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Turkey seeks to modernize customs union with EU through business diplomacy

Turkey seeks to modernize customs union with EU through business diplomacy

ANKARA: Last week, a Reuters report claimed that the German government wants the European Commission (EC) to suspend preparatory work on the current negotiations with Ankara about the update of the customs union agreement between the European Union and Turkey on the grounds that it would send the wrong signal. Contrary to politically driven reactions to matters of trade and economy, the members of Turkey’s business world and experts believe that temperate and well-managed business diplomacy is vital to preclude any harmful impact of political rows on long-standing and beneficial economic ties. As the only non-EU member country that has had a customs union agreement with the EU since 1996, Turkey has been one of the largest trade partners of the union with an export value of 66.7 billion euros and an import value of 78 billion euros in 2016 in goods alone. As for services, Turkish exports to the EU totaled 16.4 billion euros and imports of services stood at 12.2 billion euros, according to EC data. Among EU states, Germany has been the top destination for Turkish goods for a while. July export data reveals that Germany was the top market for Turkish exports in eight sectors, including: Automotive, ready-to-wear, iron, machinery, air conditioning, hazelnuts, fruits and vegetables and dried fruits. Despite Germany’s attempts to curb the update process, these figures make Turkey by far the number-one trade partner, as the EC itself confirms. As such, both politicians and experts argue that a modernized customs union would be lucrative for both parties.

In its Dec. 21, 2016 assessment, the EC proposed the modernization of the current deal, which only covers a limited range of industrial products, and excludes agriculture, public procurement and services. Highlighting that the upgrade of Turkey-EU trade relations forms an essential part of efforts made by Turkey and the EU to deepen relations in key areas of common interest, the EC reiterated its resolution to continue delivering on the commitments it has made as part of the deal with Ankara. “Modernizing the Customs Union to reflect current EU-Turkey trade relations would bring substantial economic benefits for both partners,” the commission said in its proposal. “With the evolution of the economic environment and the significant growth of EU-Turkey trade, the Customs Union that entered into force in 1996 is becoming less and less equipped to deal with the modern day challenges of trade integration,” the EC said, adding that the modernization and expansion of the customs union could unleash further opportunities for EU companies in the agri-food and services sectors and the public procurement market in a bid to express the gains it could garner for more expansive trade with Turkey. The proposal also added that the respect of democracy and fundamental rights is an essential element of the agreement, showing the political conditions of the agreement.