After "Made in EU": What Comes Next for EU-Türkiye Economic Relations?

Made in EU: How did we get here?

Amid global economic uncertainties driven by the growing weaponization of economic interdependence, intensifying competition, and rising protectionism, the European Union (EU) has been embroiled in major debates on the future of its single market. In April 2024, former Italian Prime Minister Enrico Letta published a report on the EU’s single market, highlighting the EU’s declining share among the world’s largest economies. In addition to the single market’s “four freedoms” on the movement of people, goods, services, and capital, Letta suggests addressing this issue by adding a “fifth freedom” on research, innovation, and education and mobilizing both private and public financial resources to fund this.1 Following this report, former President of the European Central Bank Mario Draghi published a report on EU competitiveness in September 2024.2 The report took a much gloomier view of the EU market, highlighting the long-run economic stagnation and industrial decline faced by the EU, driven primarily by the EU’s reliance on external markets in key strategic sectors, such as energy and security, as well as the EU’s growing innovation gap with China and the United States in high-tech industries. To reverse these trends, Draghi suggests that the EU invest an additional EUR 750–800 billion into its economy annually, relaxing the EU’s complex regulatory mechanisms, and supporting private investment with public incentives.

Services

For Türkiye to keep up with competition from new markets, it is necessary to address the current disadvantages Türkiye faces in the EU-Türkiye Customs Union—most importantly the fact that the Customs Union does not include services. This is particularly crucial for Türkiye as most EU member states define “truck transport” within the scope of the service sector. On this basis, Turkish truck transport to the EU has been subject to transit quotas imposed by several EU member states, including Greece, Bulgaria, Romania, Hungary, and Austria.17 Generally, the allocated transit quota is lower than the number of trucks that need to be transported.

Final Remarks: Back to the Customs Union

The EU-Türkiye Customs Union lies at the center of discussions on the future of European-Turkish economic relations. While there has been no progress in modernization talks since 2014, the ‘‘Made in EU’’ clause has the potential to revitalize these discussions. The Customs Union modernization agenda involves expanding the Customs Union to cover public procurement and the service sector, as it is currently limited to industrial goods and processed agricultural products. As noted, the exclusion of the service sector from the Customs Union undermines Türkiye’s competitiveness, which will be further challenged by the EU’s recent free trade agreements with new parties. The exclusion of EU-based companies from public procurement in Türkiye may affect Türkiye’s inclusion in “Made in EU,” whereas EU-based companies’ inclusion would help safeguard Türkiye’s position within the “Made in EU” framework. Modernizing the Customs Union can address these issues.