UK-Turkey Free Trade Agreement: Beyond the Economics

Introduction

On December 29, 2020, the UK and Turkey signed a Free Trade Agreement (FTA) which will become effective January 1, 2021, after the UK leaves the EU. Turkey’s Trade Minister, Rushkar Pekcan, and the British Ambassador to Turkey, Dominick Chilcott, signed the agreement. 

The timing of the agreement was interesting, since the FTA was signed days after the UK and EU had managed to clinch a Brexit trade deal, with great difficulty, and after the US imposition of sanctions on Turkey for the purchase of S400 missiles from Russia (the decision to impose sanctions is likely to have its impact not just on Turkey-US ties, but also between Turkey and other NATO member states).

Commenting on the importance of the deal, Pekcan said:

The free trade agreement is a new and special milestone in the relationship between Turkey and United Kingdom.

President Recep Erdogan, while referring to the significance of the FTA a day before it was signed, had said that it would create a win-win situation for both Turkey and the UK. He also said that the deal is crucial, and dubbed it as Turkey’s most important economic agreement after the 1995 Customs Union.

Economic importance of the FTA 

If one were to look at the economic significance of the deal, it is dubbed to be the fifth largest trade deal for Britain. The UK-Turkey FTA is also likely to give a significant boost to the bilateral trade between both countries. The UK is Turkey’s second largest export market (for commodities including vehicles, textiles, and electrical equipment). The agreement is also important from Turkey’s point of view because without a deal well over 75% of Turkey’s exports to the UK would have been subject to tariffs. The FTA will also ensure existing preferential tariffs for 7,600 British businesses that exported goods to Turkey in 2019.

According to estimates, the potential for bilateral trade between Turkey and Britain is up to $20 billion. Britain is Turkey’s fifth largest investor (investment is estimated at $11.6 billion) and a total of 2,500 British companies are based in Turkey. 

UK Trade Secretary Elizabeth Truss, while commenting on the deal, said ‘[…it] provide[s] certainty for thousands of jobs across the UK in the manufacturing, automotive, and steel industries.’

While the key features of the deal are known (it seeks to prevent supply chains in automotive and manufacturing sectors, and also covers all agricultural and industrial goods), the FTA could also give a fillip to deeper defense cooperation between the UK and Turkey (in November 2020, Turkey and the UK held defence exercises for the first time).

Geopolitical context

The FTA also has geopolitical significance, because the UK is one of the few Western countries with which Turkey has a cordial relationship. While all eyes have been on the imposition of US sanctions, and its impact on the Washington-Istanbul relationship, Turkey’s ties with the EU have also witnessed a steady deterioration due to a multitude of factors in recent years. Turkey has also not been on the same page as the Western world on a number of geopolitical issues. This includes the Syria issue, as well as the dispute between Azerbaijan and Armenia over Nagorno-Karabakh.

Turkey’s military operation in Syria and reactions

Turkey’s military offensive against Kurdish forces in Northern Syria in 2019 received strong responses from EU member states and the US. While the EU was critical of the action, US policy makers had urged Donald Trump to freeze assets belonging to Turkish leaders and block the sale of arms to Istanbul. Trump had written to Erdogan to refrain from such an action, but the Turkish President paid no heed to the same. It would be pertinent to point out that after Turkey’s October 2019 invasion of Syria, Britain had stopped sales of arms, but said it would not be providing new export licences for weapons which may be used in military operations in Syria.

If one were to look at the Azerbaijan-Armenia issue, France has been vocal in supporting international supervision of the ceasefire and has also expressed apprehension that Turkey and Russia may exclude Western countries. 

The EU has also been uncomfortable with Turkey’s policy in the Mediteranean. Only recently, the EU imposed sanctions against Turkish companies and individuals for oil drilling. Greece had wanted sectoral sanctions but this was resisted by German Chancellor Angela Merkel and Bulgarian Prime Minister Boyko Borissov, who shares a close rapport with Erdogan.

Russia-Turkey relationship

While it is believed that the main reason for the rift between Turkey and the West is the former’s growing proximity to Russia, Istanbul and Moscow too have divergences over geopolitical issues (be it Syria, Libya, or Azerbaijan). Only recently, the presence of the Turkish President at Azerbaijan’s military parade on December 10, 2020, to mark Azerbaijan’s victory over Russian ally Armenia with Turkish assistance, would not have gone down well with Moscow. Yet in public, Russia has refrained from criticizing Turkey. In an interaction with the media in December 2018, Russian President Vladimir Putin stated that sometimes Russian and Turkish interests do not ‘coincide,’ yet he also praised Turkey for pursuing an ‘independent foreign policy’ in spite of being a member of NATO and honoring its commitments. 

He has also stated that Moscow needs to be ‘patient’ and adopt a more compromising stance vis-à-vis Turkey. 

Erdogan does realize that he cannot afford a sudden deterioration of ties with the US, and his reconciliatory statements vis-à-vis Israel, and the Turkish decision to appoint an envoy after more than two and a half years, is being viewed as a step towards mending ties with the incoming Biden Administration.

Conclusion 

The Britain-Turkey FTA is important not just for economics but also for geopolitical reasons. While Britain will deal with the realities of a post-Brexit world, and such FTA’s will be important in navigating the same, for Turkey the deal is important in the context of the geopolitics of the Middle East and beyond.

One thought on “UK-Turkey Free Trade Agreement: Beyond the Economics

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