enforced specified profit margins on designated commodities. The maximum margin of profit to producers or importers varies between 20 and 30 percent; to wholesalers, between 10 to 15 percent; to retailers, between 15 and 25 percent. This regulation requires all importers, exporters, manufacturers, wholesalers, middlemen, and retailers to provide itemized invoices for everything handled by them.

CHAPTER 23

FOREIGN ECONOMIC RELATIONS

The foreign economic relations of Turkey are of pivotal importance in helping the country to achieve a rapid rate of economic growth. Foreign trade provides a means for selling the economy's surplus production, which consists largely of agricultural goods. At the same time the country is highly dependent on imports, especially of industrial products, to fill the gaps in its domestic production facilities. The economy is, therefore, sensitive to the level of Turkey's foreign exchange reserves, which to a degree determine both the quantity and composition of the country's import trade. Foreign governmental aid and private foreign investment are still essential if the country is to reach its development goals as set down in its 5-year plans.

Since World War II the economy has had a chronic trade deficit. This deficit is partly because the country's determination to develop necessitates large imports of industrial goods and partly because certain basic consumer goods are still not produced in sufficient quantities domestically. The grant military assistance Turkey has been receiving as a member of the North Atlantic Treaty Organization (NATO) and the Central Treaty Organization (CENTO) has been declining in recent years. This drain of foreign exchange has been intensified since the renewed tensions of the Cyprus crisis made themselves felt on the nation's expenditures. In addition, Turkey maintains a large army and its budgetary expenditures for defense are considerable.

From 1930 and through World War II the economy ran a consistent trade surplus because there was a large world demand for its agriculture and raw mineral exports and the need for industrial machinery and equipment was relatively small. Since that time, however, the Turkish foreign trade position has suffered from widely fluctuating demand in the advanced countries for raw materials and steeply rising relative prices of finished imports. Turkey's leading exports are tobacco, fruits and nuts, cotton, and oilseeds. Major imports are machinery, equipment, certain finished consumer goods, and petroleum products.

To overcome this trade deficit while continuing its development programs, Turkey has had to rely on annual credits and foreign

exchange loans from its allies in the Organization for Economic Cooperation and Development (OECD), from the International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD-World Bank), and from members and organs of the European Economic Community (EEC-Common Market). More recently, Turkey has sought to improve its trade position through a number of bilateral barter export agreements with the Soviet Union and the countries of Eastern Europe. It also has entered into a long-term aid agreement with the Soviet Union which allows it to repay loans with certain agricultural products.

The trade deficit is not likely to be alleviated in the next few years. Although the First 5-Year Plan (1963-67) came close to fulfilling its rate of growth, the coming Second 5-Year Plan calls for an even greater degree of industrialization, with its concomitant need for imports, while the demand for Turkish exports will be subject to the same limitations as in the past. The First 5-Year Plan envisioned an export program for manufactures to overcome the shortcomings of the Turkish marketing position as a rawmaterials producer. The program met with only limited success, however, partly because of disappointing private investment in the industrial sector and in part to noncompetitive prices.

In the next 5 to 10 years this picture may well change. In 1963, Turkey signed an Association Agreement with the EEC which should begin to affect the country's trade position by 1972. By that time, the country should also have completed the most crucial and difficult of its development stages, making for more diversified exports and a decreasing dependence on finished imports. Although the economy will continue to need the foreign credit assistance of other countries and the international organizations, it is developing a growing ability to use internal monetary and fiscal policies to improve the overall Turkish credit position.

FOREIGN TRADE

Turkey must import manufactured goods, industrial products, raw materials, and fuel. Its industries, none of which produces any significant quantity of exports, rely heavily on imported parts, machines, and transport equipment. The country has made significant gains in the production of petroleum products, in mid-1968 it was not yet self-sufficient. A whole range of finished consumer goods and, in poor crop years, foodstuffs must also be imported. Basic requirements are augmented by defense and development spending. The government's own defense outlays have been increasing with the advent of the Cyprus crisis (see ch. 15, Foreign Relations; ch. 26, The Armed Forces). While the long-range goal

of the development program is to enlarge exports and reduce dependence on imports, its results have not yet had an appreciable effect on the country's balance of trade. Both defense considerations and domestic political commitments produce pressures that make the economy spend beyond its income. Foreign aid makes continuance of this deficit position possible.

The dependence on foreign assistance is a departure from the concepts of the late 1940's which called for national economic self-sufficiency and independence. The government has relied on foreign aid and on investment laws which were aimed at attracting foreign private enterprise to provide the foreign exchange it needed. The parties in opposition to the ruling Justice Party, have, however, taken a more negative attitude toward cooperation with foreign private enterprises while stressing the need to maintain balanced governmental aid agreements with both the East and the West.

Government Role in Foreign Trade

The government regulates all primary foreign trade functions and, in addition, is sole importer and exporter for certain products. Foreign trade was formerly controlled by the Greek, Armenian, and Jewish minorities. In 1968, however, these individuals have been largely replaced by Turkish businessmen.

Recognizing that for the next few years the country's import needs will continue to exceed its export capacity, the government enforces a host of regulations all designed to put limitations on importing and to foster domestic production. Within the confines of the General Agreement on Trade and Tariffs (GATT), of which Turkey is a member, the government uses a variety of policies to control foreign trade. Direct control of imports takes place through a system of high tariffs and quotas. Some goods deemed nonessential are placed on the global quote list and their importation is limited; others are prohibited altogether.

In addition the government regulates the use of foreign exchange by requiring importers to obtain licenses. Both quotas and import-license regulations are announced in July and January of each year. Preferences are given to industrial products, machinery, and equipment. Certain crucial military and development items are not subject to foreign exchange controls. The General Directorate of Monopolies of the Republic of Turkey (Türkiye Cumhuriyeti Tekel Idareşi-TCTI) a unit of the Ministry of Customs and Monopolies, is sole importer of the items for which it holds the manufacturing monopoly in Turkey; these are tobacco products, alcoholic beverages (except beer, wine, and whiskey), tea, gunpowder, and dynamite.