DIFFERENCES BETWEEN GENERAL TRADE SYSTEM AND SPECIAL TRADE SYSTEM IN INTERNATIONAL TRADE
While creating foreign trade statistics in the world, trade systems are used., named Trading Systems. They are closely related to customs procedures. These concepts are very helpful in determining in which category the goods are and in defining some obligations and requirements applied to the goods. In the world, there are two approaches that are commonly used, and the country's foreign trade statistics data are created within the framework of these systems. These are the general trade system and special trade system. When we closely look at these two approaches, even though they are similar to each other, we can see that there are certain differences between them. For example, in the general trade system, Free Trade Zones (FTZ) and customs areas in the country are important elements of the statistical territory. However, the special trade agreement only takes into consideration the customs border.
What is General Trade System and Its Scope?
In the general trade system, statistical territory includes customs areas, which is the area within the borders of the country that consist of the land, internal area and airspace of the country, and customs processing areas, bonded warehouses, oil fields, and Free Trade Zones (FTZ).
Free Trade Zones are the regions within the borders of a country where some privileges are obtained in foreign trade in line with the agreements made with the countries. For example, certain obligations in foreign trade such as taxes, foreign trade legislation, etc. are excluded from trade agreements for contracted countries during the trade process. In accordance with this special agreement, when goods are sold from free zone areas to the third country, or when goods are imported from third countries to these regions, these are considered export-import operations, and all the data according to these operations are collected to publish foreign trade reports of the countries accordingly.
What is Special Trade System and Its Scope?
On the other hand, the special trade agreement is a narrow concept. It takes into consideration the customs border of the country. Bonded warehouses, all types of free zones, and premises for inward processing are excluded from the statistical territory. While goods that enter free circulation within the border of the country and are sent to free zone areas and customs warehouses can be registered in the statistical territory, goods that are transferred from abroad to the country’s free zones and warehouses or exit from the country couldn’t be issued in the statistical data.
In other words, while trade flow between free zones within the borders of the country is included in the statistical territory, the trade flow between the home country and third country, outside the borders, is not considered in this scope. For example, while selling abroad from free zones is not considered an export, if this happens between two free zones within the country, it is considered an export and registered. When calculating foreign trade statistics according to the special trading system;
* Transit trade
* Passenger goods (suitcase goods)
* Leased goods (excluding financial leasing)
* Repaired goods
* Coin-based gold
* Goods that do not cross the border
* Temporary import and export
are not included when generating data.
Distribution of the use of the general and special trade system in the world
When foreign trade statistics data are generated, countries use two approaches which are special trade system and general trade system. While the general trade system is a wider concept, the special trade system is a narrower approach. When we examine these two concepts closely and look at the prevalence of these concepts on the globe, we can easily realize that the general trade system is more common than the special trade system. In the world, the foreign trade process is issued according to the general trade system in 117 countries. Also, 12 of the 20 largest economies in the world establish their foreign trade data by using the general trade system. For example, the UK, USA, China, Canada, Japan, Russia, South Korea are some countries that use the general trade system. On the other hand, the special trade system is used by 74 countries in the world. Especially, most of the European countries prefer the special trade system. For example, France and Italy publish foreign trade reports on the basis of special trade concepts. Turkey is also one of the countries that uses special trade system in foreign trade.
In addition, as globalization increases in the world, countries prefer to use both general trade systems and special trade system in their foreign trade operations. This situation ensures that the statistical data is understood more accurately and that the countries have more accurate information about the country they will trade with.
Turkey is one of the countries that uses both systems. Although previously statistical data were published according to the special trade system only, as of 2019, Turkey's foreign trade statistics are collected and published according to both the special and general trade system. For example, the Central Bank of Turkey uses both in balance of payments accounts.
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