98-3973 MOREPRESS RELEASE
PRESS/TPRB/84
14 October 1998
 TRADE POLICY REVIEW BODY
REVIEW OF TURKEY
TPRB'S EVALUATION
The Trade Policy Review Body of the World Trade Organization (WTO) concluded its
second review of Turkey's trade policies on 12 and 13 October 1998. The text of the Chairperson's
concluding remarks is attached as a summary of the salient points which emerged during the
discussion.  The review enables the TPRB to conduct a collective examination of the full range of
trade policies and practices of each WTO member country at regular periodic intervals to monitorsignificant trends and developments which may have an impact on the global trading system.
The review is based on two reports which are prepared respectively by the WTO Secretariat
and the government under review and which cover all aspects of the country's trade policies, including
its domestic laws and regulations, the institutional framework, bilateral, regional and otherpreferential agreements, the wider economic needs and the external environment.  A record of the
discussion and the Chairperson's summing-up together with these two reports, will be published in
due course as the complete trade policy review of Turkey and will be available from the WTO
Secretariat, Centre William Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992),
Australia (1989, 1994 & 1998), Austria (1992), Bang ladesh (1992), Benin (1997), Bolivia (1993),
Botswana (1998), Brazil (1992 & 1996), Cameroon (1995), Canada (1990, 1992, 1994 & 1996), Chile
(1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995 ), Côte d'Ivoire (1995), Cyprus (1997), the
Czech Republic (1996), the Dominican Republic (1996), Egypt (1992), El Salvador (1996), the
European Communities (1991, 1993, 1995 & 1997), Fiji (1997), Finland (1992), Ghana (1992), Hong
Kong (1990 & 1994), Hungary (1991 & 1998), Icel and (1994), India (1993 & 1998), Indonesia (1991
and 1994), Israel (1994), Japan (1990, 1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 &
1996), Lesotho (1998), Macau (1994), Malaysia (1993 & 1997), Mauritius (1995), Mexico (1993 &
1997), Morocco (1989 & 1996), New Zealand (19 90 & 1996), Namibia (1998), Nigeria (1991 &
1998), Norway (1991 & 1996), Pakistan (1995), Para guay (1997), Peru (1994), the Philippines
(1993), Poland (1993), Romania (1992), Senegal (1994), Singapore (1992 & 1996), Slovak Republic
(1995), the Solomon Islands (1998), South Af rica (1993 & 1998), Sri Lanka (1995), Swaziland
(1998), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995), Tunisia (1994),
Turkey (1994 & 1998), the United States (198 9, 1992, 1994 & 1996), Uganda (1995), Uruguay
(1992), Venezuela (1996), Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/84
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MORETRADE POLICY REVIEW BODY
REVIEW OF TURKEY
CONCLUDING REMARKS BY THE CHAIRPERSON
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 themain 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.
The discussion developed under four main themes: (i) economic background; (ii) trade and
investment regime;  (iii) specific trade measures;  and (iv) sectoral issues.
Economic background
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 thesustainability 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.
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 introducedfrom 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.
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
shuttle trade. 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.
Trade and investment regime
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 allinvestors and traders.  Members raised questions and clarifications on the following:PRESS/TPRB/84
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MORE(a) the consistency between the customs union decision, which excluded agricultural
products, and the WTO requirement on removing restrictions on "substantially alltrade" 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.
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.
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, therewas no fixed 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 originhad 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 the Customs Union Decision had required Turkey to
apply the EU's clothing and textile arrangements, including applicable quotas.  While the
representative acknowledged that Turkey's imports from the EU had increased considerably duringthe first year of the customs union, trade with the EU was expected to reach a more balanced level
eventually.
The representative also acknowledged that although progress on privatization had been slow,
the new Government had intensified its efforts since June 1997.  46 state-owned enterprises wereslated 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.
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 foreigninvestors 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.
Specific trade measures
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 most 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:PRESS/TPRB/84
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MORE(d) tariff protection higher than the common external tariff for a number of "sensitive"
items; the increasing difference between MFN applied and bound duty rates; theintroduction of agricultural tariff quotas; and the Government's plans to simplify the
tariff system;
(e) the automatic nature of the import licensing system;
(f) the anti-dumping procedures applied by Turkey;
(g) Turkey's state-aid system, including possibl e distortionary effects and high cost, and
the system's conformity with Turkey's WTO obligations;
(h) enforcement of intellectual property rights, and the date when Turkey's legislation
will be brought in full compliance with the TRIPs Agreement;
(i) Government procurement, including the law's Article on "force account"; treatment
granted to foreign and domestic suppliers;  channels for unsuccessful bidders to lodge
complaints;  and Turkey's intention to accede to the WTO Agreement on Government
Procurement; and
(j) local-content measures in the automobile sector and their consistency with Turkey's
obligations under the TRIMs Agreement.
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 theexistence of 242 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 tari ff 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.
The representative of Turkey stated that the import licensing system was in full conformity
with the WTO Agreement on Import Licensing and was applicable 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.
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 required to coordinate their actionstoward third countries.  The five-year "Sunset" clause of the Anti-Dumping Agreement would become
valid as from 1995.
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 guidelin es under the OECD Consensu s.  Accordingly, the
Turkish Eximbank did not engage in any credit lines with operating losses.
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 Agreement.  He gave details of provisionsPRESS/TPRB/84
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MOREregarding 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.
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 observer to the Committee on Government Procurement would consider acceding to the
Agreement.  Written answers would be provided to the questions on "force account commission"
procedures and tendering by the Electricity and Power Generation Corporation.
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 pa rtners and were therefore consistent with the
TRIMs Agreement.
Sectoral issues
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 imbalan ce 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:
(k) 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);
(l) prospects of reducing Government interventions (total transfers amounted to 7.5% of
GDP in 1997);
(m) the scientific justification for the ban on imports of live animals and meat, and its
consistency with Turkey's WTO obligations;  and
(n) the Government's intentions in the future multilateral trade negotiation in agriculture.
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 noted that Turkey had progressively scaled down exportsubsidies 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 the ban on imports of live animals and
meat was a temporary measure, related to the sp read of foot-and-mouth disease.  It was the
Government's intention to terminate this measure once the risk of the disease no longer existed.
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.
On services, members commended Turkey for its contribution during the recent negotiations
including the Information Technology Agreement, the Basic Telecommunications ServicesAgreement, 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's plans to reform the financial sector.PRESS/TPRB/84
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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
commitments 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 itscommitments, 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.
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Conclusions
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 ap plication of Uruguay Round provisions.  At the
same time, specific concerns have been expressed about the scope of the customs union and its effectson 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 from replies given by Turkey in this meet ing, and look forward to receiving further replies
in writing within the next month, as promised.
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.
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 Poli cies Review Division.  I should like to take this
opportunity to thank him for his very active leader ship and contribution 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 would all like to jo in 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.
After these remarks, I now declare the pro ceedings of the Review of Turkey closed.
END