27 Aug

Known by its acronym TTIP, Transatlantic Trade and Investment Partnership has the capacity to serve as a game changer in global economic balances. At its core TTIP is a free trade agreement between the United States and the European Union with the underlying objective to increase bilateral trade among two economic blocks by the removal of tariff and non tariff based obstacles before the Transatlantic trade. As the pundits are already in line to praise the benefits of such a free trade agreement which will bring increased trade volume, more jobs and common standards for the signatories, the agreement seems to create negative externalities for the third parties. The critical issue to be reckoned with regarding the TTIP is the intention of the policy makers to frame the agreement not only as a traditional free trade agreement that usually deals with the border arrangements and custom duties but also to design it as a beyond the border arrangement that will seek to penetrate in to the areas where economic integration and legal harmonization have not yet taken place.

Such comprehensive quality of the issue makes it one of the closely followed issues around the world. One of the countries that has been keeping a keen eye on the developments regarding the TTIP is Turkey. European Union serves as the major trading partner for Turkey and the United States increasingly turning into a significant economic partner as well. European Union and the United States when combined account for more than 40% of Turkish exports, as well as 80% of the FDI that the country attracts. That’s why Turkish authorities has recently started to air their concerns over the possible deal on the subject.

Possible Impacts on Turkey

A common external tariff combined with the removal of internal tariffs might bring some difficulties for countries like Turkey. A possible effect might be the penetration of American goods to the Turkish market unhindered through the European Union given the fact that Turkey has brokered a Customs Union agreement with the European Union back in mid 1990s which is still in effect . In such a case the rule of reciprocity will be revoked in the sense that Turkish goods will continue to be subjected to the tariffs in the United States whereas American goods will have the chance to freely circulate in the market. This might not only create a trade imbalance between the United States and Turkey but also might hamper the capacity of the Turkish products to compete in the European markets against the American products. This is undoubtedly a serious blow for the countries like Turkey in terms of their foreign trade balances.

Moreover a comprehensive free trade agreement between the United States and European Union is going to require a monumental effort for the harmonization of the bilateral legal structures. This means new and more stringent regulations to be imposed on several different business sectors. The fall out of such a legal process for the third parties like Turkey is the need for a painstaking process of harmonization of the local laws, regulations and technical standards with the ones that will be imposed by TTIP. This might mean extra costs for the Turkish business in a global environment marked by fierce competition based on cost effective products and solutions.

Conclusion

If the TTIP will be successfully brokered between these two economic power blocks, it will definitely serve as a game changer in world economic balances. These two blocks together produce 46% of world GDP and one third of world trade by themselves. The comprehensive changes that such important economic actors will be exposed will inevitably have consequences for the third parties. Turkey as a country in a custom union with the European Union might feel the negative effects of TTIP in the form of market loss in Europe, loss of reciprocity in trade relations with the United States and the penetration of American goods with no hindrance to its market without the Turkish penetration to the American one.


Herdem Law Firm, Istanbul Turkey

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