Turkey’s nearly 23-year-old customs union (CU) with the European Union has defined its bilateral economic and trading relationships. Implementation of the CU was supposed to pave the way for the country’s eventual accession to the EU, but this process has become politically stalled and Turkish membership now appears unattainable at any point in the near future.
Although the customs arrangement has benefited both Turkey and the EU, both sides recognize that it needs to be modernized to improve its operational efficiency and widen its scope and coverage. Over the last decade, the EU’s introduction of a new generation of trade agreements has spurred a desire to upgrade the CU beyond its narrow focus on the removal of tariffs on industrial goods, to include provisions on services, investment, intellectual property rights, public procurement, digital innovation and sustainable development.
This paper details the operation of the EU–Turkey CU in its current form and highlights its design flaws. It then lays out the contours of the potential EU offer on an upgrade and analyses the prospects for its implementation. Finally, it proposes an alternative approach to negotiations that could minimize the impediments to a successful outcome, and outlines some salutary lessons for Brexit.