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Speech - Mutual benefits of the EU-Turkey Customs Union

European Commission - SPEECH/14/317   10/04/2014

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European Commission

[Check Against Delivery]

Štefan Füle

European Commissioner for Enlargement and European Neighbourhood Policy

Mutual benefits of the EU-Turkey Customs Union

Conference "EU-Turkey Customs Union: Time for a re-set?", Centre for European Policy Studies (CEPS)

Brussels, 10 April 2014

Excellencies, Ladies and Gentlemen,

European Union-Turkey relations are based on a number of strategic foundations. Since Turkey was granted candidate status, the accession process has certainly been the central one. But others have also grown in significance including:

  1. our dialogue on foreign policy issues, which demonstrates Turkey's key potential role in our joint neighbourhood;

  2. energy security, with Turkey at the crossroads of crucial gas and oil routes;

  3. mobility and migration, the importance of which has led to one of the biggest breakthroughs in our relations, namely the readmission agreement and the launch of the visa dialogue which, one day, will hopefully lead to visa free travel between Turkey and the European Union;

  4. Last but not least, we have our trade relations, with the Customs Union being obviously another of our historic achievements. And it is also a very special one: Turkey is the only country to have a Customs Union agreement with the European Union. Established in 1995, it marked the culmination of our trade cooperation before the accession negotiations started a decade later. This unique economic bond has not only thoroughly changed our trade, it has also led to an unprecedented economic inter-dependence between us.

A few facts and figures speak for themselves:

  1. The European Union is Turkey's main trade partner. 40% of Turkey's total trade is with the European Union. In 2013, total trade and Turkish exports to the European Union increased. This underlines the importance of the European Union as a large and secure market for Turkey;

  2. For every €100 invested in Turkey from abroad, no less than €70 has come from companies based in the European Union, in various sectors ranging from automotive to financial services;

  3. Half of the companies established with foreign capital in Turkey are European Union companies;

  4. The European Union is the main investment destination for Turkish companies. In 2012 there were about 150,000 Turkish entrepreneurs operating in the European Union, employing over 600,000 workers.

Along with this positive and solid basis, over the years we have witnessed a growing number of concerns on both sides and a worrying increase of mutual trade irritations. Last year, the Commission felt that it was time to modernise our trade relations. We therefore decided that a thorough and independent evaluation was necessary to move our economic relations with Turkey forward. I am glad that this view was shared by our Turkish partners.

For both parties it was important that this study would be carried out by a renowned institution with economic and political experience required for this comprehensive and sensitive task. We are therefore happy that the World Bank was able to put together such a competent team as the one led by Ian Gillson and Martin Reiser.

I will not pre-empt the conclusions which the World Bank is going to present today. Instead, I would like to highlight three aspects for the follow-up of the study which I consider central from the Commission´s point of view.

First, let me stress that the Customs Union remains economically beneficial both for Turkey and the European Union. The World Bank study gives you concrete evidence for that.

The Customs Union has helped Turkish industry modernise and integrate into the European Union´s economy. The European Union´s external trade tariffs were eliminated for Turkey and Turkey also benefited from a lower common external tariff. Thus, Turkey´s industrial modernisation took place through compatible standards, larger scale production and increased competition.

It is also true that the Customs Union has its flaws and remains incomplete. Both the European Union and Turkey have a number of concerns that each side is eager to solve. Some of these concerns are linked to the legal design of the Customs Union, which had been conceived as an interim agreement before Turkey would become a full member of the European Union.

But before that happens, we need to make the Customs Union more operational. This is the second point I want to make today. To start with, we should look into an effective mechanism to solve trade disputes. There are far too many disputes in areas ranging from the rules for the negotiation of new trade deals to incomplete transposition of the Custom Union´s rules. By allowing these disagreements to linger, we risk the erosion of those benefits that the Customs Union provides.

The Customs Union represents a very close integration in terms of shared tariffs and standards, but its scope remains rather narrow. This contrasts with the new generation of Free Trade Agreements the European Union is concluding with third countries which include many areas which remain outside the Custom Union´s scope, such as agriculture, services, and public procurement.

This brings me to my third and most sensitive point. Recent developments both internationally and in Turkey make a strong case for a stable economic partnership which is in the interest of the European Union and Turkey.

We are living in times at which the political stability of the post-cold-war order can no longer be taken for granted. In the future, we are likely to be confronted with a more insecure international environment. Under these circumstances, and despite the current economic crisis, the European Union continues to be seen as a beacon for fundamental rights and economic freedoms. While accession negotiations have recently progressed less dynamically than hoped for, I believe that this underlines the importance of our economic cooperation all the more.

Strengthening our economic relations, as inspired by the present World Bank evaluation, would add new substantial benefits for consumers and producers on both sides. Ultimately, it could help re-focus the political agenda on consensual issues.

Let me conclude: Turkey´s European perspective is an offer to the Turkish people who, for more than a century, have looked to Europe for orientation and modernisation. In times of political uncertainty, this partnership remains in the mutual interests of Turkish and European Union citizens and companies. I look forward to an inspiring presentation by the World Bank that will hopefully trigger a fruitful debate and an operational follow-up.

Thank you for your attention.

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