Turkey: Economic Impact of TTIP on the US, EU and Turkey

Last Updated: 20 February 2015
Article by Serap Zuvin and Aybala Kurtuldu

From past to present, international trade and investments have continued growing rapidly and connected the countries globally.  Many bilateral treaties and/or conventions have been signed by many countries to boost the trade and the investment between the same. Those international treaties, at the same time, provided for a sustainable economic development in the commercial and investment areas by removing the trade and investment barriers among such countries.

Getting Beyond the Borders...

Needless to say, since the beginning of 1900s the leading parties in setting the rules of the international commerce and investment have been the United States of America ("US") and the European Union ("EU"). In 2010 the EU released a press-release called Trade, Growth and World Affairs1 indicating the EU's trade strategy which can be briefly summarized as developing the economy by maintaining a sustainable development with high level job opportunities and a steady policy in economy. Similarly, the US's strategic plan for 2013-2017 also contemplated a fast growth in the economy with the expansion of market access for American goods and services and signing bilateral, regional and multilateral trade and investment agreements2.

The US and the EU are world's largest economic blocs and obviously they are each other's main trading partners. This partnership has ultimately lead to a entering into treaty for strengthening the trade on both sides of the Atlantic, namely Transatlantic Trade and Investment Partnership ("TTIP"), which currently is under negotiation.

TTIP's aim is to create a free trade zone between the territories of the EU and the US under "beyond-the border" trading concept, with special focus on "regulatory issues and non-tariff trade barriers" between the US and EU countries. The contents of TTIP involve terms on the trade of goods and services between US and EU countries, transatlantic job opportunities, and transatlantic innovation economy3 and with the aim of improving the treaty and parties' economies accordingly.

Current Status of TTIP

On January 7, 2015, the EU Commission has presented the negotiated texts4 to the public. According to the EU Commission's news, the treaty has 24 chapters composing of 3 substantial sections, which are: (i) market access, (ii) regulatory cooperations and (iii) rules. Factsheets on trade in goods and customs duties, on services, on regulatory coherence, on food safety and animal and plant health, on sustainable development, on customs and trade facilitation etc. have recently been published by the EU Commission. On February 4, 2015 the 8th round for presentation and chief negotiators briefing was held in Brussels5.  The discussions with the European Parliament, the EU Member States and the stakeholders had started and will continue, mostly likely throughout the first quarter of 2015. 

Potential Practical Problems

While the supporters of TTIP allege that TTIP will provide a multilateral economic growth and such growth will lead to a sustainable development almost in all areas of trade; the opponents of the TTIP claim the other way around. According to the allegations of the opponents, in the event TTIP comes into effect, the local competent authorities will have a weaker position in terms of regulating the internal market and determining on the trading rules and procedures. The opponents in the EU claim that such practical problems will arise given the fact that US and EU have different standards and perspectives on protection of the consumers, environment and public society. It is further emphasized that signing TTIP will intervene with the decision-making power of the local competent authorities on various aspects because the new standards of TTIP will become a benchmark not just for the international trade relationship between the US and the EU, but for the any potential treaties and arrangements which may be established by them with other third parties. 

The main issue which is brought into discussion is the potential risk of putting the corporate interests of countries before the states' and citizens' own interests. For example, hygiene and safety standards in the food and agriculture sectors or data protection standards are quite different in US and EU and thus it is difficult to harmonize the two. It is alleged that, recognition of mutual standards on protection levels by TTIP in terms of especially in the areas of environment, health, private data protection and consumer/worker rights will not be beneficiary due to the conflicting standards between the EU and the US.

Still There is a Common Ground

Despite of all the differences, US and the EU may still have a common goal to attain: Needless to say, the trade load has shifted to the East and China by having lower standards and cheaper labor force as compared to the US and the EU, has become a leading party in a very short time, especially in the commerce of locally produced industrial products. So, with the desire of promoting a sustainable growth in their economies by removing the trade and investment barriers, EU and US came together at the negotiation table. Ultimately, it is an undeniable fact that the US and the EU still have the world's biggest integrated economic relationship. Since total US investment in the EU is three times higher than in all of Asia; EU investment in the US is around eight times the amount of EU investment in India and China together; EU and US investments are the leaders of the transatlantic relationship, providing to the growth and jobs on both sides of the Atlantic6. The transatlantic commercial relationship also forms the shape of the global economy as a whole. Either the EU or the US is the largest trade and investment partner for almost all other countries in the global economy, (v) the EU and the US economies account together for about half the entire world GDP and for nearly a third of world trade flows. 

How About the Other Countries

While the EU and US will enjoy the benefits of TTIP, other countries trying to export goods, services to the US and/or the EU will suffer from the formalities of expatiation and they will need to spend more efforts. Well, these concerns have mutually been addressed by most of the countries not covered by TTIP especially the developing ones. In any case, potential resolutions for such concerns have been discussed in the negotiation phase by both parties at the briefings of TTIP.

How TTIP is expected to affect Turkey?

Since the geopolitical position of Turkey is very crucial for global commerce, both US and the EU have smooth and effective trade relations with Turkey.  Turkey has already signed a customs union agreement7 with the EU on December 31, 1995, however with TTIP, Turkey will be in a disadvantageous position while trading with the EU or the US. The goods imported from the US and the EU will pass through the customs of Turkey without any customs tariff, however Turkey will suffer from the tariffs. This will lead to an unfair competition for Turkey against the EU and the US. Although having signed a customs union agreement with EU, TTIP would effectively block Turkish exports to enjoy the tax advantages in the EU, unless Turkey's being a party to the free trade rules are negotiated with the EU and/or the US.

Taking these concerns into account, Turkish government announced the possibility of freezing the customs union agreement with the EU in the event that Turkey does not become a party to TTIP. The government foresees that being left out of TTIP would cost $3 billion loss to Turkey per year8. For this very reason, Turkey is currently asking from EU to add an article into the TTIP for the automatic inclusion of countries with who EU already has a Customs Union arrangement. However, Turkey's expectation to be involved in TTIP is not realistic at this point given the the level of standards, regulations and legislations in Turkey with respect to the areas covered under TTIP. There should be concrete steps taken by Turkey to fulfill necessities of the economic reforms and after satisfying all the required standards in the domestic market, production and legislation, the debates for involvement of Turkey in the TTIP can take place at a realistic level. Turkey's involvement in a free trade agreement with the US would also be quite a helpful step for eliminating Turkey's concerns for the implementation of TTIP.

1 http://europa.eu/rapid/press-release_MEMO-10-555_en.htm

2 https://ustr.gov/sites/default/files/USTR%20FY%202013%20-20FY%202017%20Strategic%20Plan%20final.pdf

3 http://transatlantic.sais-jhu.edu/publications/books/TA2014/TA2014_Vol_1.pdf

4 http://trade.ec.europa.eu/doclib/press/index.cfm?id=1230

5 http://trade.ec.europa.eu/doclib/events/index.cfm?id=1239

6 http://ec.europa.eu/trade/policy/countries-and-regions/countries/united-states/

7 http://www.avrupa.info.tr/fileadmin/Content/Downloads/PDF/Custom_Union_des_ENG.pdf

8 http://www.hurriyetdailynews.com/eu-backs-us-position-on-turkeys-inclusion-to-ttip.aspx?PageID=238&NID=74185&NewsCatID=429

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Serap Zuvin
Aybala Kurtuldu
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