Trading Problems in Turkey in Term Paper

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On the other hand, in other economic segments, foreign participation is limited to under 50%, depending on the industry.

The problems that these trade measures that the Turkish government tends to impose bring about are related to the capacity of foreign exporters to penetrate the local Turkish market. First of all, it is a matter of competitiveness. If the exporting company needs to pay additional taxes in the form of import taxes on the Turkish border, then its overall costs of production and transport will increase with the same amount. This means that the breakeven value for the foreign company for that respective trade will be higher than if the import duty was not applied. In order to remain profitable (on that respective trade) the company will need to increase the final revenue and this can only be done by increasing the price at which that product is sold on the local market to the Turkish customers.

The problem at this point is that on the local market, the foreign product, which was imported to Turkey, will be competing in terms of customer preference with the locally produced good or service. As the local producer will have not paid an import tax (in some situations, the producer might have even benefited from a governmental subsidy, thus further lowering its overall production cost), he will be able to afford to sell the product on the local market at a much lower price than the foreign producer, because he will be able to afford a lower breakeven point. This will make locally produced goods and service more competitive for local customers and easier to be sold. The higher the important taxes and tariffs, the lower the chances of a company remaining profitable with its products on the market.

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At the same time, there are several other non-tariff barriers to be considered, as previously pointed out. These play a significant role as well. For example, in the case of agricultural products, non-tariffs barriers often come in the form of licenses or specific requirements to which the products must adhere if they are to be imported on the local market. Due to the fact that extra requirements must be fulfilled, the overall cost of production will also increase, in the same manner as previously shown in the case of import taxes.

Administrative non-tariff barriers, on the other hand, will tend to delay the sale procedure, to the point where the products are no longer viable on the market or can no longer be successfully sold, because the right time has passed.

In the case of services, this is even more complicated. There are no actual import tariffs that can be applied, however, governmental intervention in several key sectors make it a problem to actually commercialize services in those areas.

The example with the petroleum and financial sectors were relevant in this sense.

In Turkey's case, problems in trade matters appear due to the tariff and non-tariff barriers that the government will tend to apply in order to protect local producers or strategic industries. While this is beneficial to some degree for the locals, foreign companies find it difficult to penetrate the market and remain competitive......

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