Turkey WT/TPR/S/44
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III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) OVERVIEW
1. Over the past four years, Turkey has undertaken important trade- and trade-related reforms.
The main liberalization has been undertaken on an MFN basis within the framework of the customs
union decision (CUD) between the European Union and Turkey, which entered into force
on 1 January 1996.  The liberalization measures include a reduction of tariffs, simplification ofcustoms procedures, a revamping of the export incentive system, the establishment of a competition
authority responsible for overseeing the new competition legislation, the enactment of comprehensive
legislation covering intellectual property rights, and harmonization of technical legislation on
standards with that of the EU.  Although the CUD provides for overall liberalization, Turkey has also
put in place some new trade instruments, in particular tariff quotas and quotas on textiles and clothing.A number of products are subject to prior import licencing.
2. The introduction of Turkey's customs union with the EU resulted in a substantial reduction of
Turkey's applied tariff rates, in cluding the abolition of various import surcharges, except for a few
lines which are still subject to a Mass Housing Fund (MHF) levy (section 2(ii)).  The new import
regime applies the EU common external tariff (CET ) for most imports of industrial products and for
the industrial component of processed agricultural products from third countries.  The simple average
MFN tariff (including the MHF levy) has, as a consequence, fallen from 26.7% in 1993 to 12.7%
in 1998 (second half).  However, tariffs on agricultural products other than processed items, are not
required to be lowered by the CUD and some have even increased (Chapter IV); for a small number
of items, mainly in agriculture, the use of specific, alternate and formula duties are so complex that
the authorities are unable to calculate the ad valorem  equivalents.  Substantial tariff dispersion
continues to exist, and the number of tariff bands (242) is unusually large.  As a result of the UruguayRound and the recently concluded ITA Agreement, Turkey bound the rates on a wide range of
products, equivalent to almost half of all tariff lines.  The bound rates are often well above the applied
MFN rates; in principle, this would allow Turkey to unilaterally increase its tariffs, but the customs
union with the EU sets an effective constraint on any such action.
3. Since the previous Trade Policy Review, Turkey has eliminated many of its export incentive
programmes, including the energy incentive, the free wheat programme of the Turkish Grain Board
(Table III.16), the pasta export subsidy, and the transportation subsidy.  Turkey now relies heavily on
a wide range of indirect measures to assist it s exporters, including duty concessions, and export
finance, insurance, guarantee, promotion and marketing assistance some of which may have a subsidy
component.
4. Turkey's state aid system of tariff and other tax exemptions and concessional credit remains
complex, non-transparent and generous, equivalent to  some 2.3% of GDP in 1994.  The amount of the
incentive depends on a number of factors.  Because of the complexity of the schemes, it is difficult to
evaluate their impact.  Moreover, the system may lead to unintended and undesirable effects on
resource allocation.  Recent reforms include: replacing sectoral targeting by a regional priority systemproviding enhanced incentives to less-developed regions, simplification of the duty exemption system,
and limiting the concessional credit sub-programme to small- and medium-scale producers.  In
parallel to the export and investment incentive programmes, various schemes extend assistance on a
sectoral basis in particular to agriculture (section 4 of this Chapter and Chapter IV, section (2)).
5. Closely linked to the incentive system is the continued heavy presence of state economic
enterprises (SEEs), which accounted for 11% of GDP in 1994. They are heavily sheltered from
competition and some SEE remain a severe drain on government funds.  Recognizing the need toWT/TPR/S/44 Trade Policy Review
Page 36
increase efficiency and reducing the pressure on scarce resources, the Government has begun a
privatization programme, but progress has been slow with court rulings often overturning projects, in
particular, in the energy and telecommunications sectors.  In order to comply with the CUD, Turkey
may have to discontinue subsidizing some of the SEEs at the prevailing rates, and align its state aid
policies to those of the EU.  Thus, it has been noted that "unless the system of state aid is aligned to
those in the EU and unless competition rules will be applied effectively to all private and public firms,EU could use commercial defence instruments (a nti-dumping and countervailing duties) against
Turkey".
1
6. Turkey made considerable improvements in its intellectual property rights regime in 1995.
New laws in the area of  patents, trade marks, industrial designs, geographical indications, and
copyright, as well as adoption of a number of important international conventions governingintellectual property rights and advance implementation of the TRIPS Agreement, have given Turkey
a modern, comprehensive legal framework for the protection of intellectual property rights.
Notwithstanding these improvements, Turkey is on the "priority watch list" of countries that fail to
protect U.S. firms' intellectual property rights as specified under the "special 301" provision of
the 1988 Trade Act.  This weaknesses in enforcement will need to be overcome by adequate staffing,training and increasing awareness of the new legal provisions.
7. Despite the general liberalization associated with the implementation of the CUD, trade
policy harmonization has also led Turkey to introduce some new trade instruments.  For example, the
adoption of the EU external policy with respect to textiles and clothing led to the introduction of
quotas on some of these products on 1 January 1996;  without the quotas, exporters could have used
Turkey as a bridge to the EU market.  Under th e CUD Turkey also applies tariff quotas on some
agricultural and processed agricultural products, and the recently signed free-trade agreements (withHungary, Israel, Lithuania and Romania) include a provision on tariff quotas.
8. Although import certificates were abolished on 1 January 1996, a number of goods (12 by
broad categories) are subject to prior import licencing, including, inter alia , telecommunications
equipment, some machinery, some motor vehicles, transmission apparatus, some chemicals and a
number of items related to civil aircraft.  The licences are used for a number of reasons: in addition tosecurity, safety and environment, the stated purposes are to protect consumers, to assure that imported
vehicles are suitable for domestic highways, and to prevent employment of import goods for other
than their intended purpose on civil aircraft.  Howeve r, the authorities have stated that such licences
are issued automatically.
9. Turkey is one of the more active users of anti-dumping measures: by number of final
measures imposed between 1989 and 1996, Turkey ranks sixth among WTO Members.  On the other
hand, there were no new cases initiated in 1995-96 nor were any new final measures introduced
from 1995 to 1997.  According to the authorities, the law is shortly to be brought into compliance
with the WTO Agreement.  No consideration has been given to the introduction of a "general interest
clause" but the authorities say that the general interest of users, consumers and labour organizationsare taken into account in practice.
                                                     
1 Togan (1997b).Turkey WT/TPR/S/44
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(2) MEASURES DIRECTLY AFFECTING IMPORTS
(i) Customs procedures
10. Since the previous Review, custom procedures have been streamlined and the system has
been modernized.  As part of the customs union decision (CUD) (Article 28) with the EU, Turkey
adopted EU customs provisions in the fields of  origin of goods;  customs valuation of goods;
introduction of goods into the territory of the customs union;  customs declaration;  release for freecirculation;  suspensive arrangements and customs procedures with economic impact;  movement of
goods;  customs debt and right of appeal.  Hence, Turkey's customs procedures commitments within
the CUD go beyond Turkey's obligations vis-à-vis  the WTO.
(a) Valuation, clearance and inspection
11. Turkey's legislation on customs valuati on, the Turkish Customs Law No. 1615 of 1972,
notified under the Tokyo Round Customs Valuation Agreement, remains valid under the WTO
Agreement on Implementation of Article VII of GATT 1994 (the Customs Valuation Agreement).
2
However, Turkey invoked provisions available for developing countries under the Agreement related
to computed value (Article 20.2 and Annex III, paragraph 3) and unit price of the imported good
(Annex III, paragraph 4).3
12. In order to comply with the CUD, Turkey has presented to the Parliament a new draft customs
law replacing Customs Law No. 1615.  However, basic amendments have been implemented by
Decree Law No. 564 (published in the Official Gaze tte of 26 July 1995).  These amendments include
the establishment of a legal basis for imports falling within the scope of intellectual and industrial
property rights, according to which customs transactions may be suspended temporarily on request
from the rightful owner (section (4)(vi)).  Customs declarations may be submitted to the customs
offices by means of data processing techniques.  Owners of goods have the right to establishtemporary storage in which to place their goods, but the Undersecretariat of Customs is entitled to
decide on the time limit of such storage.  The po ssibility of submitting an invoice instead of a
manifest was introduced.  Binding tariff information on the tariff position related to the goods is
provided at the written request of the exporter.  A right of importation of the goods subject to an
auction by its owner has been inserted.  The format of the Turkish customs declaration has beenaligned to the single administrative document (SAD)  used in the EU for customs procedures (see
below).
13. Other improvements in the customs system include the establishment of specialized customs
offices for the importation of certain goods.
4  Recently the customs administration has also been going
through extensive training programmes especially in the fields of rules of origin and tariff and riskanalysis.  The Turkish customs have started using a computerized system and plan to introduce on-
line declaration systems.  The system will make it easier for each customs point to have all the
information on preferential trade agreements and anti-dumping regulations required to determine the
correct amount of taxes to be collected.
5
                                                     
2 WTO document G/VAL/N/1/TUR/1, 31 October 1995.
3 WTO document G/VAL/10, 8 January 1997.
4 Specialized customs offices in Mersin, for plants and plants products;  Samsun, for wood and iron
products; Gebze, for petrochemical products; Bursa, for textile products;  Istanbul, for food products; Yesilkoyand Gebze, for automobiles and parts;  and Halkah, for textile products.
5 Togan , S. (1997c).WT/TPR/S/44 Trade Policy Review
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14. As a result of the customs reforms, including green channel facilities, payment by bank
transfers, computerized declarations, etc., there have been some time savings in customs procedures,
however, the authorities were unable to provide statistics on the changes.
15. Appeals procedures are laid down in section II, part 4 of the Customs Law.  Any person has
the right to appeal against decisions taken by the customs authorities that relate to the application of
customs legislation, and that concern him/her direct ly.  Statistics are not available on the number of
cases and the outcome of administrative and judicial appeals of customs decisions.
16. Turkey does not apply pre-shipment inspection for surveillance purpose.
(b) Registration and documentation
17. The 1996 Turkish import regime abolished the requirement for importers to obtain an import
certificate from the Undersecretariat of Foreign Trade and an import authorization from a bank.However, certain imports may only be imported under licence;  these include, inter alia ,
telecommunications equipment, some machinery, so me motor vehicles, transmission apparatus, some
chemical and a number of items used in civil aircraft.  A more detailed list of the items and the reason
for the licences is provided in Table III.10.  As noted earlier, the authorities have stated that such
licences are granted automatically.  In addition, imports of certain agricultural, foodstuffs,pharmaceutical, and cosmetics products are subject to health and sanitary control;  for these products
registration is required with the concerned Ministry.  Finally, conformity with Turkish standards is
required for imported products that would be subject to compulsory standards if they had been
domestically produced (section (4)(iii)).
18. Other documents required for importation and customs clearance are:  a tax number;  a
commercial invoice;  a certificate of origin;  and a bill of lading or airway bill, depending on the
method of shipment used.
19. Although Turkey has not acceded to the Common Transit Convention and the Single
Administrative Document Convention, since 1 Ja nuary 1996 implementing provisions of the Single
Administrative Document Convention, identical to th ese of the EU, have been used, so that a single
administrative document (SAD) is used for all customs procedures.  At the time of the previous trade
policy Review, the national form of declaration had been used on import, export and transitprocedure.  Form EUR1 is required for imports from third countries with which Turkey has a free-
trade agreement.  The fee, the so-called printing charge, for the SAD is TL 150,000, equivalent to less
than US$1, and TL120,000 for the EUR1 document.
(c) Rules of origin
20. Since 1 January 1996, Turkey has been applying the same preferential and non-preferential
rules of origin as the EU with respect to imports from third countries.  Non-preferential rules assign
the origin to the country where the product has been wholly obtained or where it underwent its "last
substantial working or processing" (Article 67 of the Customs Law No. 1615).
6  The criterion can be
applied in two ways:  on a case-by-case basis to decide if the product has changed its characteristics
through an operation and thus has acquired new properties;  or when the first test proves difficult toimplement the test is based on a value-added approach.
7
                                                     
6 GATT (1991), p. 86.
7 GATT (1991), p. 86.Turkey WT/TPR/S/44
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21. Within the framework of several preferential agreements, Turkey applies similar rules of
origin, based on the degree of processing or the value-added criteria (Table III.1).   The texts of
Turkey's bilateral free-trade agreements are parallel to those of the EU, accompanied by a joint
declaration concerning the implementation of the new EU system of diagonal cumulation.
By 1 January 1999 Turkey will be part of the diagonal cumulation of origin system for industrial
goods.  This system allows traders to use origina ting material from any country within the zone (EU,
EFTA, and CEEC countries) to produce an originat ing product while retaining preferential origin.8
Table III.1
Rules of origin
Agreement Rules of origin
Customs Union with the European Community
(EU)Industrial and processed agricultural products: free circulation rules are applied
between EU and Turkey.
Agricultural products: Sufficiently worked or processed based on conditions set
out in the "processing list".
Free-trade agreement with European Coal and
Steel Community (ECSC)ECSC products: Sufficiently worked or processed based on conditions set out in
the "processing list".a
Free-trade agreement with the European Free
Trade Association (EFTA)Sufficiently worked or processed, based on a change of tariff heading at the HSfour-digit level or specific requirements in the "processing list".
a
Economic Co-operation Organization (ECO)
(Iran, Turkey, Pakistan)Minimum of 50% of the f.o.b. valueb
Israel Sufficiently worked or processed based on conditions set out in the "processing
list".a
Hungary, Lithuania and Romania Protocols on rules of origin based on the "Pan European Model" as concluded by
the EU with the country:  sufficiently worked or processed based on conditions set
out in the "processing list".a
a The criterion of sufficient transformation is centred on a change of tariff heading.  Imported inputs are considered as being
sufficiently transformed if the four-digit tariff heading of the final product differs from that of the inputs.  However, the c riterion
is subject to a wide range of product-specific qualifications specifying the use of certain inputs or value-added requirements.
b The minimum local content in the exporting country is expressed as a percentage of the imported product's factory cost.
Note: The same rules of origin applying to Hungary will apply to the following agreements, which have not yet entered into force :
Czech Republic, Estonia, Latvia, and Slovak Republic.
Source: WTO Secretariat based on information provided by the Government of Turkey;  and GATT (1991), Trade Policy Review-
European Union, Geneva.
(ii) Tariffs and additional duties
(a) General features
22. In conjunction with the formation of the customs union with the EU on 1 January 1996,
Turkey adopted a new tariff regime, applying the EU common external tariff (CET) for most imports
of industrial products and for the industrial component of processed agricultural products imported
from third countries.  Turkey will maintain rates of protection above those specified in the CET for
certain "sensitive" products (equivalent to 290 items at the HS twelve-digit level) for up to five years;
these items include motor vehicles with an engine capacity smaller than 2,000cc., bicycles, leather
cases and bags, footwear and their parts, furniture, chinaware and ceramic ware, iron and steel wires
and ropes not electrically insulated, and paper or paperboard sacks and bags for cement or fertilizers.
Turkey accords at least MFN treatment to imports fr om all trading partners, including countries not
members of WTO.
                                                     
8 WTO (1997).WT/TPR/S/44 Trade Policy Review
Page 40
23. The regime provides for duty-free imports of non-agricultural items of EU/EFTA origin.  Fish
and fishery products from EFTA countries are imported duty free, while EU-origin imports are
subject to a rate of duty lower than that applied to  third countries.  The MFN rate is supplemented for
some imports (fish and fishery products) by a surcharge, the MHF levy.9
24. The new national tariff of Turkey is complex, consisting of eleven lists comprising
about 19,530 tariff lines classified at the HS twelve-digit level.10 List I displays customs duties
applied to imports of agricultural products, excludin g fish and fishery products. List II shows customs
duties to be applied to imports of industrial products and products covered by the European Coal and
Steel Community (ECSC).11  Lists III, IV and V lay down customs duties applied to imports of
processed agricultural products.  List VI displays reduced customs duties applied to imports of natural
gas, certain products used as raw materials in fe rtilizer and in the chemical industry (0-3% rate on
eleven items).  List VII lays down reduced (mostly zero) customs duties applied to imports of certain
agricultural and industrial products originating from least-developed countries.  List VIII shows either
reduced or suspended customs duties applied to imports of certain products predominately used as
raw material or intermediate inputs in chemical and electronic industries.12  List IX displays customs
duties and MHF levies applied to imports of fish and fishery products included in the Turkey-EFTAagreement.  Lists X and XI lay down customs duties and MHF levies applied to imports of
agricultural and industrial products and the agricu ltural component of processed agricultural products
originating from Israel and Romania.
(b) Form of tariffs
25. Approximately 98% of Turkey's tariffs are set on ad valorem  basis.  Specific, formula and
alternate duties apply to 337 items at the HS twelve -digit level.  Specific duties apply to 188 items
within the following categories: chocolate contai ning cocoa, milk products, sweet corn, margarine,
sugar products, pasta, prepared foods, starches, salt, beverages, and spirits.  Formula duties are levied
on 83 processed agricultural goods, including certain products within the following categories: butter,
sugar confectionary, food preparations containing cocoa, sweet biscuits, potatoes, and food
preparations.
13  Alternate duties apply to 66 items, including certain carpets, certain glass and
glassware and certain watches.  Within the framework of the customs union, Turkey applies
non-ad valorem  duties to comply with the CET for industrial products and to align the form of its
tariff rates with that of EU for processed agricultural products.
(c) Average tariff levels and dispersion
26. Since its last Review, Turkey has more than halved its simple average MFN tariff from 26.7%
in 1993 (including the MHF levy) to 12.7% in 1998 (Table III.2);  both rates take into account the
                                                     
9 The MHF was introduced in 1984 to finance the Government's low-cost housing schemes for poor
and middle-income families.  Customs duties collected from the agricultural component of processed
agricultural goods are also transferred to the MHF.
10 Turkey has been implementing the Harmonized Commodity Description and Coding System (HS)
since 1 January 1989.
11 Under this agreement, Turkey freed the rate of duty for the majority of iron and steel products for
EU/EFTA countries, while maintaining higher rates for 142 items that are considered sensitive by Turkey.  The
higher rates will be gradually reduced to zero by the end of 1998.
12 The products covered by the list are goods not produced in Turkey or the EU.  For these products
zero or less than CET rates are applied.  For the purpose of the following tariff analysis, only a few cases(34 items) have been included as the suspension in the other cases applies only to part of the tariff line.
13 The formula rate depends on the product's content of milk fat, milk proteins, and starch.Turkey WT/TPR/S/44
Page 41
percentage equivalents of non- ad valorem rates.14  Substantial dispersion of the tariff rates continues
to exist in the Turkish tariff structure, with a range of 0-365% and a standard deviation
of 24 percentage points.15  Overall, the distribution of MFN rates is skewed towards rates between
zero and 5%, which cover 46% of the tariff lines; about three quarters of the tariff lines are subject to
a duty of up to 10% (Chart III.1).  There is an unusually large number of tariff rates:  242 different
rates excluding the ad valorem  equivalents (AVEs), and 357 different rates including the AVEs.
Table III.2
Tariff structure of Turkey, 1993 and 1998(Per cent)
1993 1998 (second half)
MFN EU/EFTA MFN EU EFTA
Whole economy 26.7 (9.5) 22.2 (5.0) 12.7 (12.1) 7.6 (7.0) 7.1 (6.5)
Standard deviation 13.1 (5.7) 12.9 (4.9) 24.0 (23.4) 24.1 (23.6) (23.6) (23.5)
Duty-free lines (%) 1.4 (1.8) 7.2 (10.3) 13.8 (13.8) 84.2) (84.2) 84.2 (86.9)
Maximum tariff 132.5 (117.0) 130.0 (106.0) 365.4 (365.4) 240.0 (240.0) 240.0 (240.0)
By sector:
Agriculture (ISIC 1) 28.4 (7.1) 27.3 (6.0) 28.1 (26.0) 26.8 ((24.6) 24.6 (22.4)
Mining (ISIC 2) 21.4 (5.1) 18.7 (2.4) 0.2 (0.2) 0.0 (0.0) 0.0 (0.0)
Industry (ISIC 3) 26.7 (9.7) 22.0 (5.0) 11.8 (11.4) 6.4 (6.0) 6.0 (5.5)
.. Not available.
Note: Data in parenthesis show duty excluding MHF levy.  Tariff averages include  ad valorem  equivalents of specific, alternate and
formula duties, as available.  Tariff averages for ISIC 3 include food, beverages and tobacco manufacturing (ISIC 31).
Source: WTO Secretariat calculations based on data provided by the Turkish authorities.
27. The substantial reduction in the coverage as well as the level of the MHF levy has improved
transparency;  the coverage of the MHF levy has decreased from 87% of the tariff lines in 1993to 3%.  Currently the levy applies to fish and fishery products (equivalent to 514 items at the
HS 12-digit level).  In 1993 the levy increased the simple average MFN tariff from 9.5% to 26.7%,
but in 1998 the overall increase was only half a percentage point, bringing the average to 12.7%
(Table III.2).  As in 1993, imports exempt from  customs duty under incentive certificates are not
liable for payment of the levy.
                                                     
14 The 1998 tariff analysis is based on the second half of the year.  The non- ad valorem  duties have
been treated in the following way:  (i) based on customs revenue data, ad valorem  equivalents (AVEs)
of 120 specific duties were estimated by the authorities;  (ii) based on unit prices, AVEs for 19 specific dutieswere calculated; where import data were not available (25 items), EU AVEs for 1997 (estimated by the EU)
were applied.  The remaining specific duties (24 items) were not included in the tariff analysis;  (iii) based on
unit prices, AVEs for 28 alternate duties were calculated.  When import data were not available (38 items), onlythe ad valorem  element of the alternate duty was applied;  and (iv) 0% was applied to all 83 formula items.  On
balance, the analysis is likely to underestimate the true level of tariff protection.  AVEs for formula rates, whichrange from 0% to high specific rates, have all been estimated at the lowest possible end of the range.  Moreover,the specific rates in the formula duties are assumed to be zero.  The 1993 tariff analysis (as presented in the last
Trade Policy Review of Turkey) was based on AVEs for the non- ad valorem  MHF rates:  the specific rates and
the specific component of the mixed rates were replaced by the mean of all of the ad valorem  MHF rates.  The
remaining specific rate (lubricating oils) was not included in the tariff analysis.
15 If calculated only on the tariff lines that carry ad valorem  rates, the simple average MFN is 12.6%,
the range is 0-240% and the standard deviation is 24 percentage points.WT/TPR/S/44 Trade Policy Review
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05101520253035
0 0-5 5-10 10-15 15-20 20-25 25-30 30-35 35-40 40-45 45-50 50-60 >60Tariff ranges (per cent)Chart III.1
Tariff structure by rates, 1993 and 1998 (second half)                            
19931998Average 1993 
rate 26.7%Percentage share of tariff lines
0-5 should be interpreted as tariff is larger than zero and less or equal to five.Tariff averages (including MHF levy) include ad valorem  equivalents of specific, alternate and 
formula duties, as available.
WTO Secretariat.Note:
SourceAverage 1998 
rate 12.7%
28. The average MFN tariff rate is substantially higher for agriculture than for manufacturing or
mining.  While the rates for manufacturing and mining have reduced gradually since Turkey'sprevious Review, the rate for agricultural has stayed more or less at the same level (Table III.2).
MFN tariffs at the HS two-digit level are provid ed in Table AIII.1.  Under an ISIC two-digit
classification, the tariff profile shows peaks for agriculture and hunting (ISIC 11), fishing (ISIC 13)
and manufacture of food, beverages and tobacco (ISI C-31) (Chart III.2).  As noted above, the CUD
does not require Turkey to align its MFN tariff with the CET for agricultural goods and agriculturalcomponent of processed agricultural goods.  Sectoral tariffs are discussed in further detail in
Chapter IV.Turkey WT/TPR/S/44
Page 43
21.845.7
3.026.1
4.031.835.3
21.931.2
18.029.630.5
0.127.026.3
22.138.1
23.942.9
0.053.7
0.21.00.24.09.7
3.94.8 3.9 3.35.3 4.6
0102030405060
11 12 13 31 21 22 23 29 32 33 34 35 36 37 38 39Chart III.2
Tariff structure by sector, 1993 and 1998 (second half)                       
Per cent
ISIC Classification:
11           Agriculture and hunting
12           Forestry and logging 
13           Fishing  
21           Coal mining
22           Crude petroleum and natural gas     
23           Metal ore mining29           Other mining
31           Manufacture of food, beverages and tobacco32          Textile, wearing apparel and leather industries
33          Wood and wood products
34          Paper and paper products
35          Chemicals, rubber and plastic36          Non-metallic mineral products
37          Basic metal
38          Fabricated metal, machinery and equipment
39          Other products1993 1998
Tariff averages (including MHF levy)  include ad valorem  equivalents of specific, alternate and 
formula duties, as available.
WTO Secretariat.Note:
Source :Average 1993 
rate 26.7%Average 1998 
rate 12.7%
(d) Tariff escalation
29. Overall, Turkey's tariff displays negative escalation from raw materials to semi-processed
products; the simple average MFN, including MHF surc harge, for raw materials, is about three times
higher than for semi-processed products (Table III.3).  This is a much greater differential than
in 1993, when tariff protection did not differ significantly by stage of processing.  This negative"escalation" or de-escalation implies lower effective protection for the next stage of processing than is
evident from the nominal rates, unless processing industries are able to secure inputs at concessional
rates to offset the much higher rates on their material inputs.  De-escalation is evident in "other
manufacturing" industries, including jewellery, musical industries, sporting and athletic goods (from
raw materials through to fully-processed products); basic metal industries (from semi- to
fully-processed products); manufacture of chemical and some related products (from semi- toWT/TPR/S/44 Trade Policy Review
Page 44
fully-processed products); and manufacture of paper and paper products, printing and publishing
(from semi- to fully-processed products) (Chart III.3).
Table III.3
Tariff by stage of processing, 1993 and 1998
(Per cent)
1993 1998 (second half)
MFN EU/EFTA MFN EU EFTA
Raw materials 26.2 (6.5) 24.5 (4.8) 21.6 (18.4) 19.7 (16.6) 16.7 (13.5)
Intermediate processed 25.0 (8.5) 20.3 (3.8) 7.3 (7.1) 1.1 (0.9) 0.9 (0.7)
Processed goods 27.7 (10.8) 22.8 (5.9) 14.1 (13.9) 9.0 (8.8) 8.8 (8.7)
Note: Data in parenthesis show duty excluding MHF levy.  Tariff averages include  ad valorem equivalents of specific, alternate and
formula duties, as available.
Source: WTO Secretariat calculations based on data  provided by the Turkish authorities;  and GATT (1994), Trade Policy Review –
Turkey.
010203040506070Chart III.3
Tariff escalation by 2-digit ISIC industry, 1998 (second half)
Per cent
Unprocessed
Semi-processed
Fully processed
Tariff averages (including MHF levy)  include  ad valorem   equivalents of specific, alternate and 
formula duties, as available.
WTO Secretariat.Note:
Source : 
30. However, significant tariff escalation is displa yed in certain industries, thereby maintaining
higher levels of effective protection to the manufacturing sector than indicated by the nominal rates.As shown in Chart III.3, tariff escalation is most pronounced in sectors such as food, beverages andTurkey WT/TPR/S/44
Page 45
tobacco;  textiles, wearing apparel and leather industries;  non-metallic mineral products; and wood
and wood products.
(e) Tariff concessions (exemptions and waivers)
31. Concessional duties on imports are granted mainly within the framework of the general
investment aid programme (section (4)(ii)) or the inward-processing scheme targeting exporters.
Imports related to disabled persons or certain state administrations, financial leasing, project credit(donor) and temporary imports also benefit from tariff concessions on a limited number of products,
while all imports undertaken by the Ministry of National Defense and the North Atlantic Treaty
Organization are exempt from payment of customs dut ies (Table III.4).  No information was available
on the operation of the Encouragement of Tourism scheme nor on the private laws regarding the
exemptions scheme;  however, 17.6% of total exempted imports in 1995 were exempted under theprivate laws scheme, while only a negligible amount was imported under the Encouragement of
Tourism scheme.  Since the previous Review, the housing fund exemption programme has been
terminated.  The programme, which was abolished on 1 January 1996, provided exemption from
payment of the Mass Housing Fund (MHF) levy for th e transportation of petroleum and its derivatives
through Turkey to third countries, for grain imports by the Turkish Grain Board and for importsundertaken by the state-owned oil refineries.  Customs duty exemptions provided to the public sector
were also abolished on 1 January 1996.
32. Under the general investment aid programme, projects that introduce advanced and
appropriate technology and meet the minimum economical capacities, as determined by the
Undersecretariat of Treasury, are exempt from the customs duty (including surcharge) on all
machinery and equipment that are part of an investment project.
16  Reduced rates of duty are also
available for investment goods, start-up raw materials, intermediary goods, and operating materialswhich are part of an investment project (Table III.4).
33. Under the inward-processing regime scheme (Decree No. 95/7615 published in the Official
Gazette of 31 December 1995), exporters can import duty-free (including surcharge) either by
suspension of duties until exports have materialized (the most frequently used sub-scheme), or
re-imbursement of duties based on a drawback met hod or realization of exports with domestic inputs
and imported inputs on which VAT is paid (but not customs duty) on equivalent domestically sourced
inputs (Table III.4).
17  An application may be turned down if the production would seriously injure
producers already established in Turkey.  At the time of the previous Review, exporters were allowed
to import raw material inputs and packaging material duty-free up to 60% of the value of exports
pledged and up to 80% in the case of temporary imports.18
                                                     
16 WTO document G/SCM/Q2/TUR/2, 4 April 1997. The goods eligible for customs exemption are
listed in the Custom Entrance Tariff Schedule published as an annex to Law No. 474 of 14 May 1964 andre-arranged with Law No. 3502 of 10 November 1988.
17 Firms that wish to benefit from the inward-processing regime measures apply to the Undersecretariat
of Foreign Trade with an application form, an inward processing project form, book of authorized signature,written export undertaking, the balance sheet and profit-loss tables of the preceding year, the Trade Registergazette and other related documents indicated in the Communiqué of the Inward Processing Regime No. 96/1.
18 GATT (1994b), p. 72.WT/TPR/S/44 Trade Policy Review
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Table III.4
Key features of the concessional entry schemes in Turkey
Scheme Eligibility Incentives Performance
requirement
1. General investment aid
programmeProjects with advanced and
appropriate technology0% duty on all machinery and equipment that are part
of the investment project
Reduced duty on investment goods, start-up raw
materials, intermediary goods, and operating materials
part of the investment project aNone
2. Inward processing regime
a.  Conditional
exemption
for importsAny exporter Intended for goods to be re-export.  Suspension of duty
and VAT on raw materials, auxiliary materials, semi-finished and finished products, and packaging
materialsNone
b. Use of equivalent goods Any exporter After the realization of exports with domestic inputs,
refund of VAT (but not customs duty)None
c. Repayment of duties
collected on importsAny exporter After realization of exports with imported inputs,
refund of customs duty and VAT paid on imported
inputs, based on a draw-back methodNone
3. NATO North Atlantic Treaty
Organization0% on all imports None
4. Defense Ministry of National
Defense or by public
institutions on behalf of
the Ministr y0% on all imports None
5. Donation imports State administrations Certain items to be used mainly for the public interest
approved by relevant Ministries  Information on degree
of incentives not available.None
Disabled persons Vehicles produced especially for disabled persons
6. Financial leasing Vessels, air carriers, medical
equipment and high-tech
productsSuspension of all customs duties and taxes up to the
date the leasing contract is over, VAT reductions.None
7. Temporary imports Any importer Certain commercial or personal items:  tariff
suspension on temporary use in Turkey for 3 to
12 months without any substantial transformationNone
8 Project credit (donor) Project evaluation criteria of
Turk EximbankTerms and conditions of the project loan are in
accordance with the provisions of the OECDConsensusNone
9. Encouragement of
TourismNot available Not available Not available
10. Private (special) laws
regarding exemptionsNot available Not available Not available
a Goods imported at 20% duty: passenger vehicles, buses (excluding double-decker buses) tractors (excluding tractors conforming
to Euo-1 or Euro-2 norms having environment friendly engines), trailers (except refrigerated trailers), televisions, videos,
mini-refrigerators, furniture, import of yachts (including motorb oats), trucks, (excluding off-road truck types and rock type d ump
trucks that are not allowed on highways), mixers, and trans-mixers.
Goods imported at 18% duty: in expansion or new investments that have a minimum capacity of 100,000 units per year of firms
that will manufacture the automobiles that are considered as new models for a period of ten years after the date of their firstproduction world-wide;  the CKD components and parts within the scope of the product shall be subject to unlimited application
for the first two years and maximum 30% for the subsequent years.
Goods imported at 10% duty: raw materials, intermediary goods, and operating materials to be imported for operational needs.
Goods imported at 5% duty: construction material.
Source: WTO Secretariat based on information provided by Government of Turkey.Turkey WT/TPR/S/44
Page 47
34. Imports exempted from duty increased between 1993 and 1995.  Data have not been collected
since 1996, and the amount of forgone revenue attributed to the concessional entry schemes is not
available.  However, an indication of the magnitude can be appreciated by applying the average
simple MFN tariff to the amount of exempted imports; the amount of forgone revenue (not including
VAT and other charges) would be in the order of US$2.0 billion in 1995 (equivalent to 1.1% of GNP)
compared with US$1.4 billion (equivalent to 0.8% of GNP) in 1993.
(f) Tariff bindings
35. Before the conclusion of the Uruguay Round negotiations, Turkey had bindings on some 31%
of tariff lines, equivalent to 34% of non-oil imports.  As a result of the Uruguay Round
negotiations, 46% of Turkey's tariff lines were bound, with all tariff lines, except one, at existing
levels; all agricultural lines, and some 36% of industrial products were bound.  Turkey has agreed tofurther tariff cuts as part of the Information Technology Agreement (ITA), covering computers,
telecommunications equipment, semi-conductors, semi-conductors manufacturing equipment,
software, and scientific instruments.  Its commitment includes duty-free treatment on 358 items at the
HS eight-digit level by year 2000.  Regarding agricultural items, final bindings in 2005 will range
from 0 to 225%, while for non-agricultural goods the bindings will range from 0 to 92%.
36. Applied rates are generally well below the bound rates in 1998, and even lower than the final
bound rates in 2005 (Table III.5), thus allowing Turkey the freedom to increase its import tariffs
unilaterally.
19  In 1998 the simple average bound rate is 35.7%, which is set to decline to 30.4%
by 2005, compared with a simple average effective MFN rate of 12.7%.
Table III.5
Applied MFN rates and bound rates, 1998 and 2005
(Per cent)
Applied MFN rate
1998 (second half )aBound rate by
1998 2005
Whole econom y 12.7  (24.0) 35.7 (42.5) 30.4  (39.3)
By sector:
  Agriculture  (HS 1-24) 47.9  (42.0) 73.8 (60.6) 66.5  (57.5)
  Industry  (HS 25-97) 5.4    (4.6) 19.9 (13.8) 16.3  (11.9)
By stage of processing:
  Raw material 21.6  (26.3) 38.1 (38.7) 32.7  (35.9)
  Semi-processed 7.3    (8.0) 25.2 (20.6) 22.4  (18.4)
  Processed 14.1  (29.0) 40.2 (50.1) 33.6  (46.1)
a Tariff averages include all tariff lines, bound and non-bound lines.  Ad valorem  equivalents of specific, alternate and formula
duties are included, as available.
Note: Standard deviations are provided in parentheses.
Source: WTO Secretariat calculations based on data provided by the Turkish authorities.
37. Turkey has not re-bound its tariffs as a result of the customs union between Turkey and
the EU.  However, the CUD obliges Turkey not to impose higher tariffs than the EU common external
tariff except in areas where the CUD does not apply (mainly in agriculture).  Therefore, in practical
terms, Turkey's applied rates are largely bound at the same level as the EU bound rates.  The EU
                                                     
19 It should be noted that applied rates in Table III.5 include all tariff lines, bound and unbound.WT/TPR/S/44 Trade Policy Review
Page 48
simple average tariff on industrial products (HS Chapters 25-97), which was scheduled to decline
to 3.7% on 2000 as a result of the Uruguay Round, will be reduced to 3% as a result of the ITA.20
(g) Seasonal tariffs
38. Turkey has no seasonal tariffs.
(h) Tariff quotas
39. Since the previous Review, Turkey has introduced a number of tariff quotas.  In the context of
the free-trade agreements with Israel, Romania, Hungary and Lithuania tariff quotas were opened for
some agricultural goods and processed agricultural  products (Table III.6).  Quota allocations are made
on the "first come, first served" principle.  Under the agreements concluded with Slovenia, Estonia,
and the Czech and Slovak Republics, Turkey will also open tariff quotas for certain agricultural and
processed agricultural products.  In-quota tariff rates will differentiate between duty-free and reducedMFN rates.
Table III.6
Tariff quotas on agricultural and processed agricultural products
Free trade
agreement partnerNumber of items Examples of products affected
Israel 20 items at the HS four-digit level Avocado, mango, carrot, sweet corn, citrus fruit, orange juice, coffee,
kosher-brandy, and vodka
Romania 31 items at the HS six-digit level Live bovine animals and their meat, natural honey, potato seed, wheat,
barley, crude sunflower oil , and a pple juice
Hungary 19 items at the HS six-digit level Live bovine animals, wheat, corn, sunflower seed, crude oil, apple
juice, and s parklin g wine
Lithuania 10 items at the HS six-digit level Live bovine animals, meat, butter, cheese, potato seed, ice-cream, and
beer
European Union 26 items at the HS twelve-digit level Certain pasta products, sealing wafers, rice paper, dry dough, and
pastry
Source: Government of Turkey.
40. Tariff quotas also apply to a few processed agricultural products (equivalent to 26 items at the
HS 12-digit level) originating from the EU.  The quotas, which are allocated on a "first come, first
served" basis, were introduced in response to the EU tariff reduction on agricultural components of
macaroni originating in Turkey.
41. Since the second half of 1996, all exporters to Turkey have faced tariff quotas on dimethyl
terephalate and acrylonitryl in order to balance the interests of Turkish producers with those of EU
producers who benefit from EU preferential trade arrangements (such as the GSP).  These tariff
quotas are allocated on past performance.
(i) Plurilateral and bilateral tariff preferences
42. Since the previous Trade Policy Review, the importance of tariff preferences in Turkey's trade
has increased (Chapter II(3)).  Turkey's preferential trade agreements are listed in Table III.7.  As partof the custom union decision, Turkey must adopt, by 1 January 2001 all the preferential agreements
concluded by the EU with third countries.  As a result, Turkey currently provides preferential tariff
preferences to Hungary, Israel, Lithuania and Roma nia, while agreements have been signed, but not
yet entered into force, with the Czech Republic, Estonia and the Slovak Republic.  The majority of the
agreements, which build on the design of the C UD, aim at reducing tariffs to 0% on industrial
                                                     
20 WTO (1997), p. 45.Turkey WT/TPR/S/44
Page 49
products.  In the context of the WTO Singapore Ministerial Conference, in December 1996, Turkey
agreed to provide tariff preferences to least-developed countries on selected products.  Tariff
preferences within the ECO ceased to exist in January 1996 as the preferential rates (10% reduction
from statutory rates) were higher than MFN rates.  In consultation with the EU, the Government is
studying the possibility of extending a preferential reduction of 10% below the MFN rates within the
framework of the ECO.21  Although the overall differences between preferential rates and MFN rates
have increased, these differences should decline over time as Turkey lowers its MFN rates in tandem
with the EU common external tariff.
Table III.7
Preferential trading agreements, June 1998
Agreement/Country Coverage by Turkey Present preferential margin Future reductions
Customs Union with the
European CommunityAll industrial products
Fish and fishery productsProcessed agricultural productsDuty free on industrial products;
75% of MFN rates on fish and fisheryproducts;  preferential specific and ad-valorem
rates on processed agricultural productsEliminate tariffs on
industrial componentof processed
agricultural products
by 1999
Agreement between
Turkey and the European
Coal and Steel
Community (ECSC)Coal and steel products
(280 items at the HS eight-digitlevel)Duty free on 213 items;
1.4-5.3% tariff on 67 sensitive itemsEliminate tariffs on
sensitive productsby 1999
Free-trade agreement with
the European Free Trade
Association (EFTA)aAll industrial productsFish and fishery products
Processed agricultural productsDuty free on industrial products;
preferential specific and ad valorem  rates on
processed agricultural products and fish and
fishery productsEliminate tariffs on
industrial component
of processed
agricultural productsby 1999
Economic Co-operation
Organization (ECO)
(Iran, Turkey, Pakistan)36 items at the HS four-digit
levelbNo preferential rates appliedcNone agreed
Least-developed
countriesd556 items at the HS twelve-digit
levelDuty free on 554 items;
11% tariff on coffeeNone agreed
Israel All industrial products
Some agricultural and processe d
agricultural products (20 itemsat the HS four-digit level)Duty free on industrial products, except 50, 34,
or 25% of MFN tariffs on certain sensitive
industrial  products;  tariff quotas on agricultural
and processed agricultural productsEliminate tariffs on all
sensitive industrial
products by 2000
Romania All industrial products
Some agricultural and processe d
agricultural products (31 items
at the HS six-digit level)Duty free on industrial products, except 75, 60,
or 50% of MFN tariffs on certain sensitiveproducts;  tariff quotas on agricultural and
processed agricultural productsEliminate tariffs on all
sensitive industrialproducts by 2002
Hungary All industrial productsSome agricultural and processe
d
agricultural products (19 itemsat the HS six-digit level)Duty free on industrial products, except 75 or
45% of MFN tariffs on certain items;  tariff
quotas on agricultural and processed agricultural
productsEliminate tariffs on
all industrial products
by 2001
Lithuania All industrial products
Some agricultural and processe d
agricultural products (10 items
at the HS six-di git level )Duty free on industrial products, except 75 or
50% of MFN tariffs on certain items;  tariffquotas on agricultural and processed agricultural
productsEliminate tariffs on all
industrial productsby 2001
a A number of agricultural goods are covered under bilateral agreements between Turkey and individual EFTA countries.b Including among others certain marble, pharmaceuticals, detergents, leather products, paper and paperboard, canvas, centrifuga l
pumps for liquids, compressors, henna and bentonite.
c Preferential margin is 10% reduction from the statutory rates.  As these rates are higher than MFN rates, preferential rates a re not
applied.
d Agreed upon at the WTO Singapore Ministerial Conference.
Note: See Table III.1 for relevant rules of origin.Source: Government of Turkey.
                                                     
21 Article 16 of "Statements" section of Decision No. 1/95 of the Association Council.WT/TPR/S/44 Trade Policy Review
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(iii) Variable import levies
43. Turkey does not maintain any variable import levies.
(iv) Other levies and charges
44. The number of other levies and charges applied to imports has decreased since the previous
Review.  While the minerals surcharge has been abolished22 and the MHF levy has almost been
eliminated (section (2)(ii)), several additional ch arges and taxes still apply:  supplementary VAT;
defence industry support fund; tax for education and health care services; liquid fuel price
stabilization fund; petroleum consumption tax; motor vehicle purchasing tax (MVPT); supplementary
MVPT; environmental fund;  and stamp duty.  These apply equally to imports and domestically
produced goods.  Moreover, the value-added tax (VAT), which is levied on all goods and services on
a c.i.f. basis (including the customs duty), unless specifically exempted, has increased; in 1993, theVAT was levied at five rates ranging from 0 to 5%, while the present five rates range from 1 to 40%.
Table III.8 provides an overview of the taxes and charges levied on imports and domestic goods.
Table III.8
Taxes levied on imports and domestic goods
Tax Product Rate (%) Base
Imports Domestic goods
Mass housing fund
(MHF)Fish and fishery products Specific and
ad valorem  taxesC.i.f. price Not levied
Value-added tax (VAT) All goods:
Agricultural and essentials
Basic goods
Industrial goods
Luxury items (including cosmetics,furs, televisions and automobiles)1, 8, 15
1, 8
15, 23
23, 40
aC.i.f. price plus all
duties and chargesSale price at all
transaction levels
Supplementary VAT Tobacco and alcoholb
Beverages
Playing cardsX-ray films
All spirits and fuel oil100
10
6060
50Same as VAT base Same as VAT base
Defence industry
support fundTobacco, alcohols and beverages
(excluding juices)10 Same as VAT base Same as VAT base
Tax for education and
health care servicesTobacco, alcohols and beverages
(excluding juices)10 Same as VAT base Same as VAT base
Liquid fuel price
stabilization fund
(LFPSF)All petroleum products 15 Same as VAT base Same as VAT base
Petroleum consumption
taxAll petroleum products:
Leaded
Unleaded300
290Same as VAT base
(including LFPSF)Sale price
(not including VAT)
Table III.8 (cont'd)
                                                     
22 The minerals surcharge of 2.5%, introduced in 1985 on imports of minerals used for energy
production (e.g. oil and coal), metallic minerals, industrial minerals and precious stones, was eliminatedon 27 January 1996.Turkey WT/TPR/S/44
Page 51
Tax Product Rate (%) Base
Imports Domestic goods
Diesel
Gasoline
Fuel oil (for heating)
 LPG190
185
20, 75
1
Motor vehiclepurchasing tax (MVPT)All motor vehicles Specific taxes
cSame as VAT base Same as VAT base
Supplementary MVPT First retail sale or import of cars 12, 18 24dSame as VAT base Same as VAT base
Environment Fund All motor vehicles 25% of  MVPT Same as VAT base Same as VAT base
Stamp duty Documents:
   Given to the customs
   Related to financing
     - accredits     - guaranteed letters, contractsThe amount written
on the document
0.36
0.6The amount written on
the documentThe amount written on
the document
a Cars with a engine capacity of 2,000 cc or more.
b 40% or more of alcohol.
c Based on weight, type, model year and cylinder capacity.d Tax of 12% for cars with an engine capacity of less than 1,600 cc;  18% for 1,600 to 2,000 cc.; and 24% for above 2,000 cc.
Source: Government of Turkey.
(v) Minimum import prices
45. Turkey does not apply minimum import prices.
(vi) Import prohibitions
46. The importation of some 11 items, by broad category, are prohibited by law for a variety of
reasons such as environment, security, health, public morals or the fulfilment of international
obligations (Table III.9).  Moreover, in late 1996, Turkey imposed a temporary import ban on live
animals (dairy and beef cattle, sheep, goats and poultry) and meat (beef, sheep, goat and poultry) in
order to protect its livestock industry from epidemic diseases.  Questions have been raised within the
WTO about this measure.23  Since the previous Review, the importation of the following products
have also been added to the list of prohibited imports:  colouring matters, items on Schedule I of the
Convention on the Prohibition of the Developmen t, Production, Stockpiling and Use of Chemical
Weapons and their Destruction;  leaf, soil, stalk, grass and natural manure used for agricultural
purpose;  and counterfeit labels and products for packing.  However, a certain number of productshave been removed from the list:  coins made of silver and other materials;  antiques and
archaeological works;  angora goat;  fig cuttings, wine stems, tobacco and hazelnut seedlings;  Indian
hemp;  and tobacco seeds.
                                                     
23 WTO document G/AG/R/12, 31 October 1997.WT/TPR/S/44 Trade Policy Review
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Table III.9
Import prohibitions, June 1998
Description of item Invocation of WTO
ArticleDomestic law
1. Narcotics, hashish and prepared opium
(2 items)aHealth, IAb
(Article XX:b, h)Law on the Control of Narcotics No. 2313; International
Agreement on Narcotics Goods No. 1961
2. Ozone depleting substances
(1 item)a, cEnvironment
(Article XX:b, d)Montreal Protocol on Substances that Deplete the Ozone
Layer; London Amendments to the Montreal Protocol;
Kopenhag Amendment to Montreal Protocol; Import
Regime Communiqué No. 98/14 (Lists I, II and III)
3. Colouring matters
(1 item)Health
(Article XX:b)Law on the Protection of the Public Health No. 1593;
Regulation on Special Conditions of Foodstuffs and
Supplies and Objects Concerning Public Health; ImportRegime Communiqué 98/15 Add II (List)
4. Schedule I of the Convention
(4 items)cEnvironment(Article XX:b, d)The Convention on the Prohibition of the Development,
Production, Stockpiling and Use of Chemical Weaponsand their Destruction; Import Regime Communiqué
No. 98/17 (List I)
5. Propellant powders, prepared
explosives, fuses, caps igniters
detonatorsa
(3 items)Security
(Article XXI:b(ii))Law of 1953 on Firearms No. 6136
6. Measurement instruments not
conforming to Turkish legal norms
(non-metric or double standard)
(6 items)Compliance with
domestic law
(Article XX:d)Law on Standards and Accords No. 3516
7. Arms and ammunitiona
(3 items)Security
(Article XXI:b(i),(ii))Law of 1953 on Firearms No. 6136; Import Regime
Communiqué No. 98/2
8. Gambling instruments (except for
specified tourism purposes)a
(1 item)Public morals
(Article XX:a)Law on Gambling Instruments and Machines like
Roulette, Tilt and Pinball No. 1072
9. Products making illegal use of a trade
mark
(all industrial products)Compliance with
domestic law; IAb
(Article XX:d,h)Paris Convention 1883 annexed to the Law of 1930 on
Accession to 1925 Hague Agreement on InternationalIndustrial Property (1925); Statutory Decree on the
Protection of the Trademarks No. 556
10. Leaf, soil, stalk, straw, grass and natural
manure used for agricultural purpose
(excluding turf  and perlites cultivated in
culture environment)Health
(Article XX:b)Regulation on Agricultural Quarantine
11.Counterfeit labels and products for
packing
(all industrial products)Public moral
(Article XX:a)Customs Law No. 1615
a Prohibited except when imported by authorized government bodies.
b IA:  Undertaken in pursuance of obligations under intergovernmental commodity agreements.c Imports prohibited only from non-members of the international agreements.
Note: Number of items refers to the Harmonized System classification at the four-digit level.Source: WTO Secretariat based on information provided by the Government of Turkey.Turkey WT/TPR/S/44
Page 53
(vii) Import licensing and authorization
47. Currently, prior import licences are required for 12 groups of items (equivalent to 177 items
at the HS four-digit level), including,  inter alia , telecommunications equipment, some machinery,
some motor vehicles, transmission apparatus, some chemicals, and a number of items related to civil
aircraft (Table III.10).  Importers of these items must obtain permission from the relevant authorities.
The importation of some of the items, such as certain motor vehicles, require permission from twoauthorities.  In addition to security, safety, and environment, the restrictions are intended to protect
consumers, assure that imported vehicles are suitable for domestic highways
24, and, for a certain
number of items (79 at the four-digit level) to prevent the use of imported goods for other than their
intended purpose in civil aircraft.  The importation of old, used, renovated, faulty and obsolete goods
is subject to permission by the Undersecretariat of Foreign Trade.  Imports of certain goods fromChina require an import licence; these goods include footwear, tableware and kitchenware of
porcelain or china, ceramic tableware or kitchenw are, and toys.  Additional restrictions under
Turkey's sanitary and phytosanitary regulations are discussed below (section (4)(iii)(c)).
48. It is difficult to evaluate the importance of import licensing since the low value of such
imports may reflect either a lack of demand for such products or the restrictive effect of the licenceitself.
Table III.10
Imports requiring a licence, February 1998
Description of items Reason for licence
1. Radioactivity related items (11 items)
Selected items: uranium ores, isotopes, nuclear
reactors, X-raysImports only permitted on approval by the Turkish Atomic Energy Authority
To assure patient security against the probable harmful effects of radioactivity
2. Telecommunications related items (3 items)
Selected items: electrical apparatus for line
telegraphy, telephone answering machinesImports only permitted with an Approval Document prepared by the Ministry
of Transportation
To assure that imports are in conformity with the national telecommunication
network
3. Machinery and related items (33 items)
Selected items: air-conditioning machines,
household type electrical refrigerators, clothes
dryers, instantaneous gas water heaters, sewing
machines of household types, machine-tools fordrilling etc., vacuum cleaners, telex machines,
some photocopying machines, certain motor
vehiclesImports only permitted with a certificate issued by the Ministry of Industry
and Commerce to the effect that after-sale services such as maintenance andrepair are warranted on a regional basis and that maintenance service
technicians and spare-part stocks are sufficient
To protect consumers
 4. Motor vehicles (6 items)
Selected items: road tractors for semi-trailers,
station wagons, racing cars, trailers,special-purpose motor vehicles other than those
designed for the transport of persons or goodsImports only permitted with a pro forma invoice certified by the Ministry of
Industry and Commerce
To assure the suitability of imported vehicles for highways
Table III.10 (cont'd)
                                                     
24 Communiqués Nos:  23217 of 31 December 1997 and SGM-8/21-22 of 13 May 1998 of the
Undersecretariat of Foreign Trade, issued within the framework of the Consumer Protection Law No. 4077.WT/TPR/S/44 Trade Policy Review
Page 54
Description of items Reason for licence
5. Transmission related items (5 items)
Selected items: transmission apparatus, radar
apparatusImports only permitted on approval by the General Directorate of Radio
Communication
To assure the frequency regulations in the framework of the national
communication system
6. Banknotes and related items (2 items)
Banknotes and the like, securitiesImports only permitted on approval by the Central Bank of Turkey or the
Board of Capital Markets
To assure the continuation of administrative order related to precious
documents, e.g. shares, bonds
7. Explosives and related items (12 items)
Selected items: technical ammonium nitrate,prepared explosives, some fuses, fireworks, some
astronomical instrumentsImports only permitted on approval by the General Directorate of Security in
the Ministry of Interior
To assure national security and public safety
8. Chemicals and related items (9 items)
Selected items: benzol, toluene, solvent naphtha,
petroleum oils, benzeneImports only permitted on approval by the General Directorate of Petroleum
Works in the Ministry of Energy and Natural Resources.  Imports of toluene
require approval both from the Ministry of Energy and Natural Resources and
the Ministry of Agriculture and Rural Affairs.
9. Products affecting worker health (3 items)
Selected items:  asbestos, benzeneImports only permitted on approval by the Institute of Workers' Health and
Security in the Ministry of Works and Social Security
10. Civil aircraft related items (79 items)
A wide range of items of a kind used on civilaircraftImports only permitted on approval by the General Directorate of Civil
Aircraft in the Ministry of Transportation
To prevent employment of imported goods for other than their purposes in
civil aircraft
11. Maps related items (1 item)
Maps and hydrographic or similar charts of allkindsImports only permitted on approval by the General Command of Cartography
in the Ministry of Defence
12. Items related to the manufacturing of chemical
weapons (13 items)Imports only permitted on approval by the Undersecretariat of Foreign Trade
Note: Number of items refers to the Harmonized System classification at the four-digit level.
Source: WTO Secretariat based on information provided by the Government;  and WTO documents G/LIC/N/3/TUR/2, 27 May 1998 and
G/LIC/N/3/TUR/2/Corr.1, 4 June 1998.
(viii) Import quotas
49. Since the previous Review in 1994, Turkey has introduced import quotas on certain textile
and clothing products as a requirement for harmonization of its import policy with that of the EU.25
The quotas, which were not part of EU global quotas, were introduced on 1 January 1996 underArticle XXIV of GATT 1994.
26  Within the context of the legislation on Surveillance and Safeguard
Measures on Imports of Certain Textiles Products, the management of quotas and surveillance isrealized under a double checking system for imports from 16 countries with which an agreement has
been reached (Table III.11).  A single-checking system is applied to textile and clothing imports
from 21 countries with which no agreement has yet been reached.  For 1998, preferential quotas for a
variety of products (equivalent to 1,044 items at the HS eight-digit level or 29% of the tariff lines in
the textile and clothing sector) were distributed among 15 WTO Members.  Detailed information onthe number of quota categories per country as well as the quota distribution system is provided in
Chapter IV(4)(iii)(a).
                                                     
25 WTO document WT/REG22/7, 24 November 1997.
26 However, as a consequence of recently signed free-trade agreements and harmonization of Turkish
trade policy with that of the EU, the number of countries  subject to quotas has decreased since its introduction.Turkey WT/TPR/S/44
Page 55
Table III.11
Quota and surveillance on certain textile and clothing imports, June 1998
Countries subject to quota Countries subject to surveillance
under double checking under single checking under double checking under single checking
Belarus Argentina Bangladesh Armenia
China Brazil Egypt Azerbaijan
Chinese Taipei Hong Kong, China Latvia Estoniaa
Egypt India Lithuania Georgia
Indonesia Peru Macedonia Kazakhstan
Korea, Rep. of Philippines Moldova Kyrgyzstan
Macao Singapore Viet Nam Mongolia
Malaysia Thailand Russian Federation
Pakistan Ukraine Tajikistan
Sri Lanka Uzbekistan Turkmenistan
Viet Nam Ukraine
United Arab Emirates
Uzbekistan
a An agreement has been reached with Estonia, but has not yet entered into effect.
Source: Government of Turkey.
50. Turkey has also introduced quotas for imports of some products originating from China;
these goods include footwear, tableware and kitchenw are of porcelain or china, ceramic tableware or
kitchenware, and toys.27  The legislation applied to imports from China also applies to imports from
some other non-member countries, but no quota has yet been introduced for those countries.28  The
authorities have indicated that Turkish practice is now identical with that of the European Union both
in terms of third countries and categories of products subject to quantitative restrictions.
51. Within the WTO, some Members (Hong Kong, China; India; and Thailand) have expressed
concern that the restrictions on certain textile and clothing products are not consistent with Turkey's
obligations under the GATT/WTO.29  At the request of India, a panel was established in March 1998
(Chapter II(3)(ii)).30  Although textile and clothing imports by Turkey have been quite small (less
than 6% of total merchandise imports in 1996), the customs union between Turkey and the EU may
be perceived as a trading opportunity by countries wishing to export to the EU:  goods exported to
Turkey that are covered by the CUD may freely enter the EU.
52. Under the WTO Agreement on Textiles and Clothing (ATC), which became effective
on 1 January 1995, Turkey has submitted the list of products included in the first and second phases of
integration into GATT 1994.31  The list for the first phase of integration contains some 18% of the
                                                     
27 Legislation on Safeguard Measures and Surveillance for Imports of Products Originating from
Certain Countries.
28 Azerbaijan, Albania, Belarus, Armenia, Georgia, Kazakhstan, Kyrgyzstan, Dem. Rep. of Korea,
Mongolia, Uzbekistan, Russia, Tajikistan, Turkmenistan, Ukraine and Viet Nam.
29 WTO documents WT/DS29/1, 15 February 1996, WT/DS34/1, 25 March 1996,
WT/DS34/1, 26 June 1997 and WT/DS34/2, 2 February 1998.
30 WTO document WT/DS34/3, 15 June 1998.
31 The sector will be integrated in four stages to be implemented by 1 January 1995, 1 January 1998,
1 January 2002 and 1 January 2005.  Each member can choose which products to integrate at each of the fourstages provided that they cover at least one product from each of the following groupings: tops and yarns,
fabrics, made-ups and clothing.WT/TPR/S/44 Trade Policy Review
Page 56
volume of imports in 1990, comprising 54 HS six-digit items.32  The list for the second phase also
covers some 18% of the volume of imports in 1990, including 23 categories of mostly tops and yarns
(16.2% of the volume of imports), followed by fabrics (1.7%), made-up textile products (0 .02%), and
clothing (0.08%).33
(ix) Imports by state economic enterprises
53. Currently, some alcohol and pharmaceutical products (equivalent to nine items at the
HS four-digit level) can only be imported by specific government agencies or pre-approved
organizations (Table III.12).  Within the framework of the customs union with the EU, Turkey has
terminated the special and exclusive rights and privileges granted to public enterprises and state
monopolies of a commercial nature (Official Gazette of 31 December 1995, No. 22510  bis).  As a
result, the exclusive right granted to the Turkish Grain Board to trade in some agricultural goods(wheat, meslin, barley for the manufacture of malt, and barley other than as seed) and TEKEL's
monopoly status for natural sparkling wine and whisky have been terminated.
Table III.12
Imports and exports restricted to government agencies or pre-approved organizations, June 1998
Items Trader Purpose of restriction
1. 6 items :   beer made from malt; wine of fresh grapes, incl. fortified
wines, grape must;  vermouth and other wine of fresh grapes flavoured
with plants or aromatic substances; other fermented beverages mixturesof fermented beverages; undenatured ethyl alcohol; ethyl alcohol, and
other spirits, denatured; spirits, liqueurs, and other spirituous beveragesTEKEL To reduce the negative
consequences of alcohol
consumption
2. 3 items:   cinchona bark; potassium iodide; and alkaloids of cinchona
and their derivatives (quinine)Turkish Red
CrescentTo enable the Red Crescent to
fight the diseases of malaria
and syphilis
Note: Number of items refers to the Harmonized System at the four-digit level.
Source: WTO Secretariat based on WTO documents G/STR/N/1/TUR, 20 July 1995 and G/STR/N/3/TUR, 9 September 1997.
54. Imports of goods allowed to be traded exclusively by government agencies as a share of total
merchandise imports have remained at about the same low level of 0.07% as at the time of the
previous Review.  In 1996, such imports were dominated by undenatured ethyl alcohol goods,
accounting for some 78% of imports realized by government agencies (Table AIII.2).  However,imports of these goods by pre-approved organizations may also be permitted against a licence granted
by the relevant state-trading enterprise.  Imports undertaken by pre-approved organizations (including
private agents) were about 9.5% of total merchandise imports in 1996.
(x) Import cartels
55. Export cartels are prohibited by Turkish comp etition law (Law No. 4054 on the Protection of
Competition).  The law (Article 4) states that agreements "which cause or may have as their object the
prevention, distortion or restriction of competition in a market for goods and services are unlawful
and prohibited."
(xi) Countertrade
56. Countertrade (such as barter, counter-purchase or indirect offsets) is regulated by the Export
Regime Decree, and Communiqué No. 96/3 concerning Exportation Made through Counter Purchase
                                                     
32 WTO document G/TMB/N/44, 28 April 1995.
33 WTO documents G/TMB/N/228, 12 February 1997 and  G/TMB/N/2228/Add.1, 28 May 1997.Turkey WT/TPR/S/44
Page 57
or Barter, published in the Official Gazette on 6 January 1996.  All companies are allowed to conduct
barter and counter-purchase in accordance with established procedures.  Companies allowed to
conduct indirect and direct offset purchases are defined in a guide published by the Undersecretariat
of Defence.  Applications are made to the Exporters' Union.  In 1993, exporters were required to meet
a minimum level of 50% domestic value added.  This requirement has been abolished.
57. In 1997, barter trade amounted to US$34 million and was undertaken by 33 companies.  The
concerned countries were mostly Azerbaijan, Germany, Macedonia, Russia and Ukraine;  the trade
covered items such as chemical equipment, textiles and food.
58. The Government can require ministries and public enterprises to include an offset provision in
tender specifications when the estimated tender value is above US$1 million; major military contracts
are usually subject to such offset requirements.  Countertrade proposals often play an important rolein the decision to award a large contract, and direct offsets are preferred over indirect offsets.  A
memorandum of understanding, which expires in 1999, has been signed with Boeing providing for
an 80% direct offset for the purchase of 49 aircraft worth some US$862 million.  Under the
agreement, the Turkish Aerospace Industries (TAI) will produce some parts of the aircraft.  No other
contracts containing offset provisions are presently operating.
(xii) Local-content schemes
59. The authorities indicated that no local-content requirement is currently applied to foreign
investors.  However, in the automotive sector foreign investors usually accept a certain share of local
content (see also section (4)(vi) of this Chapter).
(xiii) Anti-dumping and countervailing measures
60. Turkish legislation on anti-dumping and countervailing measures (Law No. 3577 of 1989 on
Prevention of Unfair Competition in Importation including the related Decree and Regulationpublished in the Official Gazette on 27 September 1989) was enacted on 1 October 1989.
34  N o
investigations had been initiated prior to the enac tment of this legislation.  In order to bring the
legislation into conformity with the relevant WTO Agreements, an amending law has been prepared
but the domestic procedures for the enactment of the new legislation have not yet been completed.
The draft law includes provisions on like product, subsidy, injury, specificity, the de minimis  rule,
negligible imports, newcomers, a sunset clause, and the duration of provisional and definitive duties.
61. No consideration has been given to a "general interest clause" in deciding whether to impose
anti-dumping duties, although the authorities have indicated that, in practice, Turkey takes account of
the general interest.  Thus, the views of interested parties, such as downstream users, upstream
producers, labour organizations, consumer groups or any other interested party are taken intoconsideration during the course of the investigation.  Systematic application of the "lesser duty" rule is
another indication of the attention given to general interest.  Nevertheless the inclusion of such a
clause in the legislation would formally enshrine the rights of consumers as well as industries that are
users of the product under investigation.  An anti-circumvention provision (similar to that of the EU
anti-dumping legislation), allowing anti-dumping measures to be extended to imports of like productsif an existing measure is circumvented, is not under consideration.
35  In dealing with possible
                                                     
34 WTO document G/ADP/N/1/TUR/2-G/SCM/N/1/TUR/2, 1 December 1995.
35 The custom union decision does not require Turkey to impose EU anti-dumping measures or vice
versa.  Circumvention is defined in EU legislation as a change in trade patterns due to a practice, process or
work "for which there is insufficient due cause or economic justification, other than the imposition of the duty"(WTO, 1995).WT/TPR/S/44 Trade Policy Review
Page 58
circumvention Turkey does not have any special rules of origin requirements in respect of imported
products identical to those subject to anti-dumping or countervailing duties.  It should be noted that
the WTO Agreements do not require a general intere st clause nor an anti-circumvention provision.
62. Under the legislation, imports (i) causing material injury to an industry, (ii) constituting a
threat of material injury to an industry, (iii) causing the market impairment of an industry to be newly
established in Turkey, or (iv) causing physical retardation of an industry to be established in Turkeymay be filed for investigation under Article 3 of the current Law.
36  (Item (iii) does not constitute
injury in terms of the WTO Agreements and is excluded from the proposed new law).  A dumped
product is a product with an export price less than the "normal" value of an identical or like product;
the normal value is defined as a comparable price actually paid in the ordinary course of trade for the
identical or like product subject to consumption in the exporting country or the country of origin(Article 15 of the Regulation).  A special anti-dumping unit in charge of, inter alia , the preliminary
examination upon complaint, proposals on whether an investigation shall be initiated, and carrying out
anti-dumping investigations has been formed in the Undersecretariat of Foreign Trade.  However, the
responsibility for initiating an investigation, acceptance of undertakings, decisions on the imposition
of provisional or definitive duties and termination are made by the Board of Evaluation of UnfairCompetition in Importation, which the authorities have indicated is independent of any government
agency.
63. The examination of a complaint is required to be completed within 60 days (Article 4 of the
Regulation) and decisions to initiate an investigation are published in the Official Gazette (Article 5 of
the Regulation).  The interested parties are notified on the initial day of the investigation and have a
maximum of 30 days to respond; the time-limit may be extended by up to 15 days (Article 5 of the
Regulation).  The final decision is to be taken within one year from the initiation of the investigation,but, if necessary, this period can be extended by up to six months (Article 11 of the Regulation).  The
final measure shall remain in force as long as may be necessary to remove the effects of the injury
(Article 5 of the Decree).  The legislation provides for retroactive implementation of up to 90 days.
Provisional anti-dumping measures may be adopted  for a period of four months (which can be
extended for two months) in case of existence of sufficient evidence (Articles 6 and 12 of the Law).
64. Turkey's legislation on anti-dumping and countervailing measures was reviewed in a joint
special meeting in the WTO Committees on Anti-Dumping Practices and on Subsidies and
Countervailing Measures in April 1996.  During the review process, some Members noted that
Turkey's legislation did not fully reflect the requirements of the agreements in certain areas.  For
example, it was argued that the legislation:
- did not include provisions on (i) the earliest time, after the initiation of an
investigation, in which a provisional measure can be imposed;  (ii) the standing of a
complainant;  (iii) de minimis dumping margins and negligible import volumes;
(iv) granting new shipper reviews;  and (v) the concept of "specificity";
- did not fully reflect provisions on (i) the termination of definite measures;  (ii) the
extension of provisional measures;  and (iii) public notice and the explanation of
determinations;  and
                                                     
36 Turkey has neither initiated an investigation nor imposed any measures on the basis of market
impairment criterion up until now.Turkey WT/TPR/S/44
Page 59
- included an additional category (market impairment) not provided for in the
definition of injury in the WTO provisions.37
65. In response, the Government of Turkey stated  that "international agreements duly put into
effect carry the force of law" according to the Constitution of Turkey.  Therefore, the provisions of
the WTO Agreement on Subsidies and Countervailing Duties and the Agreement on the
Implementation of Article VI of GATT 1994 would be observed in the case of any inconsistencybetween the law and the Agreement (Chapter II).   This applies both in an ordinary and higher
administrative courts.
66. Turkey has been an active user of its anti-dumping legislation, although no new final
measures have been introduced since 1995.  By number of cases initiated (imposed) between 1989
and 1996, Turkey ranks eighth (sixth) among the WTO Members.
38  As shown in Chart III.4, in the
period December 1989 to 1997 Turkey imposed definitive anti-dumping measures in 44 cases, out of
a total of 88 investigations initiated.  Final measures mainly affected textile products, and base metals
and articles thereof.  The countries most affected were Romania (23% of the measures), Russia (11%)
and China (11%).  The large build-up of cases initiated through 1994 may be explained by the
overvalued domestic currency (see Chapter I), which, as in a number of other countries, might havecaused domestic industries to seek protection through anti-dumping measures.  Although the number
of cases initiated has fallen considerably since 1995 (when a stable real exchange rate policy was
adopted – Chapter I), the number of measures in force (presently 35) remains substantial
(Table III.13).  Almost half of the duties are levied on a specific basis; according to the authorities,
specific rates are applied in order to ensure effective implementation of definitive measures.
Twenty-ive per cent of the ad valorem duties are as high as 100%.  By May 1998, Turkey had not
initiated nor imposed any countervailing measures.
                                                     
37 WTO document G/ADP/Q1/TUR/1-G/SCM/Q1/TUR/1, 17 July 1996.
38 Based on information provided by the Government of Turkey and data presented in Miranda and
Torres (1998).WT/TPR/S/44 Trade Policy Review
Page 60
0510152025
1989 90 91 92 93 94 95 96 1997
Source : Notifications by Turkey to the WTO.Romania
22.7Other
Asia
4.5
Russia
11.4
Ukraine
4.5Korea,
Rep of
6.8
Other
Europe
20.6 Bulgaria
4.5Chemicals
4.5Chinese
Taipei
6.8
Textiles
25.0China
11.4Other
15.9
Plastics 
and 
rubber
13.6
Hungary
6.8Base metals and
articles of base metal
20.5
Glass and
glassware
11.4
Machinery and
electrical
equipment
9.1(b) By product (final measures)
Per cent(c) By origin (final measures)
Per centChart III.4
Anti-dumping cases, 1989-97
(b) By number of cases 
Final measures No final measures
Europe
70.5Asia
29.5Turkey WT/TPR/S/44
Page 61
Table III.13
Anti-dumping measures in force, December 1997
Product Country Initiation date of
investigationDate of
imposition of
final measureDuty
Polyester synthetic staple fibers (not
processed)
(5503.20.00.00.00)Chinese Taipei
Italy
Russia
Belarus7/12/1989
9/7/1991
30/7/1993
30/7/199328/11/1990
8/1/1993
16/4/1994
16/4/199420%
9%
19%
19%
Polyester synthetic staple fibers(processed)
(5506.20.00.00.00)Romania (review) 20/5/1992 19/11/1993 15%
Welding electrodes
(8311.10.10.00.00)Romania
Hungary
China7/12/1989
7/12/1989
7/12/198928/11/1990
28/11/1990
28/11/199050%
50%
100%
Printing and writing papers(4802.52.20.10.00)(4802.52.80.10.00)Finland (review)
Yugoslavia20/5/1992
7/12/19899/11/1993
28/11/19905%
20%
Lathe chucks(8466.20.91.00.11)Poland
Czechoslovakia21/3/1990
21/3/199030/1/1991 100%
100%
Cast glass and rolled glass(70.03)Romania 21/3/1990 21/2/1991 100%
Drawn or blown glass
(70.04)Romania
Bulgaria
Russia21/3/1990
1/10/1992
7/1/199321/2/1991
22/9/1993
22/9/1993100%
US$35/tonne
US$35/tonne
Roller chain(7315.11)Chinese Taipei 21/3/1990 21/2/1991 30%
Articles of porcelain or china (69.11) China 3/4/1990 21/2/1991 US$2/kg
Slide fasteners
(9607.19)Chinese Taipei 13/7/1990 9/7/1991 15%
Lead-acid electric accumulators
(8507.10.81.00.00)
(8507.10.89.00.00)Korea, Rep. of 22/5/1991 20/5/1992 12%
Glassware
(70.13)Indonesia 6/6/1991 5/6/1992 US$0.1/kg
Universal lathes
(8458.19.80.00.11)China
Bulgaria (review)22/6/1991
26/1/199522/4/1992
30/1/199650%
50%
Benzoic acid(2916.31.00.90.11)Netherlands 14/8/1991 1/9/1992 US$0.29/kg
Low-density polyethylene
(3901.10.90.00.11)Russia
BulgariaRomania9/10/1993
9/10/19939/10/199326/1/1995
26/1/199526/1/1995US$280/tonne
US$200/tonneUS$230/tonne
Polyvinyl chloride(3904.10.00.00.00)Russia
Ukraine
Romania28/1/1994
28/1/1994
28/1/199426/1/1995
26/1/1995
26/1/1995US$170/tonne
US$150/tonne
US$100/tonne
Citric acid(2918.14.00.00.00)China 4/6/1994 6/5/1995 66%
Table III.13 (cont'd)WT/TPR/S/44 Trade Policy Review
Page 62
Product Country Initiation date of
investigationDate of
imposition offinal measureDuty
Non-refillable pocket flint lighters
(9613.10.00.00.00)China 28/9/1994 6/5/1995 US$0.08/piece
Steel billets, rolled or obtained by
continuous casting
(7207.11.14.00.13)(7207.11.16.00.13)
(7207.20.15.00.13)
(7207.11.14.00.14)(7207.11.16.00.14)
(7207.20.15.00.14)Russia
Ukraine
Moldova9/2/1994
9/2/1994
9/2/19946/5/1995
6/5/1995
6/5/1995US$24/tonne
US$17/tonne
US$29/tonne
Note: Codes in parentheses refer to the Harmonized System.
Source: Government of Turkey.
(xiv) Safeguard actions
67. Turkey has neither initiated any investigation nor applied any measure against WTO
Members within the framework of the GATT Article XIX.  The legal authority in Turkey to take suchmeasures is provided in Council of Ministers Decree No. 95/6814 of 30 April 1995, and the
Regulation on Safeguard Measures and Surveillance for Imports of 1 June 1995.
39  Within the legal
framework, the Undersecretariat of Foreign Trade has the authority to propose, apply and monitor
surveillance and safeguard measures, as well as to determine the quantities and/or values of quotas, in
order to protect domestic industries.  The Committee for the Evaluation of Safeguard Measures andSurveillance for Imports decides whether to initia te an investigation, and to adopt, review, extend,
change or abolish any measure.
(xv) Measures implemented in exporting countries
68. Turkish companies are not party to any restrain t agreement with foreign countries to restrict
imports to Turkey, nor are the authorities aware of any arrangements on the part of other countries to
limit exports to Turkey.
(xvi) Balance-of-payments measures
69. Turkey has used restrictions for balance-of-payments reasons under Article XVIII:B of GATT
at various times since 1967.  Turkey disinvoked the Article on 1 January 1997.
(xvii)  Import privileges extended to free zones
70. There are ten free zones in Turkey, accounting for about 3% of merchandise exports in 1997.
All foreign imports into the zones benefit from ze ro duty, and exemption of corporate, income and
value-added taxes.  Details of the free zones are provided in section (3)(xii)(f).
                                                     
39 WTO document G/SG/N/1/TUR/2, 14 December 1995.Turkey WT/TPR/S/44
Page 63
(3) MEASURES DIRECTLY AFFECTING EXPORTS
(i) Registration and documentation
71. Since the previous Review, registration and do cumentation requirements have been simplified
and streamlined.  As part of the CUD with the EU , Turkey pledged to adopt EU standards on customs
provisions.  Hence, since 1 January 1996, Turkey's customs declaration has been re-aligned to the
format of EU single administrative document (SAD) , used in all customs procedures.  The fee (the
so-called printing charge) for the SAD is TL 150,000 (equivalent to less than US$1); no other costs
are involved in the documentation.
72. Prior to 1996, exporters were required to obtain an export certificate issued by the
Undersecretariat of Treasury and Foreign Trade.  The requirement was abolished in 1996.  However,
exporters are still required to register with the Exporters Association and their local Chamber ofCommerce.  A fee of 0.05% of the f.o.b. value of  exports is charged as a service commission.
73. Exports of some products are subject to registration:  (i) goods for which payments are made
to the Support and Price Stabilization Fund (SPSF) or goods subject to the premium deduction to the
SPSF
40;  (ii) exports against natural gas imported under the bilateral agreement with the Russian
Federation;  (iii) exports within the framework of special accounts regarding the repayment of theinstallations established on credit through barter;  (iv) exports of goods under restriction applicable to
the countries that are practising quantitative restrictions on Turkish exports;  (v) goods subject to
international sanctions;  (vi) goods with certificates under the Regulation on the Manufacturing of
Vegetal and Animal Products Using Ecological Me thods published in the Official Gazette No. 22145
of 18 December 1994;  (vii) certain electrical equipment listed in the communiqué No. Export 88/29;
centrifuges, motors, generators, rotary electrical converters, certain accessories and parts suitable for
use in machines, transformers, static converters, condensers, and electronic lamps, tubes, and valves;(viii) goods covered by Wassenaar Arrangement;  (ix) goods covered by Missile Technology
Controlling Regime;  (x) items included in the annexed Lists 2 and 3 of the Convention on the
Prohibition of the Development, Production, Stockpil ing and Use of Chemical Weapons and on Their
Destruction;  (xi) exports of goods covered by the Vienna Agreement regarding the Protection of
Ozone Layer as well as Protocols and Amendments pertaining to that charter, only to the countriesthat are the signatories of the arrangements in question;  (xii) chemicals used in chemical weapons
manufacture;  (xiii) certain protein materials and their derivatives;  (xiv) unprocessed olive oil,
processed bulk or barrelled olive oil, unprocessed olive in bags, sacks or boxes, liquorice root, raw
meerschaum and sample pipe;  (xv) original bowel;  and (xvi) live sheep and cattle.  This registration
is on a case by case basis at the time of eac h export transaction concerning these goods.
74. The Undersecretariat of Customs may authorize exporters to issue movement certificates,
without submitting them for endorsement to the rele vant authorities, in trade with the following
countries:  EU member countries (within the framework of the CUD, ECSC and agricultural
products), EFTA countries, Israel, Hungary, Roma nia, and Lithuania.  Such authorization can be
granted to exporters:  frequently making consignments;  offering guarantees to verify the status of thegoods to the satisfaction of the customs authorities;  not involved in any serious or repeated offences
against customs or tax legislation;  and with records that can be checked by the custom authorities.
                                                     
40 The SPSF extends concessional cred its to the agricultural sector.WT/TPR/S/44 Trade Policy Review
Page 64
(ii) Preshipment inspection and quality control
75. While Turkey does not apply preshipment inspection, quality is controlled at the export stage
to improve the quality of some exported agricultural products.  The Decree on the Regime of
Technical Regulations and Standardization in Foreign Trade empowers the Government to make
goods for export subject to quality control and inspection; specify the type of quality control and
inspection applied to such commodities; and prohibit the export of these commodities unlessaccompanied by a certificate of export issued by the Undersecretariat of Foreign Trade.  The
Undersecretariat, set up under the Decree, is responsible for the enforcement of quality control and
any necessary inspection of these commodities.
76. Currently, some 70 agricultural products (equivalent to 202 items at the HS 12-digit level) are
subject to compulsory control on export, including, inter alia , citrus fruit, apples, ground nuts, a
variety of edible oils, dried apricots, dried figs and some hazelnuts.  The coverage is about the same as
during the previous Review in 1994.
(iii) Export taxes, charges and levies
77. The number of commodities covered by export taxes has decreased since the previous Trade
Policy Review from seven to two.
41  Currently, export taxes apply to hazelnuts (in the form of
deductions payable to the Support and Price Stabilization Fund (SPSF)) at the rate of US$0.04 per kg.
for unshelled hazelnuts and US$0.08 per kg. for shelled hazelnuts.42  Exports of semi-processed
leather are subject to a tax of US$0.5 per kg. for environmental reasons, but the measure should also
be beneficial to the leather goods industries.43  No other levies and charges apply to exports.
(iv) Minimum export prices
78. Turkey no longer applies minimum export prices.  At the time of the previous Review,
Turkey applied minimum export prices to raisins.  The measure, which was in accordance with EUregulations, was in order to meet minimum import prices set by the EU.  Minimum export prices did
not apply to any other product or country.
(v) Export prohibitions
79. As of June 1998, some 14 items, by broad category, were prohibited under law for various
reasons, including environment, health or religious reason or to give effect to obligations arising fromcommitments to international conventions (Table III.14).  Seven items have been added to the list
since the previous Review in 1994:  (i) flower bulbs;  (ii) data dates;  (iii) liquidamber orientalis;
(iv) plants of grapevine, fig, hazelnut, pistachio and olive;  (v) ozone-depleting substances;
(vi) chemicals listed in Schedule I of the Chemical Weapon Convention to non-party States;  and
(vii) wood and wood charcoal.
80. Turkey maintains trade embargoes on Iraq, based on U.N. Security Council resolutions.
Exports of some equipment of the oil and gas industry to Libya are prohibited, also based on U.N.
Security Council resolutions.
                                                     
41 In 1993, the following goods were subject to export taxes:  hazelnuts, figs, liquorice root, pumice
stone, raw leather, rye (export to the EU exempted),  and untreated olive oil (e xport to the EU exempted).
42 Decree of the Council of Ministers published in the Official Gazette No. 89/10306 of 23 July 1997.
43Decree of the Council of Ministers published in the Official Gazette No. 89/13904 of 23 March 1989.Turkey WT/TPR/S/44
Page 65
Table III.14
Export prohibitions, June 1998
Description of item Invocation of
WTO ArticleDomestic law
1. Angora goats (1 item)aEnvironment
(Article XX:g)Law on the Amelioration of Animals (7.6.1926)
2. All game and wild animals (except wild pig,
wolf, jackal, fox, marten, badger, snake, turtle
and lizard) meat or alive and/or pieces and
garments thereof (Ch. 1 and 2)aEnvironment(Article XX:g)Decision of the Council of Ministers (8.3.1990)
3. Flower bulbs (1 item) Environment
(Article XX:g)Export Regime Decree (22.12.1995)
4. Tobacco seeds and seedlings (2 items)aEnvironment
(Article XX:g)Law on Tobacco and Tobacco Monopoly (9.5.1969)
5. Data dates (1 item) Environment
(Article XX:g)Export Regime Decree (22.12.1995)
6. Indian hemp (1 item)aHealth
(Article XX:b)Law on the Controls of Narcotics (24.6.1933)
7. Pterocarya carpinifolia (1 item) Environment
(Article XX:g)Export Regime Decree (22.12.1995)
8. Liquidamber orientalis (1 item) Environment
(Article XX:g)Export Regime Decree (22.12.1995)
9. Plants of grapevine, fig, hazelnut, pistachio and
olive (not available)Environment
(Article XX:g)Export Regime Decree (22.12.1995)
10. Ozone depleting substances (1 item) Health; IAb
(Article XX:b,d)Vienna Convention; Montreal Protocol on Substances
that Deplete the Ozone Layer; London Amendments to
the Montreal Protocol
11. Chemicals listed in Schedule I of the Chemical
Weapons Convention States, not party to the
Convention (4 items)IAb
(Article XX:d)Convention on the Prohibition of the Development,
Production, Stockpiling and Use of Chemical Weapons
and on Their Destruction
12. Trunk, log, lumber and wooden beams of walnut,
mulberry, cherry, pear, plum, elm, ash, linden,
and yew trees (Ch. 44)aEnvironment
(Article XX:g)Decision of the Council of Ministers (24.4.1974)
13. Wood and wood charcoal (Ch. 44) Environment
(Article XX:g)Export Regime Decree (22.12.1995)
14. Antiques and archaeological works (1 item)aNatural treasures
(Article XX:f)Law on Ancient Works of Art (21.7.1983)
a Export prohibited in 1993.
b IA:  Undertaken in pursuance of obligations under intergovernmental commodity agreements.
Note: Number of items refers to the Harmonized System classification at the four-digit level.Source: WTO Secretariat based on Government notification of 27 February 1996 and  information provided by the Government of
Turkey.
(vi) Export licensing
81. Turkey does not apply export licensing.WT/TPR/S/44 Trade Policy Review
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(vii) Export quotas
82. Turkey does not presently apply export quotas.  However, from time to time quotas have been
implemented for certain products.  In the 1995/96 season, the export of raw cotton was restricted
to 100,000 tonnes to ensure a continuous flow of high-quality, Turkish raw cotton to the domestic
textile industry, as well as to stabilize raw cotton prices.
(viii) Exports by state-economic enterprises
83. Turkey does not grant any exclusive export rights to state economic enterprises or
government agencies.
(ix) Export cartels
84. Export cartels are prohibited by Turkish law on competition (Law No. 4054 on the Protection
of Competition).  Article 4 states that agreements "which cause or may have as their object theprevention, distortion or restriction of competition in a market for goods and services are unlawful
and prohibited".
(x) Voluntary restraints, surveillance and similar measures
85. According to the Turkish authorities, outside the area of textiles and clothing, Turkey does
not participate in any arrangements designed to curb or control exports to third countries at the requestof foreign governments.  Under the WTO Agreement on Textiles and Clothing, Turkey maintains
restraint agreements on certain exports of textiles and clothing to Canada and the United States.
(xi) Measures maintained by importing countries
86. Turkey monitors measures maintained by importing countries that it believes restrict its
exports.  Areas of concern include anti-dumping and countervailing measures and quantitative
restrictions.  As noted earlier, Turkish exporters of certain textiles and clothing products are faced
with quotas on the U.S. market (currently quotas on 21 textile categories and 21 clothing categories)and the Canadian market (currently quotas on five clothing and textile categories).  Steel, polyester
fibre, unbleached grey cotton and some food products are among the products affected by anti-
dumping and countervailing actions (Table AIII.3).
(xii) Subsidies and other financial support to exporters
87. As a result of the customs union between EU and Turkey as well as Turkey's commitments
vis-à-vis  the WTO, Turkey has progressively revamped the incentives provided to exporters.  Changes
include the abolition of most direct export subsidies, streamlining of its duty-concession programmes,
elimination of corporate tax exemption, and the introduction of new export credit, guarantee and
insurance programmes.
88. The export incentive programmes have been costly, running at above 1% of GDP
(Table III.15).  The recent shift from direct paymen ts to general exemptions complicates the task of
estimating the total cost attributable to the incent ives, and the Turkish Government has not estimated
the amount of forgone revenue attributed to the exemptions.Turkey WT/TPR/S/44
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Table III.15
Fiscal cost of export incentive programmes, 1992-94
(Per cent of GDP)
1992 1993 1994
Total 1.4 1.2 1.2
  Forgone taxesa0.7 0.7 0.7
  Subsidized credits 0.5 0.3 0.2
  Direct subsidiesb0.2  0.2 0.3
a Customs duty and tax exemptions.
b Cash grants, energy and transport subsidies.
Source: World Bank (1996), Turkey - Challenges for Adjustment , Washington D.C., April.
(a) Export subsidies
89. Since the previous Trade Policy Review, Turkey has eliminated most of its explicit subsidy
programmes (Table III.16).  However, Turkey has a wide range of support measures, including duty
concessions, and export finance, insurance, guarantee, promotion and marketing assistance.
Table III.16
Export subsidy programmes eliminated since the previous Trade Policy Review
Programme Date of elimination Main feature
1. Energy incentive
programme1 January 1996
(Council of Ministers
Decree, published in
Official Gazette of31 December 1995)The aim of the programme was to compensate for high energy costs,
vis-à-vis  the average world energy cost levels.  Firms manufacturing the
final products to be exported could purchase electricity, natural gas and
liquified petroleum (LPG), consumed in the production of exported finalproducts, at discounted prices taking into account the energy prices in EU
countries.  Also, for fuel-oil, an exemption from payment of customs duty
and all fund levies collected on imports was implemented.
2. Free wheat
programmeBeginning of 1996 Companies signed contracts with the state economic enterprise, Turkish
Grain Board (TMO), committing themselves to export a  certain amount of
their product in return for a predetermined amount of durum wheat.  After
the exportation, the company provided invoices and other exportdocumentation to the TMO.  Upon examination and approval of the
documents by the TMO, free wheat was delivered to the company.
3. Transportation
subsidy1 January 1996 This subsidy was applied to exports of some agricultural products between 1
October and 31 December 1995 (Decree of the Money-Credit and
Coordination Council No. 95/13).  The programme provided US$35 per
tonne for exports to North and South America and the Far East;  andUS$25 per tonne to Europe, the Middle East, North Africa and other
destinations.
Note: The coverage of the agricultural and processed agricultural export subsidy programmes have changed in coverage since the
previous Trade Policy Review.
Source: WTO Secretariat based on WTO document G/SCM/Q2/TUR/6, 4 April 1997 and information provided by the Government of
Turkey.
90. The only remaining cash subsidies apply to a limited number of agricultural and processed
agricultural products.  Currently, such export subsides are extended to two agricultural products.  The
"rebates", which are paid in the form of cash grants, range between 10% and 20% of export values,
depending on the commodity. Export subsidies granted on 13 processed agricultural products areprovided to producers or exporters by deducting their debts to public corporations (taxes, social
insurance premium costs, energy costs and telecomm unications costs) from their subsidy entitlement
(Chapter IV(2)(ii)).WT/TPR/S/44 Trade Policy Review
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(b) Duty and tax concessions
91. Exporters benefit from a number of duty concessions on imported inputs, raw materials and
capital goods, which according to the authorities are aimed at neutralizing the duties paid on these
items.  The features of these schemes are described in section (2)(ii)(e) and summarized in Table III.4.
92. Until 31 December 1993, export income was exempted from the payment of corporate
income tax.44  The programme allowed exporters and producer-exporters to deduct a certain amount
of their export earnings from their revenue, thus allowing them to pay less corporate tax.  The
reduction, which had been progressively reduced, was 20% and limited to the following activities;
(i) revenue earned abroad and brought to Turkey from services such as repairs, and construction
facilities;  and (ii) producer-exporter companies' revenue from exports of industrial products
above US$250,000 a year.
(c) Export finance and guarantee
93. Exporters can take advantage of a large number of export credit schemes, operated by the
Export Credit Bank of Turkey (Turk Eximbank).  Through its credit and guarantee programmes, the
Turk Eximbank currently provides support for 15-20% of Turkey's total exports.  The Turk Eximbank
reformed its short-term credit programmes in early 1996 to bring them into conformity with the WTO
Agreement on Subsidies and Countervailing Measures.  As a result of this revision, the target market
credit programme and export credits extended to priority sectors were abolished.
94. After the establishment of the customs union between Turkey and the EU at the beginning
of 1996, Turkey made necessary arrangements to harmonise its legislation with that of the EU in
related fields, including officially supported export credits (Article 12 of the customs union decision).
Within this framework, the OECD Consensus principl es on officially supported export credits with a
repayment term of two or more years have also been adopted.45  These principles cover, inter alia ,
guidelines for calculating the degree of concession, as well as on repayment periods and minimum
interest rates.  Turkey has recently become a member of the Group on Export Credits and Credit
Guarantees (ECG), a subsidiary body of the OECD Trade Committee.
95. Since the previous Review in 1994, the number of export credit programmes has increased
from 12 to 14.46   Table III.17 provides the key features of the export credit programmes, such as the
eligibility, conditions and the amount of credit provided under each scheme.  The current interest rates
on short-term credits extended in Turkish Lira vary  between 55 and 75%, while the interest rates on
short-term foreign currency credits vary between LIBOR and LIBOR plus two percentage points,
depending on the repayment period; a discount of ten percentage points is applied to short-term
Turkish Lira credits.
                                                     
44 Export income tax exemption is included in the illustrative list of export subsidies (Annex I) of the
WTO Agreement on Subsidies and Countervailing Measures.
45 Export Communiqué 96/12 was published on 23 January 1996, based on the provisions set out by the
Council Decision of EU 96/112/EEC on officially supported credits.
46 New programmes are:  (i) the performance-related Turkish Lira export credit programme;  (ii) the
performance-related foreign currency export credit programme;  (iii) the short-term export credit discountprogramme;  (iv) the tourism marketing credit programme;  (v) the IDB import trade financing operations;
(vi) the overseas chain stores investment credit pr ogramme;  (vii) the specific export credit programme; and
(viii) the letter of guarantee programme for shipbuilding and exporting.  The following programmes have beenabolished:  (i) the export finance credit programme;  (ii) the revolving export finance credit programme;  (iii) thetarget market credit programme;  (iv) the letter of guarantee programme for ship-building and exporting;  (v) thespecific export credit programme;  and (vi) ex port credits extended to priority sectors.Turkey WT/TPR/S/44
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Table III.17
Key features of the export credit and guarantee programmes, June 1998
Scheme Eligibility Conditions Amount of credit
1. The Pre-Shipment
Turkish Lira Export
Credit Programme
(PSEC TL)Exporters,
manufacturer-exportersInterest rate:  determined by Turk
Eximbank in accordance with
developments in money markets andvaries according to repayment period
plus intermediation charges
a
Maturity maximum 120 days
Maximum 100% of f.o.b. export
commitments and TL 300 billion per
company1997:  US$732 million
1.a Small and Medium-
Scale Enterprises
Export Credit
ProgrammebSmall and medium-scale
manufacturer-exporters of up
to 200 employeesSame as PSEC TL 1997:  US$214 million
1.b Priority Development
Areas Export Credit
ProgrammebPriority development areas
(mainly eastern andsouth-eastern provinces)Same as PSEC TL 1997: US$39 million
2. Pre-Shipment Foreign
Currency Export Credit
ProgrammeExporters, manufacturer-
exportersInterest rate:  varies in accordance with
repayment period and is linked to
LIBOR/FIBORc
Maturity maximum 180 days
Maximum 100% of f.o.b. export
commitments
Maximum US$10 million per company1997: US$1,126 million
3. Foreign Trade
Companies Short-Term
Export Credit
ProgrammeAll companies that qualify as
Foreign Trade CorporateCompanies (FTCC) or have
been granted Sectoral Foreign
Trade Companies (SFTC)
d
status by TreasuryInterest rate:  determined by Turk
Eximbank in accordance withdevelopments in money markets and
varies according to repayment period
Maturity maximum 120 days
Maximum 100% of f.o.b. export
commitments1997: US$126 million
4. Foreign Trade
Companies Short-Term
Foreign Currency
Credit ProgrammeAll companies that qualify
for FTCC or SFTCd status by
TreasuryInterest rate:  varies in accordance with
repayment period and is linked toLIBOR/FIBOR
Maturity maximum 180 days
Maximum 100% of f.o.b. exportcommitments1997: US$415 million
5. Performance Related
Turkish Lira Export
Credit ProgrammeeExport-oriented
manufacturers, manufacturer-
exporters and exporters,
except FTCC and SFTC, thathave exported more than
US$500,000 worth of goods
in the previous yearInterest rate:  determined by Turk
Eximbank in accordance with
developments in money markets and
varies according to repayment periodMaturity maximum  120 days
Maximum 100% of f.o.b. export
commitments and TL 500 billion percompany1997:  US$85 million
6. Performance Related
Foreign Currency
Export Credit
ProgrammeeExport-oriented
manufacturers, manufacturer-
exporters and exporters,
except FTCC and SFTC, thathave exported more than
US$500,000 worth of goods
in the previous yearInterest rate:  varies in accordance with
repayment period and is linked to
LIBOR/FIBOR
Maturity maximum 180 daysMaximum 100% of f.o.b. export
commitments and US$10 million per
company1997:  US$395 million
Table III.17 (cont'd)WT/TPR/S/44 Trade Policy Review
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Scheme Eligibility Conditions Amount of credit
7. Short-Term Export
Credit Discount
ProgrammeeExporters, manufacturer-
exportersDiscount rate:  LIBOR
Maturity maximum 180 days1997:  US$12 million
8. Tourism Marketing
Credit ProgrammeeTourism companies selected
by Ministry of Tourism and
those attracting more thanUS$1 million worth of
currency to Turkey annuallyInterest rate:  75%
Maturity maximum 180 days
Maximum 40% of project cost and TLequivalent of US$500,0001997: US$15 million
9. Islamic Development
Bank (IDB) Longer-
Term Trade Financing
SchemeExports to OICf members,
min. 40% domestic contentMark-up is determined by IDB within a
margin of 5.5-6%
Maturity 12 to 60 months
Up to 100% of shipment amounts fortransactions up to ID
g 3 million
(approx. US$4.5 million) and 80% of
shipment amounts for transactionsexceeding ID 3 million1997: US$3 million
10. IDB Import Trade
Financing OperationseImports of raw materials,
semi-capital and capitalgoods that are used in the
production of export goods;
export commitment isrequiredMark-up rate is 6% for imports from
OIC members and 7% from non-membercountries
Maturity maximum 30 months for capital
goods and 25 months for other goodsMaximum 80% of c.i.f. imports1997:  US$13 million
11. Overseas Chain Stores
Investment Credit
ProgrammeeTurkish entrepreneurs'
overseas investments for theestablishment of shopping
malls and chain storesInterest rates:  determined specifically
for each projectMaturity maximum 7 years
Maximum 75% of investment amount if
local content is 50% or more, otherwise60%1997:  US$8 million
12. Specific Export Credit
ProgrammeeExporters, manufacturer-
exporters for their foreigncurrency generating projects
in Turkey or abroad at
pre-shipment stageTerms (interest rate and maturity) are
determined on project basisAverage maturity 2 years1997:  US$7 million
13. Letter of Guarantee
Programme for
Shipbuilding and
ExportingeTurkish firms involved in
shipbuilding and/or theexport of shipsMaximum maturity 2 years
The amount of letter of guarantee isdetermined by Turk Eximbank
The amount of counter guarantee is
determined on a project basis1997:  US$5 million
14. Project Credits
ProgrammeshForeigners buying Turkish
goods and services, min. 50%
domestic contentInterest rate:  depends on the countries'
relative credit risk standing and is
calculated in relation to LIBORMaturity 2 years or more
Deferred payments
Maximum 85% of the goods andservices provided from Turkey1977:  US$113 million
a Intermediation charges by commercial banks usually bring an additional four points to the interest charged, while commercial
banks are permitted to add a maximum of three points to the interest rates determined by Turk Eximbank.
b These programmes are sub-programmes of PSCEC TL.  A minimum of 30% of the general limit that is allocated to commercial
banks has to be extended to small- and medium-scale enterprises, while intermediary banks are required to extend between 5 and
25% of their general limit to credit demands for firms in priority development areas.
c Commercial banks are permitted to add a maximum of 0.75 points to the interest rates determined by Turk Eximbank.d Foreign trade companies established by export-oriented manufacturing firms in the same sector.
e Programme introduced after 1993.
f OIC = Organization of Islamic Conference.g ID = Islamic Dinar.
h Buyers Credit and Guarantee Programme was renamed Project Credits Programme;  mostly project financing is provided under
this programme.
Note: Export credit insurance has been voluntary since 17 February 1997.  However, if beneficiaries of the Pre-Shipment Export C redit
Programmes, Foreign Trade Companies Export Credit Programmes and Performance Related Export Credit Programmes are also
short-term export credit insurance policy holders, they receive discount on interest rates (4 points discount on TL credits and0.5 point discount on foreign currency credits).
Source: Government of Turkey.Turkey WT/TPR/S/44
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96. The Turk Eximbank has taken an active role in short-term credit activities.  The bank makes
an effort to ensure credits are available to small and medium-scale enterprises, which may experience
difficulties getting credits from commercial banks because of a lack of adequate collateral, among
other factors.  Credits are allocated through the Turkish commercial banks or directly by the Turk
Eximbank.  If they are allocated through commercial banks, the banks are responsible for the default
risk of the borrowers.  If the credit is allocated di rectly by the Turk Eximbank to the customer, then
collateral and/or a bank guarantee is required.
97. The Turk Eximbank has in recent years shown substantial negative net operating cash flows
associated with its large export credit and guarantee programmes with repayment periods of more
than one year (Chart III.5).  In 1993, the negative net operating cash flow was US$229 million, but
by 1997 this had fallen to US$27 million.  According to the authorities, the premiums are adequate to
cover the long-term operating costs and losses of the programmes.
-250-200-150-100-50050
1993 1994 1995 1996Net-operating cash flow generated by export insurance operations in 1993 was US$-0.24 million.
Export Credit Bank of Turkey.Generated by credits of maturity over one year
Generated by export insurance operations
(excludin g administration costs )US$ millionChart III.5
Net-operating cash flows of the Export Credit Bank of Turkey, 1993-96
Note:
Source : 
(d) Export insurance
98. As in 1993, the Turk Eximbank offers a variety of insurance policies for Turkish exporters,
investors and overseas contractors against commercial and political risks.  Three of the seven current
schemes have been introduced since the previous Review (Table III.18).  The insurance programmes
of the Eximbank are, according to the authorities, not concessional;  however, net operating cash
flows generated by export insurance operations have been negative in recent years (Chart III.5).  Forthe export guarantee covering political and commercial risk insurance, the exporter is charged an
amount of premium according to the risk classifica tion of the buyer's country, payment terms and theWT/TPR/S/44 Trade Policy Review
Page 72
type of buyer (sovereign or private).  Only political risk is under the guarantee of the State; the losses
due to commercial risk are indemnified by the Eximbank from its own resources.  The Eximbank has
entered into re-insurance arrangements to reduce its exposure.47
Table III.18
Key features of the export insurance programmes, April 1998
Programme Coverage
1. Short-Term Export
Credit InsuranceUp to 90% of losses incurred as a result of commercial and political risks on shipments made by an
exporter within one year, with payments deferred up to 360 days
2. Specific Export Credit
InsuranceGenerally up to 90% of 85% of the contract value against commercial and political risks on the exportof capital and semi-capital goods with at least 60% domestic content for up to five years; both pre-and post-shipment coverage
3. Overseas Contractors'
Services InsuranceUp to 90% of 85% of the Turkish portion of the contract value against commercial and political risks
4. Overseas Investment
InsuranceUp to 90% of losses against political risks of new direct investments by Turkish firms in overseas
enterprises
5. Post-Shipment Export
Credit ProgrammeaPolitical and commercial risks in the post-shipment stage; discount the export receivables related to
shipments covered under programme no. 1
6. Post-shipment Political
Risk Insurance aUp to 90% of losses incurred as a result of political risks in the post-shipment stage for receipts fromexports of capital and semi-capital goods with at least 60% domestic content and with credit terms upto five-year maturity
7. Specific Export Credit
Insurance
Comprehensive Post-
Shipment Risk PolicyaPolitical and commercial risks of medium- and long-term exports of capital and semi-capital goods
a Programme introduced since 1993.
Source: WTO Secretariat based on information provided by the Government of Turkey;  and WTO document G/SCM/N/3/TPR,
3 August 1995.
(e) Export promotion and marketing assistance
99. Attached to the Undersecretariat of Foreign Trade, the Export Promotion Centre (IGEME) is
the main public organization in the field of export promotion.  IGEME acts as an intermediary inestablishing business contacts between foreign importers and Turkish exporters.  Its activities can be
grouped into four main categories:  research and development training (training programmes,
seminars and workshops);  trade information (computerized trade information system, and library);
publicity and promotion (international trade fairs, and other promotional activities related to foreign
markets);  and project management and international relations.  In 1997, the budget allocation forIGEME was TL 384 billion, equivalent to some US$1.9 million (or 0.005% of consolidated
government expenditure), compared with TL 34 billion in 1993.  The main single expenditure item
in 1997 was personnel (63% of expenditure), followed by fairs (23%).
100. In parallel to IGEMEs activities, the Undersecretariat of Foreign Trade has carried out,
since 1995, the Trade Missions and Buyers programmes.  The market and sectoral coverage of the
programmes are determined by considering Turkey's production and export related capacity, potential
markets and trade possibilities.  Until now, trade missions have been undertaken to 18 differentcountries, while nine buyer missions programmes have been organized in Turkey.  The annual
average budget is about US$0.6 million.
                                                     
47 Ministry of Foreign Affair's web site (www.mfa.gov.tr/GRUPC/for1.htm).Turkey WT/TPR/S/44
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(f) Free zones
101. With the objective of promoting export-oriented investment and production, the Government
of Turkey has established ten free zones.  The enterprises established in the zones are active in a wide
range of areas, including high-technology investments, leather products, and storage facilities.48  A
new initiative is the Istanbul Stock Exchange International Securities Market Free Zone, which
commenced operation in the first half of 1997.  Its main objective is to create an international financecentre operating in the field of stock purchases/sales, stock barter, maintenance and other transactions
within the body of the Istanbul Stock Exchange.
102. The Free Zones Law No. 3218 of 15 June 1985, and the Turkish Free Zones regulation
of 1993 set out the framework for operations and practices in the zones.  They are designed to
promote foreign direct investment and joint ventures in export-oriented enterprises, provide easyaccess to stocks of importable raw materials and equipment on favourable terms, increase
employment, and promote international finance and banking by permitting offshore banking
development.  Free-trade zones also aim at re gional development and employment creation.  The
validity period of an operating licence is a maximum of ten years for tenant users, and 20 years for
users who wish to make their own offices in the zone; if the operating licence period is for production,the terms are 15 and 30 years for tenant users and investors, respectively.  The licence period can be
prolonged to 99 years for certain types of investment.  Strikes and lock-outs are prohibited for a
period of ten years from the beginning of operation of each zone.  In contrast to most free-trade zones
in the world, sales into the domestic market, subject to the foreign trade regime (including the duty),
and barter trade is allowed.
49
103. A wide range of financial benefits are extended to the free zones.  These include,  inter alia ,
exemption from the payment of customs duties and fees;  exemption from corporate, income and
value-added taxes;  no restrictions on profit transfer;  and convertible currencies for exchange
transactions.  The foundation and operation of the free-trade zones are generally undertaken through a
mix of government and private partnership (often realized within the framework of "build, operate
and transfer" schemes).  Investors are also free to construct their own premises, while zones have
office spaces, workshops, or warehouses available for rental on attractive terms.  Goods may bestored, assembled, repaired, tested, or repackaged for export in the free zones.  Budgeted government
expenditure in 1998 for the free zones is TL1 trillion.  Data are not available on the amount of forgone
revenue attributable to these fiscal benefits.
104. Turkey's free zones mainly consist of domestic companies; in March 1998, only 312 out
of 1,740 free-zone companies in operation were foreign.  Another distinctive feature of the zones is
their low level of exports and highly developed links to the domestic market; combined exports by
companies established in the free-trade zones were US$0.8 billion in 1997, equivalent to 3% of
merchandise exports, while "exports" from the free zones to Turkey were as high as US$2 billion.
                                                     
48 Those in operation include Aegean, Antalya, Erzurum Eastern Anatolia, Istanbul Ataturk Airport,
Istanbul International Stock Exchange, Istanbul Leather, Mardin, Menemen Leather, Mersin, and Trabzon.
49 Sales to the domestic market are subject to a fee of 0.5% of the transaction value.WT/TPR/S/44 Trade Policy Review
Page 74
(4) OTHER MEASURES AFFECTING PRODUCTION AND TRADE
(i) Competition policy and related issues
(a) Competition laws and regulations
105. As part of the CUD with the EU, Turkey pledged to adopt EU standards concerning
competition.  The country's first competition (anti-trust) law (Law No. 4054 on the Protection of
Competition) was passed in 1994.50  An independent Competition Authority, responsible for the
implementation and the enforcement of the prohib itions set out in the law, started operating in
October 1997.51
106. The key features of the competition law, which covers both goods and services, are presented
in Table III.19.  All articles covering the significant provisions are based on EU competition law:
(i) agreements, decision and concerted practices in restraint of competition (Article 4);  (ii) abuse ofdominant position (Article 6);  and (iii) mergers and acquisitions (Article 7/1).  Without regard to the
place of operation, if the agreement, decision, concerted practice, abuse of dominance, merger or
acquisition impair the market within the territory of Turkey, they fall within the scope of the law.
Thus, agreements between Turkish and foreign companies or even between foreign companies may
fall within the scope of the law if they affect market conditions in Turkey, even when the agreementsare made outside Turkey, as is the case in the EU.
107. As noted above, the Competition Authority began its duties in October 1997.  The Board,
consisting of 11 members including the Director and the Vice-Director, has been granted substantial
powers in relation to the investigation and imposition of penalties against prohibited practices.  It may
also grant negative clearance (Article 8), which confirms that the behaviour concerned is not
considered to be contrary to the competition rules.  It may request information (Article 13), open
investigations (Article 15) and impose penalties (Article 16, 17, 18, and 19).  As part of thecompetition legislation, the Competition Board ha s published certain communiqués, including on the
categories of mergers and acquisitions which, to be considered as legally valid, require prior
notification to the Board (Notification No. 97/1).
108. All sectors are treated equally under the law.  However, Article 5 empowers the Board to
issue notifications granting block exemptions for a period of up to five years for certain categories ofagreements.
52   So far, notifications by the Board have been issued concerning, inter alia , group
exemptions for exclusive distribution agreements  (Communiqué No. 97/3, which is similar to EEC
Regulation No. 83/84), for exclusive purchasing ag reements (Communiqué No. 97/4, which is similar
to EEC Regulation No. 84/83) and for motor vehicle distribution and services agreements
(Communiqué No. 98/3, which is similar to EEC Regulation No. 95/1475).  Neither of the group
exemptions, for exclusive purchasing or distribution, is applied on a sectoral basis.
                                                     
50 Prior to November 1994, competition was regulated by the 1982 Constitution (as amended from time
to time);  Article 167 states that "The State shall take measures to ensure the sound and orderly functioning ofthe money, credit, capital, goods and services markets; and shall prevent the formation, in practices or byagreement, of monopolies and cartels in the market."
51 The Competition Board, the decision organ of the Competition Authority, was constituted by a
Decree of Council of Ministers published in Official Gazette No. 22918 of 27 February 1997.
52 Article 4 (outlining certain prohibited practices) can be declared inapplicable if an activity
(a) contributes to the improvement of production or distribution of goods, and provides services or promotestechnical or economic progress;  (b) allows consumers a fair share of the resulting benefit;  (c) does noteliminate competition in a substantial part of the relevant market;  and (d) induces a restraint on competition thatis more than necessary for the attainment of the objectives referred to in (a) and (b) above.Turkey WT/TPR/S/44
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Table III.19
Substantial provisions of Turkey's competition law
Prohibition Examples of prohibitions
Agreements, Decisions and
Concerted Practices in
Restraint of Competition(Art. 4 = Art. 85/1 of EEC
Treaty)-Fixing the purchase or selling price or factors such as cost or profit
-Sharing the markets for goods and services or the sources and elements of the market
-Controlling the quantities of supply and demand or determining these figures outside the marketconditions
-Eliminating or preventing new competitors or impeding their activities
-Applying dissimilar conditions to equivalent transactions with other trading parties
-Making the conclusion of contracts subject to the acceptance of unreasonable conditions
Abuse of Dominant Position
(Art. 6 = Art. 86 of EEC Treaty)-Preventing new competitors or impeding the activities of already existing competitors
-Applying dissimilar conditions to equivalent transactions (thereby creating direct or indirect
discrimination)
-Making the conclusion of contracts subject to the acceptance of some (unjust) conditions
-Using the financial, technological and commercial advantages of a dominant position in a marketfor goods and services to detriment of a competition in another market
-Restricting production, marketing or technical development which would cause a disadvantageousposition for consumers
Mergers and Acquisitions
(Art. 7/1 and Communiqué
No.1/97 = EEC RegNo. 4064/89)-  Creating or strengthening the dominant position as a result of which competition would be
   significantly impeded
-  Operations that would be assu med as "mergers and acquisitions":
-     mergers of two independent undertakings
-     acquisitions by one or more persons or undertakings, already controlling at least one
     undertaking
-     concentrative joint ventures
Thresholds for "mergers and acquisitions":
-     if the entire market share of the merging undertakings in relevant market exceed 25% or the
     entire turnover of the merging undertakings exceeds TL 25,000 billion (equivalent to
     US$125 million)
Source: WTO Secretariat based on information provided by the Competition Authority.
109. Although the experience so far appears encouragin g, it is too early to evaluate the Board's
performance.  Actions against restrictive business practices have just started.
Between 5 November 1997 and 31 December 1997, there were 58 applications in total, 50 of which
concerned the infringement of competition rules, and the rest were notifications on mergers and
acquisitions.  Of the 50 infringement applications, the initial examination has been completed on 16
cases, the investigation has started on three cases, one is still under the preliminary investigationprocess and the rest are under the initial examination process.  Five of the examined notifications on
mergers and acquisitions (according to Article 7 and the related Notification No. 97/1) have been
given permission while three are still in the examination process.
(b) Changes in sectoral concentration
110. Available data indicate that concentration in the Turkish manufacturing industry is relatively
high by international standards.
53  Many important industries (food manufacturing; printing,
publishing and allied industries; manufacturing of industrial chemicals; and manufacturing of
transport equipment) show a high and increasing degree of concentration (Chart III.6).  In addition to
the fairly high levels of concentration, ownership of assets across product groups is concentrated
through the predominance of a few large industrial holding companies and associated banks.54
However, concentration has declined over time in several sectors.  This decline in concentration maybe attributable to an increase in competition in several sectors as well as the overall reformprogramme initiated in the early 1980s.  Privatization (section (c) below), some abolition of public
monopolies, the liberalization of the foreign direct investment regime, as well as the stiffening of
competition via trade liberalization may have encouraged new entrants.
                                                     
53 UNIDO (1995).
54 UNIDO (1995).WT/TPR/S/44 Trade Policy Review
Page 76
46.426.743.516.120.656.957.573.398.922.458.363.27.715.1
34.427.839.215.239.017.661.057.972.0100.023.035.037.337.914.77.670.247.722.912.2
6.319.7
32.8
63.4
21.7
31.7
0 2 04 06 08 0 1 0 0 1 2 0Chart III.6
Concentration in industry, 1985 and 1994
Share of the four largest firms in total output
Manufacture of food products n.e.i.
Beverages industries
Tobacco manufactures
Manufacture of textile
Manufacture of wearing apparel, except footwear
Manufacture of paper, paper products
Printing, publishing and allied industries
Manufacture of industrial chemicals 
Manufacture of other chemical products
Petroleum refineries
Manufacture of rubber products
Manufacture of pottery, china and earthenware 
Manufacture of glass and glass productsFood manufacturingPer cent 
Manufacture of  other non-metallic mineral products
Iron and steel basic industries
Manufacture of fabricated metal products 
Manufacture of machinery 
Manufacture of electrical machinery
Manufacture of transport equipment
Source : WTO Secretariat based on data supplied by the State Institute of Statistics. Note:    Private sector data for 1985 include firms where 25 or more persons are engaged 
              and data for 1994 include firms of 10 or more.Share o f 
manufacturin g
value added (1994 ) 
1985 
19944.86.05.02.01.94.312.52.2
1.7
4.51.51.92.61.58.4
6.15.011.4
8.1
2.9Turkey WT/TPR/S/44
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(c) Privatization - reforming public sector enterprises
111. State economic enterprises (SEEs) have played a significant role in Turkey's economy since
the early 1930s.  Initially, the SEEs performed well but, over time political interference in their
operations, as well as policy and institutional weaknesses, led to large losses, contributing to the fiscal
deficit, thereby causing high inflation and overall macroeconomic instability.  However, since 1995, a
number of SEEs have started to turn a profit as a result of personnel reductions, greater flexibility toadjust prices to market conditions, and the overall improvement in the financial situation (Chapter I).
55
The main SEEs that still run losses are TCDD (railways), TTK (hard coal) and TDCI (iron and steal);together these three SEEs accounted for 75% of the budgetary transfers to SEEs in 1996.
112. Building on international experience - which show s that privatization, in addition to reducing
or eliminating transfers from the Government, often increases efficiency in the delivery of theseessential services and hence encourages growth - the Government made privatization an important
component of its reform programme in the mid-1980s.
56  However, until recently, privatization has
been slow, with the courts often overturning projects, and the main progress so far has been with sales
of small and medium-sized firms.57
113. By sector, the SEEs are concentrated in manufacturing, accounting for almost half of the
SEEs total output, and in the communication and transport sector, where they account for 28% (1996)
(Table III.20).  Data on the SEEs' share of value added in the manufacturing sector (at the ISIC-three
digit level) are presented in Chapter IV section (4).
Table III.20
Composition of state economic enterprises by sector, as a share of their total production, 1985-96
(Per cent)
Sectors 1985 1989 1990 1991 1992 1993 1994 1995 1996
Agriculture 0.5 0.6 0.7 0.7 0.5 0.6 0.5 0.7 0.8
Mining 16.5 11.3 11.8 9.8 6.0 9.1 10.0 7.5 5.8
Manufacturing 35.9 35.4 33.3 30.8 27.1 26.0 28.8 38.3 48.2
Energy 15.8 13.2 14.2 4.4 11.3 16.5 17.5 18.9 14.2
Communication and
transport24.9 34.1 33.3 37.3 39.2 41.5 34.7 31.5 28.3
Commerce 6.4 5.4 6.7 17.0 15.8 6.2 8.5 3.1 2.7
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Source: Government of Turkey (data 1991-1996);  and Aktan (1996), Public Enterprises in Turkey, Annals of Public and Cooperative
Economics 67:1, Table 2.
114. There are currently 211 fully- or majority-owned SEEs (Table III.21), dominated by a few
large enterprises.  The main SEEs, employing 85% of SEEs labour force, are in the Treasuryportfolio, reporting to "line" ministries (i.e. ministries with substantive responsibilities in their
                                                     
55 Annual average borrowing requirement of 2.5% of GNP between 1984-1988, rising to 4.1% of
GNP 1991-1992, and 2.8% of GNP in 1994 (World Bank, 1996).  However, the borrowing requirement
decreased to 0.08% in 1996 (information supplied by the Government of Turkey).
56 Lessons of privatization experiences can be found in Kikeri et al (1992) and Nellis (1994).  Reports
on various country experiences can be found at the World Bank's web-site (www.worldbank.org).
57 Total gross privatization revenues by the beginning of May 1998 amounted to only US$3.8 billion.WT/TPR/S/44 Trade Policy Review
Page 78
respective areas) and the Undersecretariat of the Treasury, and operating under Decree Law No. 233.
This law regulates the structure of the management of the boards, investment and financing
programmes, and the acquisition and sale of a company, affiliated partnership or joint venture.58  As
noted by Aktan (1996), weaknesses in Decree Law No. 233 include:  (i) the fact that the SEEs are not
subject to the Commercial Code, and, therefore, to the bankruptcy law, and standard reporting and
auditing rules are not applicable;  (ii) the law limits effective performance monitoring andmanagement autonomy (supervision of management is partially delegated to management itself, and
political interference is allowed in appointment of management);  and (iii) management autonomy in
areas such as pricing, employment and investment decisions is restricted by formal or sometimes
informal arrangements.
Table III.21
Turkey's state economic enterprises, June 1998
SEEs Companies Affiliated Partnerships
Treasury Portfolio 26 87 54
State Enterprises 20 81 50
Public Economic Institutions 6 6 4
Privatization Portfolio 10 11 23
Total 36 98 77
Note: In the context of this table:  an SEE is fully owned by the Government and acts as a parent-holding of a group of "compani es",
which it fully owns, and of "affiliated partnerships" in which it owns a majority share.
Source: Government of Turkey.
115. The remainder of the SEEs are under the control of the Privatization Administration, set up by
a new privatization law (No. 4046) in November 1994.  This body is responsible for implementation,
and acts as an owner of enterprises in its portfolio.  The privatization law also established the
Privatization High Council, chaired by the Prime Minister, as the ultimate decision-making body.
116. The enterprises slated for privatization cover a variety of sectors including
telecommunications, power, textiles, petrochemicals, oil and refining, agro-industry, shipping andshipbuilding, maritime, airlines, tourism, iron and steel, pulp and paper industry, insurance, mining
and banking.  The 1998 privatization programme targets gross sales of US$12 billion, including
US$7.6 billion earmarked for the Budget.  It includes cellular phone licences and some large
enterprises, notably Türk Telekom (TTAS), ISBANK, TUPRAS (three oil refineries), POAS
(petroleum marketing and distribution), PETKIM (p etrochemicals), ISDEMIR (iron and steel) and a
number of projects in the energy sector.  The privatization of TTAS - the jewel in the Government's
privatization programme  - has been slow.  The Government had expected to receive substantial
revenues in 1997 but these never materialized; in early 1997, an advisory agreement was signed with
Goldman Sachs for the initial sale of the TTAS, with 10% of the shares (possibly worth
US$3.3 billion) to be sold in the first tranche.  Ul timately 49% of equity in the company will be sold,
of which 34% will be offered on the domestic and international markets, 10% will go to the country's
postal services, and 5% will be served for TTAS employees and for other small investors.  The recent
approval of a pricing system of ex-refinery oil products reflecting market conditions will facilitate the
delayed privatization of TUPRAS and POAS.
117. The Ministry of Energy and Natural Resources has been made responsible for involving the
private sector in meeting Turkey's energy requirements.   This involves the transfer of operating rights
                                                     
58 World Bank (1996).Turkey WT/TPR/S/44
Page 79
for 25 regions of power distribution network.  Several tenders have been announced, attracting a large
number of bids from domestic and international investors.
(ii) Investment incentives - state aid
(a) Overview
118. Since Turkey's previous Review in 1994, a switch in policies regarding the general
investment aid programme has taken place.59  Sectoral targeting has been replaced by a regional
priority system, providing enhanced incentives to the less-developed regions of Turkey.  The duty-
exemption scheme has been simplified, reducing the number of concessional rates from four to one,
providing complete exemption.  The concessional cr edit component has been eliminated, except that
credits at concessional rates continue to be provided through a new sub-programme to small and
medium-sized enterprises.  Although some of the recent reforms have been implemented with a viewto bringing Turkey's investment incentives in line  with the requirements of EU policy on investment
incentives, Turkey and the EU are yet to decide on the exact legal requirements stemming from the
customs union decision.
60
119. Notwithstanding the recent reforms, Turkey's state-aid system of tariff duty and tax
exemptions and concessional credit continues to be complex, non-transparent and generous.  The levelof incentives depends on a variety of factors:  the project's location and size, the use of debt-financing,
the source of machinery (domestic versus imported) and the expected inflation rate over the lifetime
of the project;  these factors make it very difficult for an investor to quantify a priori  the value of the
benefits.
61  According to the World Bank, the incentives have largely failed to achieve their objectives
of stimulating and re-orienting investment; some create a bias toward capital-intensive production,
running counter to employment objectives and labour-intensive production.62  While it is difficult to
estimate, the total cost of the general investment aid programme appears to have been substantial(Table III.22).  The authorities have made an estimate of some US$800 million in taxes forgone under
the whole incentive programme.
                                                     
59 It should be noted that several incentive schemes run in parallel to the general investment aid
programme.  These include assistance provided to exporters (such as duty concessions, export finance,insurance, guarantee, promotion and marketing assistance)  (section (3)(xii)), the agricultural sector (including
support purchases, input subsidy payment on fertilizers, and livestock incentive payments), the energy sector
(such as subsidies for the production of hard coal), maritime (tax incentives), and tourism (including, amongother things, corporate income tax exemption) (see Chapter IV).
60 The CUD (Article 34) notes that any aid through state resources, which distorts or threatens
competition by favouring certain undertakings or the production of certain goods, to the extent it affects tradebetween the Community and Turkey, is incompatible with the function of the customs union.  Aid to promote
economic development of Turkey's less developed regions, provided that such aid does not adversely affect
trading conditions between EU and Turkey, will be allowed until 1 January 2001.
61 Arslan (1997).
62 World Bank (1996).  Turkkan (1993) shows that the Government's use of tax incentives has been
inefficient and a relatively expensive way of promoting economic activities.WT/TPR/S/44 Trade Policy Review
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Table III.22
Fiscal cost of general investment aid programme, 1990-94
(Per cent of GDP)
1990 1991 1992 1993 1994
Tax incentives
Customs duty exemptions
Investment allowance
Financial tax exemptionFinance Fund1.1
0.7
0.2
0.10.10.9
0.6
0.2
0.10.00.9
0.5
0.2
0.10.10.8
0.5
0.2
0.00.10.9
0.5
0.3
0.00.1
Fund-based credit 0.0 0.0 0.0 0.1 0.1
Direct subsidya0.2 0.3 0.2 0.1 0.0
Total 1.3 1.2 1.1 1.0 1.1
a Includes cash grants and incentive premium.
Source: Arslan, I. (1997), "Investment Incentives in Turkey", Table 4 in Turkey and Central and Eastern European Countries in
Transition: Comparative Study with a View to Future Membership of EU, eds. S. Togan and V. N. Bulasubramanyan, Macmillan
Press Ltd. (forthcoming).
120. The incentives provided under the general investment aid programme are listed below63:
- complete exemption from customs duties and other surcharges for imported
machinery and investment part of the investment project;  reduced duty on certain
imports;
- exemptions from stamp duties and certain other financial charges;
- tax credits (so-called Investment Allowance) allowing a certain percentage of the
initial investment to be deducted from the tax base;
- corporate tax postponement (so-called Financing Fund);
- postponement of value-added tax (VAT) on imported investment goods; and
- VAT refunds from domestically produced capital goods and equipment.
121. The Government has also approved a number of other measures, such as exemption from
building and construction charges, moving subsidies, land allocation, contribution towards the cost ofa foreign letter of credit, expenses covered for quality and standardization certificates, and subsidized
credits.  These are yet to be implemented.
122. To qualify for the general investment aid programme, potential investors have to apply for an
investment incentive certificate, which is non-transferable.  Any investment project, whether foreign
or domestic, receives the same treatment.
64   Prior to 1993, incentive certificates were issued on
sectoral criteria, but incentives have since been mainly region- rather than sector-specific.  Incentives
undertaken in less developed regions receive a higher income or corporate tax exemption (at the rate
                                                     
63 Decree No. 94/6411 Concerning State Aids for In vestments of 26 December 1994, as amended, and
the Related Communiqué published in the Official Gazette on 4 April 1995.
64 However, the administration differs: foreign investment applications are handled by the General
Directorate of Foreign Investment, while domestic invest or applications are handled by the General Director of
Incentive and Implementation.Turkey WT/TPR/S/44
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of 100% compared with the normal 30%), a higher incentive premium (ten percentage points) on
domestically sourced goods, and lower proportions of output must be exported to qualify for
exemption from stamp duties and certain other financial charges.  The required minimum amount of
investment for eligibility is TL 30 billion;  the minimum required investment for R&D and
environment as well as investment by financial leasing companies is half of the normal requirement.
In addition to the geographical location, priority is given to infrastructure, services, tourism, yacht andshipbuilding sectors.  Where the investment is not realized as foreseen by the incentive, the funds are
returned with interest.
123. Chart III.7 shows the breakdown of investment in centive certificates issued in 1996.  It can be
noted that the poorest ("priority") regions (mainly located in East Anatolia, Central Anatolia and
South-East Anatolia)  received in value terms almost one-quarter of the certificates.  By sector, the
value of certificates issued for manufacturing projects declined from 70% in 1993 to 63% in 1997.
Services, on the other hand, increased their share from 21% to 28%.  Data on investment realized with
these certificates are not available.
By regionPer cent
Source :  State Planning Organization (1998), Main Economic Indicators , January.Chart III.7
Breakdown of investment incentive certificates, 1997
Black Sea
3.8
Mediterranean
12.9
Multi-regional  
Total:  TL 3 ,303 trillionMarmara
44.0
Central Anatolia
13.6Tourism
4.7Chemicals  6.5
Other 
manufacturing
24.4Mining
1.7
Energy  7.0
Other services
10.4
Transportation
12.5By sector
Aegean
14.7South-East
Anatolia
7.1
East Anatolia  1.9Textile & clothing
22.8
Transport 
 vehicles
    5.5   
Cement  3.8 Agriculture   0.8
Services
27.6    Manu-
facturing
63.0
(b) Credit policies
124. As noted above, in mid-1994 Turkey discontinued the concessional credit programme within
the framework of the general investment aid programme.  However, under a new programme, smalland medium-sized enterprises continue to receive credits at concessional rates:  the interest rate
is 20% (priority regions) or 30% (other regions) with no payment in the first year;  the non-subsidized
interest rate on one year Treasury paper is in the order of 110% (May 1997).
65  Applications for
incentive certificates are submitted to the Undersecretariat of the Treasury through the public bank,
                                                     
65 Decree No. 96/8615 Concerning State Aid fo r the Investment of Small and Medium-Sized
Enterprises and Written Notice No. 96/3 Related to State Aid for Small and Medium-Sized EnterpriseInvestments.WT/TPR/S/44 Trade Policy Review
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Turkish Halk Bankasi.  To benefit from the programme, an investor should be engaged in the
manufacturing industry, provide employment for a maximum of 150 workers, and have total net
assets of up to TL 50 billion.66
(c) Customs duty concession
125. Under the general investment aid programme, projects that introduce advanced and
appropriate technology and meet the minimum economical capacities, as determined by theUndersecretariat of Treasury, are exempt from the payment of customs duty on all machinery and
equipment covered by the investment project (section 2(i)(e).
67  As noted above, there are also
customs duty exemptions for imports of investment goods, start-up raw materials, intermediary goods
and the operating material part of the investment project.
(d) Tax concessions
126. As mentioned earlier, a number of tax concession programmes are provided to investors
holding investment certificates.  First, subject to certain export obligations, exemptions from stamp
duties  (pursuant to Law No. 448) and certain financial charges (such as charges for banking, notary,
land registry, L/C proceedings etc. pursuant to Law No. 492)  are provided.  As a condition,
US$100,000 worth of exports for investments undertaken in priority development regions,US$200,000 for normal regions and US$300,000 for developed regions, have to be fulfilled over five
years.
127. Second, the investment allowance programme grants tax exemption to income or corporate
tax payers.  The allowances, which were reduced in mid-1994 to 70% for under-developed regions
and 20% for developed regions, were increased to their original levels of 100% and 30%,
respectively, in mid-1995 to encourage investment, especially in under-developed regions.
68
Investments in the field of research and development are 100% tax deductible.
128. Third, under the Financing Fund scheme, upon presentation of an incentive certificate,
eligible investors may block up to 25% of their declared profits at the Central Bank where it earns
interest at the rate paid on government bonds.69  The amount set aside cannot exceed the total cost of
the investment.  Corporate tax is paid on the remain ing portion of the company's profit.  The deposited
amount (with no adjustment for inflation) is added to the company's tax base in the following year.70
129. Fourth, a scheme entitled Postponement of VAT on Imported Goods, was introduced in 1994.
VAT on imports of investment goods, as indicated by the incentive certificates, is postponed until the
importers' VAT payable account is equal to deferred amounts.  At that time, the nominal value of
VAT on imports is payable.  Hence, investors end up paying almost no VAT as a result of the erosion
of its value by inflation.
130. Finally, in order to create levels of treatment equal to the investment aid measure towards
imported machinery, domestically sourced investment goods may also be exempted from payment of
                                                     
66 The amount increases at the beginning of each year according to the Decree of the Tax Procedure
Law No. 213.
67 WTO document G/SCM/Q2/TUR/2, 4 April 1997. The goods eligible for customs exemption are
listed in the Custom Entrance Tariff Scheduled published as an annex to Law No. 474 of 14 May 1964 and
rearranged with Law No. 3502 of 10 November 1988.
68 IMF (1996), p. 4.
69 Law No. 2362.
70 WTO document G/SCM/Q2/TUR/6, 4 April 1997.Turkey WT/TPR/S/44
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VAT.  Under the programme, VAT Support for Purchases of Machinery and Equipment, an amount,
determined by adding ten percentage points to the pre-paid VAT on new machinery and equipment
manufactured locally, is paid to the investors from Encouragement Fund resources;  the additional ten
percentage points is to compensate for the high inflation.71  Investment to be made in the priority
regions benefit from an extra ten percentage points of the VAT on domestically obtained machinery
and equipment.
(e) Other support
131. The Government maintains additional support to small and medium-sized enterprises.  First,
KOSGEB was established in 1990 as a non-profit organization with the objective of upgrading the
effectiveness and expanding the small and medium-scale enterprises' share of total production.  At an
annual cost of some US$12 million (1997), it provides services related to production, marketingquality control, machinery and equipment support, technology development, training and information
supply;  it also prepares and executes projects.  The KOSGEB is responsible for two recently
approved schemes, within the framework of state incentives for exports.  The employment-creation
aid programme will support part of the cost of the salary of applicants with university degrees in
special fields (70 % of the salary with an upper limit of five times the gross minimum salary, andduration of maximum six months).  The training aid scheme will support part of the cost of training
(half of the training expenditure, duration of maximum one year, and any one enterprise can benefit a
maximum three times from the programme) in various fields extending from packaging, and standards
for products and environment, to leadership and organizational management.
132. Second, the government-financed (US$275 millio n in 1997) organized industrial zones date
back to early 1960s.  These zones, which offer subsidized industrial plots, constructed infrastructure,
and transportation and communication facilities, also provide subsidized credits (nominal interest rateranging from 25% to 50% depending on the degree of development of the area) towards the cost of
infrastructure investments.  The enterprises established in the zones, of which there were 41 at the end
of 1997, are of medium size.
133. Finally, the small-scale industrial estates scheme provides aid (budgetary outlays of
US$27.9 million in 1997) towards the construction of modern workshops with sanitary conditions; bythe end of 1996, 291 estates had been completed.
(iii) Standards and other technical regulations
134. Technical regulations in Turkey cover health, safety, environment and consumer protection.
As part of the Single Undertaking of the Uruguay Round, Turkey became bound by the WTO
Agreement on Technical Barriers to Trade (TBT) and the Agreement on the Application of Sanitaryand Phytosanitary Measures (SPS).  The Undersecretariat of Foreign Trade is responsible for the
implementation and the administration, except for standards, of the TBT Agreement.  The national
enquiry point foreseen in Articles 10.1 and 10.3 of the TBT Agreement is the Turkish Standards
Institute (TSE).  The obligation of relevant national authorities to meet the requirements on
notification procedures under the TBT Agreement is incorporated into the regulation published in theOfficial Gazette No. 22965 dated 15 April 1997.  On 6 March 1996, Turkey notified the WTO
Secretariat of its acceptance of the Code of Good Practice for the preparation, adoption and
                                                     
71 The VAT Support for Purchases of Machinery and Equipment replaced two schemes:  "Incentive
Premium on Domestically Produced Goods" and "Rebate of VAT on Domestically Sourced Machinery andEquipment".WT/TPR/S/44 Trade Policy Review
Page 84
application of standards. The national enquiry point foreseen in paragraph 10 of Annex B of the SPS
Agreement is the Ministry of Agriculture and Rural Affairs.72
(a) Standards, testing and certification
135. Turkey has recently enacted a decree, aimed at meeting its commitments arising from the
TBT Agreement and filling the gap that may arise from the five-year transition period for adoption of
EU legislation on technical barriers to trade.  The Decree on the Regime of Technical Regulations andStandardization in Foreign Trade entered into force on 1 February 1996 and is revised annually.  The
aim of the regime is to prevent technical legislation, specifications and standards applied in foreign
trade from constituting an obstacle to international trade; to ensure that exported products do not harm
the environment and conform to health and safety norms;  and to increase their competitiveness and
quality; and in the case of imports, to ensure the same treatment of imported and domestic products,and protect human health, safety, animal and plant life, and the environment.
73
136. The TSE sets standards for products manufactured in or imported into Turkey.  TSE is a
non-governmental organization, established in 19 60 (by Law No. 132), with sole authority and
responsibility for preparing and publishing Turkish standards for all types of materials, products, and
services in Turkey.  The TSE is a full member of the International Organisation for Standardisation(ISO) and the International Electrotechnical Commission (IEC);  it is also an affiliate member of the
European Committee for Standardization (CEN) and European Committee for Electrotechnical
Standardization (CENELEC).  All standardization work  is, according to the authorities, carried out in
parallel to ISO/IEC standards in line with the TBT Agreement.  After 1993, the TSE also started to
focus on adopting and harmonizing its standards with those of the EU, while taking into consideration
the customs union arrangements between EU and Turkey.  The aim is to harmonize Turkey's
legislation on a wide range of technical regulations under 32 main topics, such as foodstuffs, electricalequipment, machinery, etc., with those of the EU by the end of 2000.
74  Since 1993, 90% of EU
standards have been adopted as Turkish standards.  Recognition of testing procedures has been
assured by mutual agreements concluded between Turkey and EU member States.  In total, Turkey
has concluded mutual recognition of testing procedures and information exchange agreements
with 56 countries, compared with 28 in 1993.
137. Currently, Turkey has almost 17,000 standards of which 1,042 are obligatory (Table III.23).
The obligatory standards, of which only about one quarter are equivalent to international standards,
are most frequent in the construction materials and building sector (15% of the obligatory standards),
food technology (13%), electrical engineering (10%) and health care technology (9%).
                                                     
72 WTO document G/SPS/ENQ/2, 17 May 1995.
73The web-site of the Undersecretariat of Foreign Trade (http://www.foreigntrade.gov.tr/english/trade/
standard.htm).  Two Communiqués within the scope of the regime have been published addressing quality and
health (Standardization in Foreign Trade No. 96/4, Communiqué Relative to the Control of Imported Goods in
Respect of Quality and Health) and protection of the environment (Standardization in Foreign Trade 96/3,
Communiqué Relative to Items Kept Under Control for Environmental Protection).
74 In this regard, the Regulation on the Type Approval of Motor Vehicles entered into force
on 7 May 1997.Turkey WT/TPR/S/44
Page 85
Table III.23
Official Turkish standards and their equivalence with international standards
Total number of Number of Number of Turkish
Area Turkish obligatory standards equivalent Equivalence
(ICS classification) standards standards to international (Per cent)
Generalities, terminology, standardization 669 6 3 50.0
Sociology, services, company organization,
management, administration350 9 0 n.a.
Mathematics, natural science 96 0 n.a. n.a.
Health care technology 590 98 20 20.4
Environment and health protection, safety 943 17 9 52.9
Meteorology, measurement, physical phenomena 365 15 3 20.0
Testing 193 1 1 100.0
Mechanical systems and components for general
use406 71 41 57.7
Fluid systems and components for general use 634 81 22 27.2
Manufacturing engineering 511 25 3 12.0
Energy and heat transfer engineering 162 12 6 50.0
Electrical engineering 947 104 48 46.2
Electronics 437 3 2 66.7
Telecommunication 444 14 9 64.3
Information technology, office equipment 386 0 n.a. n.a.
Image technology 98 0 n.a. n.a.
Precision mechanics, jewellery 13 0 n.a. n.a.
Road vehicle engineering 221 19 1 5.3
Railway engineering 24 0 n.a. n.a.
Shipbuilding and marine structures 147 0 n.a. n.a.
Aircraft and space vehicle engineering 414 0 n.a. n.a.
Materials handling equipment 192 4 0 n.a.
Packaging and distribution of goods 170 6 0 n.a.
Textile and leather technology 608 40 1 2.5
Clothing industry 71 4 2 50.0
Agriculture 1,022 18 0 n.a.
Food technology 1,024 134 6 4.5
Chemical technology 1,150 29 5 17.2
Mining and minerals 272 1 0 n.a.
Petroleum and related technologies 621 26 6 23.1
Metallurgy 799 26 7 26.9
Wood technology 313 13 0 n.a.
Glass and ceramics industries 234 17 5 29.4
Rubber and plastics industries 720 18 7 38.9
Paper technology 104 4 0 n.a.
Paint and colour industries 219 15 6 40.0
Construction material and building 818 153 34 22.2
Civil engineering 80 19 4 21.1
Military engineering 107 0 n.a. n.a.
Housekeeping, entertainment, sports 356 40 13 32.5
   TOTAL 16,930 1,042 264 25.3
n.a Not applicable.
Source: Government of Turkey.
138. Conformity with Turkish standards is required of imported products that would be subject to
compulsory standards if they had been domestically produced.  No distinction is made between
imports of different origin or between domestic and imported products.  Testing and certificationprocedures on imported industrial products are performed by the TSE, for environment-related
products by the Ministry of Environment, for some  agricultural products by the Undersecretariat of
Foreign Trade, for other agricultural products (including processed) and foodstuffs by the Ministry of
Agriculture and Rural Affairs, and for medical products, cosmetics and detergents by the Ministry of
Health.WT/TPR/S/44 Trade Policy Review
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139. Importers must obtain an Inspection Certificate from the TSE before importation when
inspections are carried out to ensure compliance with the requirements for protection of human health,
safety, animal and plant health, and the environment laid down in the relevant standards.  The process
of obtaining the TSE hallmark complies with the ISO family fifth certification scheme.  During the
import process, a number of facilities are provided to producers of goods carrying the TSE hallmark
and those who have quality system certificates such as TS-ISO 9000, AQAP and GMP.  Producersthat own certificate of TS-EN-ISO 9000, AQAP, and GMP are exempt from inspection as long as
they import for their own needs.  Producers manufacturing the TSE hallmark are also exempt from
inspection if they use the imported materials in order to produce those TSE hallmarked goods.
About 9,364 TSE standard-marked product certificates have been issued.
140. Export controls and import controls on some products  (equivalent to 201 items at the 12-digit
level as well as all items under heading 51.01)  are made by the Group Leadership of the Controllers of
Standardization in Foreign Trade.  Products include, inter alia , certain edible vegetables, roots and
tubes (HS Chapter 7);  certain edible fruit and nuts, peel of citrus fruit or melons (Chapter 8);  not
carded or combed wool (Chapter 51.01);  and certain fine animal hair.  Laboratory analyses are also
made by the Commercial Analysis and Standardization Laboratories of the provincial organization ofthe Undersecretariat of Foreign Trade.  These laboratories have the necessary technical capacity to
perform the controls in conformity with the technical requirements of the EU.
75  Currently some 70
agricultural products (equivalent to 202 items at the HS 12-digit level)  are subject to compulsory
export quality control.
141. The General Directorate of Measures of Quality  Control within the Ministry of Industry and
Trade is empowered to enforce the industrial standards set by the TSE.76  It is also responsible for
quality control systems and establishes and operates test laboratories,  instruments of metrology, andcalibration facilities.
142. The National Quality and Accreditation Control body was established in July 1995 under the
chairmanship of the TSE.  A draft law has been prepared to establish an independent accreditation
council working in accordance with EU practices and to ensure the acceptance of Turkish
laboratories, testing and certification bodies.
77  The aim of the draft law is to establish an impartial
and independent accreditation council that will ensure the technical competence of the testing
laboratories and certification institutions in accordance with EN 45000 standards.
(b) Marking, labelling and packaging
143. While almost all voluntary standards cover details on marking, labelling and packaging, there
are three major obligatory standards related to ma rking, labelling and packaging, all complying with
ISO standards;  TS 4331 on marking and labelling of packages of materials and products that are
supplied into the market as packaged, TS 1418 on labelling of textile products and standards, and
TS 6429 on marking by using colours or alphanumeric system for electrotechnical use.  On labelling,
all imported products should be labelled with the country of origin, the quality and the price of the
product (Article 12 of Law No. 4077 on Consumer Protection).  Except for a few products, the
operating, user and maintenance instructions manual, in Turkish, must accompany each industrial
                                                     
75 The web-site of the Undersecretariat of Foreign Trade (http://www.foreigntrade.gov.tr/english/trade/
standard.htm).
76 Measurement and Calibration Law No. 3516 of 1989.
77 The draft law was submitted to the Turkish grand national assembly in December 1996 and is still
being discussed in the industry sub-committee of the assembly.Turkey WT/TPR/S/44
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product (Article 14 of Law No. 4077 on Promotion and User's Guide).78  Moreover, imported goods
that may pose a danger to health or the environment, must be accompanied by users' instructions
(Article 18 of Law No. 4077 on Destructive and Dang erous Goods and Services).  The same marking,
labelling and packaging requirements apply to domestic and imported products.
144. Marking, packaging and labelling of pharmaceuticals are regulated by the Decree on
Labelling and Packing referring to Law No. 1262.  Ma rking, packaging, and labelling of cosmetics are
regulated by Decree referring to Law No. 3977.  These regulations apply both to domestically
produced and imported goods.  According to the authorities, all regulations are based on international
regulations.
(c) Sanitary and phytosanitary regulations
145. The importation and production of pharmaceuticals, drugs, some consumable medical
products, cosmetics, detergents, foodstuffs, and ag ricultural, animal and veterinary products are
subject to health and sanitary controls.  The main legislation is the Sanitary Law No. 1593 of 1930
and the Agricultural Quarantine Law No. 6968 of 1957.  No distinction is made between domestically
produced goods and imported goods.  According to Communiqué No. 98/4 Related to the Control of
Imported Goods in Respect of Quality and Health, imports require a control certificate issued byMinistry of Health (for pharmaceutical products, drugs, some consumable medical products,
cosmetics and detergents) or the Ministry of Agriculture and Rural Affairs (for foodstuffs, and
agricultural, animal and veterinary products).  In order to obtain a control certificate, depending on the
type of the product, the following must be presented to the Ministry:  a pro forma invoice, a Health
Certificate, a Certificate of Analysis, a formula or list of contents of the product, a Pedigree
Certificate and a Radiation Analysis Report.  All documents should be obtained from and/or approved
by the public authorities of the producer country.  Documents should be in the original language and atranslation is required for each document.  Control Certificates can be obtained prior to import and
should be presented to custom authorities at the actual import stage.  The period of validity of the
control certificates ranges from four to 12 months, depending on the product.
146. Since the previous Review, Turkey has harmonized its sanitary and phytosanitary regulations
with EU norms.  Decree  No. 560 on Production, Consumption and Control of Foods (published in the
Official Journal on 24 June 1995) and the Turkis h Foods Codex Regulation (FCR) (published in the
Official Journal on 16 November 1997) harmonize Turkish food norms with the norms of the EU as
well as Codex Alimentarius Commission and other inte rnational norms.  Within the framework of the
harmonization of Turkish-EU regulations, th e Decree on Medical Equipment, the Decree on
Insertable Active Medical Equipment and the Decree on Toys have been drafted.
147. As in 1993, an inspection certificate is required for the importation of goods subject to health
and sanitary controls.  The certificate, which is required by customs at the time of the entry, is filed
with the Ministry in charge.  In some cases, the inspection certificate can be waived if the importer
assures the authorities that the products are destined for the specified purposes or for the
manufacturer's own use.
                                                     
78 Exempted products include:  certain kinds of metal, PVC, polyethylene, plastic pipes, connecting
parts, bolts, handcuffs, screws, nuts, nails, pins, and similar connecting elements;  hammers, mallets, tongs,saws, chisels, axes, and similar products;  paper, erasers, pencils, and similar stationary materials;  shovels,
pickaxes, rakes, barrows, and similar agricultural products;  towels, belts, trousers suspenders, buttons, zip
fasteners and similar clothing parts;  some construction materials;  some households appliances;  handicrafts,jewellery and similar products; and the following products sold in a package with a usage description: mineraloils, anti-freeze, hydraulic oil, matches, fertilizers an d some chemical products; paints, cements, lime and
similar products; food and drink; cleaning products; and coal and similar products.WT/TPR/S/44 Trade Policy Review
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148. Turkey has signed cooperation agreements in order to prevent animal diseases from entering
the country during the import-export and transit of live animals and animal products, veterinary
medications, fodder, and other products that may affect animal health.79  Moreover, bilateral
agreements on a product by product basis have been  signed with Belgium, France, Germany, Italy,
Netherlands, New Zealand, the United Kingdom and the United States in relation to the use of
sanitary and phytosanitary certificates.
149. As noted earlier, in order to prevent the expa nsion of epidemic diseases (including BSE),
Turkey maintains a temporary import ban on live animals (dairy and beef cattle, sheep, goats and
poultry) and meat (beef, sheep, goat, and poultry).
150. Turkey has not notified any sanitary and phytosanitary measures to the WTO.
(d) Forthcoming changes to technical regulations
151. In the context of responsibilities arising from the customs union with the EU, the draft law on
the Preparation of Technical Legislation Related to the Products which will be Supplied to the Market
has been prepared by the Undersecretary of Foreign Tr ade.  It is expected to enter into force in 1998
at which time technical regulations in the following areas will be in conformity with the Customs
Union's technical legislation:  standardization, quality, conformity assessment, tests and certification.In addition, as noted above, a draft law to establish an accreditation council has been prepared by the
Undersecretary of Foreign Trade.
(iv) Government procurement
152. Since Turkey's previous Trade Policy Review, there has been no major change to the law on
public procurement applying to general, provincial and local government (the Public Procurement
(State Adjudication) Law No. 2886 of 1 January 1984).  The state economic enterprises and certain
government entities have their own government procurement regulations.
80  Since June 1996 Turkey
has participated as an observer in the WTO Committee on Government Procurement.81  The Customs
Union between Turkey and EU recognizes the importance of public procurement but does not specify
any specific arrangements.82  Also, the recently signed free-trade agreements with Israel, the Baltic
States (Estonia, Latvia and Lithuania) and some  Eastern European countries (Bulgaria, Hungary,
Romania, Czech Republic, Slovak Republic and Sl ovenia) contain similar provisions on public
procurement.
153. The State Supply Office (DMO) is the main government purchasing agency, although the
majority of government procurement is conducted by the individual government entities in
accordance with the law.  Some small purchases (such as vehicles, tables, chairs, and other office
supplies) are sometimes handled by the DMO.
                                                     
79 Turkey has signed cooperation agreements with Algeria, Bulgaria, Germany, Iran, Netherlands, Syria
and Tunisia.  Negotiations continue with Albania, Azerbaijan, Croatia, Czech Republic, Georgia, Kuwait,Macedonia, Russia, Slovakia and Ukraine.
80 However, Law No. 2886 covers:  production, transport and distribution services of drinking water;
and transport services by trolley bus are provided by the municipalities.
81 WTO document GPA/M/2, 23 July 1996.
82 Article 48 states that "As soon as possible after the date of entry into force of this Decision, the
Association Council will set a date for the initiation of negotiations aiming at the mutual opening of the Parties'respective government procurement markets".Turkey WT/TPR/S/44
Page 89
154. Government procurement in Turkey is generally conducted through the issue of public
tenders.  Five main procurement procedures are applied in Turkey:  closed and sealed envelopes;
selective limited tendering;  public bidding;  negotiated procurement;  and direct competition
procedure.  Closed and sealed envelope tendering is normally followed, but other procedures are used
according to the value of procurement and/or the type of procurement (Table III.24).  In the case of
selective tendering, a company may be included in the pre-approved vendor list by developing areputation as a quality, reliable and experienced supplier.
83 Certain construction work up to
TL 16 billion may be procured by the concerned Ministry using the so-called "force account
commission" procedure (Table III.24).  The law provides an escape clause from the normal
procurement procedures.  According to Article 89, contracts may be awarded without competition if
agencies are authorized by the Council of Ministers.  Data are not available on the amount ofprocurement by procedure.
155. Procurement using the following methods is not required to be advertised in newspapers or
the Official Gazette:  negotiated procedure, selective limited tendering by other, force account
commission, and works of a peculiar nature (Table  III.24).  Other procurement procedures must be
advertised in newspapers;  procurement above certain values must published in the Official Gazette.In general these public notices are in Turkish.  Potential suppliers are required to have a legal
residence and a notification address in Turkey, and to be registered with the Chamber of Commerce.
84
156. The time interval between appearance of the first advertisement in a newspaper and the date
of bidding is typically short (minimum of ten days acc ording to Article 17 of the law).  It is therefore
important for foreign companies to become familiar with the procedures of various government
organizations.
157. Bid bonds and performance bonds are required;  bid bonds 3% of the total estimated work to
be completed (Article 25);  the winning bidder must submit a completion performance bond at the rate
of 6% of the contract value (Article 54), after which the bid bond is released.  The performance bond
is refunded upon completion of the contract.  Both bonds must be guaranteed by a Turkish national
bank.
158. Government purchasing agencies may request company representatives submitting bids to
provide additional information and to lower their price proposals when the tender proposal is
evaluated.  Some tenders, especially for projects involving co-production and those based on the
Build-Operate-Transfer (BOT) model, are frequently opened, closed, revised and opened again.
159. In general, the criterion followed in the award of tenders is that of the most attractive bid in
terms of price, although the quality of equipment, services, delivery schedule, availability of spareparts and after-sale service, and previous experience with the suppliers all influence the decision.  The
availability of supplier credit may determine bid awards for some major procurement schemes.  All
credit offers must be screened by the Undersecretariat of Treasury, which has responsibility for final
credit decisions.
160. There are no laws or regulations that give preference to domestic over foreign goods.
However, the legislation (Article 28) provides th e Council of Ministers with the power to grant
preferences to domestic goods.  Nevertheless, the authorities have indicated that, in practice,
preferences are generally not provided to domestic suppliers.
                                                     
83 WTO document GPA/M/2, 23 July 1996.
84 Foreign companies that have no branch in Turkey are required to register with the Chamber of
Commerce in their own country;  registration also requires approval by the Turkish Consulate or by the TurkishMinistry of Foreign Affairs.WT/TPR/S/44 Trade Policy Review
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Table III.24
Key features of Turkey's procedures on government procurement
Method Procedure Instances when the method is applied
Procurement procedures
1. Closed and sealed
envelopes 
(Article 36)Written (closed
and sealed
envelopes)Procedure normally followed
2. Selective limited
tendering (Article 44)Written (closed
and sealedenvelopes)
offers from at
least threecandidatesProcurement of aircraft, warships, war ammunition, electronic equipment, military
installations and supplies, weapon and supply systems, activities concerningdefence industry, dams, power stations, irrigation systems, harbours, docks,
airfields, railways, locomotives, highways, tunnels, bridges, fuel storage facilities,
construction work of peculiar nature, works of art having esthetic and technicalcharacteristics, plans for the city road nets, city maps, master and housing plans,
water and sewerage systems and energy facilities
3. Public bidding
(Article 45)Oral offersaContracts up to TL 40 billion (or US$1.02 million in February 1998)
4. Negotiated  procedure
(Articles 43, 49
and 51)Oral offers from
at least one
candidateaContracts up to TL 2.5 billion  (or US$0.1 million in February 1998) or
If closed and sealed envelopes procedure or selective tendering or public bidding
fail;  or for police or army requirements, urgent or secret works and a few otherspecial instances (as defined in Article 51)
5. Direct competition
procedure (Article 52)Negotiation Supervision of study, planning and project works, and works related to fine arts
6. Force account
commission(Article 81(a))Written (closed
and sealedenvelopes)Construction contracts for less than TL 16 billion.  Laying ballast in railway
construction and road construction materials;  telegraph, telephone, and powertransmission line construction;  and certain construction work related to
development of villages and military garrisons, or secret construction work, and a
few other construction related works
7. Works of peculiar
nature
(Article 89)Case-by-case
procedureWhen it is not possible to enforce the provisions of the law, the provisions may be
disregarded by the Council of Ministers upon the proposal by the Ministry
concerned.  The procedures and rules are determined by the concernedadministration and become final on approval of the Ministry concerned
Advertisement requirement:
(Advertisement not required:  negotiated procedure, selective limited tendering, force account commission and works of peculiar  nature.)
1. Local daily newspaper
(Article 17(1))All contracts
2. Nationwide daily
newspaper(Article17 (2))Contracts above TL 12 billion
3. Official Gazette
(Article 17 (3))Contracts above TL 36 billion
a Written (closed and sealed envelopes) are also allowed.
Note: The thresholds, which are revised annually, refer to 1998.  The articles refer to Public Procurement Law No. 2886.
Source: WTO Secretariat based on information provided by the Turkish authorities;  and the Public Procurement Law No. 2886
161. While the Government normally follows comp etitive bidding procedures, it occasionally
requires ministries and public enterprises to include an offset provision in tender specifications whenthe estimated tender value is more than US$1 million.  Military procurement often requires an offset
provision in tender specifications
85, but such offsets are not a requirement of the general procurement
                                                     
85 Bureau of National Affairs (1997).Turkey WT/TPR/S/44
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law (No. 2886).  Countertrade proposals often play an  important role in the decision to award a large
contract  (section 2(xi) above).
162. The authority that issues the invitation to tender is required to publish details about the award
(such as who the contract was awarded to, the nature of the work, value of the contract) in the Official
Gazette.  Parties may lodge complaints against the award of a contract with the issuing authority.
However, if the issuing authority does not accep t the complaint the complainant cannot lodge an
appeal with the courts.
(v) Price and distribution controls
163. Price and distribution controls apply to the agricultural and the energy sectors and to
pharmaceutical products.  In order to ensure stability in farm incomes through remunerative farm-gate
prices, the Government maintains a system of pricing and domestic marketing arrangements oversome agricultural commodities.  Since Turkey's previous Review in 1994, the coverage of price
controls has decreased substantially, from 24 to three agricultural commodities (cereals, including
wheat, barley, rye, oats and maize;  tobacco;  and sugar beet).  The support prices for these products
are fixed annually by the Government.  The relevant SEE purchases the output from the farmers using
its own resources, and then charges the Treasury with the amount of purchase plus a 10% margin
(termed "duty loss").  About 12 months after completion of audit, compensation is made from Budget
appropriation (see Chapter IV(2) for further details).
164. Price controls also apply to a number of energy items: crude oil, natural gas, hard coal, lignite
and electricity.  The Government sets the prices directly for electricity produced by private
distribution utilities or, for some products, the pri ce charged by the SEE is influenced by Government
policies.  The price of ex-refinery oil products are currently set in line with Italian c.i.f. prices plus or
minus 3%.  Distribution of electricity, oil and oil products are not monopolized, but the activities aredominated by state economic enterprises (Chapter IV(3)).
165. In the pharmaceutical industry, prices of all locally made products are subject to the approval
of the Ministry of Health.  Restrictions on profits apply to imported pharmaceuticals, whether
imported by domestic or foreign companies.
(vi) Trade related investment measures (TRIMs)
166. The Turkish authorities have not notified to the WTO any application of measures in violation
with the WTO Agreement on Trade-Related Investment Measures.  The authorities indicated that
investors in the automotive sector have accepted as a "gentlemen's agreement", without any legal
obligation, to incorporate a certain share of local content (Chapter IV(4)(iii)(d)).
(vii) Trade Related Intellectual Property Rights (TRIPS)
(a) Overview
167. As part of its harmonization with EU legislation on intellectual property rights and the WTO
Agreement on TRIPS, Turkey introduced important changes to its intellectual property regime
in 1995.  The new laws on patents, trade marks, industrial designs, geographical indications and
copyright, as well as a number of important international conventions governing intellectual propertyrights (Table III.25) and Turkey's advance implementation of the TRIPS Agreement, have given
Turkey a comprehensive, modern legal framewor k for protecting intellectual property rights.
Notwithstanding these improvements, as a result of difficulties in enforcement, Turkey remains on the
U.S. "priority watch list" of countries that fail to protect American firms' intellectual property rights,WT/TPR/S/44 Trade Policy Review
Page 92
as specified under the "Special 301" provision of the 1988 Trade Act.86  The weaknesses in
enforcement will need to be overcome by adequate staffing, training and increasing awareness of the
new legal provisions.
Table III.25
Turkey's status in International agreements, conventions and treaties
Name Number of
partiesTurkey's status
1. Paris Convention on the Protection of Industrial Property (1883) 143 Member since 1925
2. Berne Convention for the Protection of Literary and Artistic Works
(1886)130 Member since 1952
3. Convention establishing WIPO (1967) 165 Member since 1976
4. Rome Convention for the Protection of Performers, Producers of
Phonograms  and Broadcasting Organizations (1961)57 Member since 1995
5. Berne Convention for the Protection of Literary and Artistic Works
(1971)130 Member since 1995
6. Nice Agreement concerning the International Classification of Goods
and Services for the purpose of Registration of Marks (1957)51 Member since 1 January 1996
7. Patent Co-operation Treaty (1970) 94 Member since 1 January 1996
8. Vienna Agreement Establishing an International Classification of the
Figurative Elements of Marks (1973)10 Member since 1 January 1996
9. Strasbourg Agreement Concerning the International Patent
Classification (1971)38 Member since 1 October 1996
10. Budapest Treaty on the International Recognition of the Deposit of
Micro-Organisms for the Purpose of Patent Procedure (1977)41 Participation from 1998
11. Protocol relating to Madrid Agreement (1996) 17 Participation from 1998
12. Locarno Agreement Establishing an International Classification for
Industrial Designs (1968)29 Participation from 1998
Source: Government of Turkey.
168. Chart IV.8 provides an overview of Turkey's system of intellectual property rights and the
agency in charge.  Turkey has provided the WTO Council for TRIPS with the data required under
Article 69 of the TRIPS Agreement on contact points: the Turkish Patent Institute for issues related to
industrial property; the Directorate-General of Copyrights and Cinema in the Ministry of Culture for
issues related to copyright and neighbouring countries; and the Directorate-General of Customs in theUndersecretariat of Customs for issues related to border measures.
87
                                                     
86 Bureau of National Affairs (1998).
87 WTO document IP/N/3/Rev.2/Add.2, 31 January 1997.Turkey WT/TPR/S/44
Page 93
Chart III.8
Overview of Turkey’s Intellectual Property System
Authors' Rights
Phonogram Producers' Rights
Neighbouring RightsCopyright and Nei ghbourin g Rights
Patents and Utility Models
Trademarks and Service Marks
Industrial Designs
Geographical Signs
Topographies of Integrated CircuitsIndustrial Pro perty Rights
Trade Names
Know How
Trade SecretsCommercial Ri ghtsIntellectual Pro perty System
Ministry of CultureCommercial Law
Ministry of Industry 
and TradeTurkish Patent Institute
Source : Turkish Patent Institute.
(b) Protection in selected areas
Patents
169. In June 1995, a new patent law came into effect , replacing Turkey's 19th century patent law.88
The law includes:  the possibility of converting a patent application into a utility model, and
vice-versa (utility model certificate)89;  the granting of patents by examination and non-
examination system;  patentability criteria (novelty, inventive activity/step, industrial applicability);publications of the applications;  opposition by third parties;  patent rights of seven years for
non-examined patents, ten years for utility model certificates, and 20 years for examined patents, none
of which are extendable;  employee inventions;  penalties against infringement;  and the establishment
of special courts.  An applicant not living in the country has to appoint a local patent agent.
Foreigners are entitled to the same rights and privileges and are subject to the same obligations as
nationals.
170. Pharmaceutical products and processes have been excluded from patent protection up
to 1 January 1999, as allowed by Turkey's commitments under the customs union with the EU.
90
Nevertheless, the Turkish Patent Institute receives patent applications for inventions in the field of
                                                     
88 Decree Law No. 551 of 27 June 1995 regarding the Protection of Patent Rights (as amended by
Decree Law No. 566 of 22 September 1995, and amended, added to and partly repealed by Law No. 4128of 7 November 1995).
89 A utility model differs from inventions of patents in two respect: first, in the case of an invention
called "utility model", the technological progress required is smaller; and, second, the maximum term of
protection provided in the law for a utility model is generally much shorter (WIPO, 1995).
90 This is within the time period set out in the TRIPS Agreement since, because of its developing
country status, Turkey has five years from the entry into effect of the Agreement to apply the provisions of theAgreement.WT/TPR/S/44 Trade Policy Review
Page 94
pharmaceutical products in accordance with the "mail-box" provision contained in Article 70.8 of the
TRIPS Agreement;  applications for process patents are received in the same way.  The number of
pharmaceutical (products and processes) patent applications received by the Institute
between 1 January 1995 and 1 December 1997 totalled 584; nationals of the United States were the
single largest group of applicants, accounting for 30% of total applications, while Turkish nationals
only ranked seventh.  If an applicant has a patent certificate and marketing approval in anothercountry, exclusive marketing rights are provided for a period of five years in accordance with
Article 70.9 of the TRIPS Agreement.
91   The new law (Article 83.3) also provides protection for test
data submitted to the Institute to support applications for marketing approval of pharmaceutical and
agricultural chemical products that utilize new chemical entities, as required by Article 39.3 of the
TRIPS Agreement.
Trade marks
171. In June 1995, Turkey amended its trade mark law.92  The protection, which is extended to
marks distinguishing goods and services, guarantee marks and collective marks, is effective for
ten years from the date of registration and can be renewed for similar periods.  A licence may be
exclusive or non-exclusive, and, unless otherwise provided in the contract, the licence shall beunderstood to be non-exclusive.  Turkey does not require the trade mark to be registered in the home
country or in any other country.
Industrial designs
172. In June 1995, a new industrial designs law also came into effect.
93  Protection is provided to a
design that is new and distinctive; a design is considered new if, before the date of application, no
identical design has been made available to the public anywhere in the world.  A registered design is
protected for five years from the filing date, and protection may be renewed for periods of five yearsat a time up to a total protection period of 25 years.
Copyright
173. The Turkish Parliament also passed a Bill in June 1995 amending its 1951 copyright law
(Intellectual and Artistic Works Law No. 5846).
94  The Bill provides for copyright protection during
the lifetime of an author plus 70 years after his/her death (the previous protection periodwas 20 years), extends the coverage to include software as a literary work, and provides for the
establishment of more than one professional union in the same area.  In the field of neighbouring
rights, a new regulation was introduced in 1995 providing detailed arrangements concerning
protection of mutual rights of broadcasting  organizations, phonogram producers and performers.
95
The regulation introduced mandatory affixation of banderols on non-periodicals publishing (books
and encyclopaedias), which can be obtained from the Directorates of Culture at the provincial level.96
Affixation of banderols on audiovisual works has been carried out since 1986.  Moreover, each TV
                                                     
91 WTO documents IP/N/1/TUR/1, 22 May 1995 and IP/N/TUR/1Add.1, 1 May 1997.
92 Decree Law No. 556 of 27 June 1995 regarding the Protection of Trade Marks Rights (as amended
by Act No. 4128 of 7 November 1996; and Regulations of 5 November 1995 concerning Decree Law No. 554).
93 Decree Law No. 554 of 27 June 1995 regarding the Protection of  Industrial Designs (as amended by
Act No. 4128 of 7 November 1996; and Regulations of 5 November 1995 concerning Decree Law No. 554).
94 Amended by Law No. 4110 on 7 June 1995.
95 Regulation of 12 July 1995 on Marking Intellectual and Artistic Works.
96 Banderols are labels affixed on the covers of the published copies of the works to control the number
of duplications of the work.Turkey WT/TPR/S/44
Page 95
organization has to obtain a certificate from the Ministry of Culture, proving payments to the rights
holder.97
174. In order to implement the TRIPS Agreement, a draft law is being prepared by the Ministry of
Culture to provide for harmonization of the duration of protection, higher non-suspendable fines and
jail terms in case of the violation of intellectual property rights, and seizure of counterfeit goods at
customs.  In cases of repetition of the violation, it is proposed to increase fines and jail terms.  Thedraft law also includes regulations for the protection of the rights of the owners of broadcasts on
radio, TV or other means.
Other areas
175. Turkey provides protection for geographical indications
98, topographies of integrated circuits,
trade names, know-how and trade secrets.
(c) Enforcement of intellectual property rights
176. The infringement of patents (Part X of Decree Law No. 551), copyrights (Part V of Decree
Law No. 4110), trade marks (Part VIII of Decree Law No. 556), industrial designs (Part VI of Decree
Law No. 554), and geographical indications (Part IV of Decree Law No. 555) can be challenged in a
domestic court of law.  Foreign nationals can also challenge Turkish and foreign patent holders inTurkish courts.  In the process of granting an intellectual property right, persons making false
statements or those removing without authority the sign indicating an industrial property right on a
product or those falsely presenting themselves as the proprietor of an industrial property application
right are subject to a fine and imprisonment for a period of up to four years (Article 73A).
177. Efforts are reportedly under way to educate businesses, consumers, judges, prosecutors, and
others regarding the implications of the new laws.  The Government intends to establish a number of
special courts to hear intellectual property related cases under the new laws.  According to the USTR,the Turkish judicial system, however, remains over-burdened and it may be some time before the
necessary elements for a smoothly functioning system are in place.
99
(d) Parallel and counterfeit imports, and compulsory and contractual licensing
Parallel imports
178. Parallel imports of goods and services containing any form of intellectual property rights are
prohibited in Turkey.  Turkish legislation on copyright, trade marks, designs and patents provide for
national exhaustion of distribution rights, which enable the rights holders to prevent parallel
importation of protected products put on the market in other countries.100  This principle also applies
to the customs union agreement between Turkey and the EU (Annex 8 of Association Council
Decision 1/95).
                                                     
97 Notification of 16 September 1997.
98 Decree Law No. 555 of 27 June 1995 regarding the Protection of Geographical Indications.
99 United States Trade Representative (1997).
100 Article 6 of the TRIPS Agreement provides that, for the purposes of dispute settlement, nothing in
the Agreement shall be used to address the issue of the exhaustion of intellectual property rights, provided thatthe national treatment and MFN treatment obligations are met.WT/TPR/S/44 Trade Policy Review
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Border enforcement
179. Counterfeit imports are regulated by Turkish law (Decree No. 564 of 26 July 1995) and an
implementing regulation (in force since 1 January 1996).  For the suspension of such goods at the
border, a complaint by the rights holder rather than the customs official is required.  Small quantities
of goods of a non-commercial nature contained in  travellers' personal luggage or sent in small
consignments are not covered by the law.
Compulsory licensing
180. In the case of patents, provision is made for granting compulsory licences on the grounds that
the patent was not put into use or that the delay in the use thereof was not due to justifiable/legitimate
reasons or that the use has been suspended during an uninterrupted period of three years (Article 100
of Decree Law No. 551).   In the case of other IPR areas, there are no compulsory licence provisions .
In practice, however, compulsory licences are rarely invoked.  To date, the Turkish Patent Institute
has received no requests for a compulsory licence.
Anti-competitive practices in contractual licensing
181. The legislation related to intellectual property rights does not carry provisions on anti-
competitive practices in contractual licences.  This subject is governed by the Protection of
Competition Act.  Pursuant to Article 4, all agreements which distort, restrict or prevent competition
are prohibited, except where an exemption is granted by the Competition Board in accordance with
Article 5 of the Act.