Turkey and the EU formed a Customs Union in 1995 covering industrial products and processed agricultural goods. Turkey adopted the EU’s common external tariff (CET) for most industrial products and for industrial components of agricultural products. Both the EU and Turkey agreed to eliminate all customs duties, quantitative restrictions, and charges with equivalent effect on their bilateral trade. Turkey’s adoption of the EU’s CET also resulted in lower duties for imports from third countries, including the United States. The Customs Union allows for zero duty rates and no quotas for non-agricultural items of EU and European Free Trade Association (EFTA) origin. Turkey and the EU have discussed modernizing and expanding the Customs Union to cover additional sectors such as services and agricultural goods, though political concerns have complicated the process. 

The GoT estimates that the average duty rate for imports from the EU and EFTA countries dropped from approximately 10% to zero due to the European Customs Union. Turkey has reserved some exempted categories for sensitive products with tariffs on these items generally much higher than the CCT. Certain agricultural goods remain protected by steep tariffs.

Turkey is a member of the World Trade Organization (WTO) and regulates its customs in line with General Agreement on Tariffs and Trade (GATT) requirements. While generally in compliance with the WTO agreement, Turkey often fails to notify the WTO of changes to import requirements. When this occurs, companies’ views are often not considered, nor are they given ample time to comply and adapt to changes in how they do business. These changes to import requirements accompany other non-tariff barriers to trade such as the implementation of reference price systems, lack of control certificates, new burdensome documentation requirements, and unnecessary and intrusive inspections. Even though customs legislation is supposedly a direct translation of EU legislation, there may be differences in how legislation is interpreted, and therefore implemented, in Turkey.

The GoT adheres to a ‘reference pricing’ model for pharmaceuticals whereby the government uses a medicine’s lowest warehouse sales price selected from among five EU countries. This reference price is then converted to TL using the prior year’s average TL/euro exchange rate multiplied by an adjustment factor of 0.6.  This policy has been problematic for U.S. and other non-Turkish pharmaceutical companies’ ability to remain competitive in the Turkish market, especially in years where the TL has depreciated rapidly, and has consequently resulted in U.S. pharmaceutical companies delaying or avoiding introducing certain new, innovative pharmaceutical products.

Agricultural trade is subject to tariff quotas, onerous and non-science-based requirements, limiting foreign competition in certain domestic agricultural sectors. The agricultural and pharmaceutical sectors, especially, operate under several protectionist measures such as localization requirements that have also been extended to other industries like apparel and medical devices. Moreover, the Turkish procurement system remains prone to opaque and lengthy tendering processes, onerous terms and conditions, and substantial delays, which can hamper a bidder’s ability to effectively engage and compete.