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EU – Turkey Customs Union

“EU-TR Joint Consultative Committee "Brussels, 7 November 2013

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EU – Turkey

Customs UnionJan 1,1996

Customs UnionJan 1,1996

Candidate countryDec 11,1999

Candidate countryDec 11,1999

Accession negotiationsOct 3, 2005

Accession negotiationsOct 3, 2005

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Customs Union

• Covers all industrial goods but does not address agriculture (except certain PAPs), and coal and most steel products; both are covered by bilateral concessions (FTA type)

• Commits TR to align to the acquis communautaire in several essential internal market areas, notably customs legislation, common commercial policy, industrial standards, IPR, competition policy.

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Benefits of the Customs Union

• Turkey has benefited from an “early” legislative alignment process before its accession negotiations started.

• Turkey is participating to a large extent in the EU single market for goods.

• Turkish producers gained competitive advantage in adopting (most) EU technical standards.

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Benefits of the Customs Union (cont'd)

• Customs Union: driving force for trade liberalisation and integration into global markets

• Turkish companies are more and more integrated into the production network of the EU

• Increased sophistication of Turkish exports

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Increased trade and investment relations

• Since 1996, trade between the EU and Turkey has increased more than fourfold (from 22.6 bn € in 1995 to 105.3 bn € in 2012, for EU 15 only)

• The EU has been an open and secure market for Turkish exporters

• Despite increased trade, diminishing share of Turkey's exports to the EU (in 2012 below 40%).

• However, to be emphasized that both the EU and Turkey are benefiting from the CU

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EU trade with Turkey

010,00020,00030,00040,00050,00060,00070,00080,000

EU Imports

EU Exports

Trade Balance

Source: Eurostat

Millions of euro

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EU's Trade With Main Partners (2012)

The Major Imports Partners The Major Exports Partners The Major Trade Partners

Rk Partners Mio euro % Rk Partners Mio euro % Rk Partners Mio euro %

  Extra EU27 1,791,727 100.0%   Extra EU27 1,686,774 100.0%   Extra EU27 3,478,501 100.0%

1 China 289,915 16.2% 1 United States 291,880 17.3% 1 United States 497,658 14.3%

2 Russia 213,212 11.9% 2 China 143,874 8.5% 2 China 433,789 12.5%

3 United States 205,778 11.5% 3 Switzerland 133,341 7.9% 3 Russia 336,474 9.7%

4 Switzerland 104,544 5.8% 4 Russia 123,262 7.3% 4 Switzerland 237,885 6.8%

5 Norway 100,437 5.6% 5 Turkey 75,172 4.5% 5 Norway 150,258 4.3%

6 Japan 63,813 3.6% 6 Japan 55,490 3.3% 6 Turkey 122,961 3.5%

7 Turkey 47,789 2.7% 7 Norway 49,821 3.0% 7 Japan 119,303 3.4%

8 South Korea 37,861 2.1% 8 Brazil 39,595 2.3% 8 Brazil 76,685 2.2%

9 India 37,295 2.1% 9 India 38,468 2.3% 9 India 75,764 2.2%

10 Brazil 37,090 2.1% 10 South Korea 37,763 2.2% 10 South Korea 75,624 2.2%

Turkey is the EU’s 6th trade partner and ranks higher than some developed countries such as Canada (11) and Australia (15)

Source: Eurostat

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EU imports from Turkey (2012)

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EU exports to Turkey (2012)

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Turkey's Trade With Main Partners (2012)

The Major Imports Partners The Major Export Partners The Major Trade Partners

Rk Partners Mio euro % Rk Partners Mio euro % Rk Partners Mio euro %

 World (all countries)

167,582 100.0%  World (all countries)

109,041 100.0%  World (all countries)

272,622 100.0%

1 EU27 62,233 37.1% 1 EU27 42,280 38.8% 1 EU27 104,513 37.8%

2 Russia 17,291 5.0% 2 Iraq 5,989 3.1% 2 Russia 21,601 4.0%

3 China 15,573 4.5% 3 Russia 4,310 2.2% 3 China 17,345 3.2%

4 United States 11,529 3.3% 4 United States 3,315 1.7% 4 United States 14,845 2.8%

5 Iran 8,924 2.6% 5United Arab Emirates

2,673 1.4% 5 Iran 11,510 2.1%

6 India 4,667 1.4% 6 Iran 2,586 1.3% 6 Iraq 6,051 1.1%

7 South Korea 4,533 1.3% 7 Saudi Arabia 1,983 1.0% 7 India 5,210 1.0%

8 Switzerland 3,605 1.0% 8 Egypt 1,983 1.0% 8 South Korea 4,914 0.9%

9 Ukraine 3,457 1.0% 9 China 1,772 0.9% 9 Ukraine 4,702 0.9%

10 Japan 3,062 0.9% 10 Israel 1,717 0.9% 10 Switzerland 4,688 0.9%

The EU is Turkey's major trading partner.

Source: IMF

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EU accession negotiations"Would you say that Turkey's accession negotiations with the EU have improved or deteriorated your perception of its attractiveness for FDI?"

Source: Ernst & Young's 2013 Turkey attractiveness survey on 201 investors

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EU – Turkey investment relations

• The EU represents around 75% of incoming FDI to Turkey (average 2008-2012)

• Some 15,350 companies in Turkey with EU capital• 2007-2012, the EU directed 202 projects to Turkey,

focusing mainly on sectors with a high technology component. But business services, transport and logistics have also drawn investor attention.

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EU-Turkey CU is a success story but …

Turkish complaints (e.g.): • FTAs issue – trade policy making• SPS controls on exports of Turkish agricultural products

(fruits, vegetables, meat)• Road quotas

Trade barriers/irritants faced by EU operators (e.g.):• full and non-discriminatory implementation of the CU to

the Republic of Cyprus• import and export licenses/restrictions for certain goods • GMP certificates in pharma sector• Intensive use of safeguard measures

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Way forward

• The EU-TR CU is too limited in scope• Since several years, the EU concludes - and will

continue to conclude - deep and comprehensive FTAs with many important trade partners

• There have been attempts to extend the scope of the CU by the EU, but they have been unsuccessful so far

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Way forward (cont'd)

• The EU-TR CU scope could be extended to cover also other areas such as agriculture, services, investment, public procurement, including an operational Dispute Settlement Mechanism to tackle unresolved/future trade irritants and to ensure full implementation

• Paradox: not doing that extension will leave the EU-TR CU behind the FTAs concluded by the EU.

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Way forward (cont'd)

• WB made an assessment report of the CU and should present its final report with main findings and recommendations in Jan./Feb. 2014

• EU will study WB report and will thereafter consider together with Turkey which recommendations and policy options to take forward in the interest of both sides.

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Thank you for your attention