WHY SHOULD THE CUSTOMS UNION BE UPDATED?

long and consistently raised the issue, it has not been possible to sit at the table with the EU to revise the Customs Union. So why is updating the Customs Union so important?

As stated in the Ankara Agreement, the Customs Union is not a final goal but a transitional step towards full EU membership. While this process typically takes around five years, it has been over 29 years since the agreement between Turkey and the EU, and it remains unclear how much longer it will continue. In an environment where EU membership appears increasingly uncertain, updating the Customs Union to resolve the issues that have emerged over time appears to be the most rational option for Turkey.

The prolonged membership process and the lack of a foreseeable accession have led to debates on alternative scenarios. However, there is a general consensus that the aim of membership should not be abandoned. Given that the membership process will likely continue for a long time, there is a shared understanding within the business community that the Customs Union should be revised to function more smoothly.

It is a fact that both Turkey and the EU agree on the need to update the Customs Union. This was also reflected in a report prepared by the World Bank in 2014 at the EU’s request. Therefore, the question is not whether the Customs Union should be updated, but which topics should be brought to the table during the revision process. These include:

1. Preventing Trade Diversion Resulting from Free Trade Agreements (FTAs)

The Customs Union is based on the principle that goods in free circulation in one party should not be taxed in the other. If one party signs an FTA that the other does not, goods entering duty-free through the FTA country can also enter the other party duty-free—causing a phenomenon known as “trade diversion.” To prevent this and to ensure FTAs are aligned in content and timing, it is essential that FTA negotiations are conducted jointly.

2. Participation in Decision-Making Mechanisms

The Customs Union encompasses not just the free movement of goods, but also includes provisions such as harmonization of legislation and protection of intellectual and industrial property rights. Instead of Turkey unilaterally implementing EU legislation, the structure should evolve to allow Turkey a say in the decision-making processes.

3. Transportation Barriers to the Free Movement of Goods

At the core of the Customs Union lies the principle of free movement of goods. However, while goods may circulate freely, the vehicles transporting them do not enjoy the same freedom. At times, transit difficulties, quota restrictions, or high fees create obstacles to transporting goods. Thus, the removal of such barriers—especially in road transport—should be a key element of any Customs Union update.

4. Visa Barriers

Trade inherently involves face-to-face communication, site inspections, and in-person negotiations. Business travel is a natural component of commerce. While the Customs Union promotes the free circulation of goods, businesspeople and drivers continue to face visa restrictions. Therefore, visa facilitation must be included in the update.

5. Dispute Resolution Mechanisms

A vital condition for the healthy functioning of the Customs Union is establishing clear mechanisms for resolving disputes between the parties. While a Joint Council does exist, it often fails to convene due to political reasons. Even when it does meet, economic matters are overshadowed by political disputes, delaying resolutions.

6. Reflecting New Developments

Since the Customs Union Decision No. 1/95 was signed 29 years ago, global trade has changed drastically. It is now essential to incorporate important economic developments that have emerged since then into the agreement.

Additional Issues to Highlight:

• Today, the presentation of goods is just as important as the goods themselves. The Customs Union should therefore expand to include trade in services.
• Concepts such as “e-commerce” and “micro-trade” have become increasingly significant. Measures to support and facilitate these areas must be part of the discussion.
• Just as visas are an obstacle to trade, the inability to establish a business freely is another major barrier. Exporters should be able to set up businesses in the importing country to handle marketing and after-sales services.

Despite Turkey’s efforts, it was reported in the media that during the preparatory meeting for the EU leaders’ summit on December 15, 2021, it was decided that the frozen status of Turkey’s EU accession negotiations would remain. The EU noted that Turkey is increasingly drifting away from the Union and made it clear that opening or closing any negotiation chapters is off the table.

Given this stance, it seems unlikely that the EU will engage in talks to update the Customs Union—at least in the short term.