the OECD
negotiations on the Multilateral Agreement on Investment.
109. The 1995 amendments to Law No. 6224 simplified the screening and approval process and
reduced bureaucratic formalities.  To that end, the approval requirements for investments over
US$150 million had been eliminated.  Turkey was planning to revise its GATS schedule of specificcommitments to reflect this measure.
110. The first discussant asked whether Turkey, being a member of the OECD, was prepared to move
from developing country to developed country status in WTO.  He also asked about the discrepancy
between the figure given for Turkey's duty-free exports to the EU in the Secretariat report (85%) and the
number cited by the Turkish delegation during the meeting (93%).  Additional information on the status
of the negotiations on Turkey's free-trade agreements was sought.  On agriculture, he was interested to
know about the prospects for full integration with European agricultural policy.  Turning totelecommunications, he asked if a regulatory framework would be submitted to the Parliament by the end
of 1998.  Finally, he noted that foreign direct investment was limited in some sectors for reasons of
national security, public order, and provision of standards.  In this regard, he wondered whether there
were particular reasons underlying these restrictions.WT/TPR/M/44
Page 22
111. The second discussant stressed the importance of coverage for agricultural products in the
agreement with the EU.  He requested information on the adaptation of the Turkish agricultural policy to
the common agricultural policy.  He asked for information on the timetable of the common application of
anti-dumping measures.
112. The representative of the United States asked whether the 93% statistic on Turkey's exports to the
EU covered duty-free trade between the parties or whether it was merely preferential trade.  With regard
to import licensing, she asked whether the automatic import licensing procedures (as described in the
Secretariat report) applied to imports from the EU?  Finally, she asked for an update on privatization,
such as the status of Türk Telecom and the state oil refineries.
113. The representative of Japan noted that the Turkish delegation had stated that the Ankara
Agreement covered basically all sectors, including agriculture.  However, he emphasized that, in its
present stage, the CUD did not meet the obligations spelled out in Article XXIV of GATT 1994.  He also
wished to place on record that a country forming a custom union with an already established customsunion should not implement the customs union's anti-dumping measurers without conducting a new
investigation.
114. The representative of Australia asked for further clarification of the scope for agricultural
coverage within the EU customs union arrangements, as well as the timing for adaptation to the EU's
common agricultural policy.
115. The representative of New Zealand stated that WTO Members should not push the limits of any
definition of "substantially all trade" since it had not been clearly defined.  Nevertheless, even if Turkey's
actual duty-free exports to the EU were in the lower range of the numbers quoted during the meeting
(i.e. 85%), this accounted for what was called "substantially all trade".  He also requested a written
response on the timing for adaptation of Turkey 's agricultural policy with that of the EU.
116. In reply, the representative of Turkey said that the timing was not fixed on Turkey's adaptation to
the common agricultural policy.  The timetable had to be bilaterally negotiated and it was therefore not
only up to the Turkish Government.  On the common a pplication of anti-dumping procedures, he noted
that Turkey and the EU had not yet been able to agree on the interpretation of the single unified market
concept.  Regarding the coverage of the CUD, he said that 93% of Turkey's exports to the EU were
entering duty-free.  In addition, Turkey strongly believed that the Ankara Agreement, in principle,
covered agriculture.  The import licensing requirement was applied to all imports, irrespective of origin.
Finally, he noted that Turkey was not considering any changes to its status as a developing country.
117. The representative of the European Union noted that the progressive alignment of the Turkish
agricultural policy with the EU common agricultural policy, and the issue of the harmonization of
anti-dumping measures, were both issues of a dynamic character.  Moreover, there were two parties
involved in shaping the future direction.  Therefore, questions related to the topics would be better dealtwith in other fora.
118. The first discussant asked for clarification from the Secretariat regarding the discrepancy relating
to Turkey's duty-free exports to the EU.
119. A representative of the Secretariat (Mr. Peter Tulloch) noted that the figure of 85% given in the
Secretariat report represented 1996 data.  While he did not think that this figure included agricultural
trade covered by the 1998 agreement, he suggested this matter might be discussed further after the
meeting.WT/TPR/M/44
Page 23
(iii) Specific trade measures
Tariffs
120. The representative of Turkey noted that Law No. 2976 provided a legal framework to increase
protection rates in consistency with GATT 1994.  However, Turkey applied the EU common external
tariff for industrial products (like textile products), and could not review its tariffs unilaterally.  Moreover,
Turkey was not prepared to rebind its tariffs.  As to processed agricultural products, Turkey had adopted asimilar system to that of the EU on importation of processed agricultural products, dividing the products
into an agricultural component and an industrial component.
121. He noted that the existence of 242 distinct tariff rates should not be perceived as complex, in light
of the large number of tariff lines (more than 19,000) in the Turkish tariff nomenclature at the HS 12-digit
level.  However, the idea of simplification of the tariff system would be evaluated.
122. Turkey had bound all tariff lines for agricultural products and had applied customs duties to these
products at or below its concessions.  As Turkey did not undertake any tariffication, it did not have togrant any minimum market access provisions.
123. In an advance written question, the United States had asked how the new temporary 20% "Mass
Housing Fund" surcharge on cotton imports, introduced in September 1998, compared with Turkey's
WTO tariff binding.  In reply, the representative said that the surcharge had just been brought down and
the average protection rate was now below Turkey’s bound rates.  Furthermore, the arrangement wasretroactive and would thus eliminate all past effects of the surcharge.
124. As requested by some delegations, information on tariff quotas granted to the EU on certain
processed agricultural products was provided at the meeting in written form.  More information could be
obtained from Turkey's web-site (www.foreigntrade.gov.tr).
Imports of beer and wine125. The flow of alcoholic beverages was controlled by the state monopoly in consideration of the
negative consequences of consumption.  This system, as well as the tax system applied to these items,
was in full conformity with the principles of national treatment and non-discrimination.  Tariff rates on
these items were bound.  Wine and beer were treated under state trading rules in conformity with
GATT 1994 and the measure had been notified to the WTO.
Import licensing
126. Turkey's application of licensing was in conformity with the provisions of the Agreement on
Import Licensing.  The system was automatic in the sense that once an applicant had met established
conditions, which were based on security and safety reasons and were intended to protect the consumer or
the environment, the licence was issued automatically.  He pointed out that "permission" was not a
prerequisite and, in practice, all applicants applied only for the licence.
Anti-dumping measures127. In response to a question regarding the duration of anti-dumping duties he stated that these
remained in force only as necessary to offset the injury caused by dumped imports (Article 11.1). A yearWT/TPR/M/44
Page 24
after imposing the duties the authorities could revi ew the need for continued imposition (Article 6).
Furthermore, Turkey also abided by the five year duration rule of the definitive measures.  However, as
the domestic legislation in force did not contain any clause concerning the five-year rule, the beginning
date of the five-year period automatically became 1995 (the date of the establishment of the WTO).  In
the specific case of the anti-dumping duty on Korean lead-acid electric accumulators, he noted that
despite the lapse of one year after the date of imposition of the said duty, no request for a review had beenlodged by any of the Korean exporters.
Customs procedures
128. Turkey’s customs valuation procedures were consistent with the Agreement on Implementation
of Article VII of GATT 1994.  However, Turkey was aware of double invoicing cases and necessary
arrangements were being made to avoid such problems.
Motor vehicles sector
129. In reply to the questions on taxation of motor vehicles, the representative said that all vehicles
sold on the Turkish market, whether domestically produced or imported, were subject to the same internal
taxes.  Turkey had no plans to change its internal taxation system in this sector.
State aid and export credits
130. Regarding export credit, guarantee and insurance programmes as well as state aid for
investments, these were in line with Turkey's WT O obligations.  Moreover, the export credit system
implemented by Turkish Eximbank was in full conformity with the guidelines under the OECD
Consensus despite the fact that the Bank had not become a party to the Consensus.  Accordingly,
Eximbank did not engage in any credit lines with operating losses.
IPR
131. On intellectual property rights, a new law covering unresolved copyrights issues had been
submitted to the Parliament.  Regarding patents, protection would be provided for pharmaceutical and
veterinary products and their production process at the latest by 1 January 1999.  Turkish law on the
protection of undisclosed test (or other) data on pharmaceutical and agricultural chemical products
submitted for marketing approval was identical with the TRIPS Agreement.  Protection of well-known
but unregistered trade marks was provided by the unfa ir competition provisions.  Protection was given not
only for the sign or combination of signs which were capable of distinguishing the goods or services, but
also for combination of colours.  The protection re quirement regarding industrial designs, refered to
novelty and distinctive character; the term distinctive character was used as synonym to individual
character and was judged on the overall impression created by the design on the informed user.  The
design, right holder was given exclusive rights to use the design;  third parties were not permitted to
produce, put on the market, sell, offer, import, put to commercial use or keep in stock for this purpose, the
products in which the design was incorporated.  As the protection system of textile designs was the sameas for other designs, the application procedures may still be simplified.
132. In order to attain a successful enforcement level, Turkey was training judges, lawyers and police,
disseminating information to all parts of the societ y and implementing deterrent legislative provisions.WT/TPR/M/44
Page 25
Competition
133. In reply to the questions on enforcement of competition, he said that within the framework of
the 1995 competition legislation, competition policies were being implemented with proper enforcement
measures and there was no deficiency in the system.
Government procurement:  non-discrimination
134. Turkey was an observer in the Committee on Government Procurement, and would consider
acceding to the Agreement on Government Procurement.  As regards registration requirements, foreign
companies that had no branch in Turkey were required to register with the Chamber of Commerce in their
own country, and to be approved by the Turkish Cons ulate or by the Turkish Ministry of Foreign Affairs;
the rationale was to know whether the potential supplier was operating in the related field as a person or a
company in its own country or not.  The same procedures were required from national suppliers.
Regarding advertisement, the usual interval between the first advertisement in the newspapers and the
date of bidding was a minimum of ten days.  However, for procurement open to foreign suppliers theminimum interval was 45 days.  Unsuccessful bidders could lodge an appeal with the courts.  Written
answers would be provided to the questions on the conditions for the tendering set by the Turkish
Electricity and Power Generation Corporation (TEAS), and on the "force account commission"
procedure.
TRIMs and local-content requirements135. Turkish  laws and regulations regarding foreign direct investment did not contain any clauses
foreseeing local-content requirement.  The existin g practice in Turkey's automotive industry had been
carried out voluntarily by the partners of joint ventures and was therefore consistent with the provisions of
the TRIMs Agreement.
136. The first discussant noted the advantage of investors deciding by themselves to purchase local
products which are competitive both in quality and in price.  He asked for confirmation on whether any
pressure or intervention by the Turkish Government had been made when investors in the automotive
sector had committed to purchase local products.
(iv) Sectoral issues
Agriculture
137. In reply to the questions on the ban on live animals, the representative stated that the policy was
of a temporary nature and was not geared to protecting Turkish cattle producers.  The measure was
adopted to prevent the spread of foot and mouth disease (FMD).  Prior to the imposition of the measures,
Turkey had unsuccessfully tried to eradicate FMD.  The justification for the import ban was reviewed
every three months and it was the Government's intention to terminate this measure once the risk of
disease no longer existed.
138. Turkey had progressively scaled down export subsidies for its agricultural products.  Moreover,
only a small segment of the products eligible under Turkey’s Uruguay Round Schedule of export subsidy
commitments had been granted subsidies.  Sugar was not one of the eligible products, and was not
granted export subsidies in 1997.  In anticipation of prices in excess of actual prices, the stock level of the
Turkish Sugar Corporation had increased, and its financial situation was adversely affected.  Under theseWT/TPR/M/44
Page 26
circumstances, the management of the company decided to dispose of excess stocks at international prices
which were indeed lower than cost prices.
139. Regarding Turkey's WTO obligations, Turkey had lowered its customs duties on agricultural
products in line with the WTO Agreement on Agriculture.  Domestic support programmes had been
reduced from 24 in 1994 to three, and were in full conformity with Turkey's WTO obligations.  Studies
were under way to introduce a direct income payment system.  However, an accurate and comprehensiveregistration system was a prerequisite for the success of a direct income payment system.  Turkey had
received technical assistance from international inst itutions to start a pilot study towards this end.
140. Inspection certificates were required for the importation of goods subject to health and sanitary
controls.  However, the requirement could be waived for certain specified purposes.  For example, if the
trader imported primary and intermediate products for his/her own use only, no inspection certificate was
required.
Services141. On financial services, Turkey had fully implemented its WTO commitments.  Turkey had also
undertaken several reforms that went beyond these commitments with a view to strengthening the
banking sector.  In June 1997 the effectiveness of the supervision of the banking sector had been
increased through more stringent enforcement of cap ital adequacy requirements and of the ceiling on
banks' net open foreign exchange position.  While retaining the prudential ratio of 8% as laid out in BIS'standards, the calculation of capital base and risk weighted assets had been changed.  Furthermore, the net
open foreign exchange position of banks was reduced to 30% of the capital base in August 1998.  Also a
new draft law had been submitted to the Cabinet covering all financial institutions except those in the
capital market, for the purpose of harmonizing the legislation with international standards and increasing
the effectiveness of supervision.
142. All criteria applied by the Council of Ministers for authorizing the establishment of a bank, as
well as the first branch of a foreign bank, was of prudential nature.  So far there had been no case where a
bank complying with prudential regulations had not received approval from the Council of Ministers.
143. There was no discrimination between domestic and foreign banks.  A foreign bank intending to
open a branch or to establish a bank in Turkey was subject to the same legislation as Turkish nationals.By the same token, lending limits of the branch of a foreign bank were based on its capital;  the same rule
applied to the national banks of Turkey.
144. Establishment of an insurance or reinsurance company and opening a branch of a foreign
insurance and reinsurance company in Turkey were s ubject to prior permission from the State Ministry.
All insurance and reinsurance companies, whether foreign or national, were subject to the same
procedures.
145. Regarding the questions related to other services, he noted that Turkey was planning to include
new sectors, such as research and development services, in its schedule of specific commitments during
the next services negotiations in the year 2000.  Professional services were limited only to Turkish
citizens by specific laws and could not be rendered by foreigners either as service providers or as the
personnel of service providers.  On the other hand, foreign citizens of Turkish origin were permitted to
work in such professions for which work permits were obtained from the Ministry of Interior.  Foreignerswere allowed to perform only financial advisory services.  Since certified public accountancy services
were considered as public services, only Turkish citizens could work as certified public accountants.
Foreign engineers and architects staying more than one month in Turkey must apply to the related UnionWT/TPR/M/44
Page 27
of Chambers.  The only criterion required by the Ministry of Public Works and the Union of Chambers
was formal school education.
146. With regard to maritime transport, public cargoes could be carried by foreign flag vessels only if
their quotations were 10% below the lowest Turkish flag vessels’ quotations.  A certificate issued by the
authorities was required for both Turkish and foreign flag vessels.
147. The representative of the United States followed up on two points.  First, he asked whether the
ban on cattle and meat products applied to products originating in regions that were foot-and-mouth
disease free.  For example, did the ban apply to the entire United States or only to regions within the
United States in which there had been foot-and-mout h diseases?  Second, were there any plans to reform
the alcohol monopoly?  In this regard, he also asked for further information on the import licensing
system for distilled spirits and questioned the consistency of Turkey's labelling requirements for imported
and domestically produced whiskey with its WTO obligations.
148. The representative of Japan noted that lending limits for branches of foreign banks were based on
branch capital rather than world-wide capital.  In this regard, he asked for further information.  He also
asked for additional information on  the de-monopolization of the Türk Telekom on basic services, which
was scheduled to expire by 31 December 2005.
149. The representative of New Zealand questioned the rationale behind the ban on live animals.  A
piece of meat could not catch foot-and-mouth disease.  Therefore, he wondered how Turkey justified its
ban on meat, and asked when the temporary ban on meat could be expected to cease.
150. The representative of Australia asked whether foot-and-mouth disease was the only disease
subject to examination and review.  She was also interested to know when the temporary ban on meat
could be expected to end.WT/TPR/M/44
Page 28
VII. CONCLUDING REMARKS BY THE CHAIRPERSON
151. The second Trade Policy Review of Turkey was conducted by the TPR Body on
12-13 October 1998.  These remarks, prepared on my own responsibility, are intended to summarize the
main points of the discussion; they are not intended as a full report.  Details of the discussion will be
reflected in the minutes. The representative of Turkey provided replies in the context of the meeting and
undertook to supply further written replies within one month.
152. The discussion developed under four main themes: (i) economic background; (ii) trade and
investment regime;  (iii) specific trade measures;  and (iv) sectoral issues.
(i) Economic background
153. Members commended Turkey for its implementation of far-reaching structural and legislative
reforms since its previous review.  These reforms had contributed to the economy's sound annual average
growth of almost 8% in the past three years.  However, some members questioned the sustainability of
this growth performance in the present macroeconomic  and external framework, in which the large fiscal
deficit had led to rapid inflation and high real interest rates. Members also raised issues regarding the
importance of trade, including unrecorded "shuttle trade" with Russia in Turkey's external position, and
sought information about the effects of the global financial crisis on the Turkish economy.
154. In response, the representative of Turkey said that the slowdown in economic growth in 1999,
resulting principally from the three-year economic  stabilization programme, would help rectify
macroeconomic imbalances and reduce inflation. On the fiscal side, the primary budget surplus in the
period January-August 1998 was six times higher than a year earlier and tax reforms, to be introduced
from January 1999,  would further increase revenues in the future.  Wholesale price increases in 1998
were expected to be around 50%, as projected.  Increases in workers' remittances had more than offset
growth in the trade deficit, leading to a continuing  improvement in the current account of the balance of
payments.
155. As Turkey's trade with the Asian region was small, the current crisis had only a slight adverse
effect on exports. Moreover, since exports to the Russian Federation, a much more important trade
partner, were mostly basic commodities (food and textiles), the negative effects on Turkey of the
devaluation of the rouble were expected to be slight;  but there would probably be an increase in shuttletrade. The turmoil in financial markets and the consequent outflow of capital from developing countries
had had few effects beyond a rise in Turkey's interest rates.
(ii) Trade and investment regime
156. It was recognized that the customs union between Turkey and the European Union had given a
new impetus to the liberalization process in Turkey, going beyond its Uruguay Round commitments.  The
reforms had led to improved market access and a more secure trading environment for all investors and
traders.  Members raised questions and clarifications on the following:
(a) the consistency between the customs union decision, which excluded agricultural
products, and the WTO requirement on removing restrictions on "substantially all trade"
between parties to regional agreements;
(b) the effects of Turkey's adoption of common regulations in areas such as rules of origin,
anti-dumping, SPS, and the introduction of quotas on textiles and clothing;  and
(c) the possibility of trade diversion as a result of the customs union.WT/TPR/M/44
Page 29
157. Members also sought information on the Government's plans to speed up privatization of
state-economic enterprises; and Turkey's intention to remove remaining restrictions on foreign direct
investment.
158. In reply, the representative of Turkey stressed that, in principle, agricultural products were
covered by the customs union.  However, the two parties had agreed to postpone the free movement of
agricultural products until Turkey's adoption of the Common Agricultural Policy.  As yet, there was nofixed plan for this, which would be negotiated bilaterally.  In the meantime, a new concessional trade
regime for agricultural products, implemented from January 1998, meant that 93% of Turkey's exports to
the EU (based on 1997 data) were now subject to duty -free treatment.  Turkey was also in the process of
aligning other trade regulations with EU provisions.  He noted that anti-dumping procedures could only
be aligned upon full harmonization;  on the other hand, rules of origin had already been harmonized and
Turkey would apply pan-European cumulation from  1 January 1999. Turkey would also adopt the EU's
SPS measures gradually, as relevant products would be put into free circulation.  He stated that theCustoms Union Decision had required Turkey to ap ply the EU's clothing and textile arrangements,
including applicable quotas.  While the representative acknowledged that Turkey's imports from the EU
had increased considerably during the first year of the customs union, trade with the EU was expected to
reach a more balanced level eventually.
159. The representative also acknowledged that although progress on privatization had been slow, the
new Government had intensified its efforts since June  1997.  Forty six state-owned enterprises were slated
for privatization, the proceeds of which would be US$5 billion in 1998.  It was Turkey's intention to
include telecommunications and oil refineries in privatization.
160. The representative emphasised that Turkey's FDI regime was based on the principle of national
treatment.  Almost all sectors open to private investors were open to domestic and foreign investors alike.Nevertheless, restrictions on FDI were applied to some sectors on grounds of national security, public
order, health and the maintenance of professional standards.  Turkey had already simplified its screening
and approval process, eliminating approval requirement for investments over US$150 million, and
planned to revise its GATS schedule of specific commitments accordingly in the near future.
(iii) Specific trade measures
161. Members complimented Turkey for its implementation of important trade and trade-related
reforms since its previous review.  In the tariff area, the average level of border taxation had been cut
from 27% in 1993 to 13% in 1998, while the Mass Housing Fund levy had been almost eliminated.  Other
liberalization measures included elimination of mo st export subsidies, simplification of customs
procedures, the establishment of a competition authority, and the enactment of comprehensive legislation
covering intellectual property rights, going beyond the TRIPs Agreement provisions in some areas.
However, members raised concerns and questions on:
(a) tariff protection higher than the common external tariff for a number of "sensitive" items;
the increasing difference between MFN applied and bound duty rates; the introduction of
agricultural tariff quotas; and the Government's plans to simplify the tariff system;
(b) the automatic nature of the import licensing system;
(c) the anti-dumping procedures applied by Turkey;WT/TPR/M/44
Page 30
(d) Turkey's state-aid system, including possible distortionary effects and high cost, and the
system's conformity with Turkey's WTO obligations;
(e) enforcement of intellectual property rights, and the date when Turkey's legislation will be
brought in full compliance with the TRIPs Agreement;
(f) Government procurement, including the law's Article on "force account"; treatment
granted to foreign and domestic suppliers;  channels for unsuccessful bidders to lodgecomplaints;  and Turkey's intention to accede to the WTO Agreement on Government
Procurement; and
(g) local-content measures in the automobile sector and their consistency with Turkey's
obligations under the TRIMs Agreement.
162. In response to these issues, the representative of Turkey said that imports of a limited number of
products had been subject to higher duties than the common external tariff (CET).  However, Turkey
would gradually align these rates to the CET by 1 January 2001.  He also noted that the existence of242 distinct tariff rates should not be viewed as complex, in light of the large number of tariff lines
(19,000) in the 12-digit Turkish tariff nomenclature.  The tariff system would be evaluated with a view to
simplification.  Information on the tariff quotas granted by Turkey to the EU on certain processed
agricultural products was provided at the meeting.  He also noted that Turkey was not prepared to re-bind
its tariff at this stage.
163. The representative of Turkey stated that the import licensing system was in full conformity with
the WTO Agreement on Import Licensing and was applic able to imports from all sources.  The system
was automatic in the sense that, once applicants met established objective conditions, which were based
on security and safety reasons and were intended to protect consumers or the environment, the licence
was issued automatically.
164. The representative stated that Turkey's anti-dumping legislation was yet to be fully harmonized
with those of the European Union.  Once the process was complete, identical practices would be applied
to third countries.  Meanwhile, the parties were requir ed to coordinate their actions toward third countries.
The five-year "Sunset" clause of the Anti-Dumping Agreement would become valid as from 1995.
165. Turning to state aid, he noted that Turkey's system of subsides as a whole was in line with WTO
rules and had been notified in July 1998. The export credit system implemented by Turkish Eximbank
was in full conformity with the guidelines unde r the OECD Consensus.  Accordingly, the Turkish
Eximbank did not engage in any credit lines with operating losses.
166. On intellectual property rights, a new law co vering unresolved copyright issues was being
submitted to Parliament.  Regarding patents, Turkey would protect pharmaceutical and veterinary
products and their production processes at the latest on 1 January 1999.  Regarding the protection of
undisclosed test data on pharmaceutical and agricultural chemical products submitted for marketingapproval, Turkish law was identical with the TRIPs Agr eement.  He gave details of provisions regarding
trademarks and industrial designs.  He also noted that in order to attain successful enforcement, Turkey
was, inter alia , training judges, lawyers and police, disseminating information broadly to society and
implementing deterrent legislative provisions.
167. The representative said that Turkey did not discriminate against foreign suppliers in government
procurement.  He also noted that unsuccessful bidders may lodge complaints against the application of the
procurement procedures and the award of the contract with the procuring entity.  Turkey, as an observerWT/TPR/M/44
Page 31
to the Committee on Government Procurement would consider acceding to the Agreement.  Written
answers would be provided to the questions on "for ce account commission" procedures and tendering by
the Electricity and Power Generation Corporation.
168. The representative also noted that Turkish laws and regulations regarding foreign direct
investment contained no clauses foreseeing local content requirement. Local content practices had been
introduced voluntarily by the joint-venture partners and were therefore consistent with the TRIMsAgreement.
(iv) Sectoral issues
169. Members noted with concern the increased protection of the agricultural sector, while the
manufacturing sector had been opened up to foreign competition.  With reference to the Secretariat report,
members noted that this sectoral imbalance could be a tax both on consumer welfare and on
manufacturing and services that compete with agri culture for production factors.  On agriculture,
members raised questions on the following:
(a) prospects of reversing the levels of tariff protection in agriculture (which had increased
since the previous review from 35% in 1993 to 43% in 1998);
(b) prospects of reducing Government interventions (total transfers amounted to 7.5% of
GDP in 1997);
(c) the scientific justification for the ban on imports of live animals and meat, and its
consistency with Turkey's WTO obligations;  and
(d) the Government's intentions in the future multilateral trade negotiation in agriculture.
170. In reply, the representative of Turkey noted that, in line with the Agreement on Agriculture,
Turkey had bound all tariff lines for agricultural products, and had applied customs duties to these
products at or below its concessions.  He also not ed that Turkey had progressively scaled down export
subsidies for its agricultural products; domestic support programmes had been reduced to three products
and were in full conformity with their WTO obligations.  Turkey was examining the introduction of a
direct-income payment system.  He noted that th e ban on imports of live animals and meat was a
temporary measure, related to the spread of foot-and-m outh disease.  It was the Government's intention to
terminate this measure once the risk of the disease no longer existed.
171. In contrast to the agricultural sector, the manufacturing sector had been substantially liberalized
since the previous review.  For example, as a result of the customs union, average border protection in the
manufacturing sector had more than halved from 27% in 1993 to 12% in 1998.
172. On services, members commended Turkey for its contribution during the recent negotiations
including the Information Technology Agreement, the Basic Telecommunications Services Agreement,
and the Financial Services Agreement.  Members asked about the Government's intentions to undertake
further commitments with respect to its GATS schedule.  Members also asked about the Government'splans to reform the financial sector.
173. In response to these issues, the representative of Turkey said that the Government was planning to
include new sectors, such as research and development, in its new schedule of specific commitmentsWT/TPR/M/44
Page 32
during the next services negotiations in the year 2000.  He gave further information on conditions for
establishment in professional services and on maritime transport conditions.  On the financial sector, he
noted that Turkey had fully implemented its commitments.  Over and above its commitments, Turkey had
also, inter alia , increased its effectiveness of the supervision of the banking sector through more stringent
enforcement of the capital adequacy requirement and of the ceiling on banks' net open foreign exchange
positions.
Conclusions
174. This review has shown the strength of Turkey's  economic performance in the past few years, and
the wide-ranging liberalization that has taken place in Turkey's trade policies as a result of the customs
union with the European Union and the application of Uruguay Round provisions.  At the same time,
specific concerns have been expressed about the scope of the customs union and its effects on third
countries, in particular in agriculture, textiles and certain regulatory areas.  Some of these concerns run
parallel to issues raised in the Committee on Regional Trade Arrangements.  We have benefited fromreplies given by Turkey in this meeting, and look forw ard to receiving further replies in writing within the
next month, as promised.
175. In conclusion, I should like to extend the thanks of the TPRB to Dr. Ege and his large and able
team of colleagues from Ankara and Geneva, and I wish Turkey well in its further progress towards
economic liberalization.
176. Finally, as you all know, our colleague Peter Tulloch is attending this meeting of the TPR Body
for the last time as Director of Trade Policies Review Division.  I should like to take this opportunity to
thank him for his very active leadership and contributio n to the success of the TPR Mechanism.  Peter has
served this Body since its establishment in 1989 and been Director of the TPR Division for the past seven
years.  During that time, he has ensured the smooth functioning of the Mechanism.  I am sure you wouldall like to join me in wishing him every success in his future endeavours as Director of the Development
Division.  At the same time, I should like to welcome Clem Boonekamp, who has assumed Peter's duties
as Director of the TPR Division.  We look forward to  his carrying on Peter's fine work in achieving the
goals of the Mechanism.
177. After these remarks, I now declare the proceedings of the Review of Turkey closed.
178. The representative of Australia clarified that a Turkish alignment to the EU's common
agricultural policy was not an answer to free trade in agriculture.  The common agricultural policy had
many aspects which worked against the free movement of trade in agriculture.
__________