Countries of the World/COUNTRYS.BIN/dp/0103/01031.txt

Text File | 1991-06-25 | 35KB | 543 lines

$Unique_ID{COW01031}
$Pretitle{222}
$Title{Cyprus
Chapter 3D.   Foreign Trade and Balance of Payments}
$Subtitle{}
$Author{Donald P. Whitaker}
$Affiliation{HQ, Department of the Army}
$Subject{percent
million
turkish
cyprus
exports
cypriot
imports
government
trade
pounds}
$Date{1979}
$Log{Radio Anouncer*0103102.scf
Computer Training*0103103.scf
}
Country:     Cyprus
Book:        Cyprus, A Country Study
Author:      Donald P. Whitaker
Affiliation: HQ, Department of the Army
Date:        1979

Chapter 3D.   Foreign Trade and Balance of Payments

Foreign Trade

     At the time of the Turkish intervention Cyprus foreign trade was
overwhelmingly oriented toward the West. In the early 1970s Britain and the
other members of the European Economic Community (EEC-also called the Common
Market) annually purchased 60 to 70 percent of the island's exports and
supplied some 55 to 60 percent of its imports. Greece and Spain were also
important trading partners in Western Europe-Greece mainly as a source of
imports and Spain as a buyer of Cypriot products-and the United States
accounted for some 6 percent of imports although it purchased very few of
Cyprus exports. The East European trading area consisting of the Soviet Union
and the other socialist states of the Council for Mutual Economic Aid
(COMECON) furnished 10 to 15 percent of imports and bought close to 7 percent
of exports. In contrast, trade with the neighboring Arab states of the Middle
East and North Africa was only moderate. Imports-mainly from Lebanon and
Egypt-were relatively minor, although exports to the area had risen to about
6 percent of total exports in the early 1970s (see table 15, Appendix A).

     Britain's entry into the EEC in January 1973 was followed more or less
of necessity on the part of Cyprus by the establishment of an association
between Cyprus and the EEC in June. An agreement was also reached for a
two-step advance to full membership and a customs union, the first stage to
end in mid-1977 and the second five years later. The EEC granted Cyprus
important concessions on exports of manufactures, of particular significance
to development of the island's manufacturing sector, but lesser concessions
were made for food exports, an area in which existing competition was greater.
However, the most important arrangement was for Cyprus exports to retain their
Commonwealth preferential tariff treatment during the initial period,
including agricultural exports of which Britain regularly took about 75
percent. In 1977 this initial stage was extended until the end of 1979, partly
because of the effects of the Turkish intervention, but Cyprus lost its
Commonwealth preference and has had to negotiate annual agreements with the
EEC on its British market. In mid-1979 discussions were under way in Nicosia
between the EEC and Cyprus on the start of the second phase of the association
agreement.

     The economic relations that developed with Britain during the colonial
era were a major determining factor in trade patterns. Irrigated early
vegetable exports, a principal earner of foreign exchange in the late 1970s,
were promoted by British colonial authorities in large part to furnish the
British market with produce at a time of year when domestic production did
not meet demand. The British also promoted the development of fortified wines,
chiefly sherry, specifically produced for the British market. As a result,
during the 1960s two-fifths of the island's exports, including over
three-quarters of its agricultural products, went to Britain, a proportion
that continued in 1973. Britain also furnished about one-third of imports in
the 1960s, but the total had declined to one-fourth in the early 1970s.

     The de facto division of the island had a major impact on foreign trade
in the south. Over 50 percent of agricultural exports (which had accounted for
about half of total exports) had originated in the north. Although
modernization and extension of agriculture offered some possibilities, the
most feasible solution to this loss was considered to be the promotion of
manufacturing exports, which was favored by Cyprus' geographic position, the
large amount of skilled refugee labor, trained entrepreneurial and managerial
personnel, and comparatively low labor costs. The items producible, however,
including clothing, footwear, cement, building materials, plastics, and
packaging materials, faced strong competition in Europe. Exporters therefore
turned to the Arab states for markets. The effort was so successful that in
1976 these states took 46.5 percent of all exports (compared to 33.1 percent
by the EEC including Britain, which remained Cyprus' most important trading
partner), 47.8 percent in 1977, and 46.7 percent in 1978. The principal new
markets were Saudi Arabia, Kuwait, and the states of the Persian Gulf; Lebanon
and Egypt remained important buyers.

     Imports continued to come principally from Western Europe in the late
1970s, with the EEC accounting for better than 46 percent of the total.
Britain remained the largest single supplier furnishing 22.1 percent of
imports in 1978 while other members of the EEC combined provided another 28.7
percent. There were reports that although Britain more than welcomed Cyprus
trade some discontent existed because of the relative trade balance disparity
between imports by Britain and those by other EEC members compared to their
exports to the south. In 1977 Britain took almost 29 percent of the island's
exports. The total dropped to 23.3 percent in 1978, whereas the rest of the
EEC took only 5.4 percent in 1977.

     About one-quarter of the imports by value into the Greek Cypriot area
consisted of consumer goods. Raw materials accounted for some two-fifths and
capital goods under one-fifth (unusual purchases of civil aircraft raised
the capital goods to almost 21 percent in 1978). Fuels and lubricants,
chiefly for industrial purposes, accounted in value for 11 percent of 1978
imports.

     In 1975, the first year after the de facto division of the island, the
Turkish Cypriot area imported goods valued at close to TL450 million. The
total increased steadily thereafter through 1978 when imports reached TL2,071
million. Manufactured goods accounted for the largest share of imports
constituting about 35 percent of the total in 1977 and 1978. Machinery and
transport vehicles were in second place and foodstuffs third. Initially the
area's principal supplier had been Turkey, which furnished 64 percent of
imports in 1975, but that country's share had declined to some 39 percent in
1978. The second most important supplier was Britain, which increased its
share in the north's imports from 12 percent in 1975 to 24 percent in 1978.
Members of the EEC, excluding Britain, provided over 19 percent that same
year. The remaining imports came from some forty other countries located in
all parts of the world.

     Exports from the north amounted in value to TL151.4 million in 1975.
Turkey took 44 percent, Britain 33 percent, and the other members of the EEC
under 14 percent. During the next three years the export trade increased
relatively in value at about the same rate as imports approximately
quintupling to TL744 million in 1978. Britain's share doubled during this
time to over 65 percent in 1978, making that country the north's principal
trading partner, and Turkey second with 20 percent. Exports to the EEC varied
greatly reaching a high of over 33 percent in 1976 but dropping to only 3
percent in 1978. Agricultural products were the principal exports, major items
including citrus, potatoes, and carobs; foodstuffs, live animals, beverages,
and tobacco accounted for almost 87 percent of total exports in 1978.

Balance of Payments

     Cyprus' trade balance has been consistently unfavorable since before
independence. However, through 1967, invisible receipts-consisting of regular,
substantial transfers from Britain covering the expenditures of troops and
other British personnel located on the British bases, expendi