Associating Turkey with the Transatlantic Trade and Investment Partnership: A costly (re‐) engagement?

• Author: Serdar Altay
• DOI: http://doi.org/10.1111/twec.12533
• Date: 01 January 2018
• Published date: 01 January 2018

ORIGINAL ARTICLE

Associating Turkey with the Transatlantic

Trade and Investment Partnership: A costly

(re-) engagement?

Serdar Altay

Economics, Istanbul Teknik Universitesi, Istanbul, Turkey

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INTRODUCTION

Turkey has closely monitored the Transatlantic Trade and Investment Partnership (TTI P) negotia-

tions between the United States and the European Union (EU). Ankara is concerned particularly

because it has a Customs Union with the European Union (EU) effective since 1996. Specifically,

the Customs Union, which was supposed to be an interim step towards Turkey’s full EU member-

ship, obliged Ankara to negotiate flanking Free Trade Agreements (FTAs) with third parties that

the Europeans have concluded an FTA. However, the Customs Union set no viable mechanisms to

incorporate Turkey into EU-level commercial policymaking, either for the selection of potential

new FTA partners or to impel those partners to engage in a follow-up deal with Ankara. Over the

past two decades, the Turkish governments have pursued concluding EU-mandated FTAs with

third parties. Flanking agreements often came with some delay since these parties have not been

legally obliged and may not be economically enthusiastic to negotiate a trade deal with Turkey.

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In this regard, each new FTA signed by the EU meant a temporary increase in imports of Turkey

from a third party which gained de facto duty-free access to the Turkish market via the Customs

Union. Each new EU FTA also eroded preferential access of Turkish exporters into the EU mar-

kets while it allowed European competitors to enjoy first-entry advantage in third markets. The

challenge has become insurmountable since 2006 as the EU reinstated its FTA agenda in a more

proactive manner by approaching advanced and sizable economies such as South Korea and

Canada. Furthermore, Turkey’s EU membership talks that started in 2005 have not been as produc-

tive as Ankara had expected, registering little progress mainly due to political drawbacks on both

sides and thus leaving the Customs Union as the sole but imperfect instrument commercially link-

ing the two parties.

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For instance, Algeria and South Africa continue to avoid initiating talks for a flanking deal with Turkey, while Mexico has

eventually started negotiations after dragging its feet for more than a decade. Despite the lag between the EU’s deals and

Turkey’s, Ankara has succeeded in signing a flanking FTA with most third parties that the EU engaged with. Of 23 FTAs

that Turkey has signed, 18 are currently in force and others are in the ratification stage. Negotiations are underway with 12

other parties (Atalay, 2011, p. 3). See Turkish Ministry of Economy and European Commission’s websites for details:

http://www.economy.gov.tr/ and http://ec.europa.eu/trade/policy/countries-and-regions/agreements/ (accessed 10 August

2016).

DOI: 10.1111/twec.12533

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©2017 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/twec World Econ. 2018;41:308–336.

Against this backdrop, the TTIP negotiations have triggered strong reactions in Turkey in a

manner reflecting Ankara’s ongoing frustration with the Customs Union as well as with long-last-

ing, but ineffectual EU accession bid. Observers have argued that a transatlantic trade deal without

Ankara would shrink Turkish exporters’markets in Europe to the US’s favour and inevitably

deflect trade from the United States into Turkey (e.g., Cetingulec, 2014; Kirisci, 2013, pp. 13–16;

Yesilyurt & Paul, 2013). The impact studies by analysts of Germany’s Ifo Institute fuelled the

debate as they suggested that Turkey’s economic losses would reach 2.5% of the Turkish GDP

(Felbermayr, Heid, & Lehwald, 2013, pp. 28–30, 41; Felbermayr, Larch, Flach, Yalcin, & Benz,

2013, pp. 6–7). Experts have argued for the necessity of Ankara’s participation in the TTIP pro-

cess to prevent any economic downsides as well as to improve turbulent political relations with

Atlantic allies (e.g., Aran, 2015, pp. 3–5; Kaleagasi & Ornarli, 2013; Kirisci, 2013, pp. 17–18).

Lobbying Washington, DC and EU capitals, Turkish cabinet members sporadically threatened that

Ankara would unilaterally suspend the Customs Union or consider switching it to a more flexible

FTA if Turkey was not granted a seat at the TTIP negotiation table (Hurriyet Daily News, 28

March 2013, 28 October 2013; Cetingulec, 2014).

Neither Washington nor Brussels has acquiesced to the Turkish bid of association with the

TTIP process, at least during bilateral negotiations, which have already proven sophisticated

enough with several technical and politically sensitive issues. The policy debate has continued

elaborating upon how to re-engage Turkey with emerging transatlantic commercial architecture fol-

lowing the striking of a potential TTIP deal. Turkish officials suggested the injection of specific

provisions into the final TTIP draft for “docking”Turkey, which would apply the pact’s obliga-

tions “automatically”to the EU’s Customs Union partners (Hurriyet Daily News, 16 May 2014, 5

November 2014). Some experts have proposed the launch of “TTIP plus 3”talks after reaching a

transatlantic agreement so as to extend the pact to Turkey as well as Mexico and Canada (Akman,

2013, pp. 14–15; Kirisci, 2015). Meanwhile the United States and European governments have

opened new consultation channels to turn Ankara’s enthusiasm into a more realistic and fruitful

reform agenda. As a prerequisite to Turkey’s association with TTIP, the Americans called upon

Ankara to take steps to address specific problems pertinent to the Turkish intellectual property

rights (IPRs) regime, commercial offsets, licensing and certification processes, and trans parency

and discrimination problems in the government procurement system (D€

unya, 8 September 2014;

Today’s Zaman, 2 October 2014). Similarly, Brussels put forth the “modernisation”of the Customs

Union as a necessary step to address the aforementioned “asymmetries”created by its design and

to expand its purview from industrial products to also include farming, services and government

procurement. Turkish–European consultations have led to a mutual understanding in May 2015 to

initiate formal modernisation talks in 2017 (Hurriyet Daily News, 12 May 2015; D€

unya, 25 Octo-

ber 2016). In addition, both Europeans and Americans continued to encourage Ankara to accede to

the WTO’s Government Procurement Agreement (GPA) and effectively participate in the ongoing

Trade in Services Agreement (TiSA) talks in Geneva.

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The policy debate on TTIP and Turkey has so far intensively focused on the question of

“how,”rather than “why”Ankara should/would join a potential transatlantic commercial pact.

Existing accounts do not provide a satisfactory rationale that would economically justify a “TTIP

plus Turkey”scenario vis-

a-vis alternative policy trajectories. Specifically, studies claim Turkey’s

association with a transatlantic FTA as something beneficial, yet mostly without subst antiating this

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As a plurilateral initiative to liberalise barriers to global trade in services, the TiSA negotiations started in Geneva in 2012

between 23 parties that constitute the group of “Really Goods Friends of Services”comprising among others the United

States, EU and Turkey.

ALTAY

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