Contours of the EU offer on CU revision
Given these shortcomings, the Turkish government and the European Commission recognize the need to modernize the CU, and they have considered two options to achieve this purpose:
- Replacing the CU for industrial goods with a new Deep and Comprehensive Free Trade Area (DCFTA). This would replace the CU with full liberalization of trade in industrial goods and preferential access in non-goods areas; or
- Modernizing and improving the current CU, extending it to cover services, right of establishment, public procurement and agriculture (i.e. CU plus non-goods FTA).
On 12 May 2015, EU Trade Commissioner Cecilia Malmström and then Turkish Economy Minister Nihat Zeybekçi committed themselves to the second approach, focusing on upgrading the current CU.15
It is unclear to what extent the EU is willing to liberalize services, right of establishment, public procurement and agriculture, and under what conditions. Nevertheless, there are strong hints that the eventual EU offer on further liberalization will be partial and measured. The European Commission’s roadmap for updating the CU states that the upgrade will be ‘in line with current ambitious liberalization efforts of the EU with third countries, such as on services, public procurement, agricultural trade and SPS (sanitary and phytosanitary) measures, and other economic areas’.16 However, in the view of French President Emmanuel Macron, this will ‘not allow full access to the EU single market’.17
Thus far, the EU has granted the most ambitious terms on services and public procurement to the European Economic Area (EEA) countries – Norway, Iceland and Liechtenstein – and to Ukraine as part of its Association Agreement. The EEA agreement guarantees the free movement of goods, services, capital and, crucially, people, and therefore cannot be a model for the EU’s relations with Turkey. That leaves the Association Agreement with Ukraine, which entered into full force in 2017, as the most relevant model. It includes the most far-reaching provisions outside the EU and EEA. Although outside of the EU CU, it provides a useful guide on the possible future EU proposition to Turkey, in three areas in particular: services, access to public procurement markets, and the right of establishment.
15 European Parliamentary Research Service (2017), Reinvigorating EU-Turkey bilateral trade, pp. 7–8.
16 European Commission (2015), Enhancement of the EU-Turkey bilateral trade relations and the modernisation of the EU-Turkey Customs Union, Inception Impact Assessment, Brussels: European Commission, pp. 2–3, http://ec.europa.eu/smart-regulation/roadmaps/docs/2015_trade_035_turkey_en.pdf (accessed 3 Apr. 2018).
17 Reuters (2018), ‘Macron says that UK–EU customs union would not offer full access to the EU single market’, 2 February 2018, https://www.reuters.com/article/uk-britain-eu-macron/macron-says-uk-eu-customs-union-would-not-offer-full-access-to-single-market-idUSKCN1GB17Q (accessed 3 Apr. 2018).