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THE IMPACT OF THE EUROPEAN
SOVEREIGN DEBT CRISIS ON THE
TURKISH BUSINESS PEOPLE’S
PERCEPTIONS ABOUT THE EU-
TURKEY’S CUSTOMS UNION
Thesis submitted to the
Institute of Social Sciences
in partial fulfillment of the requirements
for the degree of
Master of Arts
in
International Relations
by
Mai Lan Thanh NGUYEN
Fatih University
January 2014
Ma
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M
.A. T
hesis
in In
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January
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© Mai Lan Thanh NGUYEN
All Rights Reserved, 2014
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APPROVAL PAGE
Student : Mai Lan Thanh NGUYEN
Institute : Institute of Social Sciences
Department : International Relations
Thesis Subject : The Impact of the European Sovereign Debt Crisis on the
Turkish Business People’s Perceptions about the EU-Turkey’s
Customs Union
Thesis Date : January 2014
I certify that this thesis satisfies all the requirements as a thesis for the
degree of Master of Arts.
Assist. Prof. Dr. Ahmet ARABACI
Head of Department
This is to certify that I have read this thesis and that in my opinion it is
fully adequate, in scope and quality, as a thesis for the degree of Master of
Arts.
Assist. Prof. Dr. Ahmet ARABACI
Supervisor
Examining Committee Members
Assist. Prof. Dr. Ahmet ARABACI ..........................
Prof. Dr. Berdal ARAL ..........................
Prof. Dr. Zehra Vildan SERIN ..........................
It is approved that this thesis has been written in compliance with the
formatting rules laid down by the Graduate Institute of Social Sciences.
Assoc. Prof. Dr. Mehmet KARAKUYU
Director
iv
AUTHOR DECLARATIONS
1. The material included in this thesis has not been submitted wholly or in
part for any academic award or qualification other than that for which it is now
submitted.
2. The program of advanced study of which this thesis is part has consisted
of:
i) Research Methods course during the graduate study
ii) Examination of several thesis guides of particular universities both in
Turkey and abroad as well as a professional book on this subject.
Mai Lan Thanh NGUYEN
January, 2014
v
ABSTRACT
Mai Lan Thanh NGUYEN January 2014
THE IMPACT OF THE EUROPEAN SOVEREIGN DEBT CRISIS
ON THE TURKISH BUSINESS PEOPLE’S PERCEPTIONS
ABOUT THE EU-TURKEY’S CUSTOMS UNION
Whether Turkey’s high and fast economic growth is a result of the Customs
Union between Turkey and the EU or not has been among one of the most
discussed topics in Turkey. This controversial issue in recent years is escalated
among the discourses by most TBP. While analyzing these discourses, we
crosscheck their justifications with empirical data and found that TBP have
changed their attitudes about the EU-Turkey’s CU more negatively after the
ESDC. Their main arguments lie among the CU’s asymmetric terms and
conditions, its impact on Turkish trade flow, and the competitiveness of Turkish
industry. Under the circumstance that Turkey is opening her market to more
destinations in the world, whereas in Europe there is discussion about the
dissolution of the euro-zone and economic turmoil in other member states of
the EU, the discourses by TBP also accumulated and left a message for a
reconsideration of the CU between Turkey and the EU.
Keywords:
Turkey, European Union accession, Customs Union problem, Free Trade
Agreements, European sovereign debt crisis, Turkish business people.
vi
KISA ÖZET
Mai Lan Thanh NGUYEN Ocak 2014
AVRUPA KAMU BORÇ KRİZİNİN TÜRK İŞ ADAMLARI’NIN
GÜMRÜK BİRLİĞİ ALGILARI ÜZERİNDEKİ ETKİSİ
Türkiye’nin yüksek ve hızlı büyümesi Türkiye ve Avrupa Birliği (AB) arasında
imzalanan Gümrük Birliği (GB)’nin sonucu olsun olmasın, GB Türkiye’de en çok
tartışılan konulardan biridir. Bu tartışmalı konu, son yıllarda pek çok Türk
işadamının söylemleri arasında da artan bir şekilde kendine yer bulmuştur.
İşadamlarının bu söylemlerini analiz ederken, onların gerekçelerini ampirik
verilerle karşılaştırdık ve Türk işadamlarının GB’ye karşı tutumlarının Avrupa
Kamu Borç Krizi’nin ardından olumsuz bir şekilde değiştiği sonucuna vardık.
İşadamlarının ana tartışma konuları; GB’nin adil olmayan şart ve koşulları,
GB’nin Türkiye ticaret akışı üzerindeki etkisi ve Türk sanayisinin rekabetçiliği
şeklinde özetlenebilir. Türkiye son dönemde dünyanın farklı bölgelerine ticari bir
açılım yapmıştır. Aynı zamanda son dönemlerde bazı üye ülkelerde ekonomik
bozulmaların meydana geldiği ve AB’nin bir çözülme sürecine girdiği yönünde
tartışmalar yapılmaktadır. Bu son gelişmelerin ardından, Türk işadamlarının GB
hakkındaki olumsuz söylemleri de artmıştır ve bu söylemler GB’nin yeniden ele
alınması konusunda bazı mesajlar içermektedir.
Anahtar Kelimeler:
Türkiye, Avrupa Birliği’ne giriş, Gümrük Birliği problemi, Serbest Ticaret
Anlaşmaları, Avrupa kamu borç krizi, Türk iş insanları.
vii
LIST OF CONTENTS
Approval Page iii
Author Declarations iv
Abstract v
Kısa Özet vi
List of Contents vii
List of Tables x
List of Figures xi
List of Appendices xii
List of Abbreviations xiii
Acknowledgements xv
Introduction 1
Chapter 1: Theoretical and Conceptual Frameworks 5
1.1 Literature Review 5
viii
1.2 Conception of the EU-Turkey’s Customs Union, Turkish Business People
and the European Sovereign Debt Crisis 9
1.2.1 Customs Union: A Bridge to the European Union for Turkey? 10
1.2.2 Categorization of the Turkish Business People 19
1.2.3 The European Sovereign Debt Crisis 22
1.2.3.1 Sovereign Debt 22
1.2.3.2 How Sovereign Debt is measured 23
1.2.3.3 The 2008 European Sovereign Debt Crisis 24
1.3 Research Design 28
Chapter 2: An Empirical Analysis about the Effects of the European
Sovereign Debt Crisis on Turkish Economy 31
2.1 The Impact of the European Sovereign Debt Crisis on Turkey’s Trade
Flow 37
2.2 The European Sovereign Debt Crisis and Its Implication for the
Competitiveness of Turkish Industry 40
ix
2.3 The Nature of Trade between Turkey and the EU after the European
Sovereign Debt Crisis 45
2.4 Turkey’s Diversification of Trade 47
Chapter 3: An Analysis on the Turkish Business People’s Discourses
about the EU-Turkey’s Customs Union 57
3.1 The Customs Union and the Turkish Business People’s Discourses before
the European Sovereign Debt Crisis 59
3.2 The Customs Union and the Turkish Business People’s Discourses since
the European Sovereign Debt Crisis 68
Conclusion 81
Appendices 85
Bibliography 105
x
LIST OF TABLES
Table 1 Turkish foreign trade by year 34
Table 2 Income Elasticity of Turkish Imports Demand 39
Table 3 Changes in Competitiveness of Turkish Industry 42
Table 4 Adjusted Grubel-Llyod Index 46
xi
LIST OF FIGURES
Figure 1 Inflation and growth rate of GDP per capita in Turkey 32
Figure 2 Turkish exports by years and country group 49
xii
LIST OF APPENDICES
Appendix A: Uruguay Round Agreement 85
Appendix B. Free Trade Agreements with the EU 92
Appendix C. Turkey’s Foreign Trade by Sectors 1999-2013 101
xiii
LIST OF ABBREVIATIONS
ACC Ankara Chamber of Commerce
ACP Africa, Caribbean and Pacific
ASEAN Association of South East Asian Nations
BSEC Black Sea Economic Region
CAP Common Agricultural Policy
CU Customs Union
DEIK Council of Foreign Economic Relations
ECO Economic Cooperation Organization
ECOTA Economic Cooperation Organization Trade Agreement
EEC European Economic Community
EFTA European Economic Free Trade Area
ESDC European Sovereign Debt Crisis
EU European Union
EUROMED Euro-Mediterranean Partnership
FTA Free Trade Area
GCC Gulf Cooperation Council
IKV Economic Development Fund
İTKİB Istanbul Textile and Apparel Exporters’ Associations
MERCOSUR Common Market of The South
MÜSİAD Independent Industrialists' and Businessmen's Association
NGO Non-Governmental Organization
xiv
NTB Non-Tariff Barriers
OIC Organization of Islamic Cooperation
PRETAS Preferential Tariff Scheme
PTA Preferential Trade Agreement
SACU Southern African Customs Union
TBP Turkish business people
TEPAV Economic Policy Research Institute
TIM Association of Turkish Exporters
TOBB Union of Chambers and Commodity Exchanges of Turkey
TTIPA Transatlantic Trade and Investment Partnership Agreement
TUSKON Turkish Confederation of Businessmen and Industrialists
TÜSİAD Turkish Industrialists and Businessmen's Association
xv
ACKNOWLEDGEMENTS
Though only my name appears on the cover of this thesis, a great many
people have contributed to its production. I owe a very important debt to all
those people who have made this thesis possible and because of whom my
graduate experience has been one that I will cherish forever.
First and foremost, I owe my deepest gratitude to my thesis supervisor,
Assist. Prof. Dr. Ahmet ARABACI. Without his continual guidance, professional
comments and persistent support this thesis would not have been possible.
I would particularly like to thank the thesis committee whose advices,
recommendations, suggestions, and feedbacks constitute the intellectual part of
my thesis. Berdal ARAL has always given me constructive comments and warm
encouragement. Prof. Dr. Zehra Vildan SERIN has been extraordinarily tolerant
and insightful.
In addition, I received generous support from Assoc. Prof. Dr. İhsan YILMAZ,
Assoc. Prof. Dr. Savaş GENÇ, and Assist. Prof. Dr. Özlem Demirtaş BAGDONAS
with their scholarly ideas. Other discussions with Assist. Prof. Ebru ALTINOĞLU
have been illuminating. I have also greatly benefited from Prof. Dr. Mehmet
ORHAN, Assoc. Prof. Dr. Bülent KÖKSAL, and Assist. Prof. Dr. Mehmet BABACAN
for their meticulous comments and instructions.
xvi
I am exceptionally grateful for the financial assistance given by the Scientific
and Technological Research Council of Turkey (TÜBİTAK) during my master
program in International Relations.
Certainly, many friends have helped me stay sane through these challenging
moments. Their support and care helped me overcome setbacks and stay
focused on my graduate study. I greatly value my friendship with Hami SAKA,
Halil İbrahim ÇELİKEL, Ramazan ALPAY, Keremet SHARSHALIEVA and Bilge
Kaan ALBAYRAK whose hands I can always reach. I deeply appreciate their
constant comfort and belief in me. I am also grateful to the Turkish families that
helped me adjust to a new country.
Most importantly, none of this would have been possible without the love and
patience of my brother and parents who have been a constant source of love,
concern, support and strength all these times. I would like to express my heart-
felt gratitude to my family.
1
INTRODUCTION
Turkey is a country of diversity with multi-cultural, multi-ethnic, and multi-
religious communities. There are so many intriguing facts with regard to the
Turkish economy, politics, and the society itself. Positioned as an
intercontinental state, Turkey is subject to both opportunities and risks with
respect to its geopolitics and geographical strategic location. It keeps adjusting
its policies accordingly not only to domestic issues, but also to neighboring
countries’ circumstances.
One of the most prominent and important neighbors for Turkey has been the
European Union (EU). Over the course of the Ottoman Empire to the creation of
the Turkish Republic, this intercontinental nation has exposed her close
attachment to the West. To illustrate, shortly after the establishment of the
European Economic Community (EEC) in 1958, Turkey immediately proceeded
to the membership application to this Community a year later. The Turkish
Republic further demonstrated her will to integrate the Turkish economy to that
of the European countries. As a result, the Ankara agreement1 was signed
between Turkey and the EEC on 12 September 1963, which came into effect in
December 1964. Supplementary to the Ankara Agreement is the Additional
Protocol signed in 1970 and came into effect in 1973. As a matter of fact, the
1 The official name is ‘the Agreement Creating An Association Between The Republic of Turkey and the
European Economic Community.’ See Ministry for EU Affairs, History of Turkey-EU relations.
2
ultimate aim of this Additional Protocol is the specification of the time schedule
for Turkey to join the Customs Union (CU) after 22 years. Finally, on 31
December 1995, Turkey concluded the CU agreement with the EU.
Along with multiple efforts to cope with the EU standards, with regard to
economic aspects, Turkey has performed very well since the beginning of the
twenty first century. With the CU, Turkey expects to broaden her market as well
as benefit from the agreement’s terms and conditions, which eventually leads
Turkey to fulfill her homework given by the EU. In other words, the CU has
been perceived by the Turkish side as a bridge to connect Turkey to the EU.
Whether Turkey’s high and fast economic growth is a result of the CU or not
has been among one of the most discussed topics in Turkey. If the CU is the
main drive for the good performance, it is certainly that the agreement is
welcomed in Turkey. Likewise, if the CU is not the causal factor or perhaps even
a potential barrier to Turkish economy, then Turkey needs to think again about
the expectations for the CU. These are exactly controversial issues nowadays in
Turkey, which are found mostly among the discourses by the Turkish business
people (TBP). It is observed that after the European sovereign debt crisis
(ESDC) in 2008, the TBP started to question more about the role of the CU on
whether it is to the advantage of the Turkish economy. The question raised in
this thesis is, therefore, if there was a change in TBP’s attitudes about the EU-
Turkey’s CU after the ESDC in 2008, and why was this.
3
This study will seek to answer the above question based on the fact that the
economic imperative is a kind of cornerstone of the CU between Turkey and the
EU. To do so, we will analyze the TBP’s discourses about the CU. Then we
collect empirical data about Turkish economy under the effects of the CU before
and after the ESDC in 2008. More specifically, to see how the ESDC has affected
the TBP’s perceptions about the CU, we divide our data into two periods, before
the crisis from 1999 to 2007, and after the crisis, from 2008 till recently. Along
with the economic performance, we compile official statements and speeches
about the EU-Turkey’s CU by representative Turkish businessmen and organized
business and trade associations, then through a method of discourse analysis,
we closely observe their perceptions about the CU in correspondence with the
empirical data to understand the logic of their justifications about their attitudes
toward the CU.
Since there is a scarcity of analysis in the literature about TBP’s attitudes
about Turkey’s EU accession process as well as their perceptions about the CU,
this study attempts to fill in this gap. In addition, the impacts of the ESDC have
been much discussed over the EU member countries only; nevertheless, we
believe that Turkey, as a candidate for full membership, deserves to be studied
as well. In this thesis, specifically, we will look at the impact of the ESDC on
TBP’s perceptions about the EU-Turkey’s CU. Therefore, we will start first with a
review chapter on the existing literature about the CU and its overall effects,
4
and then follows the EU-Turkey’s CU, in particular. The subsequent chapter
demonstrates the impacts of the ESDC on the Turkish economy under the
implementation of the CU. Then, in chapter three we will analyze TBP’s
discourses about the CU while comparing and contrasting with the empirical
framework provided in the previous chapter. Thereupon the final section
concludes our thesis.
5
CHAPTER 1
THEORETICAL AND CONCEPTUAL FRAMEWORKS
This chapter provides the general theoretical framework adopted in the
thesis. In particular, we present a theoretical reflection about the Customs
Union theory and its effects which have been studied before. This theoretical
framework will be used and complemented with our quantitative analysis in
chapter two, which deals with the time-series data to detach the impact of the
ESCD on Turkish economy under the effects of the CU. Likewise, we also define
our key concepts, namely, the EU-Turkey’s CU, TBP and the ESDC in the
following sections.
This chapter divides into three main parts. The first part is the literature
review about the CU theory and its effects. In the second part, we define the
key concepts of the research question: whether there was a change in TBP’s
attitudes about the EU-Turkey’s CU after the ESDC and why. Lastly, in the third
part, we describe the research design for our thesis.
1.1 Literature Review
We review the literature according to two main themes. The first one is
about the CU and its effects on theory according to which a particular country
will choose to enter, stay, or leave the CU. The second theme of our literature
6
review is, then, on the CU and its effects on Turkish economy, which will be
found in the conceptualization.
To begin, the CU theory has come into wide exploration in academic
literature since the work of Jacob Viner (1950). He essentially argues that the
CU arrangement has impact on both free-market economies and protectionists
in terms of economic welfare. Whether an economy chooses to participate in a
CU arrangement or not is based on the net effect of the CU brings about once
calculated. In other words, Viner’s analysis pays more attention to the effect of
trade on the production side. That is, the CU can result in trade creation and
trade diversion effects, entering or leaving the CU is a matter of the
diversification of a country’s trade relations. Follwing Viner, Meade (1955)
developed the theory on the expansion factor of trade and its implication for
economic welfare of an economy. Similar to Meade, Lipsey (1960) also focused
on the consumption dimension of the CU, which is Viner’s restriction, although
we believe that both production and consumption dimensions are not
sustainable in analyzing the effects of the CU. Ten years later, nonetheless,
Bhagwati (1971) criticized Libsey’s method of restriction on consumption, as he
believes that the method is “insufficient to rule out welfare-improving in trade-
diverting CU (8).” Wonnacott and Lutz (1989), likewise, stress the importance of
the low cost in transportation as the result of a regional trading arrangement
among member countries. Summers (1991), however, analyzes from a different
7
point of view. That is, he broadens the analysis to the trade associations that
make up the country’s business. These business people economically trade
greater among themselves, who can be from different countries in a region. The
trade volume, as a result, is high as the unity of the countries that form this
very same region in which these business people are operating. Consequently,
mal-effects stemmed from trade are minimum because of the increase in the
common regional welfare. To sum up, according to these authors, geographic
proximity and transportation costs to increase trade and commerce handle the
low and negative effect of trade, leading to an improvement of the welfare
effects of integration. In more practical studies, Panagariya and Suthiwart-
Narueput (1997), with regard to the CU theory, explains the nature of the
trading partners on the basis of volume of trade. He claims that if the trade
volume among member states is very high in comparison with non-member
countries, trade creation will be the case and as a consequence, CU will
increase welfare. According to the author, somehow similar to Viner’s theory
about CU, a country before integration looks upon the potential partner’s import
duty and estimate the tariff revenues and decide based on cost-benefit analysis.
Therefore, economic integration of the countries geographically close to each
other is more plausible and more attractive. This conclusion is, however,
opposed to the findings of Krishna (2003) that there is no evidence to support
the hypothesis that natural trading partners could be reached. The author’s
study covered the years of 1964-1995 with 24 trading partners of the U.S by
8
using a general equilibrium model. The value of welfare and trade volume
correlated with the geographic proximity was investigated. As a result, that the
trading volume and geographical proximity has effect on welfare could not be
found.
Another recent study on trade creation and trade diversion effect is by Zidi
and Dhifallah (2013). They analyze the case between Tunisia and the EU with a
gravity model. Then they find that after five years of the agreement between
Tunisia and Europe, there is no trade creation as well as that the preferential
agreement between the two partners does not generate trade diversion of
imports, whereas there is a trade diversion of exports. They also suggest that
the results can be applied to other Mediterranean countries as well because “the
tariff dismantling schedules that have been negotiated are very similar to that of
Tunisia. These countries can expect an effect of trade creation but several years
after the implementation of the agreement and a significant increase in the
protection of their domestic manufacturing industries for several years after the
entry into force of the agreements” (Zidi and Dhifallah 2013, 145).
As we can see from the theoretical literature, there are different arguments
about the effects created by the CU. These contrasting ideas have also been
proven with the empirical literature since different studies show different results
on whether an economic arrangement such as the CU would yield trade creation
or trade diversion and subsequently contribute to a country’s overal welfare or
9
not. Yet contradictory answers based on empirical analyses are also found
among scholars. Consequently, this theoretical framework leads us to an
interest in the effects of the CU on Turkish economy, in particular; and
especially with the context of the outbreak of the ESDC in 2008, we would like
to see how TBP perceive Turkey’s CU with the EU afterwards. Under the
guidance of our research question, we then define our key concepts in the
study: the EU-Turkey’s CU, TBP, and the ESDC.
1.2 Conceptions of the EU-Turkey’s Customs Union, Turkish
business people, and the European Sovereign Debt Crisis
In this section, we will define first the CU between Turkey and the EU relying
on the background of the agreement. As we would like to see the perceptions
of the TBP about this CU, we then specify what we mean by TBP with a
categorization based on their characteristics, may them be political ideology,
economic philosophy, their approaches to trade and economic arrangement, or
the composition of the TBP itself. At last, we will describe the ESDC with its
attributes on different dimensions of the concept.
10
1.2.1 Customs Union: A bridge to the EU for Turkey?
CU is a type of trading arrangements formed by a group of individual
countries which abolish tariffs among themselves while simultaneously agree on
common tariffs towards the rest of the world (Suranovic 2010, Chacholiades
and Johnson 1978). The CU was one of the exceptional cases about trade
liberalization as the result of the Uruguay round stated in article xxiv in the
GATT conference in 1994.2
A customs union shall be understood to mean the substitution of a single
customs territory for two or more customs territories, so that
(i) duties and other restrictive regulations of commerce (except, where
necessary, those permitted under Articles XI, XII, XIII, XIV, XV and XX) are
eliminated with respect to substantially all the trade between the constituent
territories of the union or at least with respect to substantially all the trade in
products originating in such territories, and,
(ii) subject to the provisions of paragraph 9, substantially the same duties
and other regulations of commerce are applied by each of the members of the
union to the trade of territories not included in the union (Section 8a, Article
XXIV, Part III).
2 See Appendix A for more information about the Customs Union framework in the article.
11
CU theory has been defined as “that branch of tariff theory which deals with
the effects of geographically discriminatory changes in trade barriers” (Lipsey
1960, 496). According to Harrison, Rutherford, and Tarr (1997), the biggest
advantage of the CU is the ability to access to third country markets. In the
existing literature there are various discussions about the CU as well.
In 1963, Turkey signed an Association Agreement with the EEC, which widely
known as the Ankara Agreement. This agreement was a framework for Turkey’s
accession process to the EU Common Market through three phases. The
preparatory phase from 1964 to 1970, the transitionary phase between 1973
and 1995, and the final phase from 1996 onward. After the completion of the
first stage, in 1973 the EU signed an Additional Protocal3 with Turkey which
envisioned a framework for a CU after 22 years.
In 1995 as a result, after the transition period, a CU was adopted, marking
the turning point for the new phase of the relation between Turkey and the EU.
Some argue that the CU is another version of the “Capitulations of the Ottoman
Empire.”4 To illustrate, articles 16 and 55 state that Turkey by precondition is to
comply with the EU and its counterparts’ treaties. That is, Turkey is, to some
3 For details of the Additional Protocol see:
http://www.avrupa.info.tr/fileadmin/Content/Downloads/DOC/e-add_ENG.rtf.
4 Metin, Aydoğan. "Avrupa Birliğini Yaratan Nedenler Ve Türkiye" (in Turkish). Retrieved 22 May 2013,
http://www.zmo.org.tr/resimler/ekler/b16b8498f74ba6b_ek.pdf?tipi=14.
12
extent, not autonomous in her foreign relations. Secondly, Turkey certainly
could not unilaterally sign any treaty with third country without EU’s knowledge
for the EU has the right to intervene and annul the treaty as one of the 56th
article of the CU. Moreover, being a CU member also means that Turkey is
subject to the European Court of Justice, where interestingly, there is no single
Turkish judge (64th article5).
The CU scope
The CU mainly covers industrial and processed agricultural goods.
Harmonization to the Common External Tariff applied by the Community on
some industrial goods from third countries was completed by 1 January 2001.
These products are referred to as sensitive materials such as automobiles,
shoes, leather products and furniture. Besides that, with the regulation of the
CU, Turkey is expected to comply with the EU requirements on intellectual,
industrial and commercial property rights.6
It is a fact that one of the ten reasons to invest in Turkey is that Turkey
singed a CU with the EU since 1996.7 Apparently, Turkey expects pretty much
5 Decision No 1/95 of The EC-Turkey Association Council of 22 December 1995 on implementing the final
phase of the Customs Union (96/142/EC),
http://www.avrupa.info.tr/fileadmin/Content/Downloads/PDF/Custom_Union_des_ENG.pdf.
6 Ibid. 7 Invest in Turkey (2013). “Ten Reasons to Invest in Turkey.” http://www.investinturkey.gen.tr
13
from the CU, both economically and politically. Above all, TBP including Turkish
businessmen and other industrialist associations see the CU as a gateway to the
full membership to the EU. Noticeably that the CU was signed in 1995 and came
into effect in 1996, at the time when Turkey experienced both economic and
political instability notwithstanding the previous coup d’états and following
trends in foreign policies.
Turkey’s economy has experienced a chain of consecutive short-term
economic and financial crises. Among the most prominent ones, which occurred
in the 1970s, 1980s, 1994, 2001, and 2008, the 1994 financial crisis has been
widely discussed with the implementation of the ‘April 5 decisions.’ The 1994
crisis was believed to be an inevitable outcome of Turkish economy, as the
previous crises had not been solved completely. The main reason was the
underestimation of those crises’ severity by the government who thought that
all problems could be handled by an exchange rate solution. However, in fact,
macroeconomic instability has caused Turkish economy its biggest current
account deficit and public debt.8 Moreover, as Turkey’s economy was attached
much to the EU since the Ankara agreement, it is believed that the European
Money Market’s turmoil during the 1990s was a triggering factor to the 1994
crisis (Yucel and Yildirim 2010, 8). Therefore, joining the CU reflected Turkey’s
8 According to Turkish Statistical Institute, the Current Accounts Deficit increased from 1 billion to 6.4
billion dollars by 1994, in addition to outstanding external debt about 12 billion dollars.
14
economic expectation on that Turkey’s economy would perform better as to
fulfill the treaty’s economic criteria. In addition, these decisions also illustrated
the fact that Turkey, after the 1980s crisis and attempts to reform, has
supported more liberal economy, as well as export-led growth strategy. It is
important for Turkey that being a signatory of the CU, in other words, opened
Turkey’s export markets to not only the EU, but also other third parties which
are trade partners of the EU.
Furthermore, after experiencing several military interventions as well as
economic and political instabilities, the EU model with its democratic level and
human rights protection attracted Turkey more than ever. Full membership to
the EU, then, became Turkey’s first and foremost priority. As a result, every
reform Turkey made is believed to be both the cause and effect of a more
deserved candidate for the EU. Being a member of the CU with the EU
indicates that Turkey had to be ready to open up its markets, adopt the EU’s
customs and tariffs’ regulations imposed on third party countries to fulfill the
economic integration conditions with the EU. Hence, TBP, in particular, were
facing both opportunities and risks in a more competitive environment. In
addition, as the CU was a means to an end for Turkey’s full membership to the
EU, this also meant that Turkey also faced challenges given by the Community’s
acquis and several other policies. Apparently, Turkey encountered substantial
administrative costs during the implementation process of the CU. Nevertheless,
15
Turkey “has incurred these costs with the hope of becoming a full member of
the EU” (Togan 2012, 22).
At the beginning, the CU was regarded as an effective instrument to
accelerate the process of economic opening in Turkey. That is, with the
operation of the CU signed with the EU, Turkey has implemented more
rigorously its trade liberalization arrangement since the 1980s. Notably, the CU,
among others, has incorporated its benefits to the unstable Turkish economy
during the 1990s by enhancing economic reforms in the country in terms of
regulations and other measurements. That is to say, to join the CU, is, to be
open to global competitiveness, certainly, requires Turkey to consolidate her,
first of all, competition policy, whether to choose to protect its key industry
during infancy period as a follow-up to the developmental state model, or to
extensively carry out export-led growth strategy with the new customs and
quantitative restrictions. Secondly, with regard to the increasing trend of
international trade and competition worldwide, more careful attention to
intellectual, commercial, and industrial rights is, too, a significant step, which
the CU was believed to bring to Turkey. Thirdly, these areas were taken care of
as a result of a demand for an activation of the CU between Turkey and the EU.
Nevertheless, “the CU was broadly criticized because of the implied loss of
Turkish sovereignty, but most Turks still managed to remain committed to the
ideal of EU membership. They regarded EU membership as confirmation of
16
Turkey’s European identity and its acceptance as part of European civilization.
This psychological factor has to be understood as an important element within
the relations between Turkey and the EU (Gündüz 2003, 12).” In retrospect, the
CU is not such a strong form of integration that could help Turkey realize this
goal easily. Strictly speaking, Turkey is vulnerable to the competitive levels with
other EU’s full member states whence joining the CU. As Keyman and Öniş
(2007) argue, “the CU represented a rather unbalanced mix of conditions and
incentives” (129). That is, the authors see Turkey at a more disadvantageous
side of the agreement. Consequently, not only Keyman and Onis but also other
economists as well as business people express their dissatisfaction with the
decision.9
Although there were pros and cons for the CU from the very beginning, even
during the negotiation process, the CU has been criticized. It seems that the EU
did not treat Turkey fairly in comparison with the other EU member states
(Gündüz 2003, 12-17). For instance, the EU had supported the development of
countries from Central and Eastern Europe even though the states themselves
did not demonstrate firm commitments. Similarly, Ülgen and Zahariadis (2004,
29) state that the CU resulted in “a policy-dependency framework that is
difficult to manage between two sovereign entities of a totally different size.”
9 For instance, Gunduz (2012) and Togan (2012) shared similar arguments and ideas in their papers as
well.
17
Meanwhile, Turkey had carried out several reforms in terms of economy,
politics, and other democratic measures. Despite this fact, Turkey is still
deliberately committing in the process until today. It is believed that Turkey and
the EU ended up in a CU framework mainly as a result of a legacy issue rather
than pure economic motives and new wave of regionalism in the 1990s (Onis
2001). As Ülgen and Zahariadis (2004) state, “this long historical relationship,
combined with the unique status of a CU between an existing regional trading
block and an independent country, have contributed to the establishment of a
successful, but also highly complex regional arrangement” (1).
To reinforce, Çalışkan (2009) argues that every part of the globe is
experiencing what is called “aggressive regionalism.” This is a result of
globalization and the escalation of international trade system, where “a CU
between asymmetric parties like Turkey and EU without a clear prospect for
closer integration may not work properly in the long run. In addition, Turkey's
memberships in several PTAs, as a result of CU framework, make its trade
regime more complex and difficult to manage” (Çalışkan 2009, 7-9). Sharing
somewhat similar view, Morgil (2000) announces that the CU has led to trade
creation effect as Turkey's trade with third countries has increased. In the same
study he also mentions that the CU has resulted in institutional changes,
reforms and rationalization of the Turkish economy. Most importantly he argues
that the CU contributed to the increase in competition as a result of economic
18
liberalization, which leads to more effective allocation of resources in the
country. In addition, Akkoyunlu (2000) also measure the effects of regional
economic integration after making an overall assessment of the research about
CU between the EU and Turkey and conclude that there was more trade
creation than trade diversion effects. This finding, moreover, is supported too
with the empirical study by Demir and Temur (1998) and Warning (2006). From
another perspectives, Malkoc (2002), Vergil and Yıldırım (2006), and Ekmen-
Özcelik and Erlat (2013) use Balassa index10 (Balassa 1965) to evaluate the
competitiveness of Turkish industry after the CU. The finding of Malkoc (2002),
for instance, indicates that Turkish machinery and transport equipment sector’s
competitiveness increased whereas that of textile, clothing and agricultural
products dropped. By the same methodology, Yilmaz (2003) investigates the
international competitiveness of Turkey vis-à-vis Bulgaria, Romania, the Czech
Republic, Hungary, Poland and the EU-15 in the world market between 1996
and 1999. Utkulu and Seymen (2004) do somewhat the same at the sector-level
while İnce and Demir (2007) conduct their study on Turkey and Germany
10 Balassa index in the short form of the Balassa’s classical RCA index to calculate the Revealed
Comparative Advantage or the level of competitiveness of an economy or a particular sector. For
instance, Amador et al. (2009) used Balassa approach for Portugal, Spain, Greece and Ireland between
1967 and 2004; Arghyrou and Bazina (2002) examined the competitiveness and the trade performance
of Greece at the sector level; Ferto and Hubbart (2002) investigated the competitiveness of the
Hungarian agri-food sector vis-à-vis the EU for the period 1992-1998; Haddad (2000) used the RCA index
to assess the competitiveness of the Middle Eastern and North African (MENA) countries in the world
market.
19
particularly. The result shows that Turkey’s textile and apparel commodities
have a comparative advantage vis-à-vis Germany, in contrast to the high-tech
products where Turkey faces disadvantage. This finding is also supported by the
study of Serin and Civan (2008).
As a matter of fact, TBP started to bring the issue about the impact of the CU
on Turkish economy into their discourses increasingly. The following section will
define who are the TBP and how we classify them in this thesis.
1.2.2 Categorization of Turkish business people
In previous studies, TBP were usually classified according to their ideologies.
For instance in (Yıldız 2011), TBP are categorized in line with their ideological
commitment characterized by Turkish political structure. For example, TÜSİAD
is considered neoliberal nationalist (Yıldız 2011, 62). That is, they are those who
support economomic liberalization and nationalist in terms of the legacy of
Ataturkism. In other words, they are Western oriented and advocates of pro-EU
policy; hence they are most of the times associated with a so-called term ‘the
White Turks.’11 These are also regarded as secularist, as opposed to more
conservative and Eastern-oriented business people such as MÜSİAD, TURK-İŞ,
11
A term constructed since the 2012 as opposed to ‘the Black Turks’ from the Tazimat period. The White
Turks composed of urban republican elites whereas the other are refered to Islamic or Anatolian Turks.
Journalist Ufuk Güldemir first coined the two terms in his 1992 book "Texas Malatya."
20
TUSKON. Lied in the middle are TOBB and ISO with neoliberal economic
ideology; yet they do not fully support pro-Western policy. From this point of
view, one can understand that TÜSİAD and the like were supporting Turkey’s
CU with the EU as they wanted to expand their export revenues and expected
that the EU would be a fruitful market for their established business. Also, the
CU agreement is certainly another product of Western-oriented and pro-EU
policy long followed by the Turkish Republic. By contrast, MÜSİAD and similar
business associations were against the CU for their own interest. That is, they
have reasons to protect their newly emerging businesses as well as their
ideological commitment (Viner (1950) and Gündüz (2003)). Briefly, the conflicts
between TÜSİAD and TOBB mainly represent the cleavage between outward-
oriented big conglomerates and largely inward-oriented firms (Onis and Webb
1994). On the other hand, MÜSİAD was generally in conflict with TÜSİAD, not in
terms of economic interests, but with each other in a more ideological sense
(Alkan 1998). As it was not long from the time Turkey opened its economy
through export-led growth strategy in the 1980s to the EU-Turkey’s CU
agreement, it is reasonable that TBP have different attitudes towards this
significant event. Those who are more liberals were more into the process,
while those who are more conservative are prone to skepticism.
In our thesis, however, we do not emphasize much the ideological
commitments of the TBP since we are not going to analyze them here. On the
21
contrary, in relation to the scope of our research interest, we are interested in
economic dimension of the issue. We define TBP at domestic level with a
categorization according to their sectors of production and degree of operation
of their economic activities. In other words, TBP, in this thesis, are industrialists,
trade and business associations, who are involved with Turkish trading
activities. Some of them are owners of individual companies while some are
managing NGOs. Yet the common feature of all is that they possess the
greatest strengths of Turkish business world and have a large share in exports
of Turkey. They are comprised of a number of entrepreneurs, ranging from big
conglomerates doing exports and imports extensively such as TÜSİAD, MÜSİAD;
small and medium-sized trade organizations such as TUSKON, ASKON as well as
those newly emerging so-called Anatolian tigers12 which also bear the name of
SİAD (Sanayici ve İşadamların Dernekleri), or Industrialists’ and Businessmen’s
Associations- such as KONSİAD in Konya, ÇOSİAD in Çorum, DESİAD in Denizli,
GASİAD in Gaziantep, and KAYSİAD in Kayseri13; and finally, some Chambers of
Commerce and Industry from different regions such as TOBB, ACC, ICC. This
selection is derived from our intention to analyze these economic actors with
“different societal visions, different identity/citizenship claims and different
12 The term refers to the Eastern cities in Turkey which experienced economically growth miracles based
on self-sufficiency and most conservative principles, namely, Denizli, Gaziantep, Kayseri, Bursa, Kocaeli,
Konya, Malatya, Kahramanmaraş. See, for instance, (Alpert and O'Neill 2006, Christianasen 1997, Turgut
2011).
13 See more at: http://portal9journal.org/articles.aspx?id=64#sthash.ghYvHxgE.dpuf.
22
institutional strategies (Keyman and Koyuncu 2005, 108)” on a political
economy base. These differences also reflect under their perceptions about the
CU between Turkey and the EU. In chapter three we will analyze the discourses
of those TBP and among them, representatives of some key economic industries
with regard to the CU effects in the context of the ESDC in 2008.
1.2.3 The 2008 European Sovereign Debt Crisis
There are a number of definitions of sovereign debt crisis in the theoretical
literature. In this section we will expose the concept of the sovereign debt first
and then specify the concept of the 2008 ESDC.
1.2.3.1 Sovereign Debt
First of all, sovereign debt is an accumulation of the outstanding payments
that a country’s government owes. It reflects the deficits created by an excess
spending of government expenditure in relation to tax revenues. As the term
“sovereign” means national government, sovereign debt can be interchangeably
used with national debt, country debt or government debt. Often time, the debt
is owed to foreign creditors; therefore public debt is another similar concept.
The Latin American debt crisis in 1980s, the Asian crisis in 1997, and the
Eurozone crisis recently are typical examples for a sovereign debt crisis (Rojas-
Suarez 2002, Reinhart 2002, Larraín, Reisen, and Von Maltzan 1997).
23
One of the most cited works in the literature on sovereign debt is of
Detragiache and Spilimbergo (2001) who define a country to be in a debt crisis
if there is an excess of 5 percent commercial outstanding payments to
commercial creditors. However, this definition does not distinguish sovereign
with private debts. Therefore in practice we usually rely on the standard
evaluation by, among few, Standard and Poor’s14 (2002) who defines a country
to be in default as long as there is not a sovereign debt obligation. In addition,
Reinhart (2002) in her sample study concludes that a country is on a brink of a
sovereign debt if there is a currency or banking crisis preceding.
1.2.3.2 How Sovereign Debt Is Measured?
As Reinhart and Rogoff (2008) states,
“Public debt follows a lengthy and repeated boom-bust cycle;
the bust phase involves a markedly higher incidence of
sovereign debt crises. Public sector borrowing surges as the
crisis nears...In the aggregate, debts continue to rise after
default, as arrears accumulate and GDP contracts markedly”
(13).
14 Along with Fitch group and Moody’s, S&P comprises of the Big Three of credit rating agencies,
http://www.standardandpoors.com/home/en/us.
24
In their paper, the authors demonstrate that at the first stage, the
government is playing a role in escalating credit borrowing within domestic
banks as well as from foreigners. Then banking crisis is accompanied with a
sovereign debt crisis (Reinhart and Rogoff 2008).
Most of the time the measurement is conducted by credit rating agencies,
among which is Standard and Poor’s, which measures debt relating with
commercial credits. Yet in our thesis’ context, sovereign debt is measured by
the amount one government owes to another, as well as to the international
creditors such as the IMF and the World Bank. The picture is different when it is
about the measurement for the European sovereign debt though. It is because
to stay in the Eurozone countries have to follow a certain restriction on a
country’s public debt according to Maastricht Criteria.15 Therefore, “their
measurement is broader, and includes state and local government debt, as well
as future obligations owed to social security” (Eurostat).
1.2.3.3 European Sovereign Debt Crisis
The ESDC is sometimes called as the Eurozone crisis or the Euro crisis. It is a
sovereign debt crisis that has great impact on the Euro-area member countries
15
The criteria include targeted inflation rate, government deficits to GDP ratio, long term interest rates,
etc. For more details see:
http://ec.europa.eu/economy_finance/euro/adoption/who_can_join/index_en.htm.
25
since its outbreak in 2008. It is a combined government debt crisis, a banking
crisis and a growth and competitiveness crisis (Shambaugh, Reis, and Rey 2012,
Reinhart and Rogoff 2008).
Likewise Lane (2012) argues that
“There are three phases in the relationship between the euro
and the European sovereign debt crisis. First, the initial
institutional design of the euro plausibly increased fiscal risks
during the pre-crisis period. Second, once the crisis occurred,
these design flaws amplified the fiscal impact of the crisis
dynamics through multiple channels. Third, the restrictions
imposed by monetary union also shape the duration and tempo
of the anticipated post-crisis recovery period, along with
Europe’s chaotic political response and failure to have
institutions in place for crisis management” (Lane 2012, 50).
The ESDC, as a result, can be defined at both national and European levels.
First of all, the ESDC took place first in the euro area members in the EU,
namely, Greece, Spain, Portugal, Ireland, and Cyprus. These euro zone
countries experienced heavily domestic economic crisis after heavy-borrowing
behaviors (Todorović and Bogdanović 2011) that led to government’s defaults
on both budget deficits and current account deficits, which eventually turned
26
out to be sovereign debts. As the situation became worse and there was not an
effective solution for these heavily indebted countries, other EU countries were
also adversely affected. As a consequence, the crisis went off.
While trying to define the ESDC in 2008 at national level, we look at the EU’s
member states. As a result of high economic integration and a monetary union
as a final goal within the EU, highly developed economies support the weaker
ones. However, this project, although seems to make sense in the European
economic integration, is not flawless, if the capital receiving parties do not have
a stable economic policy for catching up. During time of crisis, particularly,
countries might be reluctant to keep backing up the troubled economies. As a
result, the outbreak of the sovereign debt crises centered on these countries,
which “financed house price bubbles, such as Ireland and Spain. Elsewhere, it
funded excessive government consumption – for example, in Greece” (Dombret
2013, 1).
Correspondingly, we can also address the concept at the European level
based on neo-functionalism theory by Ernst Haas (1958). Haas, in his theory,
draws several assumptions and then makes predictions for the future of the EU
regarding its feature of regional integration. Some main indicators of this theory
are integration is inevitable, the spillover effect will further integrate states to
new areas, and the method for organizing interactions through integration is
parliamentary diplomacy. We argue that Haas’ neo-functionalism theory did not
27
apply under the circumstances of the crisis. This stemmed from his premise on
the organizing method and the spillover effect itself.
As a matter of fact, the European Central Bank is the unit responsible for the
monetary policy of the euro area countries. According to Haas, spillover effect
indicates that member states shall compromise and this central authority shall
look over the fiscal policies as well. Nevertheless, the fiscal policy of the 17
members of the euro area is a controlled individually. That is, each state is
responsible for its own fiscal matters, such as government spending and taxing,
etc. In other words, with regard to fiscal policy even under the common EU
umbrella, states are still above all other organizations. Here we see the
accountability and responsibility problems. To illustrate, countries irresponsibly
and constantly borrow at the cost of unwarranted endorsement.16
Furthermore, there is another problem at the European level when one looks
at the Maastricht Treaty. This treaty is one of the founding monetary union’s
settlements, of which the “no bail-out” principle is problematic. That is, no euro-
area country was to be liable for the debts of another member state. Thus,
16 Some scholars blame the borrowing behaviors of these countries nevertheless Bulow and Rogoff
(1989) shares the culpability on both the creditors and the borrowing countries that they found in the
case of the LDCs debt crisis in 1980s: “That is, loans to LDCs will not be made or repaid unless foreign
creditors have legal or other direct sanctions they can exercise against a sovereign debtor who defaults
Even if some lending is feasible because of direct sanctions, having a reputation for repayment in no way
enhances a small LDC's ability to borrow.”
28
individual responsibility was to be the guiding principle for fiscal policy in the
monetary union. In other words, each country was itself to bear the
consequences of its own fiscal policy. A chain of euro area members has faced
the same results; hence we experienced the ESDC (Lane 2012, Buiter et al.
1993, Beetsma and Uhlig 1999).
Despite the fact that Turkey has a huge stock of trade deficit and public debt,
the euro-zone crisis ignited Turkish economy into further hard times as the EU,
Turkey’s biggest trading partner, began to fall into economic recession. During
the ESDC, moreover, Turkey found herself very much disadvantaged while
having to obey the CU regulations and hence subjected to several constraints
although Turkey believes that it would have been better had the CU terms and
conditions benefited Turkey more. The CU between Turkey and the EU was
supposed to be a stepping-stone to speed up the full membership process of
Turkey to the EU, but it has been years that Turkey has been waiting. This fact
simultaneously affects the perceptions of the TBP about the CU. In the following
section we are going to design a research in order to explore the changing
nature of TBP’s attitudes towards the EU-Turkey’s CU after the ESDC in 2008.
1.3 Research Design
In this thesis, we are interested in answering the question whether there was
a change in TBP’s attitudes about the EU-Turkey’s CU after the ESDC in 2008
29
and why. After examining the theoretical and conceptual body, in this section
we draw a framework for our research design.
In the existing literature there are discussions about the effects of the CU.
Moreover we can also find the studies of the impact of the CU on Turkish
economy. More than that, studies on Turkish business groups and civil society
in Turkey are also available. However, there has not been study on TBP’s
perceptions about the EU-Turkey’s CU itself. To explore this issue, we then rely
on the discourses made by those TBP as available sources. As a result, to
answer our research question, we collect and analyze the TBP’s discourses to
examine their attitudes about the CU systematically on a yearly basis from 1995
until very recently. We expect to see a change in the TBP’s attitudes toward the
CU after the ESDC in 2008. Therefore both the qualitative data and the
discourses are divided into two periods: from 1995 to 2008, and from 2008 up
to now. To compare and contrast the discourses with the factual scenario, on
that account, we collect empirical data about Turkish economy under the effects
of the CU before and after the ESDC in 2008. Hence, we gather basic economic
indicators’ statistics from the Turkish Statistical Institute (TUIK). They are data
on variables that are directly affected by the CU, such as inflation; GDP growth
rate; and certainly Turkish exports and imports by country groups, by years and
economic activities. Based on Viner’s CU theory we employ Balassa (1965)
approach on a partial equilibrium model to detect the trade creation or trade
30
diversion effects brought about by the CU on Turkish economy with the break
point of the ESDC in 2008. Moreover, we also calculate Balassa index for some
selected economic sectors in Turkey to see whether there is a change in their
competitiveness after the ESDC. At last, we compute the adjusted Grubel-Lloyd
Index (Grubel and Lloyd 1971) to clarify the nature of trade between Turkey
and EU; whether it is still an intra-trade relation as assumed by the CU on
theory.
Accordingly, chapter two will present the empirical data to demonstrate the
impact of the ESDC on Turkish economy. Thereupon in chapter three we will
analyze the TBP’s discourses before and after the ESDC to see (1) if there is a
change in their attitudes toward the EU-Turkey’s CU due to the ESDC and (2)
whether our empirical data are accorded with their arguments.
31
CHAPTER 2
AN EMPIRICAL ANALYSIS ABOUT THE EFFECTS OF THE
EUROPEAN SOVEREIGN DEBT CRISIS ON TURKISH
ECONOMY
This chapter will present the empirical data to demonstrate the impact of the
ESDC on Turkish economy. We expect to see a change in some basic economic
indicators of Turkey after the ESDC in 2008. We will use the Balassa approach
on a partial equilibrium model to study the outcomes of the CU on Turkish trade
flow in line with Viner’s CU trade creation and trade diversion effects.
Necessarily, the Balassa index produced by the Turkish trade statistics will help
us look into the competitiveness of Turkish industry, and finally we will discern
the nature of trade between Turkey and the EU whether it is inter or intra-
industry after the ESDC by relying on the adjusted Grubel-Lloyd Index that we
will calculate.
First of all, in figure 1, we examine the two most common representative
criteria to analyze the strength of a country’s economic health, which are
inflation and GDP growth rate. The figure demonstrates Turkish economic
performance based on the two statistics in light of the relation between Turkey
and the EU since the first application of Turkey to the Community in 1959. At
32
first glance, we can see that Turkish economy has been constantly fluctuating.
GDP growth rate too are not stable. Inflation rate, in addition, was not in
control. The economic fluctuation is observed to be parallel with the political
instability of the country as well. Since we are interested in the CU effects on
Turkish economy so far, we pay more attention to the 1996 situation on ward.
Interesting enough, as the figure shows, after the CU came into force in 1996,
Turkish economy did not perform well. One of the indicators is that Turkish GDP
growth rate kept declining since 1996 as figure 1 shows. Only until 1999 with
the Helsinki summit and the announcement of EU candidacy for Turkey did we
see positive growth rate in the economy, yet the figure immediately dropped
with the 2001-banking crisis.
Figure 1. Inflation and growth rate of GDP per capita in Turkey
Source: Salehi Esfahani and Çeviker-Gürakar (2013, 2).
33
After the regulations of banking sectors and macroeconomic stability policies
implemented as a result, CPI inflation became stable. Moreover, the Turkish
economy recovered very quickly that there was a boost in GDP growth rate
again. In fact, this occurred almost the same as the outburst of the 2008 global
financial and economic crisis. That is Turkey was affected by the crisis; however
its ability to quickly recover is a success. Turkey is at this stage a candidate for
membership to the EU; yet this has been so far a long-standing, open-ended
negotiation process. As the EU also suffered from the ESDC itself, in 2008,
again we see the decline in GDP growth rate of Turkey, despite the rather
stable inflation rate. That is to say, the ESDC more or less influenced Turkish
economy as a whole. The next indicator of the CU effects we are going to look
at in this chapter is Turkish foreign trade volume. Since the CU is expected to
initiate an increase in Turkish exports with trade liberalization policy, we would
like to see how the ESDC influenced on Turkish trade activities under the
implementation of the CU as well.
To start with, the statistics in table 1 show that, after the CU, there was not
significant change in export as expected and even much lower than before the
CU until 2001 crisis. From 1995 to 1996 there was only 7.3% increase in export,
much lower than that in the year before the CU was signed, that is 9.5%.
However since the CU came into effect, in 1996 total export increased from
7.3% to 13.1%. Nevertheless, the figures were not always stable. In contrast,
34
one year since the CU came into force, total export was not performing very
well.
Table 1: Turkish foreign trade by year
Year
Exports Imports Volume of Foreign Trade Proportion
of Imports covered by
Exports
Value Change Value Change Value
'000 $ % '000 $ % '000 $ %
1991 13 593 462 4.9 21 047 014 -5.6 34 640 476 64.6
1992 14 714 629 8.2 22 871 055 8.7 37 585 684 64.3
1993 15 345 067 4.3 29 428 370 28.7 44 773 436 52.1
1994 18 105 872 18.0 23 270 019 -20.9 41 375 891 77.8
1995 21 637 041 19.5 35 709 011 53.5 57 346 052 60.6
1996 23 224 465 7.3 43 626 642 22.2 66 851 107 53.2
1997 26 261 072 13.1 48 558 721 11.3 74 819 792 54.1
1998 26 973 952 2.7 45 921 392 -5.4 72 895 344 58.7
1999 26 587 225 -1.4 40 671 272 -11.4 67 258 497 65.4
2000 27 774 906 4.5 54 502 821 34.0 82 277 727 51.0
2001 31 334 216 12.8 41 399 083 -24.0 72 733 299 75.7
2002 36 059 089 15.1 51 553 797 24.5 87 612 886 69.9
2003 47 252 836 31.0 69 339 692 34.5 116 592 528 68.1
2004 63 167 153 33.7 97 539 766 40.7 160 706 919 64.8
2005 73 476 408 16.3 116 774 151 19.7 190 250 559 62.9
2006 85 534 676 16.4 139 576 174 19.5 225 110 850 61.3
2007 107 271 750 25.4 170 062 715 21.8 277 334 464 63.1
2008 132 027 196 23.1 201 963 574 18.8 333 990 770 65.4
2009 102 142 613 -22.6 140 928 421 -30.2 243 071 034 72.5
2010 113 883 219 11.5 185 544 332 31.7 299 427 551 61.4
2011 134 906 869 18.5 240 841 676 29.8 375 748 545 56.0
2012 152 461 737 13.0 236 545 141 -1.8 389 006 877 64.5
Source: Turkish Statistical Institute
35
From 1997 to 1998 there was almost very little increase in total export, but
the figure showed, unfortunately, only a slight increase of 2.7% and
immediately after the following year, that is, in 1999, export fell sharply.
Turkish economy could not export its products as much as before, not even at
the same level. Nevertheless, after the crisis in 2001 with the new regulations in
banking sector and several economic reform packages as well as more
deliberate economic policies, the numbers increase. Yet as a result of the ESDC
in 2008 we see a significant change in 2009 export data that appears here as
such becomes negative 22.6% in 2009. One of the reasons is a dramatic
decrease in export with the biggest trading partner of Turkey, i.e., the EU.
Similarly we can see how vulnerable Turkish foreign trade is as a result of the
2008 ESDC by glancing at the import statistics. There was a change of negative
30.2% compared to the pre-crisis year. That is, with regard to the CU
agreement, under the effect of the ESDC, although Turkey could not export as
usually did, but on the contrary and worse, Turkey had to comply with the CU
and imported foreign products at a customized level of tariffs and taxes even
though this is completely against the interest of Turkish economy by that time.
So to see, the proportion of imports covered by exports in 2007 is 63.1%, in the
crisis year of 2008 is 65.4%, and after its impact spread to the economy, it is
the highest figure since the 2001-banking crisis. That is, 72.5% of imports were
covered by exports. To illustrate, we can see this significant change in volume
36
of foreign trade in Turkey with our focus on the 2008, the year in which the
global economy suffered from the economic and financial crisis, and in
particular, among all, the EU with the ESDC. Consequently, we see an abrupt
decline in the total foreign trade volume in Turkey, which is from about $334
billion to $243 billion, a decrease of approximately 27%.
Furthermore, after the CU was completed, foreign trade deficit increased
because of increasing of import level, which is between Turkey and EU. In
1998-1999, there was a minor decline in the foreign deficit because of economic
crisis. Today this deficit again started to increase (İsmail 2005, 15-17). In like
manner, Kalaycı and Artan (2010) also comment that
“In the process of customs trade, it is observed that while, in means
of proportion, there is an increase in the export of investment and
intermediate goods to EU, there is a decrease in the export of
consumer goods and on the other hand, the situation in the import
process is completely reverse” (Kalaycı and Artan 2010, 301).
In short, it may be improbable to say that the CU of Turkey with the EU bring
Turkish economy either positive or negative effects. The same discussion can
also be found in the study of Neyaptı, Taşkın, and Üngör (2012). Based on
theoretical literature, we attempt to look at the effects of the CU on Turkish
trade flow. More specifically, according to Viner’s theory on CU, Turkey, as a
partner of the CU with the EU, is believed to experience the effects of this CU,
37
i.e., trade creation or trade diversion (Özkale and Karaman 2006, 3). During
and immediately after the ESDC, the EU signed several new FTAs with third
parties. That is to say, Turkey is expected to face a new risk of trade diversion
as a result (Akdag 2013). In other words, when examining the obligations of the
CU between Turkey and the EU, what exposed is the asymmetric content of the
agreement.
“Third party originated commodities and services can travel to Turkey
without tax, but Turkey cannot benefit the same favorable method
until it also signs a similar agreement with the third party. This
asymmetry is hard to refrain from until the EU membership is
acquired, and the famous ‘wishful Turkey Clauses’ in the FTAs haven’t
been very effective” (Akdag 2013, 1).
This argument will later also be found in most TBP’s justifications for their
disappointment in the EU-Turkey’s CU analyzed in the following chapter. In the
next section, we will specifically evaluate the expected CU creation effect on
Turkish trade flow to see whether the ESDC changed its nature.
2.1 The impact of the ESDC on Turkey’s Trade flow
Most CU theories suggest that this type of economic arrangement will bring
benefits to participating countries, in terms of increasing trade volumes among
the members as well as improvement of welfare of individual countries. In other
words, CU is expected to lead to trade creation among member countries.
38
However, Jacob Viner in his CU theory (1950) argues that the CU does not
necessarily result in trade creation but trade diversion as well. Consequently,
there is no guarantee that an individual country will be better off as choosing to
participate in the CU. With regard to the TBP’s discourses, we attempt to test
those effects of the CU on the economy of Turkey to see the impact of the
ESDC. Therefore, we will analyze the two effects of the CU on a partial
equilibrium analysis according to Balassa approach (1967). The logic is to relate
the imports volume to the country’s GDP. That is, the ex-post income elasticity
of imports demand in intra area and extra area trade for periods before and
after the ESDC is computed, which is defined as:
η = (ΔM/M) / (ΔY/Y),
where η is ex-post income elasticity of imports, ΔM/M is the percentage
change in imports, and ΔY/Y is the percentage change in GDP.
The resulting elasticity will be interpreted as follows, an increase in η for
imports from partners in the post-crisis period implies the existence of gross
internal trade creation, an increase in η for imports from all sources in the post-
crisis period indicates the existence of gross external trade creation, a decrease
in η for imports from non-partners in the post-crisis period would imply the
existence of trade diversion. In this study, in order to see the impact of the
ESDC on Turkish trade flow, we collect Turkish imports and GDP data from 1999
39
to 2013 on annual basis. Since the ESDC boasted in 2008 we divided the data
into 2 sub periods to observe the role of the ESDC, from 1999 to 2007, and
from 2008 to 2013. Table 2 provides the result of our calculations.
Table 2. Income Elasticity of Turkish Imports Demand
Selected Industries
Total imports Imports from the EU Imports from the
non-EU
1999-07
2008-13
Diff 1999-07
2008-13
Diff 1999-07
2008-13
Diff
Chemicals and related products 0.65 0.49 -0.17 0.56 0.33 -0.24 0.54 0.41 -0.13
Raw materials 0.79 0.79 0.00 0.60 0.21 -0.38 0.51 0.58 0.07
Food, drinks and tobacco 0.51 0.90 0.39 0.25 0.08 -0.17 0.44 0.65 0.21
Automotive,
machinery and transport equipment 0.70 0.75 0.05 0.60 0.21 -0.39 0.58 0.55 -0.02
Mineral fuels, lubricants and related materials 0.75 0.46 -0.29 1.29 1.79 0.50 0.60 0.38 -0.22
Textile 0.46 0.27 -0.19 0.32 0.29 -0.03 0.38 0.23 0.15
Total 0.65 0.61 -0.03 0.60 0.49 -0.12 0.51 0.47 -0.04
Source: Eurostat, IMF, Turkish Statistical Institute and own calculations
We see here the income elasticity of import demand and the difference
between ex-ante and ex-post crisis periods. That is, we see trade creation in
some sectors before the ESDC while there is trade diversion after that. Firstly,
we see, at total, the income elasticity of import demand decreases from 0.65 to
0.61, which indicates that even though the CU is there, there is no trade
creation due to the ESDC. Moreover, income elasticity of import demand from
the EU fell from 0.60 to 0.49 showing that there is no gross trade creation
either, although with the existence of the CU as the ESDC took place. Similarly,
40
the figures from the non-EU imports point out that there is no trade creation as
well due to a decrease in income elasticity of Turkish imports demand from 0.51
to 0.47, even though the difference is not much. Relying on the results we got
in the table 2, from the selected sectors, we can say that there is only one
industry that enjoys gross internal trade creation at the post-crisis period. That
is the sector of mineral fuels, lubricants and related materials. While there is no
internal trade creation in automotive, machinery and transport equipment as
well as food, drinks and tobacco, on the other hand, there is gross external
trade creations in these sectors. Likewise, besides raw materials and food,
drinks and tobaccos, the rest of the industries go through trade diversion effect
after the ESDC. The trade diversion effect can be understood through the
various discourses by the TBP. They widely argue that Turkey had to oblige to
import from third countries to prevent trade diversion towards the EU, yet that
would cause harm to some certain Turkish sectors as discussed. An analysis on
Turkey’s competitiveness may give a more complementary explanation of the
issue.
2.2 The ESDC and its implication for the Competitiveness of Turkish
industry
Since the commencement of the CU, Turkey’s economy has been open to the
world more intensively. This fact results in a more challenging environment for
Turkish firms. In addition, since the 2000s economic reforms, Turkish economy
41
has performed so well that it now has numerous trading partners from almost
every part of the globe. Stated somewhat differently, Turkish firms have been
exposed to more competitive environment not only at the regional level, as
previously mostly with the EU and Eurasian partners, but at the international
level due to the fact that Turkey has multilateral trade agreements with
different economic zones, especially since 2000.
The comparative advantage or level of competitiveness in trade is perhaps
one of the most studied topics dating back from David Ricardo’s theory of
international trade17. However, it does not mean that countries, which trade
with each other freely, will necessarily gain comparative advantage. Rather
there are cases that one of the parties always appeared as the winner of all
time, such as one of the attacks by advocates of World System analysis18. In
the literature, the studies about the impact of the CU on Turkey’s
competitiveness yield somewhat interesting results. In the context of our thesis,
we compute Balassa index (1967) to examine the comparative advantage of
17 The Ricardian theory of international trade is also called the ‘theory of comparative advantage’ by the
modern bourgeois economists with the publication of his book “On the Principles of Political Economy
and Taxation” on 19 April 1817.
18 Immanuel Wallerstein (1974) is believed to have initiated the World system analysis in which he
believes that the capitalists always win and specifically Europe or the West made use of and controlled
over most of the world economy, with the tool of industrialization and capitalist economy, of which
indirectly results in unequal development.
42
certain Turkish industries and then compare the outcomes in two periods before
and after the ESDC. The formula is as below:
Balassa Index B=(Xct-Mct)/(Xct+Mct)
Where Xct is exports of commodity c in time t and Mct is imports of
commodity c in time t.
A comparative advantage exists if there is a high value of Balassa Index.
Moreover, an increase in B indicates that the country under consideration has
improved its competitive position against its competitors. Table 3 illustrates the
results.
Table 3. Changes in Competitiveness of Turkish Industry
Selected Industries
Against World Against EU Against Non-EU
1999
-07
200
8-13 Diff
199
9-07
200
8-13 Diff
199
9-07
2008
-13 Diff
Chemicals and related products -0.70 -0.65 0.05 0.78 0.70 -0.08 -1.41 -1.31 0.10
Raw materials 0.00 -0.18 -0.19 0.32 0.60 0.28 -0.01 -0.38 -0.37
Food, drinks and tobacco 0.29 0.31 0.03 -0.59 -0.29 0.30 0.57 0.62 0.05
Automotive, Machinery and transport equipment -0.45 -0.28 0.17 0.28 0.24 -0.04 -0.90 -0.55 0.35
Mineral fuels, lubricants and related materials 0.29 0.31 0.02 0.44 0.70 0.26 0.52 0.61 0.09
Textile 0.39 0.36 -0.02 -0.37 -0.25 0.12 0.21 0.55 0.33
Total -0.03 -0.02 0.01 0.14 0.28 0.14 -0.17 -0.08 0.09
Source: Eurostat, IMF, Turkish Statistical Institute and Own Calculations
43
Table 3 shows that while Turkey’s chemicals and related product sectors as
well as automotive, machinery and transport equipment sectors have
competitiveness against the whole world and the non-EU countries,
nevertheless these sectors are not competitive against the EU after 2008.
Conversely, Turkey only has competiveness against the EU in raw materials but
not against the world, neither against the non-EU countries. This is why we see
most TBP in these industries complain about the CU especially after the 2008
ESDC.
The Balassa index also indicates that Turkey has comparative advantage
against all parts of the world, including the EU and the non-EU countries in
food, drinks and tobacco, as well as mineral fuels, lubricants and related
materials with the breakpoint of 2008. This is shown by the increases in B in the
post-crisis period in comparison with the pre-crisis, or a positive difference of
the two indices on the same row.
Regarding textile industry, what is important here is that Turkey has
comparative advantage against both EU and non-EU countries in comparison
with the whole world. This finding is in confirmation of the study by İnce and
Demir (2007) as well. That is, they also found that Turkey’s textile and apparel
products enjoyed comparative advantage against Germany in the pre-crisis
period. Predominantly, the sector of textile and apparel is defined as traditional
sector in Turkey. It is believed that the country is a leader in this sector in terms
44
of production, trade volume and technology. But if we evaluate Turkey as a
global player, it is not in the good position and has not enough shares in the
textile and apparel industry. On the other hand, although the sector’ trade
volume is increasing, profit of the sector’ players is decreasing.
In short, heavy industrial sectors including automotive and high tech
products could not enjoy the comparative advantage after the ESDC even
though the CU was tightly implemented. That is to say, the CU does not work
for Turkish heavy industry’s advantage. Consequently, TBP in these industries
may find dissatisfied with the agreement and look for new alternatives.
Secondly, although Turkey has comparative advantage in textile industry, the
level decreases due to the Eurozone crisis. On the other hand, the fact that
Turkish textile and apparel industry has faced increasing challenges from
foreign competitors like China and other European partners also do not
guarantee its level of competitiveness position in the world market after being
hit by the ESDC. TBP in textile industry, thus, find themselves rational to alter
their markets or lobbying for protection from government such as adjusting
deals or agreements with trading partners.
Necessarily, as the EU is Turkey’s largest trading partner, we too are
interested in investigating whether the presence of the ESDC could alter the
45
nature of trade between the two parties. The following section will do so by
computing adjusted Grubel-Lloyd Index and see the effects accordingly.
2.3 The nature of trade between Turkey and the EU after the ESDC
Here we will evaluate whether the nature of trade between Turkey and the
EU after the ESDC is inter or intra-industry as most official EU documents claim.
In order to analyze intra and inter-industry specialization, we use adjusted
Grubel-Lloyd Index which is calculated as follows:
Adjusted GLijk = 1 – { | (Xijk/Xij) – (Mijk/Mij) | / [ (Xijk/Xij) + (Mijk/Mij)]}
where Xijk (Mijk) = exports (imports) of goods k from country i to country
j,
Xij (Mij) = total exports (imports) from country i to country j.
The results are provided in table 4 below. If the adjusted GL index is unity,
then we have a complete intra-industry. On the contrary, if the index value is
zero then we have an inter-industry relation between the two partners. The
figures indicate that, overall, the nature of trade between Turkey and the EU
has become plainly inter-industry after the ESDC even though they both are
46
parties to the CU, sharing common tariffs and imposed the same taxes on third
countries’ products.
Table 4. Adjusted Grubel-Llyod Index
Selected Industries
1999-2007 2008-2013 Difference
Chemicals and related products 1.00 0.93 -0.07
Raw materials 0.98 0.69 -0.29
Food, drinks and tobacco 0.92 0.57 -0.35
Machinery, automotive and transport equipment 1.00 0.48 -0.52
Mineral fuels, lubricants and related materials 0.94 0.46 -0.48
Textile 0.94 0.57 -0.38
Total 0.96 0.62 0.35
Source: Eurostat, IMF, Turkish Statistical Institute and Own Calculations
At the first period before the outbreak of the ESDC, the figures are more
toward unity. That is to say, before the ESDC, there was a kind of intra-industry
relation between Turkey and the EU. However, with the impact of the ESDC,
that nature has changed. Turkey and the EU in the second period, as shown in
the table, the adjusted Grubel-Lloyd Index tells us that the nature of trade
relation between Turkey and the EU has become more inter-industry, especially
47
in key industries such automotive, machinery, transport equipment, and mineral
fuels, etc.
With the impact of the ESDC, we see that Viner’s theory proved to be true in
the sense that participating countries do not necessary benefit from intra-
industry relations and hence increase the countries’ welfare accordingly.
Therefore, it makes sense if one is indifferent about staying in or leaving the CU
since bearing with the agreement does not bring extra benefit such as a
creation of an intra-industry trade relation with each other, which is most visible
after the ESDC. As a matter of fact, we increasingly observe that, especially
after the ESDC, Turkey has been attempting to diversify her foreign trade, not
only with the major trading partner such as the EU, but through multilateral
trade agreements with every part of the globe.
2.4 Turkey’s diversification of trade
Foreign trade plays an important role in economic development and is the
chief drive of the Turkish economy. After the economic crisis of 2001, and later
on the ESDC in 2008, under the policy of economic restructuring and a strong
reform, foreign trade of Turkey experienced the boom period. That is, exports
and imports continued to grow at a high level. Both importing and exporting
markets are constantly expanded. Likewise, Turkey is increasingly focusing on
the international market, tend to favor trade liberalization, supporting
48
businesses seeking enhanced business opportunities with foreign partners
through signed agreements, cooperation agreements that create the legal
framework for the countries and regions in the world. The fact that Turkish
foreign trade flourished in recent years has contributed to boosting the
country's economic development, bringing Turkey to become one of the world's
top 20 countries of import and export scale and ranked 16th in the OECD
(Haberler, 27 December 2013). To contribute to the expansion of foreign trade
activities, so far, Turkey has signed and implemented FTAs with 19 countries
and regions around the world. At the same time, Turkey is negotiating FTAs
with 14 other partners.
“Turkey’s emerging trade destinations provide a relative advantage for
the smaller size entrepreneurs due to their firm size while yielding
significant amounts of positive externalities for the conglomerates in
their increased bilateral economic ties as well. Turkey’s new trade
orientation or re-balancing act has been, therefore, beneficial to all
parties at the domestic level while providing cyclical results –beside
Africa- at the international level. The latter argument is evident in
Turkey’s significant losses in European, North American, Asian and
Middle Eastern –including Gulf countries” (Babacan 2011, 138).
During the period of 2008-2009, Turkey’s trade with its traditional partners
such as EU-27, North America, Russia, China, and the Middle East as well as
many other markets shrank dramatically as observed in figure 2, yet the only
exception to this general rule came from certain North African and Central Asian
markets.
49
Figure 2. Turkish exports by years and country group
Source: Turkish Statistical Institute
50
Turkey became a member of the WTO on 26 March 1995 while originally the
country joined the GATT in 1951. Regardless of the fact that Turkey has
experienced periods of ups and downs in politics and economy, the country has
established a number of trade relations with other parts of the world. Especially
after the 1980 coup d’état, (first Prime Minister in 1983-1989), President Turgut
Ozal has done everything possible to lead the country out of isolation. One of
the most significant contributions that President Ozal has ever made for his
country is the economic opening to the world through trade liberalization, free
competition under the principles of free market economy.
(A) The CU
The most significant landmark in the history of the Turkish economy can be
accounted for the conclusion of the CU between Turkey and the EU, the
community of which Turkey would long like to become a part. The economic
relation between Turkey and the EU, which became closest with the CU in 1996,
has also been an important factor in the initiation of the full membership
negotiation process. This relation seemed to be stable until the outbreak of the
ESDC when Turkey lost her confidence in the EU in several respects, most of
which are discussed by the TBP in the following chapter. Since then, under
different circumstances, Turkish economy experienced different opportunities
and challenges.
51
(B) A free trade agreement with EFTA
Free Trade Agreement between Turkey and the European Free Trade
Association (EFTA) is modeled on similar asymmetry of the CU between Turkey
and the EU. This agreement regulates industrial products, fish and seafood
products, processed agricultural products, intellectual property, competition
rules, state aid and anti- dumping. The agreement took effect on 1 April 1992.
Since then, EFTA countries bypassed customs duties and have the same effect
for non-agricultural goods imported from Turkey, except textiles and garments
which EFTA countries have tax redemption from 1 January in 1996. Turkey has
as well adopted equivalent tariff measures for imports from EFTA and from the
EU.
(C) Euro-Mediterranean Partnership (EUROMED)
In November 1995 a conference of European Ministers of Foreign Affairs
ended with the establishment of the Euro-Mediterranean Partnership of which
framework based on three pillars: political cooperation and security partners;
economic and financial, social arrangement; humanities and culture
(Europa.com). In the context of partnership and as part of establishing a free
trade area between Europe and the Mediterranean region, Turkey ended free
trade agreements bilaterally with Egypt, Israel, Morocco, Tunisia, the Palestinian
Authority, Jordan, Syria and Lebanon.
52
(D) Economic Cooperation Organization (ECO)
Along with Iran and Pakistan, Turkey established the Economic Cooperation
Organization (ECO) in 1985. ECO was expanded to include Afghanistan,
Azerbaijan, Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan and
Uzbekistan in 1992. The goal of ECO is to promote economic development and
social sustainability. The project was launched to cooperate in priority areas
such as energy, trade, transportation, agriculture, and the control drugs.
Moreover, ECO members have signed a framework agreement to promote
trade cooperation between the Member States in March 2000. Subsequently,
Afghanistan, Iran, Pakistan, Tajikistan and Turkey established the ECO Trade
Agreement (ECOTA) on 7 May 2003. ECOTA whose mandatory provisions of
state monopolies, state aid, protection of intellectual property rights, the anti-
dumping measures exclude out quantitative restrictions on trade. For members
of ECOTA tax is reduced to not less than 10% per year to a maximum of 15%
in the eight years since ECOTA effect19. Recently most members of the ECO
have also become full members of the Shanghai Cooperation Organization, of
which Turkey is not a member yet. After the ESDC which resulted in less
19 For details about the agreement, see ECO Trade Agreement at:
http://wits.worldbank.org/GPTAD/PDF/archive/ECO.pdf; and a summary by the Turkish Ministry of
Foreign Affairs at (Türker 2006).
53
motivation to cope only with the EU’s markets, there have been plausible
discussions about Turkey’s leaving the CU and joining the SCO instead.
E) Developing Block (D8)
Developing-8 is an organization for development cooperation among
Bangladesh, Egypt, Indonesia, Iran, Malaysia, Nigeria, Pakistan and Turkey. The
establishment of D8 is done through the Declaration of the Heads of State or
Government on 15 June 1997 in Istanbul. The goal of the organization of D8 is
through economic cooperation to strengthen the role of Member States in the
world economy, diversifying and creating new opportunities in trade relations,
promote participation in the planning policy at the international level, and
improve the living standards of people in each country.
Additionally, the D8 member countries signed a Preferential Trade Agreement
(PTA) to promote economic integration and trade in 2006. The agreement was
done to promote and expand trade by lowering taxes and eliminating non-tariff
barriers (NTB).20 It must be recalled that in such organization, unlike the CU,
Turkey has full sovereign voting rights as a member of the block.
(F) The Organization of Islamic Cooperation (OIC)
20
http://www.economy.gov.tr/upload/31BB29F4-9CED-E2E1-E2AFF480C2655BE5/Developing8.pdf.
54
The Organization of Islamic Cooperation (OIC), formerly the Organization of
the Islamic Conference is an intergovernmental organization of 57 countries in
four continents, where Turkey is a part of it. OIC's purpose is to strengthen
economic cooperation, trade and deepen economic integration, towards the
establishment of a common Islamic market. With the first phase, the
Framework Agreement on Trade Preferential System of OIC member countries
takes effect in 2002, which identifies the general rules and principles for
negotiations. The negotiations on tariff reduction modalities and schedule ended
with the Protocol on Preferential Tariff Scheme for Trade Preferential System of
the OIC (PRETAS) adopted in 2005 and entered into force in February 2010.21
PRETAS also covers non-tariff barriers, the anti-dumping measures and trade
defense and other issues related to trade. The negotiations on rules of origin
have ended in 2007. The Regulation entered into force on 9 August 2011.
(G) The Black Sea Economic Cooperation (BSEC)
The BSEC Declaration, signed on 25 June 1992 by Albania, Armenia,
Azerbaijan, Bulgaria, Georgia, Greece, Moldova, Romania, Russian Federation,
Turkey and Ukraine, aims to strengthen and diversify economic relations and
trade between the signatory countries. Areas of cooperation in the framework
of BSEC are very wide including banking and finance, exchange statistics and
21 http://www.economy.gov.tr/upload/31BB29F4-9CED-E2E1-
E2AFF480C2655BE5/The%20Organization%20of%20Islamic%20Cooperation.pdf.
55
economics of energy, transport, telecommunications, commercial and industrial
products, agricultural - farming, environmental protection, tourism, science and
technology.
(H) Bilateral free trade agreements
The association agreements and the CU have contained trade relations of
Turkey by the standard model based on the preferences that each party had
with the EU. Industry trade has been fully liberalized by the end of the
transition period, while the mutual concessions in the exchange of agricultural
products and processed agricultural products are selected. Since the review of
trade policy most recently, Turkey has concluded negotiations with Montenegro,
Serbia, Georgia, Chile, Jordan, Lebanon and Mauritius. Up to now Turkey has 17
FTAs in effect.22
Since 2008, which is the time of the ESDC, just as shown in the figure,
Turkey has less trade relation with the EU, whereas the country has intensified
trade relations via numerous business people with existing partners as well as
started to get in touch with the rest of the world. Evidently, we have seen
Turkish commitment to negotiate with the Faroe Islands, GCC, MERCOSUR,
Ukraine, Moldova, Colombia, Libya, Seychelles, South Korea, Cameroon,
Democratic Republic of Congo and Malaysia in very recent times. Turkey has
56
also initiated negotiations with Mexico, the Southern African CU (SACU), Algeria,
the ASEAN countries, Indonesia, India, Africa, Caribbean and Pacific (ACP),
Canada, Peru and Central America. However, since the discussions with
CARICOM Secretariat took place in 2009 to date, Mexico, and Algeria still did
not reply Turkey's proposal to participate in the FTA. Lately in most TBP’s
discourses, Turkey has put much effort in negotiating with the U.S for a
Transatlantic Trade and Investment Partnership Agreement, which is not
surprising given the decrease in TBP’s confidence in continuing the
implementation of the CU with the EU. In the following chapter, I am going to
analyze the discourses by TBP to conceive their attitudes as well as their
reasoning with regard to their perceptions about the EU-Turkey’s CU.
22 http://www.economy.gov.tr/index.cfm?sayfa=tradeagreements&bolum=fta®ion=0.
57
CHAPTER 3
AN ANALYSIS OF THE TURKISH BUSINESS PEOPLE ’S
DISCOURSES ABOUT THE EU-TURKEY’S CUSTOMS UNION
Since the effective date of 1 January 1996, the provisions of the CU with the
EU have become the main component of trade policy of Turkey. The EU has
started accession negotiations with Turkey from May 10, 2005. Accordingly, the
guidance on reform priorities through the program was announced; yet with the
impact of the euro-zone economic turmoil, for the third time Turkey published
the National Program on 31 December 2008 stating the goals and objectives
identified in joining the EU. On 15 March 2010, the EU Council of Ministers
together with Turkey drew a framework for 2010-2011, identified the legal basis
for accession and the need to conduct research during the negotiation process.
At the national level, the long-term development strategy of Turkey (2001-
2023), prepared by the Ministry of Development, highlights the structural
development of export-oriented manufacturing and high technology content
with an emphasis on those products and services of high added value. The
export-oriented activities, especially the activities of small and medium
enterprises, will have more support with the provision of credit and insurance
underwriting through the Turkish Eximbank. Moreover, these decisions
harmonize with the regulations for legal investment with EU standards, reduce
58
bureaucratic procedures for exporters and enhance foreign trade infrastructure
as well. On top of that, Turkey has carried out a strategy to enhance brand
image of Turkish goods in the world and help businesses in Turkey, be they
exporters or producers’ associations.23
Especially after the crisis in 2008, Ministry of Economy has periodically
reviewed Turkey’s trade policy. In this context, the regime of import and export
regulations and standardization is also reviewed annually and updated when
necessary. The private sectors and non-governmental organizations (NGO) are
responsible for the inputs of trade policy and inform and evaluate their ideas to
the Ministry of Economy and the Union of Chambers and Commodity Exchanges
of Turkey (TOBB), the Association of Turkish Exporters (TIM), Turkish
Industrialists and Businessmen's Association (TÜSİAD), Independent
Industrialists' and Businessmen's Association (MÜSİAD) and the Council of
Foreign Economic Relations (DEIK), as well as local chambers of commerce and
other individual and export associations. The consultation is sometimes
conducted with universities and research institutes such as Economic
Development Fund (IKV), Economic Policy Research Institute (TEPAV) and the
Turkish Secretariat for foreign trade.
23 The official document for long-term export strategy (export strategy for 2023) is yet being drafted.
59
3.1 The Customs Union and the Turkish Business People’s
discourses before the European Sovereign Debt Crisis
In 1995 the CU was one of the most discussed topics in Turkey. Different
opinions have been raised with regard to the benefits and potential downsides
of the CU that it would potentially bring. TBP especially, are those of most
concerns about such an important economic agreement. This is because the CU
probably affects them the most. Economically, their business shares and
competitiveness will be challenged.
Secondly, accepting the CU to merge into Turkish economy is similar to
assimilating European styles of production and consumption into their traditional
Turkish style. Third, certain products according to the agreement traditionally
produced by these TBP for exports will now be subject to common tariffs
determined by the EU. In other words, they will no longer have autonomy in
export as well as import quantity in several industries.
More than that, in most sectors Turkey will have to lower its tariffs barriers
and import extensively products from the EU with no bargaining powers from
individual firms. However, at that time of the signature, most business people
had high expectations and positive views about the promising profitable
economic agreement. As a result, we observe that there were often different
discourses by TBP from different business groups since 1995 till recent times.
60
We find sometimes, supportive statements, yet often times we also come across
with negative expressions.
At the very beginning, for instance, MÜSİAD in March 1995, strongly
predicted that:
“The government and media is crying of joy for the CU. However the CU
will not bring to Turkey much promising effects… There will be more
imports from the EU, the inflation rate will not fall, and the foreign
capital will not come”(MÜSİAD Pamphlet 2002).
This prediction has been confirmed with figure 1 in the previous chapter,
where we do not see a decline in inflation rate after the CU, although there was
a slight increase in Turkey’s exports to the EU as illustrated in table 1.
Immediately after the CU came into force, in 1996, thereupon, President of
MÜSİAD, Erol Yarar expressed his discomfort about the CU. Instead he
supported the Silk Road Union and the Cotton Association project. The Cotton
Association Project in comparison with the CU Project is much more
advantageous and much more based on solid foundations, Yarar asserted (Aras
1996). He also said that the CU was pushing Turkey to unfair competition when
he compared benefits in terms of capital and competitiveness of automotive
industry between MÜSİAD’s partner at that time, Daewoo Automotive Auto
Representative, and the CU (Milliyet, 17 July, 1998).
61
Similarly, in 2001, Fuat Miras, President of TOBB, in Dünya Gazetesi, 17
March 2001, stated that, “The CU was the biggest mistake. It blew our imports”
(MÜSİAD pamphlet 2002).
This argument by TOBB’s President proved to have shared the same view
with MUSİAD as discussed above. That is, both of these two business groups
are concerned about Turkish trade volume, whether it is exports in MUSİAD’s or
imports in TOBB’s President’s statements.
In the same year, in Dünya Gazetesi, 22 April 2001, President of the
Employers' Association of Textile Industry Halit Narin also commented that:
“Getting into the CU was very harmful for us. We need to get this deal
reconsidered” (MÜSİAD pamphlet 2002).
Through the discourse, we can see that the flow of the critics about the CU
by TBP gets tenser as the implementation of the agreement prolongs. The
Chairman of Ankara Chamber of Commerce (ACC), Sinan Aygun, among others,
several times have explicitly stated his pessimistic views about Turkey's CU
Agreement signing, in many respects. For instance, in a press release, Aygun
said that how much benefits Turkey by the time of signing the CU hoped to
attain, in the meantime, nevertheless, the exact opposite results were obtained
(Ankara Chamber of Commerce, Press Release and Report 2002).
62
Moreover, on his statements about the EU’s CU with Turkey, Aygun
expressed that Turkey’s exports to the EU was expected to explode and foreign
investment capital would flow from the EU to Turkey as well as Turkey would
benefit from PTAs which are singed between the EU and third counties;
however, what Turkey actually got is a loss of 77 billion dollars with the
implementation of the CU (Ankara Chamber of Commerce, Press Release and
Report 2002).
In addition, regarding competitiveness for Turkish industry, Aygun also
commented on the textile industry, thus:
"In our exports to the EU, 65 percent of which is accounted for the
textile sector, after the 1995 agreement the Turkish textile sector
expects to explode again the volume to the EU. However they were all
dishearten because the EU textile, with EU having special relationship
with the former East European countries, China, and India, are imported
from those countries” (Ankara Chamber of Commerce, Press Release
and Report 2002).
Furthermore, Aygun also complained that Turkey's 1995 document alone
with the EU, i.e, the CU, has an impact on Turkish manufacturing products as
well as duty-free imports. That is, the EU levied the clauses of the CU in favor
of the EU member states, and with non-EU member countries, the imposed
customs disregarded Turkish foreign trade’s position. To illustrate, Aygun said
that,
63
"the same goods Turkey export to Japan became 10 percent cheaper,
but we had to impose 20 percent tax as complied with the CU terms that
the goods became more expensive as EU goods. Therefore, in order to
be imported, Turkey currency is depreciated… Likewise, in the
pharmaceutical industry of the Patent Act, as the obligation by the CU...
the drug prices have soared, large foreign pharmaceutical companies in
the Turkish market dominance has increased. EU imports of Turkish
food and agricultural products are negatively impacted. Moreover, EU
with its CAP will adversely affect Turkish agriculture sector” (Ankara
Chamber of Commerce, Press Release and Report 2002).
These are some examples on how the CU works to the disadvantage of
Turkish economy. The Chairman, for instance, has pointed out some areas such
as agriculture and pharmaceutical products. The reason is, as he said that
prices went up in addition to the emergence of a vast number of foreign
companies, which are threats for local manufacturers. In another statement in
December 2002, again, the Chairman of the ACC strongly stated, “the CU, after
the crisis, should be revised” (NtvMSNBC.com, 16 December 2002). Here he
referred to the 2001-banking crisis in Turkey, which again increased Turkish
trade deficit as exports decreased and imports increased more than exports
(table 1), which is believed to be due to the depreciation of Turkish Lira. Hence,
the proportion of import covered by export increased to more than 77%, which
is similar to that of the 1994, a year before the CU was signed. That is to say,
the CU failed to expose as a beneficial economic arrangement for or a positive
influence on Turkish economy in time of the financial or banking crisis. We will
later check if this is also the case in the 2008 ESDC.
64
Following the vulnerability of Turkish automotive industries as President of
MUSİAD, Murat Yarar pointed out under the impact of the CU; Jan Nahum, a
former manager of Koç Holding’s automotive industry, claimed that “during the
1990s when the CU is introduced, automotive industry died, consequently,
Tofaş, Otosan could not survive in the sector” (Türk 2004). The statement
reflects the dissatisfaction about the CU from one of the key industries for
economic development in Turkey.
As Chairman of the ACC seems to be very much concerned about the
implementation of the CU as well as its effects in Turkey, he did not only focus
on external effect of the CU but also the cost of carrying out the project as well.
The Chairman, in the same year, expressed that “Entered into the CU has a
major impact on the public budget” (Ankara Chamber of Commerce, Press
Release and Report, 17 October 2004) .
He explained that these effects occur in two ways, one of them is interest;
the other is customs duty revenue. He said that the total cost of these two
effects on the budget holds about 71 billion dollars, with the addition of 8.4
billion dollars as the total cost of trade diversion, then Turkey loss due to the
implementation of the CU reached 79.5 billion dollars.
“Annual real treasure when the CU together with interest reflected in
increased interest payments on domestic debt was $ 57.9 billion dollars…
As complied with the CU, customs duties have demonstrated a decline in
65
GNP. This decline, taking place in the beginning of 1996 until the end of
2003 on budgetary cost, is calculated as 8.6 billion dollars. The loss of
customs duties for the next 10-year period, the total net present value is
estimated at $ 4.6 billion. As a result, the loss of customs duties of 13.2
billion USD over budget stands out” (Ankara Chamber of Commerce,
Press Release and Report, 17 October, 2004).
Furthermore, the Chairman also suggested that Turkey should return to a
FTA model instead of the CU. He underlined that the Progress reports about
Turkey’s performance took the road that was quite troublesome or even
impossible to overcome obstacles to full membership. In order to establish a
predictable and sustainable relationship with the EU, it is required to, among
other conditions, “cancel the CU Agreement” with the EU and instead sign an
FTA, Aygun asserts.
"Such agreements require autonomy in economic policies and
institutional harmonization… FTA with the EU, NAFTA or similar FTA with
Far East countries will be enabled as well. In other words, what is
important is that in these agreements which sectors will be covered will
be bilaterally determined, and certainly, Turkey can opt out any sectors
that may harm Turkish economy under bilateral negotiations… FTA with
the EU will continue until Turkey's full membership is reached. After being
a full member Turkey will re-enter the CU” (Ankara Chamber of
Commerce, Press Release and Report, 17 October, 2004).
In this press release, apparently, the Chairman has underlined the
shortcomings of the EU-Turkey’s CU. That is, the CU obscured Turkey’s
economic autonomy and hence, economic policy, to some extent. Moreover,
66
that Turkey does not have a right in determining which sectors to have common
external tariff with the EU against third countries as well as which products
whose tariffs will be abolished with other EU member states encouraged a
reconsideration about a fairer economic arrangement. In his speech, for
instance, the Chairman of the ACC has suggested an FTA with the EU like that
with other economic zones signed by Turkey earlier.
In 2006, ten years after the CU was signed, TOBB again expressed their
attitudes about the CU in a President’s speech:
“The EU accession process is a new transformation process containing
both opportunities and risks for the real sector…Let us not forget that
undervaluing the opinions of the business community concerning the CU
process has caused many expensive mistakes.”24
With regard to a process of economic integration with the EU, the President
of TOBB suggested that Turkey has to set up systems that “will prepare our
companies for this process and reflect the sensitivities of our sectors to the
negotiations.25” While giving the opinions from the businesses about the CU as
an example for a public support to the government’s EU policy, he also
emphasized that such a system would be to the advantage of the government
24 M. Rifat Hisaarcıklıoğlu, President's Speech for 61st General Assembly of TOBB, 27 May 2006, Ankara.
Available at:
http://www.tobb.org.tr/Baskanimiz/Documents/Eng/konusmalar/genel_kurul_2006_english.doc.
25 Ibidem.
67
for the maintenance of the public opinion support, which will inevitably diminish
when serious difficulties arise.
Cem Duna, a former member of the Board of Directors of TÜSİAD at the very
beginning of the CU signature, said that, “We expect that the CU with the EU
will lower this number, and our external trade relations will be more open”
(Milliyet, 28 May 1996). The statement was made in a meeting with TÜSİAD
office in Europe as well as with the EU represetatives not long after the EU-
Turkey’s CU was realized. This shows a high expectation of, in particular,
TÜSİAD, for the CU, most importantly in terms of trade relations with the EU.
Thereupon Cem Duna highlighted again the issue by emphasizing in a seminar
in 2004 with regard to foreign trade deficit of Turkey.
“… Towards the development of the country, we give more importance
to the issue of foreign trade deficit” (TÜSİAD Press Release, 4 March
2004).
However, the outburst of the ESDC in 2008 has changed almost significantly
most TBP’s perceptions about the CU, including TÜSİAD. We can see at first
this change in attitude of the TBP with the discourse by the President of
TÜSİAD, Arzuhan Doğan Yalçındağ. She pointed out that during the crisis the
FTA that the EU has signed with third countries has affected Turkey negatively
(Euractive 2008).
68
3.2 The Customs Union and the TBP’s discourses since the
European Sovereign Debt Crisis
Another evidence is from a yearly report by TÜSİAD in 2008, where we
observe very obvious disappointing attitudes among those businessmen and
industrialists. They argue that there is the black side of the coin. That is,
Turkish industry is required to comply with the CU regulations in terms of
reforms and other economic activities. However, the EU did not provide the
required financial assistance that the Turkish industry remained to assume itself
the costs of the whole process. When the EU decides to sign any additional
trade agreement with third countries, Turkey is, unfortunately, not included in
the decision-making process and hence, faced substantial scathes.
“We TÜSİAD, in the last period are ever more skeptical about the EU’s
FTA process. We are observing the situation in which Turkey will face
losses under these FTAs signed unilaterally by the EU. Here is the
problem: Some third countries subject to FTAs do not take Turkey
positively. Turkey demanded a solution from the European Commission,
but unfortunately due to lack of an EU member status, Turkey cannot
make pressure on third countries” (TÜSİAD report, 30 April 2008).
By third countries, the industrialists here refer to those which are in the EU's
FTA agenda. TÜSİAD believe that there are preparations with South Korea,
Ukraine, ASEAN (i.e. Indonesia, Malaysia, Philippines, Singapore, etc.) for FTAs.
“If we cannot conclude the FTAs with these countries by the time, which
may be the locomotive for Turkey, we will see major damage in sectors
69
such as textiles, electronics, automotive, iron and steel, and chemistry.
We as TÜSİAD expect to see the EU to work closer on this matter and
we expect to resolve the CU terms and conditions of the fastest and
most efficient so that both sides will have benefits” (TÜSİAD report, 30
April 2008).
At the same period of time, Mustafa Koç, the Chairman of the Board of Koç
Holdings, one of the biggest business groups in Turkey, very strongly and
explicitly criticized the CU. He was also talking about the Turkish TV and other
electronic device manufacturers and the market loss that they encountered in
Europe during the crisis. Koç and Bülent Bulgurlu, the CEO of Koç Holdings
point out that while the manufacturers from Far East increase their market
share in Europe, Turkish manufacturers encountered with market share loss.
Bulgurlu also further pointed out that the CU was confronted with a fait
accompli in a short period of time.
The two Koç Holdings members also mention about the FTA between South
Korea and Europe. They argue that this agreement will provide convenience for
the Korean commodities to enter the EU with reciprocity principle. Nevertheless,
interestingly this is not the case for Turkey, a long time partner with the EU,
although Turkey is within the CU.
“We are in the CU but we have no right to speak. We have got post-
haste inside the Union without taking anything… Turkey is the only
country that enters the CU and not yet a member of the EU. As to their
interest we are from Europe, as not to their interest we are not from
Europe” (Ekinci 2008).
70
With the outburst of the ESDC, this discourse of Mustafa Koç later on was
believed to influence very much on the perceptions of TBP about the CU as well.
Meanwhile, such attitudes have been found in several other discourses by TBP
in the same year, when the European countries’ sovereign debts were on the
brink of crisis. Therefore, it is sometimes believed that that Turkey did not
become a full member of the EU is more beneficial for the development of this
country because it could avoid the consequences of the downturn of the
European economic health lately (Peker 2013, Kaya 2013, Quest 2012).
Consequently, at the same period of the publication a year later, that is, after
the eruption of the ESDC, we see a shift in the discourses by TBP. They no
longer speak more about the CU, neither their belief of the economic
arrangement being a bridge to speed the Turkish full membership to the EU. By
contrast, TBP draw our attentions to different economic destinations with
potentially lucrative markets in which trading partners are from other parts of
the globe, besides the traditional European countries. For instance, Turkey’s
former Ambassador in Washington, Faruk Loğoğlu, soundly talked about the
TTIPA as a synthesis of the EU, Turkey and the U.S with an emphasis on the
role of Turkey in the region,
“(Turkey’s) unique capabilities…are among the factors that enable
Turkey to play a useful and facilitating role in the ME, the Caucasus and
the Balkans. However Turkey’s activity and efforts alone will not be
enough to bring these complicated conflicts to resolution. We need to
connect Turkish energies to the capacities of the US and the EU. Such
71
synergizing should enhance the overall effectiveness of the Euro-Atlantic
community”(Loğoğlu 2008, 53).
In 2009, a yearly publication by TÜSİAD is another evidence for illustrating
their perspective about the issue. It is clearly stated in the publication that
Turkish industry and business association are encouraged to invest more in the
US (TÜSİAD publication, April 2009).
The more attractive the other markets are, as expected, the less favorable
the CU portrayed, most obviously after the ESDC. Again recently the matter of
the unfair terms in the CU regarding third country has been increasingly
criticized by the TBP. Among them, for instance, President of TOBB, Rıfat
Hisarcıklıoğlu has such statement:
“On the one hand the CU release the commodities movement, on the
other hand the EU requires a visa from seller of these commodities and
its logistic. Turkey has entered the CU without becoming a member of
the EU. Turkey has to adhere to the agreements those EU has been
made. The EU makes FTAs with third countries and they don’t care
about Turkey’s opininon... Unfortunately this is not fair for Turkey. This
is the reverse of the CU’s understanding” (Patronlar Dünyası, 22
February 2010).
Similar ideas have been shared by Ender Yorhancılar, Chairman of the Board
of the Aegean Region Chamber of Industry (EBSO), at the Crafts Automotive
and Supplier Industry Group Joint Committee Meeting in 2012, has pointed out
72
that Turkey is so disadvantageous with regards to the CU as the EU unilaterally
signed additional FTA with the third parties.
“As we all know, the CU represents Turkey's EU agreements with third
countries. That is, Turkey is to comply with the terms of the CU and
levied common tariffs to third parties according to the EU standards.
However, Turkey is not included in agreements between the EU and
third countries. Therefore, we want our country to be included as soon
as possible in the process of the EU's FTAs with third countries CU”
(EBSO Chairman speeches, 24 February 2012).
Not only pointing out the flaw of the CU with regard to Turkish side,
Chairman Yorhancılar also illustrated the competitive disadvantage of the
automotive, iron and steel and electrical machinery industry as one of the
sectors negatively affected as a result of the CU.
“In particular, the EU has signed an FTA with South Korea, this will harm
Turkey's exports to the EU regarding automotive, iron and steel and
electrical machinery industry in terms of rising unfair competition as a
result of the CU” (EBSO Chairman speeches, 24 February 2012).
As a matter of fact, the above discourse is confirmed with the result of table
3 in chapter two which shows the Balassa index or the level of competitiveness
of Turkish industry. In that table, too, the Balassa index of the automotive,
machinery and transportation equipment industry exhibits that Turkey has
comparative advantage against both non-EU and the world’s markets, but has
not such competitiveness against the EU. This is exactly what the Chairman of
EBSO was arguing.
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Moreover, it is important to note that Turkey is the only non-EU member
state and at the same time a member of the CU with the EU. Therefore Turkey
experienced some disadvantageous conditions compared to other EU’s full
members. In other words, without having the same rights and status as an EU
member state, the CU created asymmetrical FTA markets, which are unfair for
Turkey with accession to EU’s partners. We have seen this from various
discourses of the TBP as well.
Considerably, one of the explanations for Turkey’s economy to experience
very quick recovery after the economic downturn created by the CU’s limitations
after the ESDC is the fact that Ankara has found confidence in new exporting
markets. That is, Turkey has enlarged its markets with many more trading
partners from other parts of the globe, from Africa, Middle East, to Latin
America and Asia through several FTAs such as those illustrated in the
diversification of trade in chapter two. Observed a bit more closely with both
the empirical data and the discourse help us understand that Turkish trade
dynamic was carried out mainly by the TBP after the event of the ESDC took
place in 2008.
To illustrate, Hikmet Tanrıverdi, president of the İstanbul Textile and Apparel
Exporters’ Associations (İTKİB), told Sunday’s Zaman, suggesting at the same
time that Turkey may also think of replacing the CU with an FTA with the EU.
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“Turkish businesspeople have long expressed discomfort with the CU
agreement, maintaining that it doesn’t work in Turkey’s favor, especially
because of the FTAs the EU has concluded with third countries. The
textile industry may be one of the potential victims…If Turkey is not
allowed to be a party to the FTA, then Turkey should think about getting
out of the CU” (Albayrak 2013).
This is exactly what appeared in the 2004 discourse by President of the ACC,
Sinan Aygun, where he suggested a cancellation of the CU and a formation of
an FTA between Turkey and the EU instead until Turkey achieves a full
membership status.
Furthermore, TÜSİAD President, Muharrem Yılmaz showed his concerns
about private sectors regarding the formation of an economic trading bloc. For a
developing country like Turkey, private sectors are believed to play very
significant roles in economic development process. Therefore, a concern about
private sector by TÜSİAD should be also taken into account to understand how
they relate this sector to the effects of the CU from say, TBP’s perspectives.
“Undertaken as part of Turkey's CU of the EU's preferential trade
regime, due to the EU and third countries, groups of countries that
conduct FTA is of great importance for the Turkish private sector”
(Federation of Industrial Association Report, 7 May 2013).
While analyzing the discourses of the TBP with the emphasis on their
perceptions about the CU, in addition, we find that most TBP are very much
sensitive and concerned about the unfair competition of Turkey with regard to
75
the CU and the third countries’ FTA solitarily signed by the EU. Moreover, the
fact that there have been rising comments on the dissolution of the Eurozone
with a prolong debt crisis also discourages trade condition between Turkey and
the EU.
One of the most recent discourses about this matter is by Nurettin Özdebir,
the Chairman of the Board of the Ankara Chamber of Industry. He spoke of the
recommendation about a revision of this economic arrangement, especially after
the ESDC. He explains that there has been increased risk of economic recession
in the EU and countries with open or secret methods resorted to protectionist
policies. In such an environment, then, Turkey needs to jealously guard her
domestic market. Market surveillance and control mechanisms should operate
effectively to the extent that the country will curb the entry of foreign or shoddy
goods in time of economic crisis.
“In addition, we believe that our customs policy should also be revised.
From third countries entering the CU to problems of free movement, all
lead to unfair competition for our domestic producers” (Özdebir 2012).
All in all, Chairman Özdebir affirms that the issue about the CU with respect
to the EU's free trade agreements with third countries should be revised, with a
more proper tariff or rate of customs duty policy. Moreover, this proposal is too
supported by Ahmet Zorlu, the Chairman of the Board of Zorlu Holdings, one
among the biggest business groups in Turkey. He justified for his unpleasant
perception about the CU by claiming that,
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“The main reason is discrimination: With current agreement, the EU sells
to us commodities how much ever they want. But Turkey is not on equal
terms with the EU regarding the rule of the game created by the CU. We
have the right to say to the EU that we have to be on equal terms”
(Aksam Gazetesi, 28 March 2013).
Nevertheless, it is not that the EU has not responded to any of the voices
and comments of the TBP. In May 2013, for instance, Jean Maurice Ripert, a
French diplomat and an ambassador of the EU to Turkey, in his statement, said
that both the EU and Turkey agreed on reaching out to the World Bank to
intervene in their CU agreement with regard to the EU-US trade deal.
“There are irritants on both sides on the functioning of the CU. We try to
find a solution. We, together with Turkey, asked the World Bank to
study comprehensively the functioning of the Customs Union with its
advantages and disadvantages” (Demirtaş 2013).
Indeed, Ripert since 2011 tried to convince that the EU had an attempt to
appease the situation. In one of his speeches in summer 2013, he explicitly
stated the timeline that the EU promised to follow with regard to the CU with
Turkey.
“Both sides claim that CU does not function well. We too would like to
find a solution. The special team is working on it. We will reach the
conclusions in autumn. After that we will decide what will be
done”(Demirtaş 2013).
Frustrated by lack of any solution in this front, TBP boldly asserted much
stronger criticisms with regard to the terms of the CU, the unfair competitive
environment for Turkey, lack of Turkish consent when the EU signed other FTAs
77
with the third parties, etc. For instance, when asked about the branding issue in
Turkey, the Garanti Bank General Manager Ergun Özen said that Turkey has
gained some positive effects by the CU with the EU at the beginning, yet to
develop efficient business models at some stage, it requires the CU agreement
to be re-examined (Akarsu 2013).
Regarding the terms and clauses of the CU itself, recall that TOBB President
Rifat Hisarcıklıoğlu again harshly criticized the CU with somewhat similar
arguments from that which he made in 2010. He argued that Turkey has been
experiencing problems in logistics and transportation of the traded goods, and
plainly denounced the CU once again.
“This is not like the CU and free movement of all goods were once
claimed. Even there is the CU agreement, we still face quantitative
restrictions when we sell some properties. This is the problem of the
basic clause about the free movement of goods” (Patronlar Dünyası, 22
February 2010).
This claim by President Hisarcıklıoğlu has, to some extent, explained the
problem of trade deficit of Turkey. In other words, TOBB President accounted
the decrease in volume of Turkish exports to, say, the EU, for the quantitative
restriction on some certain products. That is, he claims that there is no proper
implementation of the free movement of goods clause in the CU terms between
Turkey and the EU.
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In the year of 2013, especially, a number of intensive meetings and
negotiations between the EU and the US on a FTA ignited the concerns of most
TBP and top economic officials. President of the Turkish Confederation of
Businessmen and Industrialists (TUSKON), Rızanur Meral, recently expressed his
perspectives about the TTIPA within the constraint that Turkey is a party of the
CU with the EU.
“This is a great danger for Turkey. In the future, the trade imbalance
between Turkey and the US would further increase… Now, the US
signed a FTA with the EU, Turkey also has foreign trade relation with the
US then we will also sign… In this context the requirements of the CU
agreement must be revised” (Albayrak 2013).
By exposing such attitude, President Meral suggested too a more active
diplomacy by Turkey to counter such a deal between the US and her CU’s
partner, the EU. In the same manner, TÜSİAD President, Muharrem Yılmaz, in
his speech in Washington, has expressed his weariness about the CU
agreement, which was first created between Turkey and the EU in order for
Turkey to speed up the accession process. He further argued that a party to the
CU without a TTIPA would cause damages to Turkish economy. He expects by
the time the TTIPA is concluded and came into force, Turkey will become a full
member of the EU, and then the picture will be better (Esmer 2013).
Indeed, it is argued that if there were only FTA with the EU, Turkey could
have flexibly adjusted its economy without following many regulations.
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However, as tied with the CU, Turkey has to align all her customs arrangements
according to the treaty,
“Despite Turkey has urged the EU to restructure the terms of the
current CU, or cancel the CU altogether and make a separate free trade
deal with Turkey…The CU has begun to work completely against Turkey.
Under these circumstances, to switch to a Free Trade Deal would be
more in line with Turkey’s interests” (Levent 2013).26
In addition to the unfair attitudes of the EU, technically speaking, Turkey also
faced asymmetrical terms and conditions with regard to the CU articles. Firstly,
the EU-Turkey’s CU covers only the industrial goods and the agricultural
products whose contents are, too, industrial. Traditional agricultural goods,
however, are not included in the CU. Secondly, as a result of being a CU
member, Turkey has eliminated all customs duties, tariffs, quotas, and other
similar taxes, not only from the EU, but also from the third parties countries
with which the EU had separate preferential agreements (Togan 2012, 22).
By the same token, Turkey cannot enter into any FTAs with countries that do
not sign an agreement with the EU. These facts, accordingly, triggered the
concerns of the TBP. With one hand being tied to the CU with the EU, Turkey
found it hard to be flexible in managing its trade balance. Surrounding with the
ESDC conditions, as one can understand from the discourses, the CU between
26 Quoted from Çağlayan’s speech during a meeting of automotive industrialists on March 27, 2013.
Source: Hurriyet Daily News.
80
Turkey and the EU exposed its shortcomings so obviously that most TBP
increased their already existing negative perceptions about this EU-Turkey’s CU
even more.
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CONCLUSION
We have seen that most TBP have always been criticizing the CU since the
very beginning of the agreement. Those who did not express their negative
attitudes had hopes for the full membership of the EU based on the expectation
that the CU would finalize the accession process by increasing economic
standards in Turkey and the like. However, as we can see, lines of criticisms
keep increasing in our time-series analysis about the discourses of TBP. We also
observed that these excoriations reached their climax as there were continuous
and numerous discourses about the negative effects of the CU exposed clearly
after the ESDC. As a result of the crisis, moreover, the discourses shift Turkey’s
attention to the new alternative markets, where there have been improved
trade relations in the environment created by the 2008 ESDC. This has been
empirically demonstrated with actual data as we have analyzed.
Up until the ESDC in 2008 too we experienced a tremendous shift in the
competitiveness of some selected Turkish industry. While Turkey’s chemicals
and related products’ as well as automotive, machinery and transport
equipment sectors have competitiveness against the whole world and the non-
EU countries, nevertheless these sectors are not competitive against the EU. By
contrast, Turkey only has competiveness against the EU in raw materials but
not against the world, neither against the non-EU countries. This is why we see
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most TBP in these industries complain about the CU especially after the 2008
ESDC.
The Balassa index also indicates that Turkey has comparative advantage
against all parts of the world, including the EU and the non-EU countries in
food, drinks and tobacco, as well as mineral fuels, lubricants and related
materials. Regarding textile industry, what is important here is that Turkey has
comparative advantage against both EU and non-EU countries in comparison
with the whole world. Moreover, we also find out that the nature of trade
between Turkey and the EU changed promptly from intra-industry to inter-
industry as a result of the ESDC.
All in all, the ESDC is believed to be the reason for more excoriations by the
TBP as the severity of the crisis has had a sharp impact on Turkey’s economy as
a whole, and their trade and business associations’ market shares in particular.
More precisely the ESDC has created a second time an environment in which
the EU-Turkey’s CU could not function well. These are found both in the
empirical data and the discourses by the TBP.
Secondly, the perceptions of the TBP are also widely influenced by the on-
going debates and discussions about the possible dissolution of the euro-zone.
As TBP give great importance to the EU with regard to the fact that the EU
could be a large and potential, profitable market for exporting products from
83
Turkey, now that the EU has got into a severe crisis, it is understandable that
the TBP lobbying for Turkey’s withdrawal from the CU is taken into
consideration. As the EU is in decline due to the ESDC, Euro-skeptics in Turkey
have been increasingly given reasons for Turkey to forget about being a
member of such a problematic community. Moreover, with the belief that
Turkey and the EU have been closely connected with each other as a result of,
most demonstratively, the CU, now that Turkey is under the discussion of
parting from the EU, implementing the CU, therefore, no longer makes sense
for the TBP.
The most obvious and practical justification for the TBP became less
motivated about the CU between Turkey and the EU after the ESDC is the effect
of globalization itself. The whole world seems to put their eyes more towards
the East and newly industrializing countries. Hence, it is also reasonable for
Turkey to open its markets to the larger and more promising destinations. That
is to say, with new alternatives available, Turkey can and has been easily
formed PTAs, FTAs, or any other trade agreements with new partners from
South East Asia, Latin America, Africa, and the Middle East.
In conclusion, since Turkish economy is growing very fast, Turkey needs to
take into account deliberately which economic strategies are good for the
country. One of them is the issue about FTAs between Turkey and other trading
partners. In the end, it seems that the CU between Turkey and the EU should
84
be revised so that the supposed benefits from such an economic arrangement
shall be realized, especially from the perspectives of the TBP.
85
APPENDIX A
URUGUAY ROUND AGREEMENT
Understanding on the Interpretation of Article XXIV of the General
Agreement on Tariffs and Trade 1994
Members,
Having regard to the provisions of Article XXIV of GATT 1994;
Recognizing that CUs and free trade areas have greatly increased in
number and importance since the establishment of GATT 1947 and today cover
a significant proportion of world trade;
Recognizing the contribution to the expansion of world trade that may be
made by closer integration between the economies of the parties to such
agreements;
Recognizing also that such contribution is increased if the elimination
between the constituent territories of duties and other restrictive regulations of
commerce extends to all trade, and diminished if any major sector of trade is
excluded;
Reaffirming that the purpose of such agreements should be to facilitate
trade between the constituent territories and not to raise barriers to the trade of
other Members with such territories; and that in their formation or enlargement
86
the parties to them should to the greatest possible extent avoid creating
adverse effects on the trade of other Members;
Convinced also of the need to reinforce the effectiveness of the role of
the Council for Trade in Goods in reviewing agreements notified under Article
XXIV, by clarifying the criteria and procedures for the assessment of new or
enlarged agreements, and improving the transparency of all Article XXIV
agreements;
Recognizing the need for a common understanding of the obligations of
Members under paragraph 12 of Article XXIV;
Hereby agree as follows:
1. CUs, free-trade areas, and interim agreements leading to the formation
of a CU or free-trade area, to be consistent with Article XXIV, must satisfy, inter
alia, the provisions of paragraphs 5, 6, 7 and 8 of that Article.
Article XXIV:5
2. The evaluation under paragraph 5(a) of Article XXIV of the general
incidence of the duties and other regulations of commerce applicable before and
after the formation of a CU shall in respect of duties and charges be based upon
an overall assessment of weighted average tariff rates and of customs duties
collected. This assessment shall be based on import statistics for a previous
representative period to be supplied by the CU, on a tariff-line basis and in
values and quantities, broken down by WTO country of origin. The Secretariat
shall compute the weighted average tariff rates and customs duties collected in
87
accordance with the methodology used in the assessment of tariff offers in the
Uruguay Round of Multilateral Trade Negotiations. For this purpose, the duties
and charges to be taken into consideration shall be the applied rates of duty. It
is recognized that for the purpose of the overall assessment of the incidence of
other regulations of commerce for which quantification and aggregation are
difficult, the examination of individual measures, regulations, products covered
and trade flows affected may be required.
3. The “reasonable length of time” referred to in paragraph 5(c) of
Article XXIV should exceed 10 years only in exceptional cases. In cases where
Members parties to an interim agreement believe that 10 years would be
insufficient they shall provide a full explanation to the Council for Trade in
Goods of the need for a longer period.
Article XXIV:6
4. Paragraph 6 of Article XXIV establishes the procedure to be followed
when a Member forming a CU proposes to increase a bound rate of duty. In this
regard Members reaffirm that the procedure set forth in Article XXVIII, as
elaborated in the guidelines adopted on 10 November 1980 (BISD 27S/26-28)
and in the Understanding on the Interpretation of Article XXVIII of GATT 1994,
must be commenced before tariff concessions are modified or withdrawn upon
the formation of a CU or an interim agreement leading to the formation of a CU.
5. These negotiations will be entered into in good faith with a view to
achieving mutually satisfactory compensatory adjustment. In such negotiations,
88
as required by paragraph 6 of Article XXIV, due account shall be taken of
reductions of duties on the same tariff line made by other constituents of the
CU upon its formation. Should such reductions not be sufficient to provide the
necessary compensatory adjustment, the CU would offer compensation, which
may take the form of reductions of duties on other tariff lines. Such an offer
shall be taken into consideration by the Members having negotiating rights in
the binding being modified or withdrawn. Should the compensatory adjustment
remain unacceptable, negotiations should be continued. Where, despite such
efforts, agreement in negotiations on compensatory adjustment under
Article XXVIII as elaborated by the Understanding on the Interpretation of
Article XXVIII of GATT 1994 cannot be reached within a reasonable period from
the initiation of negotiations, the CU shall, nevertheless, be free to modify or
withdraw the concessions; affected Members shall then be free to withdraw
substantially equivalent concessions in accordance with Article XXVIII.
6. GATT 1994 imposes no obligation on Members benefiting from a
reduction of duties consequent upon the formation of a CU, or an interim
agreement leading to the formation of a CU, to provide compensatory
adjustment to its constituents.
Review of CUs and Free-Trade Areas
7. All notifications made under paragraph 7(a) of Article XXIV shall be
examined by a working party in the light of the relevant provisions of
GATT 1994 and of paragraph 1 of this Understanding. The working party shall
89
submit a report to the Council for Trade in Goods on its findings in this regard.
The Council for Trade in Goods may make such recommendations to Members
as it deems appropriate.
8. In regard to interim agreements, the working party may in its report
make appropriate recommendations on the proposed time-frame and on
measures required to complete the formation of the CU or free-trade area. It
may if necessary provide for further review of the agreement.
9. Members parties to an interim agreement shall notify substantial changes
in the plan and schedule included in that agreement to the Council for Trade in
Goods and, if so requested, the Council shall examine the changes.
10. Should an interim agreement notified under paragraph 7(a) of Article
XXIV not include a plan and schedule, contrary to paragraph 5(c) of Article
XXIV, the working party shall in its report recommend such a plan and schedule.
The parties shall not maintain or put into force, as the case may be, such
agreement if they are not prepared to modify it in accordance with these
recommendations. Provision shall be made for subsequent review of the
implementation of the recommendations.
11. CUs and constituents of free-trade areas shall report periodically to the
Council for Trade in Goods, as envisaged by the CONTRACTING PARTIES to
GATT 1947 in their instruction to the GATT 1947 Council concerning reports on
regional agreements (BISD 18S/38), on the operation of the relevant
90
agreement. Any significant changes and/or developments in the agreements
should be reported as they occur.
Dispute Settlement
12. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated
and applied by the Dispute Settlement Understanding may be invoked with
respect to any matters arising from the application of those provisions of
Article XXIV relating to CUs, free-trade areas or interim agreements leading to
the formation of a CU or free-trade area.
Article XXIV:12
13. Each Member is fully responsible under GATT 1994 for the observance of
all provisions of GATT 1994, and shall take such reasonable measures as may
be available to it to ensure such observance by regional and local governments
and authorities within its territory.
14. The provisions of Articles XXII and XXIII of GATT 1994 as elaborated
and applied by the Dispute Settlement Understanding may be invoked in
respect of measures affecting its observance taken by regional or local
governments or authorities within the territory of a Member. When the Dispute
Settlement Body has ruled that a provision of GATT 1994 has not been
observed, the responsible Member shall take such reasonable measures as may
be available to it to ensure its observance. The provisions relating to
compensation and suspension of concessions or other obligations apply in cases
where it has not been possible to secure such observance.
91
15. Each Member undertakes to accord sympathetic consideration to and
afford adequate opportunity for consultation regarding any representations
made by another Member concerning measures affecting the operation of
GATT 1994 taken within the territory of the former.
92
APPENDIX B
FREE TRADE AGREEMENTS WITH THE EU
Source: European Commission
Tables I and II list all preferential trade agreements that the EC has notified under either Article XXIV of the GATT or Article V of the GATS and where the GATT/WTO notification has not been overtaken by later notifications of successor agreements. Table III lists EPAs under preparation.
I. Agreements notified under GATT Article XXIV (Free Trade Areas and CUs covering Trade in Goods
Partners
Nature of agreement
OJ Reference
Date of entry into force
Date of
notification
to
GATT/WTO
Status of GATT/WTO examinati
on
Comments
European Community
EC Member States
(EC12)
Treaty of Rome 01.01.58 24.04.57 Examination concluded in 1957.
Subsequent accessions of
Denmark/Ireland/UK, Greece
and Portugal/ Spain were also
all notified and examined.
EC - Accession of
Austria, Finland and
Sweden (EC15)
C/241, 29.08.94 01.01.95 19.01.95 WTO consideration concluded.
EC – Accession of:
Cyprus, Czech
Republic, Estonia,
Hungary, Latvia,
Lithuania, Malta,
Poland, Slovakia,
Slovenia (EC25)
L/236, 23.09.03 01.05.04 26.04.04 WTO consideration
concluded.
EC – Accession
of Bulgaria and
Romania (EC27)
L/157, 21.06.05 01.01.07 27.09.06 WTO consideration ongoing.
93
CU
Andorra CU L/374, 31.12.90 01.07.91 25.02.98 Factual examination
concluded
Exchange of Letters.
Turkey CU L/35, 13,02.96 31.12.95 22.12.95 Factual examination
concluded
Decision 1/95 of the EC-
Turkey Association Council.
San Marino Customs Union L/359, 09.12.92 01.12.92 Interim agreement,
Pending entry into force of CU also signed on 16.12.91.
MFN exemption for
customs regime with Italy
recognised by the GATT
Havana Conference.
Free Trade Agreements (a) Europe
Faroe Islands Free Trade Agreement L/53, 22.2.97 01.01.97 19.02.97 Factual examination
concluded
Replaces earlier (1991)
trade agreement.
Norway Free Trade Agreement L/171, 27.06.73 01.07.73 13.07.73 Working Party report
adopted
Iceland Free Trade Agreement L 301, 31.12.72 01.04.73 24.11.72 Working Party report
adopted
Switzerland Free Trade Agreement L/300, 31.12.72 01.01.73 27.10.72 Working Party report
adopted
FTA also covered
Liechtenstein, which now participates in EEA.
94
The former Yugoslav
Republic of
Macedonia
Stabilisation and
Association Agreement (SAA)
L/084, 20.03.04
L/085, 23.03.04 C/213e, 31.07.01
01.05.04 23.10.01 Factual examination First applied concluded under Provisions
Interim Agreement.
Croatia Stabilisation and L/26, 25.01.05 01.02.05 20.12.02 Factual examination First applied
Association Agreement concluded under Interim Agreement.
Albania Stabilisation and L 104 01.04.2009 07.03.07(goods) Factual examination Provisions first applied
Association Agreement (24/04/2009) 07.10.09
(services)
concluded for trade in goods, under Interim Agreement.
L 300 on going for trade in services
(31/10/2006)
L 107
(28/04/2009)
Montenegro Stabilisation and L 108 01.05.2010 16.01.08(goods) Factual examination ongoing Provisions first applied
Association Agreement (29/04/2010) 18.06.10(services
)
for trade in goods and
services
under Interim
Agreement
Bosnia and Interim Agreement on L 186 01.07.08 11.07.08 Factual examination ongoing Interim agreement,
Herzegovina trade and trade related
matters
(15/07/2008) for trade in goods pending entry into force of
SAA
L 233
(30/08/2008)
L 169
(30/06/2008)
Serbia Interim Agreement on L28/2, 30.01.10 01.02.10 31.05.2010 Factual examination Interim agreement,
trade and trade related
matters
ongoing for trade in goods pending entry into force
of SAA.
95
(b) Mediterranean
Algeria Association Agreement L/265, 10.10.05 01.09.05 24.07.06 Factual examination not
started
Euro-Mediterranean
Agreement replaces co-
operation agreement
(L/263, 27.09.78) notified to
GATT on 28.07.76 (report
adopted 11.11.77)
Egypt Association Agreement L/345, 31.12.03 01.06.04 04.10.04 WTO consideration on-going. Euro-Mediterranean
Agreement; replaces co-
operation agreement
(L/266, 27.09.78) notified to
GATT on 15.07.77 (report
adopted 17.05.78)
Israel Association Agreement L/147, 21.06.00 01.06.00 20.09.00 Factual examination
concluded
Euro-Mediterranean
Agreement; trade provisions
initially applied under
Interim (1995) Agreement
Jordan Association Agreement L/129, 15.05.02 01.05.02 20.12.02 Factual examination
concluded
Euro-Mediterranean
Agreement, signed on
24.11.97
Lebanon Interim Agreement L/262, 30.09.02 01.03.03 04.06.03 WTO consideration not
started.
Euro-Mediterranean
Agreement signed on
17.06.02; replaces
cooperation agreement
(L/267, 27.09.78) notified to
GATT on 15.07.77 (report
adopted 17.05.78)
Morocco Association Agreement L/70, 18.03.00 01.03.00 13.10.00 Factual examination
concluded
Euro-Mediterranean
Agreement
96
Palestinian Authority Association Agreement L/187, 16.07.97 01.07.97 30.06.97 Factual examination not
started
Interim
Euro-
Mediterran
Agreement
Syria Co-operation Agreement L/269, 27.09.78 01.07.77 15.07.77 Working Party report adopted
17.05.78
Euro-Mediterranean
Agreement signed in
October 2004. It has not
entered into force yet.
Tunisia Association Agreement L/97, 30.03.98 01.03.98 23.03.99 Factual examination concluded Euro-Mediterranean
Agreement
(c) Others
Certain Overseas Countries and Territories (OCT/PTOM II)
Association Agreement 01.01.71 14.12.70 Working Party reported
adopted 09.11.71
Association of the Overseas
Countries and Territories, as
foreseen under Part Four of
the Treaty of Rome
Chile Association Agreement,
and Additional Protocol
L/352, 30.12.02
L/38, 10.02.05
01.02.03 (trade)
01.03.05 (full)
03.02.04 Factual examination concluded Association Agreement
signed in November 2002
Mexico Economic Partnership,
Political Coordination and Cooperation Agreement
L/276, 28.10.00
L/157, 30.06.00 L/245, 30.09.00
01.07.00 25.07.00 Factual examination
concluded
Decision 2/2000 on EC-
Mexico free trade area in
the context of global
agreement signed in
December 1997
97
South Africa Trade, Development and
Co-operation Agreement
L/311, 04.12.99 01.01.00 02.11.00 WTO consideration ongoing. Under an Exchange of
Letters, the provisions
establishing an FTA in
Goods are applied
provisionally from 01.01.00
pending entry into force of
the full agreement.
CARIFORUM States
(Antigua and
Barbuda, Bahamas,
Barbados, Belize,
Dominica, the
Dominican Republic,
Grenada, Guyana,
Haiti, Jamaica, Saint
Lucia, Saint Vincent
and the Grenadines,
Saint Christopher and
Nevis, Suriname,
Trinidad and Tobago)
Economic Partnership
Agreement
L/289, 30.10.08 Pending 16.10.08 WTO consideration ongoing. Succeeds the trade
provisions of the Cotonou
Agreement which expired
on 31 December 2007.
Date of signature: 15
October 2008 (Haiti
signed on 11
December 2009)
Ivory Coast Interim Economic
Partnership Agreement
L/59, 03.03.09 Pending 11.12.08 WTO consideration ongoing. Agreement on trade in
goods which succeeds the
trade provisions of the
Cotonou Agreement which
expired on 31 December
2007.
Date of signature: 26 November 2008
Cameroon Interim Economic
Partnership Agreement
L/57, 28.02.09 Pending 24.09.09 WTO consideration ongoing. Agreement on trade in
goods which succeeds the
trade provisions of the
Cotonou Agreement which
expired on 31 December
2007.
Date of signature: 15 January 2009
98
II. Agreements notified under GATS Article V (Regional Economic Integration Agreements covering Trade in Services)
Partners
Nature of agreement
OJ Reference
Date of entry into force
Date of
notification
to
GATT/WTO
Status of GATT/WTO examination
Comments
European Community
EC Member States
(EC 12)
Treaty of Rome 01.01.58 10.11.95 Factual examination
concluded
EC 15 Enlargement C/241, 29.08.94 01.01.95 19.01.95 Factual examination
concluded
EC 25 Enlargement L/236, 23.09.03 01.05.04 26.04.04 WTO consideration
concluded
EC 27 Enlargement L/157, 21.06.05 01.01.07 26.06.07 WTO consideration ongoing
Europe
Iceland,
Liechtenstein
, Norway
European Economic Area L/1, 03.01.94 01.01.94 10.10.96 Factual examination concluded EEA replaces
previous FTA
agreements with
these countries
(L/300-301,
31.12.72 and
L/171, 27.06.73)
which were notified
to GATT on
27.10.72, 24.11.72
and 13.07.73.
(reports adopted
on 19.10.73 and
28.03.74
99
Chile Association Agreement L/352, 30.12.02 01.03.05 28.10.05 WTO consideration
concluded
Mexico Economic Partnership,
Political Coordination and Cooperation Agreement
L/276, 28.10.00 01.10.00 21.06.02 WTO consideration not
started.
Decision 2/2001 of EC-
Mexico Joint Council, in context of EC-Mexico Economic Partnership, Political Coordination and Cooperation Agreement signed 8 December1997
CARIFORUM States
(Antigua and Barbuda,
Bahamas, Barbados,
Belize, Dominica, the
Dominican Republic,
Grenada, Guyana, Haiti,
Jamaica, Saint Lucia,
Saint Vincent and the
Grenadines, Saint
Christopher and Nevis,
Suriname, Trinidad and
Tobago)
Economic Partnership
Agreement
L/289, 30.10.08 Pending 16.10.08 WTO consideration on-going. Date of signature: 15
October 2008 (Haiti signed on 11 December 2009)
The former Yugoslav
Republic of Macedonia
Stabilisation and
Association Agreements
L/84, 20.03.04 01.04.04 06.10.09 WTO consideration not
started
Croatia Stabilisation and
Association Agreements
L/26, 28.01.05 01.02.05 13.10.09 WTO consideration not
started
Albania Stabilisation and
Association Agreements
L/107, 28.04.09 01.04.09 07.10.09 WTO consideration not
started
100
III. EPAs under preparation
Partners Nature of agreement Comments
EAC
(Burundi, Kenya, Rwanda, Tanzania, Uganda)
Interim Economic Partnership Agreement Agreement on trade in goods which succeeds the trade provisions of the Cotonou
Agreement which expired on 31 December 2007.
Negotiations on a more comprehensive Economic Partnership Agreement ongoing.
ESA
(Comoros, Madagascar, Mauritius, Seychelles,
Zambia, Zimbabwe)
Interim Economic Partnership Agreement Agreement on trade in goods which succeeds the trade provisions of the Cotonou
Agreement which expired on 31 December 2007.
Signed on 29 August 2009 by Mauritius, Seychelles, Zimbabwe and Madagascar. Negotiations on a more comprehensive Economic Partnership Agreement ongoing.
Pacific
(Papua New Guinea, Fiji)
Interim Economic Partnership Agreement Agreement on trade in goods which succeeds the trade provisions of the Cotonou
Agreement which expired on 31 December 2007.
Papua New Guinea signed on 30 July 2009. Fiji signed on 11 December 2009.
Negotiations on a more comprehensive Economic Partnership Agreement
ongoing.
SADC
(Botswana , Lesotho, Namibia, Mozambique,
Swaziland)
Interim Economic Partnership Agreement Agreement on trade in goods which succeeds the trade provisions of the Cotonou
Agreement which expired on 31 December 2007.
Botswana, Lesotho, Swaziland and Mozambique signed in June 2009.
Negotiations on a more comprehensive Economic Partnership Agreement ongoing.
West Africa
(Ghana)
Interim Economic Partnership Agreement Agreement on trade in goods which succeeds the trade provisions of the
Cotonou Agreement which expired on 31 December 2007.
Negotiations on a more comprehensive Economic Partnership Agreement ongoing.
101
APPENDIX C. TURKEY’S FOREIGN TRADE BY SECTORS 1999-2013 Source: Turkish Statistical Institute, Eurostat.
All sources Export Import Export Import Export Import Export Import
1999 1999 2000 2000 2001 2001 2002 2002
Chemicals and related products 1 234 778 6 846 332 1 397 489 8 083 680 1 480 503 6 775 274 1 580 672 8 660 577
Raw materials 183 224 146 802 147 744 189 072 176 001 125 501 156 221 151 622
Food, drinks and tobacco 2 123 260 1 095 809 1 958 560 1 198 519 2 097 287 1 053 900 1 980 451 1 407 770
Automotive, Machinery and transport
equipment 1 211 737 5 065 188 1 375 956 5 837 874 1 564 386 4 936 880 2 077 511 6 474 241
Mineral fuels, lubricants and related materials 1 605 235 1 245 916 1 781 993 0.1525 1 964 732 1 195 637 2 399 942 1 496 867
Textile 4 557 626 1 645 807 4 614 078 1 852 729 4 943 497 1 682 881 5 532 758 2 500 459
EU Export Import Export Import Export Import Export Import
1999 1999 2000 2000 2001 2001 2002 2002
Chemicals and related products 3,635 394 4,922 505 4,211 555 5,043 628
Raw materials 762 646 1,098 630 974 672 1,316 610
Food, drinks and tobacco 493 1,914 546 1,946 349 2,177 501 2,090
Machinery and transport equipment 10,321 3,478 16,520 4,240 9,438 5,519 11,650 6,906
Mineral fuels, lubricants and related materials 464 129 927 195 421 250 421 212
Textile 734 1,675 1,026 2,006 843 2,293.20 1,015 2,521.44
Non-EU Export Import Export Import Export Import Export Import
1999 1999 2000 2000 2001 2001 2002 2002
Chemicals and related products 339.6912432 6,845,938 283.93 16007.28725 351.5799646 12207.70169 313.4388152 13790.72731
Raw materials 240.4509715 146,156 134.56 300.1144681 180.6996484 186.7571893 118.7091316 248.5608609
Food, drinks and tobacco 4306.816116 1,093,895 3,587.11 615.888335 6009.417201 484.106604 3952.99694 673.5740349
Automotive, Machinery and transport equipment
117.4049794 5,061,710 83.29 1376.857127 165.7539911 894.5243213 178.3271295 937.4805728
Mineral fuels, lubricants and related materials 3459.558028 1,245,787 1,922.32 0.0007823 4666.821012 4782.546244 5700.573822 7060.695406
Textile 6211.586661 1,644,132 4,495.04 923.7136887 5860.878081 733.8571913 5452.974696 991.6789779
102
All sources Export Import Export Import Export Import Export Import
2003 2003 2004 2004 2005 2005 2006 2006
Chemicals and related products 1 926 341 11 238 032 2 556 412 15 134 359 2 818 310 17 477 334 3 480 913 19 599 125
Raw materials 188 850 225 783 226 348 245 549 296 435 249 465 309 946 258 459
Food, drinks and tobacco 2 739 391 1 691 939 3 427 469 1 977 347 4 393 446 2 207 638 4 520 648 2 537 185
Automotive, Machineryand transport equipment 3 118 511 8 141 311 3 913 354 10 362 811 4 865 027 12 209 659 6 005 610 14 315 315
Mineral fuels, lubricants and related materials 3 303 494 1 648 182 4 516 855 2 291 100 5 371 430 2 951 774 6 148 833 3 866 133
Textile 6 841 165 3 094 036 7 998 061 3 786 308 8 742 704 3 974 375 9 265 791 4 226 822
EU Export Import Export Import Export Import Export Import
2003 2003 2004 2004 2005 2005 2006 2006
Chemicals and related products 5,638 671 6,998 801 7,861 907 8,704 1,189
Raw materials 1,606 724 1,760 805 1,891 923 2,332 1,146
Food, drinks and tobacco 515 2,034 580 2,451 756 2,946 785 3,019
Automotive, Machinery and transport equipment
14,086 8,142 19,453 11,092 21,054 12,734 23,574 15,282
Mineral fuels, lubricants and related materials 655 194 1,108 306 1,602 474 1,589 928
Textile 1,112 2,759.04 1,402 3,081.96 1,574 3,221.10 1,805 3,594.60
Non-EU Export Import Export Import Export Import Export Import
2003 2003 2004 2004 2005 2005 2006 2006
Chemicals and related products 341.6709764 16748.18548 365.3060201 18894.33091 358.5179412 19269.38686 399.9210176 16483.70464
Raw materials 117.5901323 311.8543781 128.6068319 305.0295192 156.7607432 270.2759029 132.9098686 225.5315219
Food, drinks and tobacco 5319.205816 831.8283707 5909.429117 806.7510065 5811.437016 749.3679141 5758.787289 840.4056519
Automotive, Machinery and transport equipment
221.3907801 999.9153699 201.1696868 934.2599203 231.073775 958.8235267 254.755649 936.7435692
Mineral fuels, lubricants and related materials 5043.502931 8495.78218 4076.583788 7487.255278 3352.952413 6227.370468 3869.624094 4166.091597
Textile 6152.637129 1121.417587 5706.450095 1228.538832 5554.550954 1233.856413 5133.831498 1175.881112
103
All sources Export Import Export Import Export Import Export Import
2007 2007 2008 2008 2009 2009 2010 2010
Chemicals and related products 4 056 760 23 624 613 4 994 803 26 993 947 4 299 617 21 374 356 5 705 513 27 034 188
Raw materials 331 734 413 248 350 568 569 207 387 148 409 086 439 441 574 977
Food, drinks and tobacco 5 359 215 2 743 138 6 752 639 3 867 115 6 197 542 3 018 013 6 998 599 3 522 217
Automotive, Machineryand transport equipment 8 032 297 17 094 630 9 763 363 17 013 992 8 070 272 12 533 249 9 059 416 15 533 245
Mineral fuels, lubricants and related materials 7 649 672 4 357 985 9 852 462 5 037 458 8 238 942 3 763 793 8 961 460 4 711 327
Textile 10 804 633 5 316 839 11 323 038 5 093 383 9 559 339 4 345 440 10 932 274 6 058 596
EU Export Import Export Import Export Import Export Import
2007 2007 2008 2008 2009 2009 2010 2010
Chemicals and related products 9,152 1,355 9,200 1,592 8,527 1,342 10,639 1,815
Raw materials 2,666 1,228 3,311 1,013 2,413 643 4,317 1,097
Food, drinks and tobacco 991 3,054 1,173 3,135 1,128 2,929 1,740 3,310
Machinery and transport equipment 24,180 17,505 23,781 17,544 18,690 13,793 27,572 16,004
Mineral fuels, lubricants and related materials 1,522 719 2,687 1,076 1,829 417 2,552 403
Textile 1,998 4,135.32 1,964 3,821.76 1,614 3,048.12 2,099 3,492.00
Non-EU Export Import Export Import Export Import Export Import
2007 2007 2008 2008 2009 2009 2010 2010
Chemicals and related products 443.2648521 17435.139 542.9133748 16955.9967 504.2355664 15927.24013 536.2828351 14894.86924
Raw materials 124.4314598 336.5215223 105.8799229 561.9022405 160.442636 636.2152056 101.7932288 524.1356486
Food, drinks and tobacco 5407.885976 898.2114538 5756.72531 1233.529375 5494.275139 1030.390115 4022.183417 1064.113939
Automotive, Machineryand transport equipment 332.187645 976.5569828 410.5531022 969.7897739 431.7962619 908.6673691 328.5730569 970.5851571
Mineral fuels, lubricants and related materials 5026.065687 6061.175293 3666.714707 4681.652057 4504.615692 9025.883422 3511.543964 11690.63712
Textile 5408.094894 1285.714059 5764.388119 1332.73243 5923.363725 1425.613031 5209.502096 1734.993123
104
All sources Export Import Export Import Export Import
2011 2011 2012 2012 2013 2013
Chemicals and related products 6 742 722 33 244 587 7 308 244 31 700 962 5 564 713 25 263 376
Raw materials 460 091 792 126 462 074 663 132 337 228 515 868
Food, drinks and tobacco 9 181 614 5 007 390 9 929 534 5 249 995 8 030 732 4 138 289
Automotive, Machineryand transport equipment 11 126 283 21 291 819 11 856 605 20 683 742 9 323 267 17 176 842
Mineral fuels, lubricants and related materials 10 272 321 5 743 480 10 672 456 5 644 108 8 476 546 5 023 436
Textile 12 920 412 6 880 909 13 259 405 5 454 259 10 681 310 4 425 374
EU Export Import Export Import Export Import
2011 2011 2012 2012 2013 2013
Chemicals and related products 11,869 2,083 12,220 2,284 12,223.61 2286.203956
Raw materials 4,887 1,220 5,173 1,139 5,176.03 1138.243779
Food, drinks and tobacco 2,343 3,429 2,264 3,578 2,263.24 3579.554745
Machinery and transport equipment 32,587 17,663 31,404 17,891 31,392.60 17893.30943
Mineral fuels, lubricants and related materials 4,057 762 6,171 749 6,203.16 748.8722178
Textile 2,434 4,027.14 2,541 3,845.88 2,542 3844.148984
Non-EU Export Import Export Import Export Import
2011 2011 2012 2012 2013 2013
Chemicals and related products 568.0952006 15959.95518 598.0559487 13879.58074 455.2428751 11050.35949
Raw materials 94.14591037 649.2835058 89.32408904 582.2050284 65.15186706 453.2140763
Food, drinks and tobacco 3918.742672 1460.306314 4385.836442 1467.298641 3548.33938 1156.090359
Automotive, Machinery and transport equipment
341.4331763 1205.4475 377.550802 1156.097603 296.9893415 959.9589157
Mineral fuels, lubricants and related materials 2531.99936 7537.375635 1729.453307 7535.524302 1366.48931 6708.001103
Textile 5307.483994 1708.63413 5217.466129 1418.208417 4201.160811 1151.197371
105
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