Controversy brews over Turkey-EU customs union

04/04/2013

Turkish official denounces perceived double standards, but others see much to praise.

By Menekse Tokyay for Southeast European Times in Istanbul -- 04/04/13

photo

A Greek police officer stops a truck near the country's border with Turkey. The debate over the future of the Turkey-EU customs union continues. [AFP]

Economy Minister Zafer Caglayan's characterisation of the EU-Turkey customs union as unfair to Ankara has triggered a public debate, with some analysts backing Caglayan and others calling for a more conciliatory approach.

"The EU allows businessmen from many non-member countries to enter countries of the union, while Turkey is exempt from this list," Caglayan told reporters. He also criticised restrictions on Turkish exports to Europe and Turkey's freedom to negotiate trade partnerships with countries that have pacts with the EU.

"If the current situation continues like this, we may have to bring the customs union back to the table because it is now working against Turkey," the minister said at a news conference.

A customs union involves removal of taxes on products exchanged among countries that are members of the union. The goal is to stimulate trade and ensure the free movement of goods within the defined area. Customs unions also entail creation of a standard tax on products exported to member nations by countries that are not part of the union.

In a statement to SETimes, Peter Stano, a spokesman for EU Enlargement Commissioner Stefan Fule, said the customs union is "beneficial to both parties."

"It enabled [a tripling of] bilateral trade to 120 billion euros, [attraction of] EU foreign direct investments accounting today [for] three-fourths of all incoming foreign investments to Turkey and significantly favoured industrial and economic integration between the parties," Stano said.

"With the EU being Turkey's biggest trading partner, nearly 42 percent of Turkey's trade is still anchored to the EU market. More than half of foreign capital companies in Turkey have European capital."

Stano added that European officials are aware of Turkey's concerns.

"The asymmetric nature of the EU-Turkey customs union caused some implementation problems which are regularly discussed in the Customs Union Joint Committee and other relevant fora," he said.

A study carried out by the World Bank in co-operation with the European Commission and Turkey will be released in autumn "in order to evaluate the current implementation, effectiveness and additional potential of the customs union in view of its possible extension or modernisation," Stano said.

Regarding the issue of visas, Stano said: "EU member states, in co-ordination with the commission, are making efforts to use all possibilities provided by the existing EU Visa Code with the aim to ensure a harmonised implementation of practical improvements for Turkish visa applicants."

He added that relevant bodies are "ready to launch the visa liberalisation dialogue."

Bahadir Kaleagasi, international co-ordinator of the Turkish Industrialists and Businessmen's Association, told SETimes Ankara should stick with the customs union.

"For a country in the process of EU accession, exiting the customs union is not an option," he said. "Overall the customs union has been beneficial for the Turkish economy, paving the way to more exports in volume and variety, to higher standards and more resilience vis-a-vis external economic crisis waves."

According to Kaleagasi, Turkey would be better served by focusing more on its EU membership bid.

"The wisest policy option is to deepen the democratic reforms, regulatory convergence and investments in human capital and innovation," he told SETimes. "The real problem emerged when Turkey missed the opportunities to rapidly implement democratic reforms to start the membership negotiations and then when the EU started to act incoherently vis-à-vis Turkey."

Kader Sevinc, CHP representative to the EU, agreed.

"This is a wrong debate cut from the real challenges of Turkey's social and economic development. The customs union, despite its deficits, has integrated Turkey to the European single market," Sevinc told SETimes.

"The task for the government is not to dissociate Turkey from Europe but on the contrary to be more successful in transforming Turkey in to a country which fulfills EU democratic, economic and regulatory criteria," Sevinc said.

But Selen Akses, a researcher at the Istanbul-based Economic Development Foundation IKV, told SETimes changes in the Turkish and European economies necessitated changes in the customs union.

"Although the trade volume has increased significantly, the transport quotas granted to Turkey has not been adjusted accordingly," Akses said. "When the framework and the details of the customs union were laid down, Turkey was a developing country whereas now Turkey is the sixth-biggest economy in Europe and the 16th in the world, while the EU is dealing with a severe economic and financial crisis."

The controversy over the customs union has also generated discussion about Turkey's position in free trade agreements negotiated between the EU and third countries. Due to its responsibilities under the customs union, Turkey has to apply the same tariffs as the EU on goods imported from third countries. But, Turkey cannot benefit from the lowering of the customs duties by the third country because it is not a EU member yet.

According to Sevinc, the EU's free trade agreements should also extend to Turkey, which has to be part of their negotiations.

"Although this is difficult to arrange in legal terms, it can be possible as a political arrangement giving Turkey a special status in the trade talks," Sevinc told SETimes.

Akses agreed that Turkey should be in the room when the EU negotiates its free trade deals.

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"This will allow Turkey to defend its own economic and trade interests and to determine with the EU a common position when the EU is conducting negotiations a preferential trade agreement with a third party," Akses said.

Meanwhile, Deputy Prime Minister Ali Babacan dismissed recent talk of Turkey abandoning its customs union with the EU in favour of a free trade agreement.

"He who gets up in anger sits down with a loss," Babacan said, according to media reports.

Do you think current economic arrangements between the EU and Turkey are fair to both sides? If not, what can be done to improve them? Let us know by leaving a message below.

This content was commissioned for SETimes.com.
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