Customs Union falls short on trade

Dicle Alıcı

Prof. Dr. Özgür Tonus from the Faculty of Economics and Administrative Sciences at Anadolu University emphasized that the customs relations between the EU and Turkey remain fixed and that the terms of the customs union need to be changed and improved.

Prof. Dr. Özgür Tonus

Prof. Dr. Özgür Tonus stated that Turkey’s relations with the European Union include not only trade but also political and economic dimensions. The developments and problems in Turkey’s EU membership process are among the important factors affecting the country’s foreign trade. Therefore, Turkey and the EU should adopt a sincere and cooperative approach to improve their relations and solve problems.

1996 The beginning of our trade industry

In 1963, Turkey signed the Ankara Agreement with the European Economic Community and started trade relations with the EU. After 1983, Turkey liberalized its foreign trade as it opened its economy to the outside world. With these developments, Turkey was able to make the Customs Union work. Turkey quickly made the Customs Union reductions to harmonize with the EU trade and the Customs Union with the EU started in 1996, with the council meeting in 1995 saying yes.  

World trade trends also affected Turkey

Starting in 1996, Turkey’s industrial trade continued unabated until the 2000s. European trade, which accounted for 60-65% of trade in the early years, has shifted to new marketplaces, with Russia and China taking the top spot in Turkey. This is not only true for Turkey, but other European countries have also turned to Asian countries for a wider market space. 

The EU is still very important in trade, but it has fallen to 41% of exports and other markets have become more important for Turkey. Turkey has diversified its economy across countries and regions.

Customs Union effects and problems

Since 1996, Turkey has not faced any tariffs or trade restrictions on the trade of manufactured goods and processed agricultural products. Thus, Turkey’s production can compete in Europe without any trade barriers. This is of great advantage and importance for the Turkish economy. 

With the effect of the Customs Union, the prices of vehicles produced in Turkey and those coming from abroad have become equal. Even though the vehicles coming from abroad were perhaps a bit more expensive in terms of comfort and quality, they were preferred because they were considered to be of better quality. This increased Turkey’s imports. As a result, to compete with imported vehicles, local manufacturers abandoned older versions of vehicles in favor of high-quality production and started research and development activities. This enabled Turkey to export its vehicles and compete in foreign markets. Moreover, the Customs Union facilitated the entry of durable consumer goods produced in Turkey into foreign markets. This gave Turkish brands, such as Arçelik, the opportunity to prove themselves and export abroad. The Customs Union played an important role in the transformation and development of Turkey’s industry.

However, Customs Union countries apply a common trade practice. Non-EU countries have to abide by this tariff. Since Turkey is one of these countries, it has to act according to the rates set by EU countries. Although Turkey is an exceptional country, it poses a significant problem in terms of trade. Turkey’s trade independence is hampered by the Customs Union countries issuing decrees according to their decisions. This obstacle is complicated by the fact that Turkey is a Customs Union country but not an EU member.

Similarly, as the Customs Union is not amended or renewed, Turkey faces several problems. While any truck driver from an EU country can trade freely, a Turkish driver needs a passport, a visa, and official documents certifying that he is doing that job. Even if the documents are complete, the truck driver may face trade quotas imposed on countries. An EU member country may limit the number of trade trucks entering its country. While these disruptions do not apply to EU countries, they create difficulties for non-EU countries.

Another obstacle is that the Customs Union promotes free trade but is insufficient for Turkey in terms of protecting and developing the people who engage in this trade. Trade agreements that allow the EU to export to 27 countries require a separate signature for Turkey because it is not an EU member. While EU products can easily enter Turkey, Turkish products face various barriers to entering EU countries, leading to trade distortions. Therefore, Turkey needs to have a strong position in trade and arrangements should be made to ensure that Turkey’s views are taken into account in EU trade relations. Moreover, the fact that the Customs Union is only used for the manufacturing industry causes Turkey to face difficulties in the trade of agricultural products. Therefore, it is important that agricultural products are included in the Customs Union and trade is carried out more lawfully. The areas that the EU has not expanded in the Customs Union hinder the development of trade and Turkey faces problems.

EU-Turkey relations uncertain

Turkey’s relations with the European Union (EU) are frequently activated or stagnated by political agendas. Especially with the launch of the Customs Union in 1996, Turkey was recognized as a candidate country to join the EU, and membership negotiations started in 2004. However, political obstacles, such as the Southern Cyprus issue, have prevented relations from moving forward. Since Turkey did not recognize Southern Cyprus’ EU membership, negotiations were suspended and there were some difficulties in trade. These political problems hindered the progress of Turkey’s EU process and made relations more interest-driven. For example, the EU’s demand for visa facilitation in exchange for Turkey’s help with the migration problem has detracted from the sincerity of relations. The lack of a solution to the Cyprus problem has hindered the development of the EU process for Turkey. Cyprus’ membership of the EU and Turkey’s failure to recognize it has led to certain difficulties in trade and political relations. Appropriate resources and sincere cooperation are important to prepare Turkey for the EU.

The Turkish side is not the only source of these problems, Tonus said, stressing that powerful countries such as France and Germany should put pressure on EU members to find a solution