An agreement with the European Coal & Steel Community (ECSC) was signed on 25 July providing for the elimination of customs duties.

The agreement is linked to the EU customs union which began on 1 January 1996.

The agreement provides for the abolition of customs duties on an agreed list of products, and is effective from 1 August. In practice, Ankara had adhered to the agreement since 1 January, but the actual signing was delayed by domestic political upheaval. Turkey will phase out duties on the remaining 5 per cent of goods on the list over three years.

Turkish steel exporters are expected to benefit from the agreement particularly because it cancels Turkey's obligation to apply the EU common customs tariffs against third countries. Only ECSC and Turkish products will benefit from the agreement's preferential arrangements. In addition, the agreement stipulates that neither party will impose quota restrictions, which the ECSC does on third countries.

In the interests of fair competition, the agreement requires strict monitoring of state aid towards industrial restructuring, although such support may be extended under certain conditions during a five-year transition period to investments aimed at balancing excessive capacity in parts of the sector. The ECSC will probably permit a shift from lower-quality, long-steel products to higher-quality flat products, say Ankara diplomats.