“It’s the Trade, Stupid!” – How to Survive the EU-Turkey Stalemate

Written by | Tuesday, January 16th, 2018

Giving up hope on the progress in Turkey’s path towards EU membership, Ankara and Brussels decided to invest their energy in revamping their Customs Union. Upgrading this trade agreement would unlock many economic benefits on both sides by further liberalizing trade between Turkey and the EU. Yet, these efforts are now under threat as a group of EU members led by Germany have expressed their opposition to a new trade deal with Turkey. Experts, however, warn that this position should be revisited since blocking the renewal of the trade deal could eliminate the most feasible means by which the EU could demand anything from Ankara as well as generally maintain its engagement with Turkey.

There are numerous benefits to the modernization of the EU-Turkish Customs Union. Revamping the trade relations could boost economic growth on both sides by extending the EU’s scope beyond manufactured and processed agricultural goods to cover the agricultural sector writ large, as well as public procurement and trade in services. A modernization of the deal would also lead to major reforms in four key areas: dispute settlement, public procurement, state aid and services regulation. Such reforms would also motivate Ankara to abide more by the rules of economic governance, provide a more viable vehicle for adjudicating trade disputes and maintain the momentum for the mutual economic engagement.

There are, however, also risks of forestalling a Customs Union modernization given the political reality of the EU-Turkey relationship that has found itself in a deep crisis. Even if a new and revamped customs union came into fruition, it is not going to solve the current economic problems plagued by regulatory convergence between the EU and Turkey as well as by a dysfunctional dispute resolution mechanism. A failure to modernize the Customs Union would effectively undermine the EU’s most effective tool for pursuing economic and diplomatic engagement with Ankara while also eliminating its leverage by which to encourage domestic reforms in Turkey and push Ankara to align its economic regulations more closely to EU standards. Moreover, a new Customs Union would likely take the onus off Turkey to make some difficult economic and political decisions.

The Customs Union is more than a framework for overcoming the stalemate between the EU and Turkey. In the absence of a positive political dynamic, the Customs Union has actually acquired a political significance as possibly the only viable means by which to keep the EU engaged with Turkey. Ultimately, modernizing the Customs Union may help both sides create further momentum that could act as an insurance policy against the likely threat that Turkey will become totally disconnected from Europe. As such, the Customs Union is currently the only realistic rules-based platform that can serve as a stepping-stone for future engagement and betterment of the mutual ties.

‘Trade As Turkey’s EU Anchor’ – Research Paper by Sinan Ülgen – Carnegie Europe.
(The Research Paper can be downloaded here)

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