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A BRIEF HISTORY OF CUSTOMS UNION: WHAT FUTURE FOR IT? *from an unusualist's view point M. Haluk Nuray İKV Brussels Representative 32 nd Meeting of the.

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Presentation on theme: "A BRIEF HISTORY OF CUSTOMS UNION: WHAT FUTURE FOR IT? *from an unusualist's view point M. Haluk Nuray İKV Brussels Representative 32 nd Meeting of the."— Presentation transcript:

1 A BRIEF HISTORY OF CUSTOMS UNION: WHAT FUTURE FOR IT? *from an unusualist's view point M. Haluk Nuray İKV Brussels Representative 32 nd Meeting of the EU-Turkey Joint Consultative Committee Bruxelles, 7 Nov. 2013

2 Although CU is an old and long story with many ups and downs, in the last couple of years, when the Turkish economy and business' actors mention the CU, it is usually in the form of “complaints” and with negative intonations.

3 The basic rules of CU were negotiated and decided at 1969; put on paper at 1970 and implementation partially started at For the Turkish side, at the beginning, the CU was accepted without calculating its economic implications but because the integration model emerging in Western Europe was based on it. In other words the decision was “political”. The philosophy was to extend to Turkey the same apparently successful recipe of EEC. History of the Customs Union Episode 1 : Great Expectations ( )

4 Turkey stopped tariff reductions. At that point I see that Turkey's failing to fulfill the CU commitments were partially linked to "economic" grounds. The political ups and downs had been corrosive in the EC-Turkey relationship and the relationship was “officially frozen” from early 80s until 1986 and “practically cool” even until 1988 despite the membership application of April History of the Customs Union Episode 2 : Hesitation and Political Downturn ( )

5 From 1987, the evaluations made by both sides after the new membership application led to a conclusion that the progress in the relationship should (and could only) be based on CU. However, in period there was disappointment and hesitations. Dissapointments on the EU side were mainly due to the unfullfiled CU obligations. On the Turkish side there were mainly two areas of dissapointment: failure to obtain free movement of workers and failure to obtain new financial assistance since But after 1992, the process accelerated. As the Turkish economy of the day was predicated upon a speedy liberalization, at that point, economic and political motives overlapped. That, in turn, created a strong political will behind the CU. History of the Customs Union Episode 3 : Revitalization (1) ( )

6 Not without problems of course. Easy one: The concept of CU changed.... Solution: Found Difficult one: The EU did not stop and wait; it has completed its internal market and headed towards the economic and political union. So, the problem faced was not only to conclude a trade agreement but also to determine Turkey’s place in this new EU and the question was if CU would be enough to secure a good place for Turkey in the new EU. Solution: Not found !yet! EU has viewed the CU in terms of strengthening its economic and political relationship with Turkey. For Turkey, in contrast, the CU is not considered a self-standing trade agreement but seen as a tool that should ultimately lead to full membership. SENTIMENTAL DIMENSION of the CU. History of the Customs Union Episode 3 : Revitalization (2) ( )

7 Against all these difficulties and challenges the CU decision was adopted at March 6, 1995 and the full implementation of the CU started as of The rules laid down by this very same decision, today, form the foundation of the system that regulates the commerce between Turkey and the EU. Even more important than this; the CU is one of the key factors that helped shape the Turkish industry into what it is today. History of the Customs Union Episode 4 : From Rejoice to Complaints (1) ( today)

8 History of the Customs Union Episode 4 : From Rejoice to Complaints (2) ( today) It was only 18 years ago when we rejoiced the approval of the CU decision by the European Parliament on March 6, 1995 by fireworks. "I believe that in three to four years Turkey will not only be in CU with the EU but will be a full member” said Prof. Dr. Tansu Çiller, Prime Minister of Turkey on May 7, “We are a full member of the EU in 1998 latest”

9 CU has brought significant benefits to both Turkey and the EU. Turkey’s trade deficit with the EU has increased (but it was a calculated risk). As a whole, trade and investment linkages between the EU and Turkey have deepened; It opened and consolidated the Turkish market in a privileged way for EU producers but at the same time, Turkey became an export base for neighboring regions enabling Turkish companies to penetrate and operate in those markets; Turkey also became an important investment base for EU companies leading to an increasing degree of integration of Turkey affiliates in EU supply and production networks; CU helped modernize a large part of Turkey’s economic legislation giving rise to important micro and macro-economic dynamics. History of the Customs Union Positive Effects

10 There are also a number of ‘trade irritants’, or complaints regarding the implementation of the CU, many of which have been unresolved for years Most of the complaints refer to the adverse implications of the Free Trade Agreements (FTAs) the EU signs with third countries. The complaints concerning the FTAs are definitely well grounded and right; with some other criticism like visas and transport quotas one can also agree with; but there is also unjust criticism with no scientific basis which categorically discredits and rejects the CU; there is no possible way to agree with or even acknowledge them. History of the Customs Union Complaints

11 Reason 1: The CU, as negotiated, was imperfect The asymmetric structure of the agreement stems from the original perception that it was meant to be temporary in the lead up to accession. And let us not forget, Turkey did negotiate only with the “knowledge, understanding and means of forecast of the day”. History of the Customs Union Why and how did we come from a national celebration to national grievance?

12 Reason 2: Time Factor CU after its completion, greatly helped Turkish industry with its two major needs; opening up to new markets and getting prepared for the challenges of globalization. But everything has changed gravely in the following years: not only in Turkey and in the EU but in the rest of the world as well, and these changes in turn changed and diversified the needs. History of the Customs Union Why and how did we come from a national celebration to national grievance?

13 THE CUSTOMS UNION THAT WAS AN ANSWER TO SOME OF TURKEY’S ECONOMIC PROBLEMS OF THE PAST AND THE STAR OF THE ECONOMIC AGENDA OF 90S, FALLS SHORT OF FULFILLING THE NEEDS OF TODAY’S TURKEY. History of the Customs Union

14 Bay B Bay A Bay C History of the Customs Union

15

16 Conclusion 1 - Renegotiating the CU It is imperative and necessary to negotiate and debate the parts of the CU subject to complaints from Turkish industrialists like the daily operation of the CU or the FTAs. Is it possible to find a solution to "complaints" through renegotiating the CU? My answer is NO. BOTH SIDE HAVE COMPLAINTS BUT WHILE EU'S COMPLAINTS ARE MORE OPERATIONAL AND EASIER TO SOLVE WITHIN THE PRESENT STRUCTURES, TURKEYS COMPLAINTS ARE SYSTEMATIC AND REQUIRES STRUCTURAL CHANGES. Although CU is one of the earliest attempts by the EU to share some its legal system with another country, it has reached its limits. The only definitive solution is MEMBERSHIP OF TURKEY. If we will renegotiate the CU it could / should only cover this trade aspect of it. It is not a good idea to add new areas onto an proven imperfect, old dated structure. History of the Customs Union Final Episode : What future for the EU? *humble opinion of an unusualist

17 Conclusion 2 - Renegotiating the CU Role of the CU in Carrying the Relationship / and Turkish Economy From Today to Future CU has changed the fabric of Turkish industry and fulfilled its task and made its time as a tool to carry the relationship forward. TODAY; THE CRITICAL QUESTİON THAT HAS TO BE ANSWERED IS WHAT SHOULD REPLACE THOSE FEATURES OF THE CU THAT HAVE SO SUCCESSFULLY PREPARED TURKEY FOR THE GLOBALISATION OF 2000S AND THAT HELPED TURKISH İNDUSTRY BECAME WHAT IT IS TODAY. The “Big economies” are trying to establihs a new international trade order through economic partnership networks (TPP, T-TIP…) The aim is “making rules worthy of 21st Century”. FROM A STRATEGIC AND GLOBAL PERSPECTIVE TURKEY CANNOT AND SHOULD NOT STAY OUT OF IT. History of the Customs Union Final Episode : What future for the EU? *humble opinion of an unusualist

18 In any longstanding relationship, the economies and societies of the two parties are likely to evolve at different paces at different times and even at different directions. Therefore, if the development of the relationship is linked to programs and timetables and the process takes too long it is not surprising if one or the other party falls behind or even find itself backsliding. This might be damaging the further harmonious development of the relationship. Today, we are facing the exact same problem in the negotiation process. Last Word *of an unusualist


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