Micah Zenko

Politics, Power, and Preventive Action

Zenko covers the U.S. national security debate and offers insight on developments in international security and conflict prevention.

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Turkey-EU Trade on Tenterhooks? Faltering Membership Talks Threaten Economic Ties

by Guest Blogger for Micah Zenko
December 20, 2016

Turkey's President Tayyip Erdogan attends a Republic Day ceremony at Anitkabir, the mausoleum of modern Turkey's founder Ataturk, to mark the republic's anniversary in Ankara, Turkey, October 29, 2016. (Reuters/Bektas).

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Sabina Frizell is a research associate in the Civil Society, Markets, and Democracy Program at the Council on Foreign Relations.

After yesterday’s assassination of the Russian ambassador, Turkish officials were quick to place blame on Fetullah Gulen, an exiled religious leader and one of President Recep Tayyip Erdogan’s strongest critics. Erdogan is sure to use the attack as yet another justification to silence dissenting voices in the name of security. His ongoing crackdown further diminishes Turkey’s prospects for joining the European Union (EU), following the European Parliament’s overwhelming vote on November 24 to suspend membership negotiations.

While the European Parliament’s vote was largely symbolic, it adds urgency to the question of whether, after decades of Turkey’s slow progress toward membership and ten-plus years of stop-and-start negotiations, the EU should continue membership negotiations.

Most analysts have focused on what ending the talks would mean for the EU-Turkey migrant deal, Turkish democracy, and already-deteriorating human rights under Erdogan. However,  the effect on trade issues has been largely overlooked. Turkish and EU economies are deeply intertwined despite mounting political tensions. In considering membership negotiations, the EU must take trade into account, as ending talks would undermine these mutually beneficial economic linkages.

Fifty Years in Waiting

Understanding the current crisis requires an appreciation of Turkey’s long, faltering path toward membership—and of the negotiations’ futility. With or without the talks, Turkey is highly unlikely to become an EU member in the foreseeable future. The EU has always been reluctant to grant Turkey membership, due partially to legitimate concerns about governance, but also to cultural and religious prejudice. EU membership negotiations are based on the Copenhagen Criteria, composed of thirty-five chapters outlining the principles and standards with which all candidate countries must comply. Throughout the 2000’s, Turkey made substantial progress on these criteria. It solidified what the EU deemed a “functioning market economy” that could withstand competitive pressure within Europe, and afforded greater freedom and rights to ethnic and religious minorities. But Europe justifiably expressed concern about overly broad antiterrorism laws, insufficient measures to fight corruption, and the lack of an independent judiciary.

However, there is also evidence that Europeans hold Turkey to more stringent standards than other candidate countries. As Turkey made progress on the Copenhagen Criteria, perhaps faster than expected, some European politicians pointed to “cultural differences” and claimed that Turkey is in some indelible way “not a European country.” The hesitation to support Turkey’s membership revealed anti-Muslim sentiment that likely undermined the accession process all along.

In light of this reluctance, Erdogan’s backtracking on democratic progress makes accession nearly impossible. In the past month, Erdogan’s government has gone further than ever to quash dissent by dismissing thousands of workers, shutting down dozens of news outlets, and jailing journalist and opposition leaders. The ruling Justice and Development Party (AKP) looks set to issue a referendum that could allow Erdogan to stay in office until 2029, and Erdogan raised the possibility of reinstating the death penalty—which would be a deal-breaker for the EU.

Trade Matters

Though negotiations are currently at an impasse, they help to maintain fraught but vital trade ties between Turkey and the EU. Without the talks, the cornerstone of their trade relationship, the EU-Turkey Customs Union could crumble, harming both economies.

The Customs Union, established in 1995, eliminated customs duties and other import restrictions on trade between Turkey and the EU. Though several major sectors were exempt, the union was a boon to the manufacturing sector for both parties. It increased trade between the EU and Turkey fourfold and triggered a similar rise in foreign investment flows to Turkey. Research shows that Turkey improved its competitive advantage for dozens of different products since 1995. The union also provided an impetus for broader trade facilitation and customs reform, which helped Turkey open up to the world and achieve 6 to 9 percent growth in gross domestic product (GDP) from 1995 to 2005.

For the EU, Turkey became an increasingly important part of supply chains. German companies especially rely on Turkey to produce unfinished parts of goods that are then imported and incorporated into final products. Germany’s metal, chemical, and automobile sectors all draw heavily on Turkish imports.

Despite its benefits, the Customs Union is an unequal agreement. Ankara is obliged to comply with the EU’s trade agreements with third-party countries and open up to those markets—but as a non-EU member, it is not granted a seat at the negotiating table. This leaves Turkey deprived of the ability to govern its own trade future. The union was intended as an interim step toward full membership. But if the EU takes membership off the table, it is hard to imagine that Erdogan would continue to accept these debilitating conditions indefinitely.

What would happen if membership talks were suspended and the Customs Union abolished? On the EU side, the move would fragment manufactured goods production. For Turkey, the effects would be much more significant. About 60 percent of its exports are to Europe, representing 12.5 percent of GDP. Diminished ties with its top trade partner could threaten not only Turkey’s economy, but its long term security. Research shows that countries with open economies are less likely to experience internal conflict—and given the Syrian civil war’s spillover and Turkey’s ongoing conflict with the Kurds, the country’s security is already tenuous. As Turkey’s security is tied to that of Europe, maintaining stability should be a top priority for the EU.

Recent coverage of EU-Turkey talks tends to ignore consequences for trade, and by extension, Turkish stability. Freezing negotiations and thus endangering the Customs Union would damage Turkey’s already-flailing economy. Amid Turkey’s democratic retreat, it may be too late for Europe to shed its prejudice and seriously consider Turkey’s candidacy. However, ending talks now would be a mistake without a day-after alternative to ensure trade endures.

Post a Comment 1 Comment

  • Posted by Costas Apostolides

    The article is useful in drawing attention to the possible effects on EU Turkey trade of the political instability and conflict within Turkey, and extension in the case of the Kurds into Iraq (attacks on PKK) and Syrian Kurds. It does not however go into the detail of the post coup attempt response in Turkey which has had a maasive effect on human rights in Turkey with over 30,000 imprisoned and more than 100,000 civil servants losing their jobs, as well as some very ugly treatment of suspects The EU cannot accept such treatment, especially as issues of rule of law are involved.

    On the EU membership process the article fails to describe the problem of the Chapters that are blocked, with over 20 Chapters being involved. As a result it is very difficult to for the process to move forward, because as opened Chapters are analysed and completed, it is very difficult to find new chapters that can be examined. Of the blocked Chapters 10 are blocked by the Republic of Cyprus, which Turkey does not recognize, but is an EU member state. The main reasons for these blocks on Chapters relate to Turkey blocking ports and airports to Cyprus ships and civil aircraft. Giving that Cyprus has the 11th largest merchant fleet in the world and the third highest in Europe, and is in addition is one of the main ship management centers, hundreds of European Owned ships (notably German ships are affected) are affected. Owing to this Turkish ban and the non-recognition of Cyprus’s Exclusive Economic Zone in the East Mediterranean Cyprus has blocked 8 Chapters related to trade and shipping owing to the violation of the conditions of the Customs Union. Another 2 Chapters related to non-recognition of the EEZ are also blocked because of Turkish non-recognition and use of warships associated with oil exploration in that zone. The other blocked Chapters are mainly on Human Rights issues and the rule of law by other member states. In view of these problems with blocked Chapters it is very difficult to make much process in the Turkey accession process, and this should have been mentioned.

    The good news is that progress has been made on the UN sponsored negotiations for a Cyprus Settlement, and from 9th January 2017 negotiations will take place in Geneva for a solution of two key issues, territorial adjustment and security. The negotiations involve Cyprus, the 3 guarantor powers (UK, Greece and Turkey), the Greek and Turkish Cypriot Communities on Cyprus, the UN Secretary General, and all 15 members of the Security Council are invited to attend by the UNSG. If Turkey can agree on a suitable arrangement for guaranteeing the agreement, all its Cyprus related Customs Union and trade problems will be resolved and negotiations can proceed smoothly for EU accession for another couple of years to resolve the 10 blockages, before they reach the blocks set by other member states.
    In would suggest that closer analysis of the EU reports on Turkish EU accession would have been useful.

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