The customs union between Turkey and EU needs modernization due to its implementation problems in the current agreement and changing world's needs, World Bank director for Turkey, Martin Raiser said on Tuesday.
Raiser said that both Turkey and the EU will benefit in resolving issues on the custom union in his opening remarks at the World Bank meeting in Ankara with the Economic Policy Research Foundation of Turkey (TEPAV). At the meeting on the “Evaluation of the EU-Turkey Customs Union Report,“ Raiser said that extending the custom union's coverage to include agriculture and the service sector, will enhance Turkey's bid for European Union membership.
The World Bank´s report, prepared on the request of the European Commission, was released on April 8, 2014 and reports on Turkey's concerns regarding the antiquated agreement which has come to light with the changing global market between the EU and Turkey. The report also makes constructive recommendations such as the need to cover agriculture and services, which account for 70 percent of Turkey's GDP, as well as industrial goods, and the prominence of EU members' free trade agreements with third countries (countries not formally part of the EU).
The need to upgrade the agreement has also been reiterated by Turkish Economy Minister, Nihat Zeybekci in March when he discussed the agreement with his EU counterparts and agreed to re-negotiate no later than June.
These third countries due to their agreements with the EU can export their products without tax, while Turkey cannot. This disadvantage has caused uneasiness and as the report says "Third countries with which the EU has concluded free trade agreements sometimes refuse to conclude free trade agreements with Turkey. Consequently, Turkish firms have not received automatic reciprocal access to those markets while imports from these countries can often enter Turkey duty-free."
Raiser added that the custom union is better than a free trade agreement (FTA) for Turkey with the EU. "The custom union has undisclosed potential but it does not cover agriculture or the service sector. You cannot benefit from the agreement without addressing this problem."
Turkey is the only non-EU country which has a Custom Union Agreement that came into force on 31 December 1995 and was a keystone to the EU membership for Turkey.
However, the advantage Turkey has acquired over the last 19 years since the deal was made is now being eroded. Turkey's lack of progress in its EU bid, the change in world trade structure, the EU's free trade agreement with third countries, the exclusion of services and unprocessed agricultural goods, visa issues facing Turkish business people are amongst the reasons cited for the need to upgrade the agreement.
The free trade agreement between the EU and third parties enables these other countries’ goods to enter European markets or Turkish markets via Europe without duty charges, but Turkey exports to the third countries, and does not benefit from the same tariff reductions granted to the European Union. As a result, Turkey still has to face high tariffs and non tariff barriers.
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