Tunisia and Turkey Revise Free Trade Agreement to Address Trade Deficit
In December 2023, Tunisia and Turkey agreed to revise their free trade agreement, aiming to tackle the massive trade deficit with Turkey and protect Tunisia's industry through three key measures:
- A customs duty on a defined list of industrial products with a local equivalent, ranging from 27% to 37.5% (75% of the general tariff regime), for a period of five years.
- Unilateral Turkish support for Tunisian agricultural exports, through the establishment of annual quotas exempt from customs duties.
- A focus on increasing Turkish investments in Tunisia, with the organization of a Tunisian-Turkish investment forum, scheduled to take place in Istanbul during the first half of 2024, to present projects and investment opportunities in Tunisia to Turkish investors.
Four months have passed since the agreement, and an initial assessment is possible. On the import side, a 4.8% decrease was recorded, reaching 1,198.9 million Tunisian dinars (Mtnd). Notably, in 2023, during the same period, imports had already shown a significant decline of 34.7%. While this may seem like a positive trend, it is essential to continue monitoring the dynamics of these movements.
On the export side, a 7.3% increase was recorded, reaching 247.3 Mtnd. However, the amount remains relatively low, making it difficult to conclude a significant rebound.
A significant part of these developments can be attributed to the exchange rate effect. During the first four months of 2023, the TRY/TND parity evolved between 0.170 and 0.160. In contrast, during the same period in 2024, it ranged from 0.097 to 0.100. In other words, considering the highest rates, this represents a 39.3% appreciation of the TND.
The competitiveness of Turkish prices should not be underestimated. They have simply compensated for the customs duty by devaluing their currency. The result is a persistent deficit, and it is clear that we will end 2024 with a bilateral trade deficit of at least 2,500 Mtnd in the best-case scenario. The Turkish trade conundrum is far from being resolved.
