EUROPEAN UNION – TURKEY RELATIONS IN THE CONTEXT OF ECONOMY AND FOREIGN TRADE

Negotiations regarding the process of Turkey’s integration into the European Union have become official with the ratification of the Ankara Agreement in 1964. Three stages envisaged regarding the acquisition of the membership status. The first stage has started with the ratification of the Ankara Agreement and continued until the Additional Protocol entered into force. With this protocol, the preparatory stage has come to an end while the conditions within the transitional stage have been determined. Turkey also gained the official membership status while the free movement privileges have foreseen to complete the Customs Union between parties. The examination in this paper of the economic adventure between Turkey and the European Union has shown that the trade between parties indicated a positive trend from 2013 to 2018, despite the political fluctuations that occurred during the membership process.

ÖZET

Türkiye’nin Avrupa Birliği’ne entegrasyonuna ilişkin süreç, 1964 senesinde Ankara Antlaşması ile resmiyet kazanmıştır. Antlaşmaya göre Türkiye’nin birliğe üyeliği için üç evre öngörülmüştür. İlk evre olan Hazırlık Dönemi, Ankara Antlaşması’nın yürürlüğe girmesi ile başlayıp 1973 yılında Katma Protokol arasındaki döneme verilen addır. Bu protokol ile hazırlık dönemi sona ermiş, Geçiş Dönemi için şartlar belirlenmiştir. 1996 senesinde ise Türkiye Gümrük Birliği’ne üye olmuş, malların serbest dolaşımı ve ortak ticaret politikası fasıllarında imtiyazlar öngörülmüştür.  Türkiye ile Avrupa Birliği arasındaki ekonomik serüveni konu alan bu yazıda yapılan araştırmalar, üyelik sürecinde meydana gelen siyasi dalgalanmalara rağmen taraflar arası ticaretin 2013'ten 2018'e kadar pozitif bir eğilimde olduğunu göstermiştir.

Anahtar Kelimeler: Avrupa Birliği, Türkiye, Ekonomi, Dış Ticaret.

ABSTRACT

Negotiations regarding the process of Turkey’s integration into the European Union have become official with the ratification of the Ankara Agreement in 1964. Three stages envisaged regarding the acquisition of the membership status. The first stage has started with the ratification of the Ankara Agreement and continued until the Additional Protocol entered into force. With this protocol, the preparatory stage has come to an end while the conditions within the transitional stage have been determined. Turkey also gained the official membership status while the free movement privileges have foreseen to complete the Customs Union between parties. The examination in this paper of the economic adventure between Turkey and the European Union has shown that the trade between parties indicated a positive trend from 2013 to 2018, despite the political fluctuations that occurred during the membership process.

Keywords: European Union, Turkey, Economy, Foreign Trade.

I.                   INTRODUCTION

Since the establishment of the European Union (EU), relations between Turkey and the EU have always been important for both sides. As the biggest economic integration of the world, the EU is a crucial partner for Turkey with its power on economy, politics, and international affairs.

The journey of the membership of Turkey, which begins in 1959, continues for decades and it has its highs and lows in particular times such as military coups and economic crisis. Today, there are many positive and negative points of view and opinions in the EU and Turkey on the membership of the country to the integration.

In this study, the main purpose is to learn and understand the economic and commercial relations between the EU and Turkey in order to create new perspectives on the area. This study contains the establishment and characteristics of the EU, a brief history of Turkey – EU economic relations, observations on the foreign trade between the parties, and lastly, some opinions gained through the research.

II.                ESTABLISHMENT AND CHARACTERISTICS OF THE EUROPEAN UNION

The European Union is a political and economic integration composed of geographically neighbouring countries and has 27 member countries. It has many institutions and bodies such as the European Parliament, the European Commission, the European Council, the European Central Bank, and the European Court of Justice. Its founding members (also known as the Inner Six) are France, Italy, Germany (Western Germany at that time), Belgium, the Netherlands, and Luxembourg.

The European Union’s lynchpin was set on May 9^th, 1950, via a memo prepared by French Minister of Foreign Robert Schuman and Jean Monnet. In this memo, it was foreseen that the French and German production and distribution efforts of coal and steel would be supervised by a to-be-established union, or more precisely, a cartel. Other Western European countries would also be able to accede to this cartel should they desire to. This is also known as the Schuman Plan (Seydioğlu, 2003, s. 219-221).

As a result of the Schuman Plan, the European Coal and Steel Community was founded in 1951 by the six founding members – Belgium, Luxembourg, the Netherlands, France, Italy, and the Federal Republic of Germany. The first chairman of the Community’s High Authority was the mastermind who had inspired the Schuman Plan, Jean Monnet. Thusly, staples of war, coal and steel, would become instruments of peace and for the first time in world history, countries would willingly hand over a portion of their sovereignty to a supranational institution. In 1957, the six-member states decided to establish an economic community based on the principle of the free circulation of labour, products, and services. Therefore, in order to establish an economical unity in other sectors aside from coal and steel, the European Economic Community was founded in 1957 after the signing of the Rome Agreement. The objective of the European Economic Community was the establishment of a common market where products, workforce, services, and capital could move freely and ultimately the formation of political unity. (Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Relations, 2020)

The European Atomic Energy Community also was established by the Rome Agreement that went into effect as of January 1st, 1958. The objective of this Community was determined as coordinating the research programmes of member states in order to secure the safe use of nuclear energy and utilization with peaceful purposes. With the Merger Treaty signed in 1965, a single Council and a single Commission were constituted for all of the three abovementioned communities – European Coal and Steel Community, European Economic Community, and European Atomic Energy Community – and these Communities began to be referred to as the European Communities (Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Relations, 2020).

The first expansion of the European Union was in 1973 with the accession of Denmark, Ireland, and the United Kingdom. The member count increased to 12 with the accessions of Greece in 1981 and Spain and Portugal in 1986. The Maastricht Treaty, also known as the Treaty on European Union, went into effect on November 1st, 1993. With this treaty, it was enacted to complete the monetary union, to form European citizenship, and to create cooperation policies on justice and internal affairs and common policies on foreign and security (Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Relations, 2020).

In 1995, Sweden, Austria, and Finland joined the European Union. Along with the completion of the aforementioned monetary union in 2002, the member count had increased to 28 with the expansions in 2004, 2007, and 2013. With the secession of the United Kingdom on February 1^st, 2020, the European Union maintains its existence with 27 member states.

The European Union, recognized as the strongest regional integration in today’s world, has an important place in the global economy with its economic, cultural, and representation of many common specialties. As can be understood from aspects such as intraregional commerce composing 60% of the Union’s trade with the world and steps taken to deepen integration within, the European Union shall remain influential in the future of the global political economy (Dikkaya & Üzümcü, 2017, s. 141).

III.             A BRIEF HISTORY OF THE RELATIONS BETWEEN THE EUROPEAN UNION AND TURKEY

After the establishment of the European Economic Community (EEC) in 1958, Turkey has applied for membership of the integration in 1959. The application has been accepted and the parties decided to sign an agreement, Ankara Agreement, which will be in force until Turkey fulfils the membership requirements. This agreement was a key to benefit from the common market features and to trade without restrictions with the European Union countries, which were called the EEC at that time. The target of this agreement was the elimination of economic differences and harmonization between Turkey and the EEC.

In the context of the Additional Protocol that came into force in 1973, excluding some oil and textile products, the EEC unilaterally reset the tariffs and quotas on imports from Turkey on industrial goods. In response, it was foreseen that Turkey would also abolish the tariffs on the industrial goods from EEC in 22 years. This period of 22 years has been called as “Transitional Stage” (Eğilmez, Türkiye Ekonomisi, 2019, s. 178).

Because of the political and economic obstacles from the beginning of 1970 until the second half of the 1980s, Turkey and EU relations have followed an erratic course. Relations were officially suspended after the military coup of 12 September 1980 and revived with the re-establishment of the civil administration in the country in 1983 and the abandonment of import substitution policies in 1984 (Eğilmez, Türkiye Ekonomisi, 2019, s. 179).

In 1987, Turkey applied for full membership, but it has been denied because the economic and socio-cultural adaptation process has not been completed for implementation. In 1993, negotiations began for the Customs Union, and the decision was adopted officially in 1995. After that, Turkey has been an official member of the Customs Union in 1996.

Turkey's candidacy was formally approved at the EU Summit held in Helsinki in 1999 and gained equal rights with other candidate countries. In 2001, the accession partnership document which is prepared for Turkey, approved by the EU Council. In the 2004 Brussels Summit, “The Council stated Turkey sufficiently fulfilled the political criteria and took the decision to start accession negotiations with Turkey on 3 October 2005” (Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Affairs, 2020).

IV.             HISTORY OF ECONOMIC RELATIONS OF THE EUROPEAN UNION – TURKEY

Without a doubt, Turkey and the EU’s foreign trade began with the Ankara Agreement which entered into force in 1964. In Article 2, the purpose of the Agreement is stated as follows: “The aim of this Agreement is to promote the continuous and balanced strengthening of trade and economic relations between the Parties while taking full account of the need to ensure an accelerated development of the Turkish economy and to improve the level of employment and living conditions of the Turkish people. In order to attain the objectives set out, a customs union shall be progressively established.” (Ankara Agreement, 1963).

Ankara Agreement envisages three periods for Turkey’s accession to the European Economic Community: a preparatory stage, a transitional stage, and a final stage. The preparatory stage began on December 1, 1964, with the Agreements’ entry into force. In order to reduce economic differences between the parties, in the preparatory period, Turkey has not assumed any obligations. Some institutions have been established between the two parties for the functioning of the partnership relationship (Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Affairs, 2020).

With the Additional Protocol that entered into force in 1973, the preparatory stage foreseen in the Ankara Agreement has ended and the conditions regarding the "Transitional Stage" have been determined. In this period, it was envisaged to ensure the free movement of industrial products, agricultural products, and persons between the parties in order to complete the Customs Union. In 1996, Customs Union membership officially realized and Turkey has become one of the European Union's official trade partners. In the following periods, Turkey officially entered the candidate country status and gained equal rights with other candidate countries.  Today, Turkey continues its Customs Union membership and the Common Trade Policy remains the harmony between chapters with the European Union.

V.                DEVELOPMENT OF FOREIGN TRADE OF EU COUNTRIES – TURKEY BETWEEN 2013 – 2020

Table 1: Development on the Foreign Trade of Turkey - European Union Countries

(Million Dollars and %)

Source: TÜİK (2020), Foreign Trade Statistics, Foreign Trade Developments by Country Groups (General Trading System Data), * Data of January-November 2020 Period. https://data.tuik.gov.tr/Kategori/GetKategori?p=dis-ticaret-104&dil=1 (Accession Date: 22.02.2021).

Based on the data in Table 1, Turkey’s exports to European Union countries have been increased, especially in 2018 and 2019, and the foreign trade balance rose to a positive step. However, according to the data until November 2020, the balance has deteriorated again, although not as much as before 2018. In addition to the political developments, the pandemic that the world was under the effect of caused this situation. On the other hand, import has tended to decrease in the last two years. It is possible to say that other trading partners have also influenced the reason for this, apart from the two reasons mentioned earlier.

Foreign trade volume grew until 2018, and after, it started a gradual decrease. While the coverage rate was able to rise above 1% in 2018 and 2019, it decreased again in 2020, but not a big decrease was observed. Thus, based on the basic foreign trade indicators, it is possible to say that the commercial relations between Turkey and the EU remained positive.

Table 2: Place of the European Union Countries Turkey's Foreign Trade

(Million Dollars and %)

Source: TÜİK (2020), Foreign Trade Statistics, Foreign Trade Developments by Country Groups (General Trading System Data), * Data of January-November 2020 Period. https://data.tuik.gov.tr/Kategori/GetKategori?p=dis-ticaret-104&dil=1 (Accession Date: 22.02.2021).

According to Table 2, it is possible to say that the commercial relations between Turkey and the European Union in terms of imports and exports in a stable condition. It can be seen that Turkey’s share of EU countries in exports of 0,35- 0,40% of EU countries continued in the vicinity of watching the band of 0.30% share in Turkey’s imports.

The impact of the sharp problems with Greece in the Eastern Mediterranean was not reflected in trade relations between Turkey and the EU, despite Greece's demands for sanctions. Tensions with France also did not affect overall exports and imports with the Union. In 2021, it is possible to see the link between the political situations and the economic course because of the continuing Eastern Mediterranean problems.

In addition, the 2020 Progress Report of Turkey, prepared by the European Commission, maintains some important notes on “Customs Union” (CU) and the “External Relations”. About the Customs Union, this statement draws attention: “Turkey maintains a good level of preparation for the customs union. There was backsliding in the reporting period. Turkey continued to extend the scope of additional duties applied on imports of a large number of products originating in third countries, which are in free circulation in the EU, thus infringing the fundamental principle of the Customs Union. The requirement for a certificate of origin for goods in free circulation in the EU is in breach of the Customs Union rules. Duty relief, free zones and surveillance measures remain not fully in line with the EU acquits nor with Turkey’s obligations under the Customs Union.” (European Commission, 2020, s. 104).

In the same report, there is another captivating statement about the progress of Turkey on the external relations with the EU: “Turkey is moderately prepared in the area of external relations. The backsliding continued in the reporting period. The level of alignment with the Common Customs Tariff (CCT) diminished as Turkey continued to apply and extend additional customs duties, while divergence from the EU Generalised Scheme of Preferences further increased in breach of Turkey’s legal commitments under the EU-Turkey Customs Union. The recommendations from last year were not implemented.” (European Commission, 2020, s. 105).

In the light of these information on CU and the external relations, declared by the European Commission, it is clear to say that Turkey did not take action in these particular areas in 2020. However, this situation did not affect the commercial relations between the EU and Turkey this year. For the progress on these specific parts, Turkey needs to take some actions in order to sustain a healthy environment for foreign trade and economic relations.

VI.             CONCLUSION

Turkey’s European Union adventure that started in 1957 had improved with the Ankara Agreement that went into effect in 1964 and escalated to a new dimension with the Customs Union membership in 1996. The candidate country status, officialised in 1999, made Turkey an important country for the European Union and granted them equal rights as the other candidate countries.

It is possible to say that the general situation in the 2013-2020 period was positive in terms of foreign trade among Turkey and the European Union and, despite minor fluctuations, no sharp drops occurred. The European Union continues to be one of Turkey’s most important trading partners.

The development of foreign trade between Turkey and European Union member states has also been positive and although the balance of foreign trade took a toll due to the global COVID-19 pandemic in 2020, no steep rises nor sharp drops were observed.

Lastly, for the sake of the future of both general and commercial relations between Turkey and the European Union, political crises must be urgently resolved or agreed upon. Although no serious declines were observed until now, the recent EU decisions of sanctions against Turkey may be foreshadowing more serious outcomes. Specifically, in terms of commercial relations, it can be said, especially following the negotiations and statements by the heads of states, Turkey’s mercantile and political importance in the eye of the European Union will rise in the following days.

Bengisu Dereş

Avrupa Çalışmaları Stajyeri

VII.          BIBLIOGRAPHY

Ankara Agreement. (1963, 09 01). Agreement Establishing an Association Between the European Economic Community and Turkey. Ankara, Turkey.

Dikkaya, M., & Üzümcü, A. (2017). Uluslararası Ticaret ve Finans. Ankara: Savaş Yayınevi.

Eğilmez, M. (2019). Türkiye Ekonomisi. İstanbul: Remzi Kitabevi.

European Commission. (2020). Turkey 2020 Report. Brussels.

Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Affairs. (2020, 02 12). History of Turkey- EU Relations. Retrieved 02 22, 2021, from https://www.ab.gov.tr/brief-history_111_en.html

Republic of Turkey Ministry of Foreign Affairs, Directorate for EU Relations. (2020, 05 08). History of the European Union. Retrieved 02 22, 2021, from Directorate for EU Relations: https://www.ab.gov.tr/history-of-the-eu_105_en.html

Seydioğlu, H. (2003). Uluslararası İktisat: Teori, Politika ve Uygulama. İstanbul: Güzem Yayınları.

TÜİK (2020), Foreign Trade Statistics, Foreign Trade Developments by Country Groups (General Trading System Data), * Data of January-November 2020 Period. https://data.tuik.gov.tr/Kategori/GetKategori?p=dis-ticaret-104&dil=1 (Accession Date: 22.02.2021).

TÜİK (2020), Foreign Trade Statistics, Foreign Trade Developments by Country Groups (General Trading System Data), * Data of January-November 2020 Period. https://data.tuik.gov.tr/Kategori/GetKategori?p=dis-ticaret-104&dil=1 (Accession Date: 22.02.2021).