The EU's Trade Relationship with Turkey15 July 2009
by inadim -- last modified 20 July 2009
The EU and Turkey are linked by a Customs Union agreement, which came in force on 31 December 1995, pursuant to the 1963 EU-Turkey Association Agreement, which aims at promoting trade and economic relations. The Customs Union is ambitious but does not cover essential economic areas, such as agriculture, to which bilateral trade concessions apply, services or public procurement. Turkey has been a candidate country since 1999.
BILATERAL TRADE RELATIONS
The EU and Turkey enjoy a deep trade relationship. Indeed, the EU ranks by far as number one in both Turkey's imports and exports while Turkey ranks 7th in the EU's top import and 5th in export markets. Main Turkish exports markets in 2007 were the EU (56.4%), Russia (4.4%), USA (3.9%), Romania (3.4%), United Arab Emirates (3.0%) and Iraq (2.6%). Textiles and transport equipment dominate EU imports from Turkey, both accounting for about 24% of the total. Other important imports are machinery (17.7%), and agricultural products (7.1%).
Imports into Turkey came from the following key markets: the EU (40.8%), Russia (14.0%), China (7.9%), USA (4.8%), Iran (3.9%) and Switzerland (3.1%). Main EU exports to Turkey are machinery (32.2%), transport material (18.6%) and chemical products (16.9%).
Free Trade Agreements
In addition to the Custom Union with the EU, Turkey has signed Free Trade Agreements with EFTA, Israel, the former Yugoslav Republic of Macedonia, Croatia, Bosnia-Herzegovina, Tunisia, Morocco, the Palestinian Authority, Syria, Egypt, Georgia and Albania.
Foreign Direct Investment
In 2007, €0.3 billion of EU inflows came from Turkey, while €12.4 billion of EU out-flows went to Turkey.
In 1963, Turkey signed an Association Agreement with the European Union to promote trade and economic relations. By the Association Council Decision of 6 March 1995, the Customs Union came into force on 31 December 1995. The Customs Union covers all industrial goods but does not address agriculture (except processed agricultural products), services or public procurement. In 1996 a free trade area was established between Turkey and the European Union for products covered by the European Coal and Steel Community. Decision 1/98 of the Association Council covers trade in agricultural products.
In addition to providing for a common external tariff for the products covered, the Customs Union foresees that Turkey is to align to the acquis communautaire in several essential internal market areas, notably with regard to industrial standards.
Finally, Turkey is also member of the Euro-Mediterranean partnership and as such should conclude free trade agreements with all other Mediterranean partners, with a view to the creation (by 2010) of a Euro-Mediterranean free trade area.
At the Helsinki summit in December 1999 Turkey was given the status of a candidate country. The December 2004 Brussels European Council concluded that Turkey sufficiently fulfils the Copenhagen political criteria to open accession negotiations. Negotiations started on 3 October 2005 when the Council adopted a Negotiating Framework.
The Commission's objective of "extending and deepening" the Customs Union (CU) was endorsed by EU Member States at the December 2002 Copenhagen Council. Subsequently, the Council has agreed on negotiating guidelines on the liberalisation of services and public procurement. Several rounds of negotiations have so far taken place. In other areas, such as the requirement to align with the Community's preferential customs regimes, the EU is encouraging Turkey to make further advances.