The Customs Union Between
Turkey and the European Union

On January 1st 1996 the Customs Union between the European Union and Turkey came into effect, thereby creating the closest economic and political relationship between the EU and any non-member country.

What does the Customs Union do?

Essentially the Customs Union gives Turkey improved access to the group of countries previously known as the Common Market. It guarantees the free circulation of industrial goods and processed agricultural products. Customs duties and charges have been abolished and quantitative restrictions such as quotas are prohibited. The Customs Union involves harmonization of Turkey's commercial and competition policies including intellectual property laws with those of the European Union and it extends most of the EU's trade and competition rules to the Turkish economy.

Level playing fields' are being established with Europe

The Decision which constitutes the legal basis for the Customs Union consists of 66 articles, 16 statements and 10 annexes. A Customs Union Joint Committee is the main body responsible for ensuring that trade operates smoothly, dealing with technical issues and any disputes. The Committee meets at least once a month.

The chief characteristic of the Customs Union is that goods will move freely between the EU and Turkey without being subject to customs duties or quantitative restrictions; it covers all aspects of trade and commercial policy to ensure there is a "level playing field" for Turkish and European firms. The main features of this Decision are:

• the elimination of customs duties, quantitative restrictions and measures of equivalent effect on trade in industrial goods, including processed agricultural products, between Turkey and the EU.
• the adoption by Turkey of the EU's Common External Tariff in its trade with third countries.
• the adoption by Turkey of measures equivalent to the EU's common commercial policy.
• progressive alignment of tarriffs by Turkey in line with the EU's preferential trading arrangements with certain third countries.
• the adoption by Turkey of customs provisions in line with those of the EC.
• agreed competition rules and the alignment by Turkey of its legislation in this area with that of the EC.
• the adoption by Turkey of legislation in the field of intellectual property protection to secure a level of protection equivalent to that in the EC.
• the abolition by the EC of Voluntary Restraint Arrangements in trade in textiles with Turkey.
• the formation of an EC/Turkey Customs Union Joint Committee and the adoption of other institutional arrangements to enable Turkey to be properly informed of, and formally consulted about, policy formulation in the EC on matters which affect the Customs Union.

During the Association Council meeting, a Resolution was also adopted in accompanying areas which provides for the intensification of cooperation between the European Union and Turkey in the fields which are not covered by the Customs Union i.e. industrial cooperation, Trans-European networks, cooperation on energy, transport, telecommunications, agriculture, environment, science, statistics, matters relating to justice and home affairs, consumer protection, cultural cooperation, information and communication.

During the meeting of the Association Council, the European Union made a statement about financial cooperation with Turkey, in order to help it to restructure its industrial sector to the new competitive situation created by the Customs Union and improve its infrastructure linkages with the European Union as well as to reduce the difference between its economy and that of the Community. This financial cooperation amounts to some 2.2 billion ECU's for a 5 year period.

What the Customs Union has meant so far

Upon entry into force of the Customs Union Decision, Turkey cut all duties and equivalent charges on imports of industrial goods from members of the EU to zero. Furthermore, Turkey harmonised its tariffs and equivalent charges on the import of industrial goods from "third contries" with the Common External Tariff of the EU, and will progressively adopt EU commercial policy and preferential tariff policies within 5 years. For certain specifically identified "sensitive" products Turkey will maintain rates of protection above those specified in the Common Customs Tariff for imports originating in third countries for up to five years. These products include mainly ceramic products, motor vehicles and footwear.

As a result of these measures Turkey's weighted rates of protection for imports of industrial products have fallen from 5.9% to 0% for products originating in the EU and EFTA and from 10.8% to 6% for products originating in third countries. These rates will drop further to 3.5% after the fulfilment by the EU of its commitment under the Uruguay Round of GATT. Although agricultural products are excluded from the treaty, Turkey is progressively adopting many aspects of the Common Agricultural Policy. The EU will take as much account as possible of Turkish agricultural interests when developing its agricultural policy. Progressive improvement, on a mutually advantageous basis, of the preferential arrangements for the trade in agricultural products is also envisaged.

Harmonisation work so far with the EU's commercial policy includes monitoring and safeguarding measures on imports both from the EU and third countries, the management of quantitative restrictions and tariff quotas and the prevention of dumped and subsidised imports.

Turkey has adopted EU rules and legislation on competition. Subsidies through State resources in any form whatsoever which distort or threaten to distort competition are banned. However assistance to promote economic development in Turkey's less developed regions and assistance intended to promote cultural and heritage conservation and which does not adversely affect competition will be allowed. On the other hand Turkey will progressively adjust any state monopoly of a commercial character so as to ensure that no discrimination exists in the conditions under which goods are produced or marketed between nationals of EU member countries and Turkey.

Turkey has harmonised its laws with EU legislation eliminating technical barriers to trade. There is now effective co-operation between Turkey and the EU in the fields of standardisation, calibration, quality, accreditation, testing and certification.

Turkey has harmonised its legislation on intellectual, industrial and commercial property to EU standards and has implemented laws covering consumer protection, and the protection of competition. Both sides are banned from using internal taxes as indirect protection mechanisms and from using tax rebates as export subsidies.

The Customs Union aims to intensify not just the level of economic co-operation but also political co-operation between the two sides. Political dialogue between the two parties will increase through high level meetings. There will be greater co-operation in the fields of industry, transport, telecommunications, agriculture, environment, science, justice, home affairs, consumer protection and culture. There will be occasional meetings on common foreign and security policy.

The Customs Union is the natural outcome of Turkey's history

Turkey is the only fully pluralist, secular democracy in the Muslim World and has always attached great importance to developing its relations with European countries. Historically Turkish culture has exerted a powerful influence over much of Eastern and Southern Europe.

Turkey first began to 'westernize' its economic, political and social structures in the 19th Century. After the First World War it chose western Europe as the model for its new modern and secular republic.

Since that time Turkey has closely aligned itself with the West. It is a founder member of the United Nations, a member of NATO, the Council of Europe, the OECD and an associate member of the Western European Union. Turkey has played and still plays a key role in the defense of the European continent and the principal elements of her foreign policy have in general converged with those of the Community. Turkey, for example, played a pivotal role in assisting the UN effort during the Gulf War at considerable economic cost to itself. This important area of co-operation has run parallel with a deepening economic and political relationship.

Turkey is the EU's longest standing associate, and for the past 50 years, Turkey has participated in the activities of practically all international bodies involved in European integration.

In 1959 Turkey made its first application to join what is now the European Union. This resulted in the Ankara Agreement of 1963 which formed the basis for the current relationship and, by recognizing Turkey's eligibility for membership, paved the way for subsequent negotiations.

Tariffs barriers come down

In 1973 a 22 year timetable was set for achieving a Customs Union prior to full membership. The European Union abolished all its customs duties on industrial goods, with a few exceptions, and Turkey has enjoyed free access to the European Union since then. On the other hand, the EU granted a preferential regime on imports of agricultural and some processed agricultural products originating in Turkey. Turkey has had free access to the European Union since then. It began dismantling its tariff system in the early 1970s and accelerated this process from 1987 onwards.

A Big Emerging Market

Turkey's economic growth and its population of over 62 million means that it enjoys increasing clout in world markets. It is now acknowledged by the United States government as one of the world's big emerging markets'. It is the 10th biggest trading partner of the European Union and does nearly half its trade with the Union. The basis of the Customs Union Treaty lies in the recognition by both parties of this reciprocal economic significance and interest.

In March 1995, the Turkey-European Union Association Council which comprises the Foreign Ministers of the 15 EU Member Countries and the Foreign Minister of Turkey agreed on a text setting out the terms of the Customs Union. This was accompanied by a separate declaration of the Association Council on Turkish and European relations.

The European Parliament gave its assent to the Decision in December 1995 and the Customs Union came into effect on January 1st 1996. The assent process was by no means a foregone conclusion. Turkey had to meet some onerous legislative and technical obligations. It devoted great effort to doing so. The drive to the European Parliament's assent was spearheaded in Turkey by all economic and social partners, the business community and trade unions alike which recognized that economic partnership with Europe could only be mutually beneficial.

Meanwhile, Turkey was engaged in a far-reaching democratic reform process. During 1995 Turkey enacted substantial legal and constitutional reforms including a package of 16 amendments to the Constitution. These amendments liberalized aspects of the political process affecting university teachers and trade unions, lowered the voting age to 18. A key clause in Turkey's legislation against terrorism was also changed, enlarging the scope of the freedom of expression.

While the Customs Union clearly has both political and economic implications, the large majority in the European Parliament for its assent reflects the fact that the Customs Union is in the economic interests of the European Union as well. It also reflects awareness of Turkey's strategic and political importance as an ally. The first few months of the Customs Union have seen steady progress on both sides. So far no delays or technical hitches of any sort have been reported on the Turkish side. Greek objections to EU financial assistance to Turkey to help it restructure its economy inside the Customs Union continue. For the Customs Union to work successfully, Turkey is entitled to the structural assistance which all countries have enjoyed up to now when setting up a Customs Union with the EU.