The Customs Union, established between the parties as of 1 January 1996 as foreseen by the Additional Protocol which entered into force on 1 January 1973, was a breakthrough in bilateral relations between Turkey and the EU, and brought the integration process to a critical level. With the completion of the Customs Union by Association Council Decision No. 1/95; custom duties, quantitative restrictions and measures having equivalent effect have been eliminated in trade of industrial goods between the parties to ensure the free movement of goods; while the Common Commercial Policy, including the Common Customs Tariffs, have been implemented towards third countries. As a result of the Customs Union, Turkey has opened its internal market to the competition of the EU and third countries, while guaranteeing free access of its exporters to the EU market. In addition, Turkey has undertaken to align itself to the preferential regimes applied to third countries by the EU and to harmonize its legislation with the EU’s acquis communautaire in a wide spectrum of areas, including the standards and technical legislation, as well as competition policies. On the other hand, trade in agricultural products is managed in the framework of the preferential system between the Parties; while trade in iron and steel products is governed by the Free Trade Agreement between Turkey and the European Coal and Steel Community. Consequently, the Turkish economy has been integrated with one of the most competitive economic bloc of the world and obviously that has given the biggest impetus to Turkish economy since the adoption of liberalization measures of the early 1980’s.
As a consequence of this high level of integration, traditionally comprehensive economic relations between Turkey and EU, especially in trade and investments, have been strengthened significantly. In this respect, the volume of trade with the EU increased from 30.2 billion USD in 1995 to 159.3 billion USD in 2017. By 2017, Turkey’s exports to the EU reached 73.9 billion USD and its imports from the EU reached 85.4 billion USD. In this context, the EU accounts for 47.1% of total exports and 36.5% of total imports of Turkey. On the other hand, Turkey is an important trade partner of the EU according to the foreign trade statistics of the EU, indicating that in 2017 Turkey ranks sixth at imports and fifth at exports of the EU with shares of 3.8% and 4.5% respectively.
Following the establishment of the Customs Union, the product composition of Turkish exports transformed in parallel to changing production scales and structure due to the improved competition conditions and market access advantages gained from the Customs Union. Apart from traditional sectors like agriculture or textile and clothing, certain high value added sectors such as durable goods and automotive increased both their shares in total exports and improved their competitiveness in the EU and world market. In this respect, in Turkey’s exports between 1995 and 2017, the share of agricultural products to the EU decreased from 17.6% to 7% and the share of textile and clothing products decreased from 48% to 29.4%; while the share of automotive products increased from 2.8% to 25.2%, the share of machinery products increased from 3.2% to 9.5%, the share of iron and steel products increased from 4.3% to 7.3% and the share of electronic products increased from 5.1% to 5.9%.
In addition to that, the EU is the main source of foreign direct investments (FDI) in Turkey and accounts for 70% of the FDI inflow to Turkey between 2002-2017.
On the other hand, the update of the Customs Union process have been launched with the aim of increasing mutual gains provided by the Customs Union for 22 years through deepening and bringing the bilateral commercial and economic relations to the highest level.
The accession negotiation process has also strengthened the positive outcome of the Customs Union on economic relations between Turkey and EU, and this would be further enhanced with Turkey’s full membership.
During the Helsinki European Council held on 10-11 December 1999, Turkey was officially recognized as a candidate country, without any precondition. Thus Turkey, like the other candidates, became eligible to benefit from a pre-accession strategy to stimulate and support its reforms; as well as to participate in the EU programs open to candidate countries and agencies. With the launch of the accession process, Turkey has undertaken to align its legislation to the whole acquis communautaire, beyond its obligations stemming from the Customs Union.
With the confirmation of Turkey’s fulfillment to the Copenhagen political criteria by the 2004 Progress Report and the Recommendation Document of the European Commission, the Brussels European Council of December 2004 decided to initiate Turkey’s accession negotiations. In this framework, the Accession Negotiations Framework Document for Turkey, defining the principles governing the negotiations, the substance of negotiations, negotiating procedures and list of negotiation chapter headings, was adopted by the EU Council on 3 October 2005 and the accession negotiations have been started. The Accession Negotiations Framework Document emphasized that the ultimate objective of negotiations is full membership.
Currently, negotiations are provisionally closed regarding one chapter (Science and Research) and continue on 15 chapters (Enterprise and Industrial Policy, Financial Control, Statistics, Consumer and Health Protection, Trans-European Networks, Free Movement of Capital, Intellectual Property Rights, Company Law, Information Society and Media, Taxation, Environment, Food Safety, Veterinary and Phytosanitary Policy, Regional Policy and Coordination of Structural Instruments, Economic and Monetary Policy, Financial and Budgetary Provisions).
However, accession negotiations have been suspended on 8 chapters (Free Movement of Goods, Right of Establishment and Freedom to Provide Services, Financial Services, Agriculture and Rural Development, Fisheries, Transport Policy, Customs Union and External Relations) by the Brussels European Council on 14-15 December 2006, claiming that Turkey does not fully implement the Additional Protocol. In this respect, until the time the European Council decides that Turkey fulfills its commitment stemming from the Additional Protocol, screening reports will be prepared, opening criteria will be determined, but negotiations will not start in the said chapters and negotiations will not be closed in any chapters
The progress achieved in the framework of Turkey’s accession negotiations, is being assessed in the Progress Reports published annually by the Commission. In this respect, it is confirmed that regarding the chapters on Free Movement of Goods, on Customs Union, on Company Law, on External Relations and on Consumer and Health Protection for which the Ministry of Trade is responsible, a high level harmonization with the EU acquis has already been achieved.