How should we read the Medium Term Plan 2025-2027 regarding foreign trade?

REMZİ AKÇIN
Unsped Customs Consultancy
Chairman of the Board

The Medium Term Program (MTP) is the 3-year road map of the economy. The MTP, implemented annually by Presidential decree, includes macro policies, principles, targets and indicative key economic aggregates, total revenue and expenditure forecasts, budget balance and borrowing status, and appropriation proposal ceilings of public administrations. It is also the main policy document that initiates the central government budget preparation process. 

The objective of the MTP is to strengthen predictability for the public and private sectors by setting macroeconomic targets and policies in economic and social areas in light of global, regional, and national economic developments.

The MTP covering 2024-2026 was published in the Official Gazette dated September 6, 2023, and the MTP covering 2025-2027 was published in the Official Gazette dated September 5, 2024. How does the 2025-2027 MTP differ from the previous MTP in terms of customs and foreign trade, which emphasizes the goals of ensuring price stability by reducing inflation to single digits in the medium term, ensuring technological transformation with a focus on transition to a green and digital economy, and reducing informality in the economy? We wanted to put this on the table.

In both MTPs, both the current period assessment and policies and targets regarding foreign trade are included under the “balance of payments” heading. In addition, the table titled “Arrangements for priority reform areas”, which constitutes Annex 3 of the document, sets out the contents of the areas that are envisaged to be regulated. It is possible to access the developments and targets in terms of foreign trade and customs by analyzing the contents of these titles of the previous and subsequent MTPs

In the 2024-2026 MTP, under the heading “Macroeconomic Targets and Policies”, policies and measures related to the balance of payments are listed under 53 headings and at the micro level. In the 2025-2027 MTP, most of the same policies and measures are categorized under the following headings from a more macro perspective:

Green and digital transformation in exports,
Product and market diversification,
Effective trade diplomacy,
Trade facilitation,
Export financing,
Reducing import dependency,
Development of service exports.

Aside from the way the policies and measures are written, the targets in both MTPs overlap in general. In the first MTP, the targets are more detailed in bullet points, while in the second MTP they are categorized and written in a more macro context. However, it is worth noting that there are some differences.

In my personal opinion, the most important difference between the two MTPs is that in the 2024-2026 MTP, “Efforts will be carried out before the European Union (EU) institutions and member countries to update the Customs Union, the reform of the EU Customs Code will be closely monitored and efforts will be made to harmonize the Customs Law and establish EU information systems.” In the 2025-2027 MTP, the target was changed to “ Efforts will be continued before the European Union (EU) institutions and member countries to update the Customs Union”. This change should be read as meaning that Türkiye's goal is only to update the Customs Union and that the goal of updating the Customs Code in line with the EU Customs Code and establishing an EU information system has been abandoned.

Article 54 of the Association Council Decision 1/95, which sets out the principles of the Customs Union between Türkiye and the European Union, stipulates that Turkish legislation in areas directly related to the functioning of the Customs Union shall be harmonized with Community legislation as far as possible. In the second paragraph of the said Article, the areas directly related to the functioning of the Customs Union are listed as follows:

Community trade policy and preferential trade agreements with third countries,
Legislation on the removal of technical barriers to trade in industrial products,
Antitrust policy,
Legislation on intellectual and industrial property rights,
Customs legislation.

Thus, harmonization of customs legislation with the EU Customs Code is an obligation imposed by the Association Council Decision No. 1/95. In accordance with this obligation, the current Customs Law No. 4458 was put into force on February 5, 2000, in line with the EU Customs Code, and the amendments made to the EU Customs Code in 2009 and 2013 were reflected in this law. However, the EU Customs Code put into force a new Customs Code based on the execution of all transactions in the electronic environment, postponed its implementation due to the failure of the member countries to complete their technical infrastructure and started its implementation upon completion of the technical infrastructure. The most important component of the implementation of the EU Customs Code, which includes significant differences within the scope of customs regimes, is the execution of all transactions electronically. For this reason, not only the amendment of the Customs Code is not sufficient for harmonization, but also the establishment of a technical infrastructure compatible with EU information systems is mandatory for the implementation of the Code. Naturally, this will be a lengthy process.

The removal of the New Customs Law, which was initiated in 2016 and opened for consultation in 2019, from the 2025-2027 MTP means that there is no such objective at least until the end of 2027. Of course, this regulation may be made despite not being stated in the MTP, or the issue may be shaped according to the decision to be taken as a result of the updating of the customs union, but it would not be wrong to interpret the fact that a target included in the previous MTP is not included in the next MTP as it is no longer a target.

We believe that it is important to emphasize both “green and digital transformation in exports” and “development of services exports” in the 2025-2027 MTP balance of payments policies and targets. It would be beneficial to keep these issues, which are among the most current and most important issues in the field of foreign trade, which will become even more important in the future, and which constitute both risks and opportunities for Türkiye's exports, at the forefront and constantly on the agenda.

However, the title “reducing import reliance” raises the question of whether there will be a reversal in foreign trade policy. Reducing import reliance implies that imported products should be produced in the country without considering the price advantage, in other words, the import substitution foreign trade policy. Prior to the January 24th Decision in 1980, Türkiye pursued a closed foreign trade policy based on self-sufficiency (import substitution) and protected domestic production with high customs duty rates. However, as Türkiye was unable to find enough foreign investments to cover its energy imports, the January 24th Decisions led to an export-prioritizing, export-led, open growth strategy. Therefore, we believe that it is more accurate to evaluate this target as increasing the added value in production, rather than abandoning the stated strategy.