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US-EU to sign free trade deal, Turkey upsets

US-EU to sign free trade deal, Turkey upsets

ANKRA: EU Customs Union, driven by anxiety over the implications of the Transatlantic Trade and Investment Partnership (TTIP), a free-trade deal being negotiated by the European Union and the United States to integrate their markets, a total population of 800 million. At this stage Turkey has reached a critical situation.

Turkey is questioning its participation in the EU Customs Union because a free trade agreement being negotiated between the European Union and the United States would open its markets to tariff-free US products while levies on Turkish exports to the United States would remain.

TTIP talks, which began in July 2013 and convened for a fifth round in May, are expected to be completed in late 2016 or early 2017. Once the agreement takes effect, customs barriers between the United States and EU countries will fall. The agreement will be unilaterally binding for Turkey because of the customs union deal it struck with the EU in 1996. In accordance, US products would be allowed onto the Turkish market free of tariffs, while levies on Turkish products sold to the United States would remain in place. Thus, not not only would Turkey lose revenues from customs tariffs, it would also struggle to protect its economy and industry against an influx of tariff-free goods.

The import of cheap goods will boom, while Turkish exports will suffer. Many enterprises in Turkey would be forced to close or to reduce their capacity, which would of course stoke unemployment. The chain reaction promises to deal a blow to the country’s economic indicators, including economic growth and the current account deficit.

That is the “nightmare scenario” behind the anxiety gripping Turkey, which is also angry about being shut out of the EU’s planned economic integration with the United States despite their 18-year-old customs union. Only EU member countries will benefit from the US deal, and Turkey is still in the stage of accession talks. Because Turkey’s eventual EU membership is only a distant prospect, Ankara is left with two options: negotiating an independent free trade agreement with the United States or persuading the EU to have Turkey included in the TTIP.

The idea of a free trade agreement between the United States and Turkey has been under discussion for some time, but no tangible progress has ever been made; thus, its prospects are not particularly rosy. Turkey is therefore trying to deal with its impending trade problem from the EU side. This is why Turkish officials have begun speaking more frequently about pulling out of the EU customs union or suspending the agreement. If the EU fails to deepen the customs union in a way that the TTIP covers Turkey, suspension of the customs union is likely to emerge as a serious option.