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Turkey-EU Customs Union: Its Modernization and Potential for Turkey-EU Relations

The customs union is still one of the most concrete outcomes of Turkey’s gradual integration to the EU. However, due to changes in world trade, EU trade policy and Turkey-EU relations, the customs union is in need of a comprehensive revision and update. This commentary aims to analyze the current working and need for upgrading of the customs union within the overall scope of Turkey and EU relations. It is argued that the customs union is not only about the bilateral trade relationship, and its modernization could bring a breath of fresh air to Turkey-EU relations and reignite the process of Turkey’s gradual integration into the EU.

Turkey-EU Customs Union Its Modernization and Potential for Turkey-EU Relations
(L-R) EU President Tusk, Turkish President Erdoğan and European Commission President Juncker attend a joint news conference with the Bulgarian Prime Minister Borisov in Varna on March 26, 2018. DIMITAR DILKOFF / AFP / Getty Images

Introduction

Turkey is at the same time a candidate and negotiating country to join the EU and an associate partner of the Union. Sometimes these multifaceted relations may confuse the observer since different strands of the relationship run in parallel and with direct and indirect effects on each other. For example, the visa liberalization process is closely related to the migration and refugee issue-area. The visa liberalization process could only be started upon the signature of the Turkey-EU Readmission Agreement on December 16, 2013. The visa issue is also indirectly related to the customs union since it presents an extra burden for business people who would like to travel to the Schengen area for business purposes. The customs union is not only about the bilateral trade relationship since it, directly and indirectly, triggers Turkey’s alignment to the EU acquis, rules governing the economic infrastructure, production norms and standards. The customs union between Turkey and the EU, having served multiple functions in Turkey’s integration to the EU until now, is in clear need of an upgrade and overhaul. It has to be adapted to the new realities of world trade, EU trade policy and Turkey-EU relations. This process, which is denoted as a “modernization of the customs union” cannot be initiated due to political conditionality applied by the EU. Turkey is expected to take measures in order to realign the political situation in the country with the EU’s Copenhagen criteria, including improvements with respect to rule of law, freedom of expression, political rights and related freedoms. The modernization of the customs union, if it could be started, could also induce an improvement in Turkey with respect to reigniting fundamental reforms and in turn accelerate Turkey’s compliance with the membership criteria in the above-mentioned areas. This process is in the interests of both Turkey and the EU since it would work to correct the imperfections in the functioning of the customs union and expand the bilateral trade relationship to include new sectors of the economy, such as agriculture, services and public procurement. In this way, the modernization of the Turkey-EU customs union would act as a trigger that would place the relationship on a new footing and facilitate Turkey’s integration to the EU Internal Market.

The customs union between Turkey and the EU dating back to December 31, 1995, is actually based upon the Association relationship between Turkey and the European Economic Community (EEC). The Ankara Agreement of 1963 established an Association between the parties, the last phase of which was based upon a customs union to be gradually built by consecutive steps. Additional Protocol of 1970 determined the timing and conditions of the transition phase leading to the customs union by gradually lifting customs duties and quantitative barriers in the trade of industrial goods between the parties and Turkey’s alignment to the EU’s Common Commercial Policy (CCP) and Common External Tariff (CET).1 While the EC of the time abolished all customs duties levied on goods imported from Turkey with the exception of such goods as textiles and oil products above a certain quota,2 Turkey would abolish customs duties on EC industrial products over a period of 12 and 22 years respectively from the date of entry into force of the Additional Protocol.

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