The future of the customs union between Turkey and the EU: Trade policy agenda of the EU

In the recent years, Turkey has been experiencing difficult times in the context of its perspectives on European integration. The future of the Customs Union between Turkey and the EU, which has been in effect for almost two decades, is blurrier than ever. The main reason of this is the sudden shift in the trade policy of the EU and the proliferation of EU’s free trade agreements with third countries. During its implementation, the Customs Union with the EU had diverse effects in different sectors in Turkey, but after the EU announced its new trade policy “Global Europe” in 2006, Customs Union suddenly became a significant challenge for the Turkish economy. The shift in the trade policy of the EU has been alarming news for Turkey where Turkey has faced a serious problem of trade deflection. As a consequence, Turkey has committed itself to taking the necessary measures and negotiating agreements on a mutually advantageous basis with the countries concerned.

The aim of this paper is to discuss the challenges of the Customs Union, the reasons for and consequences of these challenges, possible ways to cope with these hardships in the future and the effectiveness of Turkey’s recent trade policies against possible losses in trade and customs revenues. After explaining the external trade policy of Turkey in the context of European economic integration, the paper discusses the negative consequences of the aggressive Free Trade Agreement (FTA) strategy of the EU for Turkey’s trade, and finally shows the unpreparedness of Turkish trade policy makers for this situation with examples of fallacious trade policy decisions. The methodology of the paper is mainly based on the policy analysis of case studies of the FTAs of both Turkey and the EU with common partners, by the comparison of tariff concessions and FTA coverages. In the light of the case studies, the future projections about the Customs Union agreement will be discussed.