The European Union-Turkey Trade Relations under the Influence of Customs Union

Abstract

Customs Union Agreement between Turkey and European Union (EU) in the area of trade was expected to have a positive impact on Turkish Economy because Turkey is the only candidate country that has an agreement enhancing trade integration. In this paper, overview, assessment and widening of the agreement in terms of trade will be evaluated. In addition to this, problems caused by the asymmetric nature of customs union (CU) agreement will also be emphasized. Our panel gravity model proved the ineffectiveness of CU on trade flows between Turkey and EU-15. Therefore it would have been better for Turkey to have signed a Free Trade Agreement (FTA) with the EU and renegotiating an FTA instead of the CU.