Turkey’s resistance to trade liberalisation with the EU through temporary trade barriers

Baybars Karacaovali 04 September 2011

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Turkey, as a major emerging economy, started to use antidumping policies in 1989 and has since been one of its more active users (Bown 2010). Beginning in 2005, Turkey also adopted global safeguard measures, and this policy quickly became a significant temporary trade barrier (TTB) complementary to antidumping. More recently, Turkey has implemented a number of China-specific safeguards and countervailing duties, and its total use of temporary trade barriers increased especially over the second half of the 2000s (Figure 1). Moreover, temporary-barrier initiations resulted more frequently in imposed measures in the 2000s, and there was some tardiness in the removal of existing barriers playing a role in the recent build-up of Turkey’s stock of barriers.

Figure 1. Turkey’s use of temporary trade barriers, 1990-2009

a. Share of temporary trade barrier-impacted HS-06 products by count

b. Share of TTB-impacted HS-06 products by import value

Source: Author’s calculations using Temporary Trade Barriers Database-TTBD (Bown, 2010) and COMTRADE, UN Statistics Division.

Turkey went through significant trade liberalisation as it fully formed a customs union with the EU in January 1996. As a result of the customs union decision, Turkey has abolished all trade barriers in the manufacturing sector vis-à-vis the EU, and it has considerably reduced barriers against third party countries by adopting the EU’s common external tariff. Turkey has also gradually taken on an array of EU preferential trading relationships, such as the euro-Mediterranean partnership and Generalised System of Preferences. Turkey formed free-trade areas with the European Free Trade Association in 1992, and then with the prospective EU candidate countries in Central and Eastern Europe since joining the customs union.

The drastic intra- and extra-group trade liberalisation—brought on by the adoption of the common external tariff of the EU and its preferential agreements as well as the requirement to finalise the liberalisation of sensitive sectors—is a potential contributing factor to the rise in Turkey’s use of temporary trade barriers. Due to various trade policy commitments with the EU, temporary trade barriers offer one of the few channels through which Turkey retains some control over its trade policy.

Turkey has been significantly affected by the 2008-9 global economic crisis, with especially negative effects in 2009. After six years of positive growth, Turkish real GDP per capita contracted by 0.6% in 2008, and by 6% in 2009. The 2008-9 crisis proved to be as severe as Turkey’s two previous major economic crises; in 1994, real GDP per capita declined by 6.3%, and in 2001 it fell by 7.1%. However, unlike the earlier crises, both Turkey’s imports and exports declined in 2009, an experience shared by the rest of the world (WTO, 2010). The 1994 and 2001 crises were financial in nature as the Turkish lira depreciated sharply. Consequently, Turkey’s exports kept increasing while its imports declined during those periods.

During 2008-9, Turkey considerably increased its use of temporary trade barriers. Nevertheless, apart from the significant emergence of global safeguard measures, it is hard to argue that the 2008-9 increase was not part of a pre-existent upward trend. Yet, the full response to the crisis may be felt with a lag as Turkey may adopt more temporary trade barriers after the crisis.

Turkey’s use of temporary trade barriers has become more widespread across sectors over time. The products that Turkey has covered with temporary trade barriers coincide with the list of goods that were deemed ‘sensitive’ in its initial agreement with the EU. These products had higher rates of import protection that were phased out by 2001. Turkey has increasingly targeted textiles, especially after the expiration of the WTO Agreement on Textiles and Clothing that allowed Turkey to use import quotas despite the customs union agreement. The expiration of this agreement in January 2005, accompanied by China’s accession to the WTO in late 2001, were likely contributors to the expanding set of products in this sector being targeted by Turkish temporary trade barriers beginning in 2002.

In general, Turkey does not target established EU members, although there is no legal prohibition against doing so. Turkey mainly targets developing countries, and especially China (Figure 2).

Figure 2. Share of HS-06 product-target country combinations subject to a temporary trade barriers by country group (stock)

Source: Author’s calculations using TTBD (Bown, 2010) and COMTRADE.

China has increasingly borne the brunt of Turkey’s protection over the 2000s, in comparison to any other nation or country group. Between 2000 and 2009, China was involved in 43% of all antidumping cases and 82% of distinct investigations. This figure becomes even starker when comparing China to the next countries in line. Taiwan and Thailand faced only 7% (13%) and 6% (12%) of the antidumping cases (distinct investigations), respectively. Moreover, in 65% of the cases against China, it was the only country named in the investigations.

Finally, on average, the products that Turkey has subjected to temporary trade barriers have higher tariff rates and preference margins. The political economy forces that lead to higher tariff protection and more preferential access seem also to affect Turkey’s use of temporary trade barriers.

If these trends continue, temporary trade barriers can potentially add up to a significant amount of new protection covering several products. Given the existence of its various preferential agreements, this may lead to further efficiency losses from trade diversion on top of the already welfare-reducing effects of protection for Turkey.

References

Bown Chad P. (2010), “Temporary Trade Barriers Database”, The World Bank, July.
Karacaovali, Baybars (2011), “Turkey: Temporary Trade Barriers as Resistance to Trade Liberalisation with the EU?”, in Chad P Bown (ed.), The Great Recession and Import Protection: The Role of Temporary Trade Barriers, CEPR and the World Bank.
World Trade Organisation (2010), International Trade Statistics 2010. Geneva, Switzerland: WTO.

 

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Topics:  International trade

Tags:  antidumping, Turkey, temporary trade barriers

Assistant Professor of Economics at the University of Hawaii at Manoa

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