FREE TRADE ZONES DURING THE CUSTOMS UNION PROCESS
Turkey’s free trade zones do not infringe EU rules and its memberships to various international economic cooperation organizations do not obstruct Customs Union arrangements with the EU. The Customs Union arrangements and rules between Turkey and the EU continue uninterrupted since they took force on January 1st, 1996, though Turkey has suspended political consultations with the Union since the Luxembourg Summit last December.This means Article 10 of the 1963 Ankara Treaty concerning the last stage of Turkey’s association with the EU, the Customs Union, is in force. This article reads:
“…The Customs Union shall involve Turkey’s adaptation of the Common Customs Tariff of the Community in its trade with third countries, and an approximation to the other Community rules on external trade.”
Likewise, Association Council Decision 1/95, which regulates the Customs Union process, calls for revising Turkey’s free trade rules by December 31st, 2000.
Now that Turkey is giving a boost to these free trade zones as a step forward for the Eurasian Union and concluding free trade agreements with a number of countries, as well as being members to several economic cooperation organizations, such as BSEC, ECO and OIC, how compatible are these arrangements with the above rules of the Customs Union with the EU?
Without waiting for the end of the year 2000 as the agreement calls for, back in mid-1995 Turkish delegations made contacts with the EU Commission in Brussels and in this country about the status of free zones in the EU and Turkey’s Free Zones Act, 3218.
It was found out from these contacts that there is no single regulation in the EU about free trade zones and that they are only trying to achieve an approximation among these rules. The Hamburg, Madeira, Shannon, Barcelona and Trieste free ports or free trade zones are all subject to different rules because they were established before the European integration began with the Treaty of Rome in 1957. Also, the EU rules do not necessitate the uniformity of the statuses of free trade zones in Europe. The national legislation of each country for these free trade zones has to be observed by the Union under EU rules.
Free trade zones help diversify Turkey’s industrial cooperation
Turkey was relieved to learn these facts and was able to have a free hand in establishing its own free zones according to its own legislation. Nevertheless, Turkey has still kept in mind the necessity of harmonizing its national legislation with that of the EU, and in drawing up its status for free trade zones and ports it made certain adjustments to conform to European norms. With the alterations made in the Customs Law, rules parallel to the EU Customs Code were adopted with Decree Law 564 promulgated on December 29th, 1995, two days before the Customs Union went into force.
Free trade zones and ports enable Turkey to exclude third country goods from EU rules as far as customs duties, foreign exchange rules and trade policies go, because free trade zones are regarded as areas outside the Customs areas. These advantages will continue without any interruption throughout the Customs Union process. The Single Administrative Document (SAD) used in the EU to eliminate customs formalities on the frontiers is also used for Turkish exports.
As textiles are subject to quota restrictions in the EU, Turkey also has to conform to these rules. Turkey can bring textiles to the free zones from a third country and re-export them, but cannot possibly import them into the country even if it pays the tariffs. This restriction is causing difficulties between Turkey and Turkmenistan. Turkish companies have set up a big textile complex in Turkmenistan, but its products cannot enter Turkey due to the above rule whereas Turkish exports to Central Asia enjoy free trade area facilities.
Even though such rules create small problems for Turkey in its current endeavour to diversify its external trade, the practice of recent years shows that Ankara has been very successful in coordinating its EU commitments with its expansion to Eurasia.
Turkey’s current expansion outside of the EU is not necessarily for seeking alternatives to Europe but in preparation of the globalizing world that is being pioneered by the United States. uras@ada.net.tr , August 13th, 1998