#Turkey and the #EUCustomsUnion - a marriage in need of urgent reform

The European Union and Turkey met this week to discuss revising the Customs Union agreement that has existed between them since 1995. This has long been overdue and is now in need of a significant upgrade, writes former MEP Daniel Dalton.

The EU-Turkey relationship remains vitally important for both sides and trade remains the bedrock of this relationship. The EU is Turkey’s largest trading partner and Turkey is an indispensable geopolitical partner for Europe in areas far beyond trade. The 2016 migrant deal between the two is the most recent example of the importance of Turkey for the EU.

The Customs Union has served its original purpose of increasing trade between Turkey and the EU. Combined trade now stands at over €140 billion. However, this has come at a cost to Turkey, which now finds itself restricted, both in terms of its freedom to legislate domestically, and its access to trade deals the EU signs with third countries.

The Customs Union allows Turkey to export goods tariff and quota free into the EU, provided the goods are produced in accordance with EU standards. The arrangement doesn’t include all goods or any services. Most agricultural goods, coal and steel are excluded, and that means that there are often significant delays on the Turkish/EU border.

The biggest challenge is that Turkey must follow the EU trade policy for imports into Turkey. This means that if the EU signs a trade deal with a third country, such as Canada or Japan, Turkey must also reduce its restrictions on the imports of goods from those countries. However, as Turkey is not in the EU, and therefore not part of the trade deal the EU has negotiated, she does not benefit from the trade deal for her exports.

As the EU continues to sign more trade deals around the world, the situation deteriorates. Turkey must gradually open her borders to imports from more and more countries, whilst not gaining any further preferential access for products produced in Turkey.

Turkey can try to negotiate trade deals with third countries in areas not covered by the Customs Union, such as services. But most third countries have little incentive to negotiate access for Turkish goods into their market, given the fact that they already have access to the Turkish market through their EU trade deal.

This asymmetrical access puts the Turkish economy in a vulnerable position and cannot continue indefinitely. It will also affect the future trade relationship that the EU and the UK negotiate after Brexit. Turkey potentially faces losing the preferential access it has to the UK market even if the UK agrees a post Brexit trade deal with the EU.

The Customs Union was intended as a political tool – a short-term stepping-stone ahead of Turkey joining the EU. However, it’s unlikely that the EU will welcome Turkey as a full member in the foreseeable future.

The Customs Union is therefore in need of a significant upgrade and, given the challenging nature of modern EU-Turkey relations, a focus on the economic partnership would send the right signal that the relationship is valued, and can continue to be a stepping-stone to closer cooperation.

The asymmetrical nature of access in trade deals is the most important issue. Turkey should be able to benefit from EU trade deals. The EU should recognise that it is unreasonable and unsustainable for such a situation to endure for as long as it has.

The Customs Union could also be deepened to include agricultural goods and public procurement markets. Such an opening of trade would benefit both sides, increase competition, reduce cost and bring Turkey and the EU closer together. Turkey and the UK can build on this relationship to ensure that they enhance their own trading links in areas not covered by the Customs Union, most notably in services.

In a world where protectionism is rising, the EU has so far defied the trend and has recently concluded trade deals around the globe. It should do the same with Turkey.

The Customs Union is ready for modernisation, it is nearly 25 years old and its problems are well documented. A new economic approach could underpin a new period of warmer EU-Turkish relations in general. The UK should also stand ready to offer Turkey increased trade whatever the outcome of Turkey’s Custom Union negotiations. This will cement the close geopolitical links between the two countries.

Europe has nothing to fear from increasing trade with Turkey, in fact, it has everything to gain.

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