Ties That Bind: Turkey, TTIP and Transatlantic Partnership

by Baris Ornarli & Audrey Stevens

Late last month, EU Trade Commissioner Cecilia Malmström met with U.S. Trade Representative Michael Froman for nearly five hours in an effort to provide momentum to the Transatlantic Trade and Investment Partnership (TTIP) negotiations.
Negotiations are progressing slowly, however both sides are reportedly looking to accelerate the process in order to finalize TTIP before President Barack Obama leaves office in January 2017. During this critical phase of negotiations, it is important to reiterate the true potential of TTIP and lay the ground work for its eventual expansion. It is therefore important to recognize Turkey, among other third countries, as an indispensable part of an effective transatlantic economic area.

TTIP negotiations started in 2013, aiming to propel economic growth in both the U.S. and the EU. The Centre for Economic Policy Research (CEPR) estimates TTIP would create economic gains of EUR 119 billion for the EU and EUR95 billion for the U.S. It is an ambitious, comprehensive trade and investment agreement that would set global rules and standards. USTR asserts that TTIP “can set high standards and pioneer new rules” and the EU affirms that TTIP has a large role to play in “paving the way for setting global standards.”

The partnership’s articulated role of setting global rules and standards requires a thoughtful and thorough plan for third-country admission procedures, not unlike the Trans-Pacific Partnership (TPP) ‘docking arrangement.’ At the very least, the negotiating partners need to begin considering how an eventual enlargement would take shape. A 2014 European Parliament report notes this lack of focus on TTIP’s effects on third countries and asserts that EU and U.S. trading partners, like Turkey, “may face severe losses.”

As a member of the EU customs union, Turkey is not able to negotiate free trade agreements with countries that do not already have an arrangement with the EU. If it is left out of TTIP, Turkey will be obliged to extend trade privileges to the U.S. without reciprocation. According to the World Bank, as Turkey’s shares in global trade has increased, the impact of EU trade agreements on Turkey has significantly expanded.

U.S. and EU officials acknowledge Turkey’s unique position. In 2013, a bilateral High Level Committee was established by the Office of the U.S. Trade Representative and the Ministry of Economy of Turkey 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. At the same time, Turkey and the EU are working to update the customs union agreement that could resolve the asymmetrical problem of trade liberalization with third countries.

Overlooking Turkey in the context of transatlantic relations is misguided. Turkey is a dynamic country, fully integrated into the European economy and is a natural trading partner for the U.S. and Europe. Turkey is the EU’s sixth largest trading partner. The EU is Turkey’s number one trading partner and accounts for 70 percent of FDI in Turkey. Two out of every five goods traded by Turkey come from or go to the EU. As candidate country for EU membership, Turkey already holds itself to many EU standards, and has adopted a majority of European economic legislation. Although trade volume between the U.S. and Turkey remains below potential at USD20 billion, there has been concerted effort to improve economic ties. Often imagined as an ‘economic NATO,’ TTIP recognizes the value of a comprehensive trade and investment agreement between economies which account for half of global GDP and one third of global trade. As the 18th largest economy in the world with average annual growth of 4% over the last 15 years, Turkey’s potential added value to the agreement should not be overlooked. Furthermore, by expanding the partnership, Turkey’s commitment to robust international standards and transatlantic cooperation would be strengthened. TTIP is the next natural step for Turkey, further solidifying Turkey’s relationship with western allies, and strengthening the transatlantic economy.

Business communities on all sides recognize the concrete benefits of Turkey’s inclusion. In 2013 BUSINESSEUROPE, Europe’s most prominent business lobby, argued for Turkey’s inclusion stating, “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.” Similarly, the U.S. Chamber of Commerce recently asserted that “Turkey’s large and growing market and its expanding ties with regional neighbors also make Turkey a very attractive candidate for its inclusion in T-TIP” and that “excluding Turkey from T-TIP could also harm Turkey’s economy and its status as a global economic center.” The Turkish Industry and Business Association (TUSIAD) has been a strong proponent of Turkey’s accession to TTIP, much like it has been champion of Turkey’s EU membership.

This article originally appeared in America’s Trade Policy. 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. Audrey Stevens is a Research Assistant at the Washington Representative Office of the Turkish Industry and Business Association (TUSIAD).