Internal Market and the European Union
The association relationship of Turkey with the European Union dates back to 1963, which is the time the Ankara Agreement was signed. The Ankara Agreement entered into force on 1st December 1964. It has drawn the framework of institutional relations between the parties, making way for Turkey’s full membership in the EU.
The Ankara Agreement aims to establish free movement of goods between Turkey and the EU, provide free movement of labor and services, and capital to integrate Turkey into the European Single Market.
The Customs Union was established on 31st December 1995, which became a breakthrough in bilateral relations between Turkey and the EU, bringing the integration process to a critical level.
When the Customs Union by Association Council Decision No 1/95 was completed, custom duties, quantitative restrictions, and measures were eliminated in the trade of industrial goods between the parties, ensuring free movement of goods, while the Common Customs Tariffs were implemented in third-world countries.
Because of the Customs Union, Turkey opened its internal market to EU and third world countries, guaranteeing free access to the exporters to the EU market.
Additionally, Turkey undertook to align itself to the preferential regimes applied to third world countries by the EU harmonizing its legislation with the EU’s acquis Communautaire in a wide spectrum of areas, including the standards and technical legislation alongside the competition policies.
Trade-in agricultural products are managed within the framework of the preferential system between the parties. However, iron and steel trading is governed by the Free Trade Agreement between Turkey and the European Coal and Steel Community. The Turkish economy has integrated with the most competitive economic block of the world that has given energy to the Turkish economy since liberalization measures were adopted in the early 1980s.
In consequence of this high level of integration, the economic relations between Turkey and the EU have strengthened. For instance, trade with the EU had increased from USD 33.0 billion in 1996 to 143 billion USD in 2020.
In 2020, Turkey’s exports to the EU reached USD 69 billion, and the imports from the EU reached 73 billion USD. Now, the EU accounts for 41.3% of total exports and 33.4% of total imports in Turkey.
Turkey is a significant trade partner of the EU, according to the foreign trade statistics. The report indicates that in 2020, Turkey ranks at number six for imports and exports of the EU with 3.7% and 3.6% of shares respectively.
After the Customs Union’s establishment, the product composition of Turkish exports transformed in parallel to changing production scales and structures due to the competition and market advantages gained from the Customs Union.
Besides the traditional sectors such as agriculture, textile, clothing, electronics, and machinery, parties increased their shares in total exports and competitiveness in the EU alongside the World Market.
Agriculture products to the EU decreased from 15.4% to 7.9%, and textile and clothing products also decreased from 42.1% to 20.1% in shares. On the other hand, while the automotive products increased from 2.5% to 20.8% in shares, machinery products increased from 2.7% to 10.9%, iron and steel products increased from 3,2% to 7.8%, and electronic products increased from 4.5% to 5.6% in shares.
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