Turkey hopefully on right track to join economic NATO

It is customary for Turkish governments to keep the bar high, endorse a maximalist position and spend unnecessary political capital by asking for the impossible ahead of a negotiation. Thank God; at one stage common sense would prevail (dictated by a better analysis of what is at stake by insisting on the impossible) and Turkey would back down to a more rational line.

It seems this is what happened on the issue of the Transatlantic Trade and Investment Partnership (TTIP), a free trade agreement being negotiated between the United States and the European Union. Some label it an economic “NATO.”  It is certainly the economic pillar of the transatlantic community.

When completed, both sides stand to gain tremendously; Europe is expected to register a growth of 4 percent while the U.S. 5 percent. If excluded from the TTIP, Turkey stands to lose, since it has a customs union with the EU without being a member. Turkey is expected to experience a drop of 1.56 percent and some industries like the automotive industry will be negatively affected. This is because, while U.S. goods enter the Turkish market without any barrier, the same would not be valid for Turkey, since Washington is unwilling to negotiate a separate free trade agreement with Turkey.

Aware of the consequences and arguing that there is a custom union, Turkey insisted on becoming a party to the negotiations. Brussels and Washington did not accept having Turkey in the room - not that they did not understand Turkish concerns, but they did not want to have an additional complex component in an already complex web of hurdles to overcome.

According to Sinan Ülgen the chairperson of the Center for Economics and Foreign Policy Studies (EDAM), Turkey has recently changed its strategy and reformulated its demand. Instead of being present in the room, Turkey will wait for the conclusion of the agreement with the expectation that it will include a mechanism that will allow like-minded countries to join it.

“We can’t expect the TTIP to enlarge before it is concluded. It will eventually be multilateralized. It will have an enlargement clause,” says Ülgen. So far the sides have not been officially vocal on what is being called “the accession or docking clause,” yet Ülgen is convinced that there already is such an understanding on both sides even if they have not made it official yet. That’s why it will be a positive signal if the two sides were to make a statement that the deal will be open to like-minded countries like Turkey, according to Ülgen.
 
The fact that Turkey is now following a new strategy on the issue can also be seen from the understanding reached with the European Commission to update the customs union. With a memorandum of understanding that was signed on May 12, the two sides agreed to go ahead with a deeper integration by including for instance agriculture and services in the customs union. A deeper integration with the EU will mean losses on the short term for Turkey but important gains in the long term. In the short term for instance Turkey stands to lose in the agricultural sector. Yet, widening the customs union will certainly facilitate Turkey’s inclusion in the TTIP.

While it might prove difficult to convince some of the stake holders in Turkey to widen the customs union, neither updating the customs union nor entry to the TTIP is a given. On the contrary, Turkey will need allies on both issues. As Erdal Yalçın, from the center for International Economics, argues, not everybody in Europe will be happy to see additional competition coming from Turkey when the customs union is widened.
When it comes to the TTIP, most probably each member county will have to ratify the inclusion of a new member, and at that point, in the absence of a negotiated settlement in Cyprus, it won’t be a surprise to see Greek Cypriots raising their veto card.

Turkey’s relations with the EU have always been an uphill battle. That is not a novelty. At this stage it is important to set the course on the right track in order not to be left out of the economic pillar of the transatlantic community.