Will Froman and De Gucht Talk Turkey?
By Baris Ornarli
United States Trade Representative Ambassador Michael Froman and EU Trade Commissioner Karel De Gucht are meeting in Washington this week to take stock of the Transatlantic Trade and Investment Partnership (TTIP) negotiations to date. They will assess progress made in the first three rounds of negotiations and provide political guidance on how best to move forward. The stocktaking meeting also provides an opportunity for the U.S. and EU to discuss the unique position of Turkey – an important American and European ally that should not be excluded from the transatlantic economy.
TTIP is an ambitious, comprehensive, and high-standard trade and investment agreement that aims to boost economic growth in the United States and the EU. The U.S. and EU account for nearly half of world GDP and a third of global trade. The Centre for Economic Policy Research estimates that “an ambitious and comprehensive transatlantic trade and investment agreement could bring significant economic gains as a whole for the EU ($160 billion a year) and U.S. ($130 billion a year).” But there is room for more.
Since it is not yet a member of the European Union, Turkey is not a party to TTIP and its exclusion will have economic consequences. A study commissioned by the German Federal Ministry of Economics and Technology estimates that Turkey’s exclusion could result in a welfare loss of 2.5 percent. Moreover, Turkey’s customs union precludes it from negotiating bilateral free trade agreements with those countries that do not already have an agreement with the EU. Unless an arrangement is made, as a customs union member, Ankara must take on all the obligations associated with the U.S. – EU free trade agreement without requiring Washington to extend any trade privileges to Turkey. This would certainly deepen the trade imbalance between the U.S. and Turkey and counteract the shared goal of improving economic ties.
The Turkish government and the business community have been vocal about Turkey’s position. As a result, in May 2013 the United States and Turkey decided to establish a bilateral High Level Committee led by the Ministry of Economy of Turkey and the Office of the U.S. Trade Representative, with the ultimate objective of “continuing to deepen Turkish American economic relations and liberalize trade.” Although this was an important decision, it was only first step.
Turkey’s dynamic economy and integration with many European institutions make it a natural partner for the U.S. and EU. Turkey is the 17th largest economy in the world and Europe’s sixth largest trading partner. Turkey remains in accession negotiations with the European Union for full membership and has a customs union with the EU since 1996. Over 55 percent of the European economic legislation is already transposed to the Turkish legal order. Therefore Turkey is already a part of the European economy. Associating Turkey with TTIP would strengthen the transatlantic economy and further solidify Ankara’s relationship with the West.
In a Brookings Institution report, TUSIAD Senior Fellow and Director of the Turkey Project, Kemal Kirisci argued that, “Involving Turkey in TTIP would give concrete life to the idea of a model partnership [between the United States and Turkey] and also become a means to reconnect Turkey to the transatlantic alliance. Turkey’s involvement in TTIP would not only benefit the economy but also help consolidate and strengthen Turkey’s democracy through a continued expansion of the principles of accountability, transparency and rule of law. The size of the Turkish economy and its close economic links to its neighborhood would also bring an added value to TTIP.”
Although the issue doesn’t appear to be a priority, officials say they are mindful of Turkey’s position, but there isn’t consensus on how to proceed. As Kirisci suggests in his report, TTIP could include a “docking arrangement” – much like the Trans-Pacific Partnership (TPP) agreement – so that other countries might be able to join once the agreement is finalized. Other suggestions include introducing a clause highlighting EU accession countries or customs union members as future partners of TTIP. Another option would be to begin laying the groundwork for a bilateral U.S. – Turkey free trade agreement. Although there may be technical and practical challenges to associating Turkey with TTIP, this is ultimately a political decision.
Business interests on all sides support Turkey’s strong association with the transatlantic economy. The Turkish Industry and Business Association (TUSIAD) has been the leading proponent of including Turkey in TTIP. In a May 2013 position paper, Europe’s most influential business lobby, the Confederation of European Business, BUSINESSEUROPE, also argued for Turkey’s inclusion: “Turkey is a fast growing entrepreneurial European economy and its association to the TTIP would be an added-value for the business communities of both sides.” For its part, the U.S. Chamber of Commerce this year will be publishing a comprehensive study on the benefits of a U.S. – Turkey free trade agreement.
TTIP has been likened to an “economic NATO,” and Turkey’s exclusion is counterintuitive. The economic and strategic arguments for ensuring Turkey’s association with TTIP are strong. What’s needed is greater political will. At the very least, the issue could be explored at the stocktaking meeting, now that negotiations are well underway.
This article originally appeared in the America’s Trade Policy of the Wilson Center. Click here to see original article.
Baris Ornarli is the Washington Representative of the Turkish Industry and Business Association(TUSIAD). Follow him on twitter @BarisOrnarli