FOREIGN TRADE OF TURKEY

Foreign Trade Policy

Due to the implementation of the liberalization process since the 1980s, the Turkish economy has experienced a period of high growth. Foreign trade, both in exports and imports, has grown rapidly and noteworthy changes in the structure of exports have taken place. The dominant role of agricultural products in exports came to an end in favour of industrial products. At the same time the product composition of exports diversified and the volume of foreign trade increased about three-fold in that decade.

The Customs Union established with the European Union and the conclusion of the Uruguay Round are the main determinant factors shaping Turkey's foreign trade policies and orientations. The Customs Union incorporates Turkey into the single European market by extending most of the EU's conventions on trade and competition to Turkish industry.

Foreign Trade Volume/Trade Balance

In 2005, Turkish exports reached over US$ 73 billion, recording an increase of 16% over 2004. Imports on the other hand recorded an annual increase of 19.3 %, parallel to the boost in the domestic production and amounted to US$ 116,3 billion. The foreign trade volume reached to US$ 189.6 billion with an increase of 18% compared to the previous year. The export/import ratio decreased from 64.7% in 2004 to 63.0% in 2005. The foreign trade balance showed a deficit of US$ 43.1 billion, registering an increase of 25.3% compared to 2004.

Imports

The Turkish import regime highlights the liberalization of Turkish imports in line with its commitments to complete the Customs Union with the EU, its relationship with EFTA and its obligations under the WTO. Turkey placed special emphasis on its engagement to reduce the customs duties in order to align itself with the Common Customs Tariff. Turkey made the necessary modifications in its import regime, and by January 1, 1996 the Customs Union with the EU became effective.
The basic aims of the Turkish import policy since the early 1980's could be summarised as follows:

* Reduction of protectionist measures in conformity with the new GATT rules
* Reduction of bureaucratic procedures
* Securing the raw material supply and intermediary goods at suitable prices with certain quality standards.
In 2005, Turkish imports recorded an increase of 19.3%. This rise in imports was due to strong domestic demand, high oil prices, keeping Turkish Lira still strong and growth in demand for Turkish export products highly de-pendent on imported inputs in production. According to the main commodity groups, the share of capital goods in total imports was 17.4% with an increase of 16.7% over 2004. The imports of intermediate goods on the other hand constituted 70.1% of total imports and attained US$ 81.5 billion with a rise of 20.7% as compared to the previous year. An increase of 15.2% was recorded in the imports of consumption goods at the end of 2005. The share of consumption goods was 12.0% with a value of US$ 13.9 billion.
As for the main sectors, the share of agricultural products in total imports was 2.4%. Imports of mining and quarrying products took a share of 14.0%. In 2005, manufactured products remained to be the largest product group in imports. The share of manufactured products was 80.7% with a value of US$ 93.8 billion in 2005 and with an increase of 16,6% compared to the previous year. As for agricultural products, cereals and animal or vegetable fats and oils are the major import items while mineral fuels and oils, machinery and mechanical equipment, electrical machinery and equipment, iron and steel, plastic products, vehicles and parts, organic chemical industry products and pharmaceutical products are important among industrial products.

As in past years the OECD countries took the largest share In total imports. The value of imports from OECD countries was US$ 65.8 billion in 2005 with a share of 56.6 % in total imports. Imports from EU countries took the biggest share In this group. Their share in total imports was 46.6% with a value of US$ 45.4 billion. Five EU members are among the top ten suppliers of the Turkish market. Germany is the first source for Turkish imports. Imports from Germany registered a rise of 8.6% compared to the previous year and amounted to US$ 13.6 billion. Germany's share in total imports was 11.7% in 2005. Russian Federation ranked second as an important source with its 11.0% share with a value of US$ 12.8 billion. It is followed by an OECD member, Italy, with a share of 6.5%. One of the most striking countries in Turkish imports in 2005 was China which climbed two ranks up, to the fourth rank replacing both France and USA first time, recording US$ 6.8 billion and costituting a share of 5.9% in total im-ports of Turkey. The fifth major supplier country of Turkey in 2005 was France with a share of 5.0 % and value of US$ 5.9 billion. The Turkish imports from USA remained only at the 6tn rank in 2005, having a share of 4.6% and value of US$ 5.4 billion. Imports from OECD countries were increased by 10.5 % in 2005. In 2005, significant import increase from Islamic Conference member countries was observed reaching to US$ 14.4 billion and constituting the share of 12.4 % over total imports. The increase was about 36 % compared to previous year.

Exports

In 2005, exports of agricultural products grew by 30.5% in comparison with the previous year, and also their share in total exports increased from 4.0% to 4.5%. In mining and quarrying products, an increase of 24.5% was observed over 2004 and their share in total exports was registered as 1.1%. The share of manufactured products in total exports on the other hand was 93.7% in 2005, recording an annual increase of 15.3%, amounting to US$ 68.6 billion.

share of 3.7% in total exports and Irak has turned out to be the 6tn major export partner country of Turkey.

In 2005, the OECD countries took a share of 60.4% with a value of US$ 44.3 billion in the total exports of Turkey. Among OECD members, exports to the EU were US$ 38.3 billion, which is equal to 52.3% of total exports. Among the top ten markets for Turkey, eight of them are from the OECD group. Top ten markets accounted 59.3% of total exports in is Edible fruits, which constitute the backbone of agricultural exports, showed an increase of 31.1% and amounted to US$ 2.5 billion in 2005.

Among industrial products, the textile and ready-to wear industries continued to play a major role in Turkish exports. Iron and steel products are another important group in exports with US$ 4.7 billion in 2005. Electrical machinery and equipment, non-electrical machinery and mechanical equipment, motor vehicles and parts are other important export products. Exports of vehicles and parts have shown a sig-nificant increase of 15% in 2005 and amounted to US$ 9.5 billion.

Turkey's export markets are highly diversified. The largest export market for Turkish products is Germany. Turkish exports to Germany have increased since the unification of East and West Germany.

Turkey's exports to Middle-Eastern and Asian countries have increased overall since 1990. As the UN embargo on trade with Iraq lifted in May 2003, Turkey realised US$ 2.7 billion exports to Iraq in 2005, with a 2005. In this group, Germany, with its 12.9% share, is the major market for Turkey. Turkey's second largest export market is the U.K with a share of 8.1% whereas Italy with its share of 7.7% constitutes the third largest market for Turkey replacing the 3rc' rank of USA in 2004. Member countries of the Islamic Conference took a share of 17.7% in exports of 2005 with a value of US$ 13.0 billion