EU-Turkey Customs Union

On 31 December 1995, a 6 March 1995 Decision of the EC-Turkey Association Council, established by the Ankara Agreement, to implement a customs union (Turkish: Gümrük Birliği) between Turkey and the European Union, came into effect. Goods may travel between the two entities without any customs restrictions. The Customs Union does not cover essential economic areas such as agriculture (to which bilateral trade concessions apply), services or public procurement.

In 1996 a free trade area was established between Turkey and the European Union for products covered by the European Coal and Steel Community. Decision 1/98 of the Association Council covers trade in agricultural products.

In addition to providing for a common external tariff for the products covered, the Customs Union foresees that Turkey is to align to the acquis communautaire in several essential internal market areas, notably with regard to industrial standards.

Turkey's main exports to EU and imports from EU are dominantly industrial (95% of all its imports and exports). Since 1996, Turkey's gross domestic product has increased 4-fold, making it one of the fastest growing economies in the world. At the same time, however, the foreign trade deficit of Turkey (between EU) has increased 2 fold and 6 fold with non-EU countries (the rest of the world), between 1995–2008. The Customs Union is a large factor in both of these developments. Some commentators have pointed to a vicious circle that the profits generated from imports are being used to buy raw materials and assembly parts again from Europe. This shows that Turkey is dependent on European raw materials and parts.

Some argue that the customs union treaty is quite like the Capitulations of the Ottoman Empire. It was giving economical and political powers to a union (EU in this case) which the signing party (Turkey) was and still is not a member:

As Turkey is in a customs union with the EU, it has to adjust its tariffs and duties to match those of the EU. However, the free trade agreements (FTAs) signed by the EU do not extend to Turkey, so the EU's FTA partners can export to Turkey tariff-free, while maintaining tariffs on Turkish goods, unless they also conclude an FTA agreement with Turkey. During the negotiation of the Transatlantic Trade and Investment Partnership (TPIP), Turkey raised the prospect of leaving the customs union over the economic contraction it would suffer as American goods would enter Turkey tariff-free and Turkish goods would continue to face American tariffs. The EU and Turkey are in negotiations for amending the customs union agreement to add Turkey to the EU's present and future FTAs.

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Wikipedia