Bilateral Trade Relations Turkey August 2002 ----------------- I. Trade Agreements In 1963, Turkey signed an Association Agreement with the European Union to promote trade and economic relations. In order to achieve this objective, both parties agreed to progressively establish a Customs Union (CU). As a result of an Association Council Decision of 6 March 1995, the CU came into force on 1 January 1996. The CU only covers industrial goods and does not address agriculture and services. The Council has agreed on a negotiating guidelines on the liberalisation of services and public procurement. Several rounds of negotiations have so far taken place. There is a commitment between the parties to include agriculture through ongoing negotiations on mutual concessions with a view to establishing a free trade area. At the Helsinki summit in December 1999 Turkey was given the status of a candidate country. Furthermore, Turkey is also member of the Euro-Mediterranean partnership and as such should conclude free trade agreements with all other Mediterranean partners, with a view to the creation (by 2010) of a Euro-Mediterranean free trade area. II. Bilateral Trade Relations Turkey's GDP was €165 billion in 2001. The EU ranks number one in both Turkey's imports and exports while Turkey ranks 12th in the EU's top import and export markets. Main Turkish exports markets in 2001 were the EU (54.6%), USA (10%), Israel (2.3%), Russia 1.6%, Egypt (1.4%) and Algeria (1.3%). Textiles is by far the biggest export sector to the EU accounting for some 41% of total exports. Other important export sectors are agricultural and processed foods (11.2%), electrical goods (televisions) and motor vehicles and parts. Imports into Turkey came from the following key markets: the EU (44.8%), USA (7.4%), Russia (7.1%), Algeria (2.8%), China (2.5%), Ukraine (2.3%). Main imports from the EU are chemical products (19%), power generating machinery (15.4%) and transport material (14.7%). In addition to the CU with the EU, Turkey has signed Free Trade Agreements with EFTA, Israel, Romania, Lithuania, Hungary, Estonia, Czech Republic, Slovakia, Bulgaria, Poland, Slovenia, Latvia, FYROM, Croatia and Bosnia-Herzergovina. III. Foreign Direct Investment In 2000, 0.1% of EU inflows (€200 billion) came from Turkey, while 0.5% (€1.7 billion) of EU out-flows went to Turkey. IV. Future Prospects In order to advance the CU, Turkey and the EU are pushing ahead to deepen it into new areas such as services and public procurement. In other areas, such as the requirement to align with the Community's preferential customs regimes, the EU is encouraging Turkey to make further advances. Since Turkey is a "candidate country" it must fulfill all of the Copenhagen Criteria and adopt all of the EU acquis in addition to that brought by the CU.