People living in Turkey might have very well experienced it, people, like the author, looking at Turkey as an independant observer, might not know it too much. Since it's foundation in 1923, Turkey witnessed turbulent times almost thoroughgoing the 20th Century. Political as well as economical wise. Economically the climax was reached when Turkey felt into international insolvency in 1978. From then on, although attempts were made in earlier years too, large reforms were introduced. In this paper we will look at the Turkey's trade policy before and after the liberalization reforms of the 1980's.
Trade liberalization mostly implies less intervention by the government in the
traded goods sectors. But whether a less interventionist trade regime results in a less distorted, more open and outward oriented economy will depend on the characteristics of the pre- and post-reform trade and exchange rate regimes. This paper aims to present a general survey about Turkish trade policy: a bird's eye view. The author therefore abstains from generating a model and test the impact of the reforms on one single industry. Instead, such regression results are rather resorted to other studies, in order to generate an appropriate picture of the trade liberalization as a
whole without getting stucked into detail too much on the one hand, and without
staying out of detail too much on the other hand. The rst section outlines the
economical background of Turkey from the pre-1980-reform period at rst and con-
tinues with a presentation of the reforms imposed from 1980 onwards. It draws a
historical picture as well as it points out the main impacts on the export and import pattern of Turkey's foreign trade. The following section deals with Turkey's accession of the Customs Union of the European Union in 1996. There is economical and politacal weight ascribed to the accesion as it is seen to be a major step towards a full membership of the European Union for Turkey. After outdrawing the historical backgrounds of the accesion, we will look at its impact on trade for several sectors, mainly by examining a study done by De Santis in 2001. Another section shows some empirical observations on trade indicators and their change in respect to the liberalization reforms.
Table of Contents
1 The Issue
2 Trade Liberalization in Turkey
2.1 The Pre-1980 Period
2.2 The 1980’s Reforms and their Impact on Turkey’s Foreign Trade
3 Turkey and the European Union Customs Union
3.1 Trade Creation or Trade Diversion ?
4 Empirical Observations of Trade Liberalization in Turkey
4.1 Protection Rates
4.2 Import Elasticities
5 Conclusion
Research Objectives and Focus
This paper aims to provide a general survey of Turkish trade policy, specifically examining the transition from an inward-looking economy to an outward-oriented one following the liberalization reforms of the 1980s and the subsequent accession to the European Union Customs Union in 1996.
- Historical analysis of Turkish trade policies since the pre-1980 period.
- Evaluation of the 1980s economic reforms and their impact on export and import patterns.
- Investigation into the economic implications of the Customs Union with the European Union.
- Assessment of trade creation versus trade diversion effects in the Turkish economy.
- Empirical review of protection rates and import demand elasticities.
Excerpt from the Book
3.1 Trade Creation or Trade Diversion ?
In the economic theory a customs union can act like a double edged sword. The elimination of tariffs among the members of the customs union can lead to additional trade, which is welfare enhancing if it replaces high-cost domestic production with low-cost imports from another member nation. Trade is then created, thus this effect is called trade creation. Trade diversion occurs when tariffs with respect to the rest of the world remain high. The additional trade created between the member nations would then replace lower-cost imports from the rest of the world. A trade-diverting customs union results in both trade creation and trade diversion, it can therefore increase or reduce the welfare of member nations. It is the relative weight of these two effects that will determine the overall impact of the customs union.
Given the relatively low level of the common external tariffs, and the large size of the European Union, the intuitive prediction would be that trade creation would dominate trade diversion. By using a static multi-sector, multi-labour, multi-household Applied General Equilibrium (AGE) model, De Santis (2001) shows that changing the protection rates to the prevailing rates in 1996 is not trade diverting.
Chapter Summaries
1 The Issue: This chapter introduces the historical economic context of Turkey from 1923 and sets the stage for analyzing the liberalization reforms of the 1980s and the Customs Union.
2 Trade Liberalization in Turkey: This section details the pre-1980 restrictive period and the fundamental shift in economic policy initiated in the 1980s towards export-led growth.
3 Turkey and the European Union Customs Union: This chapter explores the integration process with the European Union, the institutional framework of the Customs Union, and the theoretical concepts of trade creation and trade diversion.
4 Empirical Observations of Trade Liberalization in Turkey: This section provides an empirical analysis of protection rates and import demand elasticities to measure the effectiveness of trade liberalization.
5 Conclusion: The final chapter summarizes the transformation of the Turkish economy and evaluates the overall positive impact of trade reforms and the Customs Union.
Keywords
Turkish Economy, Trade Liberalization, Customs Union, European Union, Export-led growth, Import Substitution, Protection Rates, Trade Creation, Trade Diversion, Import Elasticities, Economic Reform, Foreign Trade, Manufacturing, Market Integration, Structural Adjustment
Frequently Asked Questions
What is the primary focus of this paper?
The paper provides a comprehensive survey of Turkish trade policy, focusing on the country's transformation from a closed, inward-looking economy to an export-oriented, liberalized market.
What are the central themes of the research?
The core themes include the 1980s economic reform program, the accession to the EU Customs Union, and the empirical measurement of trade efficiency, specifically regarding export growth and import penetration.
What is the primary research objective?
The goal is to provide a "bird's eye view" of how Turkish trade policies changed over time and to analyze whether these reforms led to welfare-enhancing outcomes through trade creation rather than trade diversion.
Which scientific methods are employed?
The author uses a qualitative historical review combined with an analysis of quantitative indicators, such as macroeconomic growth data, import penetration ratios, and findings from Applied General Equilibrium (AGE) models.
What is covered in the main body of the work?
The main body examines the pre-1980 economic period, the 1980s structural adjustments, the history and impact of the 1996 Customs Union, and empirical data on sector-specific import and export behaviors.
Which keywords best characterize this work?
Key terms include trade liberalization, Customs Union, export-led growth, import substitution, and trade creation.
What is the author's stance on the Customs Union's impact?
The author concludes that the Customs Union has been largely positive for Turkey, noting significant trade creation with minimal trade diversion.
How does the author address the issue of trade diversion?
By citing empirical studies and models, the author argues that because European Union trade shares remained consistent and overall market access increased, trade creation has dominated over potential diversion effects.
- Quote paper
- Skanderbeg Schmusch (Author), 2008, Turkey's trade liberalization and it's accession to the European Union Customs Union, Munich, GRIN Verlag, https://www.grin.com/document/116113
