Turkey eyes EU customs union as US trade talks progress

WASHINGTON - Reuters

Economy Minister Nihat Zeybekci. AA Photo

Turkey would find it very hard to continue in a customs union with Europe if the country is excluded from a free trade deal with the United States, but quitting the union is not an option, Economy Minister Nihat Zeybekci said May 15.

Turkey is pressing to be included in the Transatlantic Trade and Investment Partnership (TTIP) being negotiated between the United States and the European Union, which would cut tariffs and harmonize regulations in the world’s biggest economic blocs.

Under Turkey’s current customs agreement with the European Union, the TTIP would also give the United States automatic access to Turkish markets, but Turkey’s exports would not see the same reciprocal benefit.

“In that case, to continue in the customs union would be very difficult,” Zeybekci said during a visit to Washington, where he met with U.S. trade officials. A World Bank study found Turkey could gain $130 million if it were included in the TTIP but could lose up to $160 million in a one-way arrangement to drop duties on U.S. imports.

But Zeybekci stressed Turkey was optimistic that its customs agreement with the EU would be upgraded to allow automatic access to any third-party trade agreements and said dropping out of the union would be like cutting off an arm.

“I don’t think of this as an option,” he told Reuters. The next talks with the EU on the customs agreement are scheduled for June, he told a Brookings Institute event. The EU wants to add services, agriculture and public procurement to the deal.

On May 14, U.S. Trade Representative Michael Froman said the two countries agreed on a work program to assess the impact on Turkey of TTIP negotiations, which will enter their fifth round next week and are expected to continue through 2015.

“We’re prepared to keep them informed and update them on a regular basis on those negotiations and to ensure that, as the negotiations proceed, that we are very much recognizing the legitimate interests,” Froman said after meeting with Zeybekci.

Critics of the customs union that was agreed in 1996, including Zeybekci’s predecessor Zafer Çağlayan, say it restricts Turkey’s export competitiveness. This is because the bloc is able to enter into free-trade agreements with other nations that are binding for Ankara, without the Turks having a say.

The Transatlantic Trade and Investment Partnership is the latest such agreement to deal a blow to Turkey, causing the resentment of many local exporters. Free trade deals between the EU and third parties enable other countries’ goods to enter Turkish markets via Europe with zero duties, but the decision to provide the same privileges to Turkey is up to the third party.