The Liberalization of International Trade in Turkey during the 1980s

In 1979, Turkey was forced to reschedule its debts to western governments and foreign commercial banks. A precondition for rescheduling was the acceptance of the IMFs structural adjustment programme implemented in January 24, 1980. The immediate goals of the programme were the reduction of inflation and the balance of payments deficit. The programme also aimed at changing radically Turkey’s development strategy by an increased reliance on market forces. The most important steps taken towards increased reliance on market forces concerned exchange rate management and trade policy. The traditional policy of fixed exchange rates was replaced by periodic small adjustments. These assumed a daily pattern in July, 1981. As a result, the real exchange rate depreciated with a consequent increase in export competitiveness. Furthermore, the system of multiple exchange rates was phased out by mid-1981. More Significantly, in 1984 the govern· ment undertook a sweeping liberalization of foreign trade by dismantling all import quotas and import bans. The purpose of this paper is to investigate to what extent the recent trade reforms have resulted in a more open economy and in what way they have affected the structure of nominal and effective protection. The following section examines the reforms in the import regime of Turkey. Section 3 discusses the characteristics of the inter-industry distribution of protection and the final section provides some policy recommendations.