Includes the barriers (tariff and non-tariff) that U.S. companies face when exporting to this country.
The EU-Turkey Customs Union, established in 1995, covers 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 due to the Customs Union, the average duty rate for imports from the EU and EFTA countries dropped from approximately 10% to zero. Turkey has reserved some exempted categories for sensitive products with tariffs on these items generally much higher than the CCT. Many agricultural goods remain protected by steep tariffs.
Turkey is a member of the 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 implementation of reference price systems, lack of control certificates, new burdensome documentation requirements, and unnecessary and intrusive inspections can serve as non-tariff barriers. Even though customs legislation is a direct translation of EU legislation, there may be differences in how they are interpreted and, therefore, implemented in Turkey.
The GoT adheres to a ‘reference pricing’ model for pharmaceuticals whereby the pharmaceutical prices in France, Spain, Italy, Portugal, and Greece are referenced and prices are determined based upon the lowest reference price available in those markets. If a product is an original drug, the price is set at 100% of the lowest price among those five countries. However, if it is a generic product, it is set to 60%. As reimbursement is determined by prices denominated in euros, the TL-EUR exchange rate is vital to the feasibility of pharmaceutical products in the Turkish market. Since 2015, at the beginning of each year, the GOT announces a fixed TL-EUR rate for use that year. In 2015, this rate was determined by taking 70% of the previous year’s average TL-EUR exchange rate. It was amended in early 2019 to 60% of the previous year’s average. This policy has been problematic for U.S. and other non-Turkish pharmaceutical companies’ ability to remain viable in the Turkish market. Consequently, several new, innovative pharmaceutical products have either been delayed or not entered the market altogether.
Agricultural trade is subject to tariff quotas and price regulation, and thus a significant degree of protection. The agricultural and pharmaceutical sectors especially are 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.