Beginning from 1980, the Turkish Government embarked upon series of reforms which were designed to remove price controls and reduce subsidies, lessen the role of the public sector in the economy, emphasise growth in the industrial and service sectors, encourage private investments and savings, liberalise foreign trade, reduce tariffs and promote exports, ease capital transfer and exchange controls, encourage foreign investments, make the Central Bank more independent and reform the taxation system. Turkey moved towards full convertibility of the Turkish lira by accepting the IMF agreement's related article in 1990.

Turkey's exchange and trade systems have been liberalised extensively since the 1980s as a part of the economic reforms mentioned previously. Turkey now follows an independently floating exchange rate policy under which the exchange rate is determined daily. Commercial banks, special financial institutions, change offices and the PTT are free to set their exchange rates according to existing market conditions.

Due to the implementation of the liberalization process the Turkish economy 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-folds in that decade. 

At the beginning of the 1990s, due to unfavourable political and economic conditions both inside and outside the country, Turkey's trade balance suffered since the Gulf Crisis with its economic embargo against Iraq, the war in Bosnia and the stagnation in the OECD countries which are the main export markets of Turkey have all impeded exports. In addition, strong domestic demand, lower customs duties and overvaluation of the Turkish lira caused a boom in imports. All these factors caused a large trade deficit of $14 billion in 1993.

On April 5th 1994, the Government introduced an Economic Stabilization and Structural Adjustment Program. In particular, the program aimed at reducing the rate of inflation, maintaining the balance of foreign trade and restoring stability in the foreign exchange market. The implementation of the Stabilization Program resulted in revitalized economic activity and a growth rate of 8% in 1995.

The Customs Union established with the European Union on January 1st  1996 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. The Customs Union will provide a boost to Turkey's industries that are already competitive, mainly the existing export sectors, including textiles and glass and ceramic products. In case of third countries, Turkey's arithmetic average import duties for industrial products have been reduced to 5.8% in 1996 and further to 5.6% in 1999. Turkey is close to complete the harmonisation of its commercial laws and regulations on the free movement of capital in conformity with those of the EU. Turkey is adopting trade arrangements with a number of countries corresponding to those in effect between them and the EU. Within this framework an agreement between Turkey and the European Coal and Steel Community on trade of the products covered by the ECSC Treaty was signed on July 25, 1996 in Brussels. Furthermore free trade agreements with the EFTA member countries, Israel, Romania, Hungary, Lithuania, Estonia, Czech Republic, Slovakia, Bulgaria, Latvia, Slovenia, Macedonia and Poland have been completed while negotiations with other countries continue.

Turkey wants to develop multilateral trade in international economic relations on the one hand, and try to take maximum advantage of the contributions provided by regional integration on the other.

Turkey has taken the lead in the establishment of the Black Sea Economic Co-operation Zone, which intends to create a regional trade organization of countries surrounding the Black Sea. Agreement has been reached with Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, the Russian Federation and Ukraine to establish a Black Sea Development Bank, which will promote regional projects in the area. Turkey has also embarked on efforts to get a share in new export markets in parts of the world, which are not among Turkey's traditional markets.

On the other hand Turkey is a member of the Organization for Economic Co-operation (ECO) and conducts its relations with Islamic countries under the Organization of the Islamic Conference. In addition to fostering economic and political relations with many countries both in Europe and in the Middle East, Turkey is currently improving its relations with Azerbaijan, Kyrgyzstan, Tajikistan, Turkmenistan, Kazakhstan and Uzbekistan.

Foreign Trade Volume/ Trade Balance

In 2000, Turkish exports reached $ US 27.3 billion, recording a increase of 2.8% over 1999. Imports on the other hand recorded a significant annual increase of 32.7% and reached to $ US 54 billion. The main reasons of this rise were overvaluation of Turkish Lira owing to the pre-announced exchange rate policy implemented in the framework of the disinflation program, the relative fall in interest rates and strengthening of domestic demand.

The foreign trade volume realised as $ US 81.3 billion with an increase of 21%. The export/import ratio fell from 65.3% in 1999 to 50.6% in 2000. The foreign trade balance gave a deficit of $ US 26,7 billion, registering an increase of 89,1% compared to 1999.

FOREIGN TRADE OF TURKEY (US $ THOUSAND)  

Source: State Institute of Statistics

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