ECONOMY

Greek-Turkish trade rises

After four years of negotiations, Turkey and Greece are close to signing a very important agreement. The agreement on the exemption of double taxation will greatly help boost trade between the two countries. However, there are still some thorny issues to resolve. Economy and Finance Minister Nikos Christodoulakis was to have visited Ankara on July 17-18 to sign the agreement. The trip, however, was postponed, after a meeting of officials from several ministries involved on July 10, in Ankara, did not end as expected. According to Kathimerini sources, some issues, such as the taxation of shipping, remain unresolved. Greece insists that only the ships carrying the Greek or Turkish flags be reciprocally taxed, while Turkey, knowing full well that many Greek owners use flags of convenience, insists on taxation on the basis of the headquarters of the ships’ owners. An Economy and Finance Ministry official said that signing such agreements is not an easy process, as both countries – or, rather, both governments – stand to lose money. Each country wants to minimize its losses. The official mentioned a similar agreement with Russia, which took 10 years to negotiate. Greece has so far signed 46 double-taxation-exemption agreements and four more await ratification by Parliament. In any case, the Greek delegation is optimistic that it is «very close to an agreement» with Turkey and members say the agreement will be signed sometime in the fall. According to data made available by the Economic and Commercial Affairs Bureau at the Greek Consulate in Istanbul, Greek exports to Turkey increased at a very slow pace during the first five months of the year, while Turkish exports to Greece have increased spectacularly. Specifically, Greek exports have increased 7.54 percent to $156.98 million from $145.98 million in the same period in 2002, while Turkish exports have risen 69.18 percent to $341.40 million, from $201.80 million in the first five months of 2002. Thus, Greece’s trade deficit with Turkey has increased 230.36 percent, to $184.42 million. It is estimated that bilateral trade volume for the whole year will, for the first time, break through the $1 billion barrier, probably reaching $1.2 billion. Why the difference? Haralambos Kounalakis, commercial attache to Istanbul, says it is «the great increase in Greek demand for Turkish products. On the other hand, demand for Greek products in Turkey is very limited and mainly concerns raw materials and, occasionally, other types of goods. Greek businesspeople do not make a serious effort to crack the Turkish market.» Entry difficulties Greek investments in Turkey are only $60 million, while Turkish investments in Greece are minimal. The signing of the agreement on avoiding double taxation is expected to remove a major barrier to investment. Still, the Turkish market is difficult to break into due to a variety of other technical problems. Turkey demands certification of imported goods by TSE, Turkey’s standards institutes, even if these products are up to European Union standards. As a result, these products are burdened with additional costs and considerable delays through customs. This way, Greek companies are excluded from tenders for the provision of a variety of goods, as a prerequisite is certification by TSE. Also, the application of the EU-Turkey Customs Agreement is applied in a very haphazard, some would say capricious, fashion, for example, in the import of processed agricultural products. Turkey considers all processed and manufactured products that include agricultural products as agricultural and imposes a 50 percent tariff on those. Other products are slapped with tariffs up to 150 percent. All products (including, of course, foods) related in one way to another with «public health» must obtain a special license before they can be exported to Turkey. It goes without saying that obtaining such a license is a lengthy process. Other counter-incentives include anti-dumping tariffs on PVC products, the requirement of an import license for certain categories of software, tariffs on alcohol and alcoholic beverages, long waits at customs checkpoints for truck drivers, the absence of an adequate legal framework on copyright protection, and a number of others. However, the biggest counter-incentive to export to Turkey is the fact that the economy has not shown signs of complete recovery from the 2001 crisis, when it shrunk by 9 percent. The Turkish debt, internal and external, remains high and inflation persistently tops 30 percent. It was running at a pace of 30.7 percent in May.