Turkey avoids economic pain with EU trade agreement
The customs union agreement between the EU and Turkey is scheduled to be signed May 11.
Prime Minister Ahmet Davutoglu announced the development in his address to the General Assembly of the Union of Chambers and Bourses of Turkey. Davutoglu emphasized that henceforth there will be no infringement of Turkey’s rights in future EU free trade agreements.
Turkey was excluded from the TTIP negotiations that began between the United States and the EU in 2013 because it was not an EU member. The risk of being kept out of the planned accord that would provide economic integration with the world’s largest free trade market of 800 million people brought Turkey to the verge of leaving the customs union.
The TTIP will remove all customs barriers between the United States and the EU. But as Turkey had already made a customs union agreement with the EU in 1996, the TTIP would have burdened Turkey with a tremendous disadvantage.
Once the TTIP went into effect, Turkey would not impose a customs duty on imports from the United States, but the United States would continue such fees on imports from Turkey, costing Turkey considerable tax revenue. Moreover, its industry would be threatened by duty free imports; industries would shut down, production would decline and unemployment and the deficit would rise.
This scenario has been a nightmare for Turkey for several years. Turkey had two options: Either to reach a separate free trade agreement with the United States, or be included in the TTIP by persuading the EU to let it join.
While the government was studying various options, including terminating the customs union, Turkey's Central Bank listed the effects the TTIP would have on Turkey.
If Turkey joins the TTIP and can export goods to the United States duty-free, its exports will rise by 7%.
If Turkey is excluded, there will be a $ 4 billion reduction in its gross domestic product, but if it is included, its GDP will increase by $31 billion.
The TTIP will provide 2.6-9.7% increases in the welfare economies of EU countries and 13.4% for the United States. Among the countries not covered by the TIPP, there will be the following welfare losses: Switzerland 3.7%, Canada 9.48%, Mexico 7.24% and Turkey 2.5%. ■