Why the revision of Turkey-EU Customs Union was inevitable
Turkey and the EU have recently agreed to revise the Turkey-EU Customs Union. The increase of complaints over the past few years regarding its functioning was a clear indication that the revision of the Customs Union was long overdue.
Since its framework was drawn with the Ankara Agreement and details laid out by the Additional Protocol, not only Turkey and the EU but also global trade have gone through tremendous changes. While Turkey has undergone a profound economic transformation, lifting the country from the status of a developing country to an emerging market, the EU has also enlarged and deepened its economic integration. The global trading system is also facing a trade increase in services and international investments, emergence of global value chains, rise of new economic actors and new emerging trade related topics. While important achievements have been made in reducing the tariffs on goods, it has become essential to deal with new forms of protectionism and tackle non-tariff measures. But nowadays it is difficult to find consensus on complex issues among countries and advance in multilateral trade negotiations conducted by the World Trade Organization (WTO).
In this context, the EU shifted its focus on free trade agreements (FTA) in order to access new markets. Thus the number of trade agreements signed by the EU has increased, with the scope of these agreements going beyond simple tariff reduction. The EU not only foresees tariff reduction and liberalization of trade in goods, but also the elimination of non-tariff barriers and liberalization of trade in services. The agreements also cover a wide range of topics such as intellectual property rights, public procurement, investment, competition, regulatory cooperation and sustainable development.
It goes without saying that the EU’s new trade policy directly impacts Turkey, since the latter has committed itself to align its trade policy to the EU’s preferential trade regimes. While at the beginning, the FTAs signed did not constitute a big threat to Turkey’s competitiveness, these FTAs began to be perceived as a major source of concern once EU started to deal with stronger trade partners and emerging competitive countries. At this early stage, Turkey was already facing difficulties in convincing some countries, with whom the EU signed FTAs, to conclude a separate one. The products of the countries that have signed a FTA with EU can enter Turkish market via the EU without paying the customs duties; but in return Turkey does not benefit from the same concessions granted to the EU in terms of trade facilitation. This asymmetric situation results from Turkey’s absence in the negotiation and decision making processes. And this has taken a new turn with the ongoing Transatlantic Trade and Investment Project (TTIP) negotiations between the EU and the U.S., as it is estimated that Turkey would face loss in term of economic welfare if it is left out of this process.
In this context, it is beyond a shadow of doubt that the framework of the Customs Union established 20 years ago has become outdated. It needs to be revised and expanded in the light of the new global tendencies of world trade and of its shortcomings. Before the launch of the negotiations, both parties have around one year to make the necessary impact assessments and consultation of stakeholders. It is important for Turkey to enhance the dialogue between public authorities, private sector and civil societies as well as to take into account the interests and problems of the Turkish private sector before determining the new framework, especially in the areas of agriculture, service and public procurement. In this respect, it is necessary to identify which products in agriculture should be listed as “sensitive products” in order to ask for longer transitional periods in the progressive removal of customs tariffs. The services could prove to be one of the most problematic areas where both parties will seek to gain better market access by removing non-tariff barriers. Without doubt, Turkey and the EU, both already negotiating a plurilateral agreement on trade in services on the same platform with other WTO members, have become experienced in determining each other’s position. When talks on services will be carried out, one of the key items of the agenda for Turkey will probably be whether the mobility of service providers will be put on the table. On the other hand, considering that Europeans advocate an ambitious opening of public procurement markets outside the EU, the position of Turkey should be duly assessed.
The revision of the Customs Union will be an opportunity for Turkey to address its problems deriving from its absence in the consultation and decision making processes and problems related to transport quotas and visa obligations applied to Turkish businessmen since these discriminatory treatments put the free movement of goods in jeopardy. It will provide a platform for both parties to expand the scope of their economic and trade integration. It is hoped that the revision of the Customs Union will also pave the way for a speedy and balanced accession of Turkey to the EU.
*Selen Akses is a researcher at the Economic Development Foundation (İKV).