Incentives for international trade and its economic effects

The concept of foreign trade has become one of the complementary elements of economic development. Countries have gradually increased the importance they attach to foreign trade in order to maintain their economic sustainability and development. In this context, countries carry out various exemption and incentive programs in order to increase exports. Although many programs have been developed in this context in Turkey, which is dependent on foreign sources for input supply, economically effective customs regimes that partially or completely eliminate the taxes that the manufacturer will face in importing raw materials, semi-finished goods or intermediate goods find an intensive use in increasing international trade. In this context, when the added value it provides, the effects it creates on macroeconomic indicators and its economic applicability are evaluated together, it is seen that the most intensively used customs regime is the inward processing regime (IPR). The support provided within the scope of IPR enables the manufacturer to increase the variety of products it produces for export, and increases its competitiveness in the international market due to the cost advantage it obtains thanks to customs exemptions. These advantages of IPR increase the foreign trade volume of the countries. In this study, international trade for Turkey within the scope of IPR has been examined theoretically and empirically. In the econometric analysis part of the study, it is aimed to examine the effect of imports and exports within the scope of IPR on external balance and economic growth, which are important macroeconomic indicators. As the analysis period, 2005:01-2021:07 period, which is the longest data interval that can be reached within the scope of monthly data, has been taken into consideration. Time series regression analysis, VAR (Vector Autoregression) analysis and Causality analysis were used to analyze this relationship. According to the results of the analysis, exports made within the scope of IPR have the effect of increasing economic growth and improving the foreign trade balance; It has been empirically revealed that imports within the scope of IPR have a reducing effect on economic growth and a worsening effect on the foreign trade balance. In addition, while it is seen that the export and import variables within the scope of foreign trade balance and IPR have bidirectional causality with each other, it has been determined that there is a one-way causality relationship from economic growth to these variables.