OPINION - Customs Union and Green Deal

By Omer Bolat

- The author is the trade minister of the Republic of Türkiye.

ISTANBUL (AA) - As a candidate country, Türkiye attaches great importance to its relations with the European Union. Türkiye’s process of integration with Europe and its institutions has a history spanning more than half a century and constitutes one of the central themes in its foreign policy. Today, Türkiye maintains its EU-membership perspective and remains committed to deepening its relations with the EU both in economic and political terms, in accordance with that perspective.

The Customs Union was put into force in 1995 as a last phase before Türkiye’s accession to the EU. The underlying logic behind the Customs Union was to ensure a high level of integration between the economies of both parties’ and accustom the Turkish industry to the economic standards set by the EU. Since 1995, the Customs Union has led to progressive liberalization in trade and enabled Türkiye to align itself to a great extent with the EU’s economic policies. As a result of this unique and comprehensive partnership, our bilateral trade with the EU has increased at a rapid pace and hit a record of nearly $200 billion in 2022.

- Benefits for both Türkiye and the EU

So far, the Customs Union has fulfilled an important function in terms of the sophistication of the industrial capacity and quality of Türkiye and the integration of the Turkish economy into global supply chains. On the other hand, the EU has also benefited from this unique partnership, as Türkiye has become an important production hub for the EU and thus an important supplier in its closest proximity. With its qualified workforce, rapid and flexible just-in-time production capacity, and advanced banking and financing infrastructure, Türkiye has attracted a significant number of investments from European countries. Furthermore, thanks to its strategic position and logistical advantage, Türkiye maintains a high trade potential with countries in the region and provides easy access to Middle Eastern and Near Eastern countries.

In that respect, the free movement of goods established by the Customs Union (officially called the Association Council Decision No. 1/95) and Türkiye’s increasing conformity with the EU acquis in respective areas, as well as its geographical proximity to the EU, have made significant contributions to the EU’s competitiveness at the global level and provided a hedge for the EU against the fluctuations and challenges in the global supply chains. The Customs Union remains the backbone of economic interactions between Türkiye and the EU and yields clear-cut benefits for both sides.

- Structural problems

On the other hand, since 1995, the global economy has undergone significant changes while the Customs Union between Türkiye and the EU has remained the same. In this context, despite all its benefits, our Customs Union, in its current shape, falls short of reflecting contemporary economic realities and responding to recent geo-economic challenges unfolding on an international level. First of all, our Customs Union is restricted to the trade of industrial products and processed agricultural products and, in that regard, fails to capture the recent trends in the international economy. In line with the ongoing processes of globalization, digitalization, and green transformation, the areas of services and e-commerce have been becoming increasingly important. The scope of the Customs Union also does not include other important fields in today’s economy, like public procurement, trade in services and trade in agricultural products.

In addition to its limited scope, the Customs Union has certain structural defects that prevent parties from fully benefiting from its promises. The lack of involvement of Türkiye in the decision-making mechanism of the Customs Union prevents Turkish interests from being represented when important decisions regarding the implementation of the Customs Union are taken.

Another structural problem of the Customs Union is the increasing divergence between the free trade agreements of both parties. Despite the fact that the EU has a rapidly enhancing free trade agreement network, the possibility of entering the Turkish market via the EU diminishes the motivations of the EU’s free trade agreement partners to conclude a similar agreement with Türkiye which constitutes a significant threat of trade divergence.

At its current state of implementation of the Customs Union, Türkiye’s capacity to make most use of the Customs Union’s benefits has been consistently precluded by certain practices of either the EU or member states. The quotas imposed on transit passages and difficulties created for our drivers and businesspersons in the visa-granting process can be mentioned under this category. Additionally, the constant denial of Turkish access to several databases and participation in relevant EU agencies creates outcomes controversial to the principle of free movement of goods.

In light of the existing challenges and the direction that the world economy is heading, a new stimulus is needed in the economic relations between the EU and Türkiye. Pursuant to the inherent problems of the Customs Union, Türkiye strongly advocates that updating the current scope of the Customs Union to a new scheme that is more compatible with global economic realities would serve to unlock true economic potential between Türkiye and the EU.

- Türkiye's own Green Deal Action Plan

As Türkiye closely follows the recent developments within the EU’s economic sphere, in particular developments in the European Green Deal, Türkiye published its own Green Deal Action Plan, a comprehensive roadmap to a green, sustainable, and resource-efficient economy, in July 2021. In order to protect and develop its high level of integration with EU policies, especially regarding free movements of goods which can be highly affected by these developments, the plan includes a total of 32 objectives and 81 actions to be implemented by various institutions and stakeholders.

The imperative nature of Türkiye’s shift towards environmental sustainability is acknowledged as a fundamental factor for achieving comprehensive and sustainable economic expansion, fostering competitiveness in exports, and becoming an integral part of global value chains. The successful execution of the plan, coupled with its alignment with EU legislation, will play a crucial role in the achievement of the above-mentioned ambitious goals. An essential factor in effectively implementing an environmentally friendly, technologically advanced, and equitable transition while effectively combating climate change lies in directing investments primarily towards technology and advancing research and development (R&D). In this context, we reiterate Türkiye’s commitment to fostering knowledge exchange and collaborative experiences in innovation and R&D through international partnerships, while also welcoming foreign investments as we work towards achieving global climate objectives.

The modernization of the Customs Union together with enhanced cooperation on a green and digital transition would better equip us to cope with challenges emerging in global supply chains and the global economy and serve both parties' economic security by significantly enhancing our capability to jointly respond to these challenges.

*Opinions expressed in this article are the author’s own and do not necessarily reflect the editorial policy of Anadolu.​​​​​​​