HAS THERE BEEN A LIGHT OF HOPE IN THE UPDATE OF THE CUSTOMS UNION?

REMZİ AKÇİN 
UGM Chairman of the Board of Directors

On August 22, 2024, the Ministry of Foreign Affairs announced that Turkey had been invited to the European Union (EU) Informal Foreign Ministers' Meeting (Gymnich) after 5 years. Gymnich meetings are informal meetings where EU foreign ministers can freely exchange views on current international issues. Turkey accepted this invitation with pleasure, considering it as a sign that the EU understands the need for a "quest for dialogue" and to develop relations between Turkey and the EU in the face of regional and global challenges.
In a statement made by Minister of Foreign Affairs Hakan Fidan after the meeting held in Brussels on August 29, it was stated that how Turkey-EU relations could be institutionally advanced and how cooperation could be developed between Turkey and the EU on global and regional issues was discussed. He also stated that Turkey's expectations regarding the re-activation of the established dialogue mechanisms suspended in 2019 and the updating of the customs union continue.
After these statements, we cannot help but wonder, "I wonder if there is a glimmer of hope regarding the updating of the customs union?"

WHAT IS A CUSTOMS UNION?

A customs union is the third stage after the “Preparation Period” and “Transition Period” that must be followed in the EU membership process in accordance with the 1963 Ankara Agreement, and the last stage before membership. A customs union includes not only the free movement of goods, but also the obligation to comply with EU legislation in areas such as competition policy, intellectual and industrial property rights.
A customs union is not a goal, but a stage that must be achieved in order to become a member of the European Union. The customs union process, which usually lasts five years, has not ended despite 29 years having passed in Turkey, and there is no prediction as to when it will end. The uncertainty of whether Turkey will become a member of the EU has made it necessary to update and maintain the customs union.

Although Turkey has been making efforts since 2014 to update the customs union, it has still not even been able to sit at the table. Hopes that gained momentum in 2015 and gradually faded afterwards were revived when the statement made on April 6, 2021, following the meeting of EU Council President Charles Michel, Commission President Ursula von der Leyen and President Recep Tayyip Erdoğan in Ankara, emphasized that there was a common view on updating the customs union. However, instead of making progress, the decision of the EU Council on December 15, 2021 to “keep the membership negotiations frozen” destroyed the hopes.
Will there be any developments on this issue after the gymnich meeting? Although we evaluate this possibility as weak, it is also useful to note the existence of a glimmer of hope that takes refuge in the word “I wonder”.
WHY SHOULD THE CUSTOMS UNION BE UPDATED?
Due to the problems experienced by the parties, especially Turkey, regarding the functioning of the customs union, Turkey’s failure to become an EU member, and the reasons listed below, updating the customs union has become inevitable. In fact, the report prepared by the World Bank in 2014 upon the request of the EU has revealed that the customs union needs to be updated. Therefore, it is not important whether the customs union needs to be updated or not, but what issues should be discussed for Turkey in the update.

1- Prevention of Traffic Deviation Resulting from Free Trade Agreements
The customs union is based on the principle that goods in free circulation in one of the parties are not taxed in the other party. In cases where the parties sign a free trade agreement, no tax is collected if the goods imported within the scope of this agreement are sent to the other party. In cases where the parties do not sign the same agreement, the non-signing party has the right to have the goods sent tax-free within the scope of the FTA. This is called traffic deviation. In order to prevent this, FTA negotiations should be carried out jointly.

2- Participation in Decision-Making Mechanisms
The Customs Union includes not only the free circulation of goods, but also a series of provisions from the harmonization of legislation to the protection of intellectual and industrial property rights. The customs union is designed to harmonize Turkey's legislation with EU legislation. The economic requirements of the EU and Turkey are not always the same. The customs duty rates determined according to the economic conditions of the EU work against Turkey. Therefore, Turkey needs to participate in the decision-making mechanism so that decisions are not taken unilaterally but jointly.

3- Transportation Obstacle in the Free Movement of Goods
The placing of goods into free circulation requires the physical delivery of that goods to the other party. While the free movement of goods is regulated by the decision of the partnership council, the free movement of the vehicle carrying the goods is not regulated.There are difficulties even in EU member countries regarding the transportation of goods.

4- Visa Barrier
While the free movement of goods is the basis in the Customs Union, there is a huge visa problem in front of the free movement of business people who trade goods and the drivers of the vehicles carrying the goods.

Although there is an agreement between Turkey and the European Union on the removal of visas, Turkey has fulfilled 66 of the 72 criteria agreed upon to provide visa-free travel and has not completed 6 criteria.

5- Resolving Disputes
One of the conditions for the healthy operation of the customs union is to decide how the disputes between the parties will be resolved. Although there is an institution called the “Association Council” on this issue, most of the time they do not come together for political reasons and the solution of the problems arising from the operation of the customs union remains in the shadow of political issues.

6- Reflecting New Developments
A lot has changed in world trade during the 29 years that the customs union has been implemented. Considering these developments, the following should also be included in the scope of the customs union agreement as an example:
- Providing training on the installation of goods without damage, their use and maintenance is part of the goods as well as the goods trade. Therefore, the customs union should cover service trade as well as goods trade.
- In this process, regulations should be included to further develop e-commerce and remove the obstacles in front of it.
- The lack of freedom of establishment is as much an obstacle as the visa is to the development of trade. The exporter should be able to freely establish a workplace in the importing country in order to market the product they produce and to provide after-sales services. This issue should also be included in the scope of the customs union.
- Recently, trade policy measures have become widespread and these measures are implemented based on the principle of origin. Tax exemption is granted to goods within the scope of the customs union upon presentation of an A.TR movement document, and the origin of the goods is not included in these documents. When an A.TR movement document is issued for products originating from third countries, problems are experienced in the implementation of trade policy measures. What do you think, will the update of the customs union turn into a lying shepherd's tale or has it already turned into one?