RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/192 
5 November 2007  
 
(07-4743) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
TURKEY 
 
  
 
This report, prepared for the fourth Tr ade Policy Review of Turkey, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Turkey on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to Ricardo 
Barba (Tel. 022 739 5088) 
 
Document WT/TPR/G/192 contains the policy statement submitted by Turkey. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Turkey. Turkey WT/TPR/S/192 
 Page iii 
 
 
CONTENTS 
 
  Page 
SUMMARY OBSERVATIONS vii 
 (1) T HE ECONOMIC ENVIRONMENT  vii 
 (2) I NSTITUTIONAL FRAMEWORK  vii 
 (3) T RADE POLICY INSTRUMENTS  viii 
 (4) S ECTORAL POLICIES  ix 
 (5) T RADE POLICY AND TRADING PARTNERS  ix 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AJOR FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (3) T RADE PERFORMANCE AND INVESTMENT  4 
 (i) Trade in goods and services 4 
 (ii) Foreign direct investment 8 
 (4) O UTLOOK  9 
II. TRADE AND INVESTMENT REGIMES 11 
 (1) G ENERAL FRAMEWORK  11 
 (2) P OLICY OBJECTIVES  12 
 (3) T RADE AGREEMENTS  13 
 (i) WTO 13  (ii) Regional agreements 17 
 (iii) Bilateral agreements 20 
 (iv) Other preferential trade arrangements 21 
 (4) I
NVESTMENT FRAMEWORK  21 
III. TRADE POLICIES AND PRACTICES BY MEASURE 26 
 (1) I NTRODUCTION  26 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  26 
 (i) Customs procedures, clearance, and valuation 26 
 (ii) Rules of origin 28  (iii) Tariffs, other duties, and taxes 29 
 (iv) Import prohibitions, quotas, and licensing 38 
 (v) Contingency trade remedies 41  (vi) Standards and other technical requirements 46 
 (vii) Government procurement 52 
 (viii) Local-content requirements 54  (ix) Countertrade 55 
 (x) Other measures 55 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  55 
 (i) Registration and documentation 55 
 (ii) Export taxes 56  (iii) Export prohibitions, controls, and licensing 56 
 (iv) Export subsidies, finance, assistance, and promotion 58 
 (v) Free zones 61 WT/TPR/S/192 Trade Policy Review 
Page iv 
 
 
  Page 
 
 (vi) Other measures 62 
 (4) M EASURES AFFECTING PRODUCTION AND TRADE  62 
 (i) Incentives 62 
 (ii) State trading, state-owned enterprises, and privatization 65 
 (iii) Competition policy and price controls 68  (iv) Protection of intellectual property rights 71 
IV. TRADE POLICIES BY SECTOR 76 
(1) O
VERVIEW  76 
 (2) A GRICULTURE AND RELATED ACTIVITIES  76 
 (i) Main features 76 
 (ii) Policy developments 77 
 (3) M INING AND ENERGY  83 
 (i) Overview 83 
 (ii) Mining 84  (iii) Energy 86 
 (4) M
ANUFACTURING  91 
 (i) Main features 91 
 (ii) Policy developments 92 
 (iii) Selected industries 94 
 (5) S ERVICES  97 
 (i) Main features 97 
 (ii) Financial services 97  (iii) Telecommunications and postal services 101 
 (iv) Transport 104 
 (v) Tourism 111 
 
REFERENCES   113 
APPENDIX TABLES  115 Turkey WT/TPR/S/192 
 Page v 
 
 
CHARTS 
  Page 
I. ECONOMIC ENVIRONMENT 
 I.1 Structure of merchandise trade, 1995 and 2000-05 6 
I.2 Direction of merchandise trade, 1995 and 2000-05 7 
 III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
III.1 Breakdown of applied MFN tariff rates, 2007 31 III.2 Tariff escalation by ISIC 2-digit industry, 2007 33 
 
IV. TRADE POLICIES BY SECTOR  
IV.1 Tariff protection in the industrial sector, 2007 93 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Main economic indicators, 2002-06 3 I.2 Balance of payments, 2002-06 5 
I.3 Foreign direct investment, 2002-05 8 
 II. TRADE AND INVESTMENT REGIMES 
 
II.1 Selected notifications to the WTO, 2007 14 II.2 WTO dispute settlement cases involving Turkey, 1995-07 16 
II.3 Bilateral trade agreements, 2007 20 
II.4 Foreign direct investment restrictions, 2007 22 II.5 Turkey's FDI regulatory restrictiveness index, 2006 25 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
 
III.1 Preferential rules of origin, 2007 29 
III.2 MFN tariff distribution, by type of duty, 2007 30 III.3 Structure of MFN tariffs, 2003 and 2007 30 
III.4 Summary analysis of Turkish MFN tariff, 2007 32 
III.5 Key features of concessional entry schemes, 2007 34 
III.6 MFN and preferential tariff averages, 2007 35 
III.7 Preferential trad ing agreements, 2007 36 
III.8 Preferential tariff quotas on agricultural and processed agricultural products, 2007 37 
III.9 Import prohibitions, 2007 39 
III.10 Imports requiring a licence, 2007 40 III.11 Definitive anti-dumping measures in force, July 2007 43 
III.12 Definitive safeguard measures in force, 2007 46 
III.13 Turkish standards and their equivalence with international standards, 2007 49 III.14 Export prohibitions, 2007 57 
III.15 Exports requiring a licence, 2007 57 
III.16 Key features of the export insurance programmes, 2007 60 III.17 Trade in free zones, 2002-06 62 
III.18 Key features of the state aid programmes, 2007 64 
III.19 Selected public enterprises, 2007 66 III.20 Independent regulatory institutions, 2007 70 
III.21 Cases handled by the Competition Authority, 2000-06 71 
III.22 Membership in international agreements, conventions, and treaties, 2007 72 WT/TPR/S/192 Trade Policy Review 
Page vi 
 
 
  Page 
 
IV. TRADE POLICIES BY SECTOR 
 IV.1 Agricultural structure, 2006 and 2013 78 
IV.2 Export subsidies by agricultural product, 2007 81 
IV.3 Transfers associated with agricu ltural policies, 1986-88, and 2003-05 82 
IV.4 Credit schemes, 2007 86 
IV.5 Select state intervention in the energy sector, 2007 87 
IV.6 Structure of the manufacturing sector, 2002 and 2005 92 IV.7 Selected telecommunication indicators, 2002-06 101 
IV.8 Licences granted, 2004-06 102 
IV.9 Freight transport, 2006 and 2013 105 IV.10 Maritime transport, 2004-06 106 
IV.11 Selected tourism indicators, 2005-07 111 
 
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Structure of exports, 1995 and 2000-05 117 AI.2 Destination of exports, 1995 and 2000-05 119 
AI.3 Structure of imports, 1995 and 2000-05 120 
AI.4 Origin of imports, 1995 and 2000-05 122  
II. TRADE AND INVESTMENT REGIMES 
 AII.1 Trade-related legislation, 2007 123 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
AIII.1 Applied MFN tariff averages by HS2, 2007 127 
AIII.2 Products subject to non- ad valorem  tariffs, 2007 132 
AIII.3 Excise duties or special consumption tax, 2007 138 
AIII.4 Key features of the export credit and guarantee programmes, 2007 142 
 IV. TRADE POLICIES BY SECTOR 
 
AIV.1 Applied MFN tariffs, by ISIC Rev.2 category, 2007 146 
AIV.2 Summary of Turkey's specifi c commitments in services 149 
AIV.3 Summary of Article II (MFN) exemptions listed by Turkey 152 
 Turkey WT/TPR/S/192 
 Page vii 
 
 
SUMMARY OBSERVATIONS 
 
(1) T HE ECONOMIC ENVIRONMENT  
1. Following its economic crisis in 2001, 
Turkey has been implementing an ambitious 
reform programme, notably on the fiscal, privatization and social security fronts. The programme has been successful in stabilizing the economy, and has contributed to an annual 
average real GNP growth rate of 7.4% during 
2002-06, a reduction in the inflation rate from 29.7% in 2002 to 9.6% in 2006, and a fall in the overall fiscal deficit, from 12.5% to 0.8% of GNP over the same period. Recent reforms have also been aimed at bringing Turkey 
closer to its goal of accession to the European 
Communities (EC). 
2. Nonetheless, Turkey still faces key 
structural problems, including its widening current account deficit (0.8% of GNP in 2002 
and 8.2% in 2006), which could make the 
economy vulnerable to external shocks. Unemployment also remains high (9.9% in 2006, against 10.3% in 2002), and key industries continue to be dominated by state-owned enterprises (SOEs), such as Turkish 
Petroleum Company (TPAO), Turkish 
Hardcoal Enterprises (TTK), Turkish Electricity Transmission Company (TEIAS), and Turkish State Railways. 
3. On 1 January 2005, the new Turkish 
lira (YTL) was issued after the old Turkish lira 
was redenominated, dropping six zeros. The Central Bank of the Republic of Turkey (CBRT) moved from a crawling peg to a floating exchange rate system on 
22 February 2001. During 2002-05, as a result 
of record high capital inflows, the real effective exchange rate appreciated over 10% per year on average. At the end of 2006, however, interest rate hikes in major industrial countries prompted a real depreciation of the 
YTL estimated by the CBRT at 6.6%. 
4. Since its last TPR in 2003, Turkey has 
adopted measures to improve its investment climate, including through the establishment of the Turkish Investment Support and Promotion Agency in June 2006. As a result, Turkey's 
annual FDI inflows averaged US$4,757 million over 2003-05, and reached a peak estimated at around US$20,000 million in 
2006. Nevertheless, some restrictions to 
foreign investment have been introduced over the last few years on real estate acquisition, and a number of sectors are still subject to FDI restrictions (e.g. broadcasting, fishing, 
petroleum, mining, and financial services).  
5. Turkey's merchandise exports have 
more than doubled since 2002, with the manufacturing sector contributing over 80% to its total merchandise exports, followed by agriculture, and mining products. More than 
half of Turkey's exports go to the EC; 
Germany remains the major export market. Turkey's merchandise imports have also more than doubled since 2002, with manufactured goods representing about two-thirds of total 
merchandise imports, followed by mining, and 
agriculture products. Turkey continues to be a net exporter of services, with a surplus of US$13.4 billion in 2006 (up from US$7.9 billion in 2002). 
(2) I
NSTITUTIONAL FRAMEWORK  
6. Formulation, administration, and 
coordination of Turkey's trade policy are the responsibility of the Undersecretariat for Foreign Trade (UFT). Depending on the nature of the issue, the UFT consults with relevant 
ministries and other institutions that also take 
part directly or indirectly in foreign trade policy formulation and/or implementation. The views of the private sector, including NGOs, are customarily taken into consideration 
throughout the process (although this is not 
legally required). A WTO Coordination Committee, headed by the UFT with the participation of the private sector and NGOs, has been established. 
7. The WTO Agreements and Turkey's 
current trade relations with the EC are the 
main factors influencing the Turkish trading system. Over the last few years, Turkey has amended its legislation on, inter alia , 
intellectual property rights, and enacted new WT/TPR/S/192 Trade Policy Review 
Page viii 
 
 
legislation, notably on safeguards, to seek 
conformity with its obligations under the EC acquis  communautaire  and the WTO 
Agreements. 
8. A Contracting Party to the GATT 
since 17 October 1951, Turkey became an original Member of the WTO on 26 March 1995. It accords at least MFN treatment to all its trading partners. Turkey is not a 
signatory to the Plurilateral Agreements that 
resulted from the Uruguay Round; it is an observer to the Plurilateral Agreements on Government Procurement and Trade in Civil Aircraft, and party to the Information Technology Agreement (ITA). Turkey has 
been involved in several cases under the WTO 
Dispute Settlement Mechanism. 
9. Turkey has a customs union 
agreement (mainly on non-agricultural products) with the EC, a free-trade agreement 
with EFTA (also on non-agricultural goods), 
and nine bilateral agreements in force, of which six were concluded during the period under review, with Bosnia-Herzegovina, Egypt, Morocco, Palestin ian Authority, Syria, 
and Tunisia; the others being with Croatia, 
Israel, and Macedonia (FYR). In addition, a 
bilateral trade agreement with Albania has been signed and is due to enter into force soon, while negotiations continue with other countries. Turkey is also part of the Euro-
Mediterranean Partnership, aiming at 
establishing a free trade area in the region by 2010; the Economic Cooperation Organization (ECO); and the Black Sea Economic Cooperation (BSEC). 
(3) T
RADE POLICY INSTRUMENTS  
10. Goods imported into Turkey may be 
subject to various charges: customs duties (customs tariffs, and the Mass Housing Fund levy); and internal taxes (excise duties also known as the Special Consumption Tax, the 
VAT, and the stamp duty). As a result of its 
participation in the customs union with the EC, Turkey has, since 1996, based its tariff on industrial products and the industrial components of processed agricultural products (imported from third countries) on the EC 
common external tariff. Turkey's tariff comprises ad valorem  (97.9% of total lines, 
down from 98.5% in 2003) and non- ad 
valorem  rates (specific, mixed, compound, and 
variable duties), applying to 378 items at the HS twelve-digit level, up from 284 in 2003. Using the WTO definition, the average applied MFN tariff is substantially higher in 
agriculture (47.6%) than on non-agricultural 
products (5%). 
11.  Some 46.3% of Turkey's tariff lines 
are bound.  The simple average bound rate is 33.9%, and the simple average applied MFN rate 11.6% in 2007 (11.8% in 2003); the 
ceiling bound rates thus leaves Turkey ample 
margin for tariff incr eases. Moreover, the 
imposition of non- ad valorem  tariff rates does 
not ensure compliance by Turkey with its WTO binding commitments made at ad 
valorem  rates. In addition to applied and 
bound tariffs, Turkey also maintains the so-called statutory tariff. Indeed, the Government can replace rates of the applied MFN tariff by 150% of the corresponding rates of the statutory tariff, with a view to ensuring higher 
protection to local industries. In the case of 
products subject to tariff bindings, when the new rate (i.e. 150% of the statutory tariff rate) is higher than the corresponding bound tariff rate, then the latter applies. These three 
categories of tariff further complicate the 
regime and make it more unpredictable. 
12. Turkey remains an important user of 
anti-dumping measures. As of August 2007, it had 93 definitive anti-dumping duties in force 
(compared with 27 at the end of 2002). Turkey 
has increasingly made use of safeguards during the last few years, imposing definitive measures on products such as motorcycles, salt, steam irons, vacuum cleaners, and footwear. Turkey has never initiated or 
imposed a countervailing measure. 
13. Import licences are maintained on 
tariff quota administration, health, sanitary, phytosanitary and environmental grounds. Turkey has continued harmonizing its regime 
on standards and technical regulations with Turkey WT/TPR/S/192 
 Page ix 
 
 
that of the EC. Export promotion is one of the 
main objectives of Turkey's trade regime. The incentives system comprises duty and tax concessions, finance, marketing assistance, 
and promotion. There are 20 free zones in 
Turkey (compared with 21 in 2003); in February 2004 new arrangements were made regarding the tax incentives provided under this regime. On the basis of the government 
procurement framework, supplies of Turkish 
origin are eligible for price preferences of up to 15%. Turkey has made progress in enforcing its TRIPS legislation over the last few years. Nevertheless, piracy and counterfeiting of copyright and trademark 
materials have been reported as problematic. 
(4) S
ECTORAL POLICIES  
14. Since its previous TPR, Turkey has 
taken measures to tackle structural problems in some services subsectors, notably the 
monopoly of Turk Telekom over fixed 
telephone line, domestic long-distance and international telephony services ended on 31 December 2003. Nevertheless, various SOEs continue to dominate services activities, and in some cases still operate under 
monopoly, or hold exclusive rights in certain 
branches of the services sector, such as Turkish State Railways. Under the General Agreement on Trade in Services (GATS), Turkey scheduled commitments in several 
service categories, and maintains some MFN 
exemptions. It has also tabled its initial and revised conditional offers in the ongoing services negotiations. 
15. Manufacturing is a major beneficiary 
of state aid.  It is also the main beneficiary of 
various incentive schemes (duty and tax concessions in particular), as well as export credits and guarantees. MFN customs tariffs on manufactured goods (Major Division 3 of ISIC Revision 2) average 10.9% (down from 
11.1% in 2003); relatively high rates (ranging 
up to 225%) continue to apply to some processed food products. The tariff structure does not encourage investment in certain manufacturing activities, such as chemical and 
plastic industries where the tariff displays negative escalation.  Furthermore, high 
effective protection of industries such as textile and apparel, beverages, and tobacco products hampers their competitiveness. 
16. Turkey is implementing a wide-
ranging programme to restructure its agriculture, so as to reduce the burden of support on its economy and move its policies closer to those of the EC's. Some of the 
potentially most production-distorting 
measures in the sector (e.g. administered output prices) are being phased out and replaced by a less distortionary direct support system. Nonetheless, the simple average applied MFN tariff in agriculture is 28.3%, up 
from 25% in 2003. This relatively high tariff 
protection, and the li mited coverage of 
agricultural products under Turkey's preferential trade arrangements (with products generally subject to preferential tariff quotas) 
impedes the exposure of the sector to greater 
competition. 
17. In mining and quarrying, customs 
tariffs average 0.3% (against 0.2% in 2003); imports of electricity are duty free. Several new energy-related laws have been enacted 
over the last few years aiming to further 
liberalize the subsector. The lack of adequate investment, together with large energy waste, still causes power shortages in some areas. Increasing Turkey's electricity generation 
capacity continues to be a top priority for the 
Government, which has open all segments of the electricity subsector (except transmission) to direct private participation. 
(5) T
RADE POLICY AND TRADING 
 P ARTNERS  
18. Turkey is pursuing a strategy of trade 
liberalization through negotiations at the multilateral, regional, and bilateral levels. It is 
actively participating in the Doha Development Agenda. Nonetheless, Turkey's 
membership in several arrangements makes its 
trade regime complex and seemingly difficult to manage. Future trade agreements could further complicate the trade regime and detract from multilateral efforts, given Turkey's WT/TPR/S/192 Trade Policy Review 
Page x 
 
 
limited resources as a single country. 
Moreover, delays in alignment of its preferential trade regime on the EC's may lead to trade diversion to the detriment of Turkey's 
exports. Further multilateral trade 
liberalization, both on goods and services, could reduce the need for preferential trade negotiations. 
19. Turkey is taking steps to move 
towards a competition-based and consumer-
welfare oriented economy to overcome the deep dualities between its few highly productive enterprises and its large number of low-productivity companies. However, the high level of tariff protection in agriculture has 
limited the exposure of the sector to 
competition, and has made it difficult for its products to be exported or to be used as inputs in the production of export goods without  support, including subsidies. This could well 
hinder Turkey's long-term growth performance. 
20. An acceleration of Turkey's structural 
reforms, including completion of the 
privatization agenda, sectoral reforms (e.g. labour, education, health), extension of the scope of tariff binding commitments, reduction of bound rates, and further tariff 
rationalization would contribute to better 
resource allocation. This could attract larger FDI inflows, avoid falling back into the boom-bust cycle of the past, increase the predictability of the trade regime, reduce the need for concessions, and enhance the 
integration of Turkey into the multilateral 
trading system. Trading partners could help by ensuring that their mark ets are fully open to 
goods and services of interest to Turkey.