Time for EU-Turkey Customs Union 2.0

When Chairman of the Board of the German-Turkish Chamber of Commerce and Industry Markus C. Slevogt answered a question during a panel discussion in Ankara last week, he didn’t mince words: “Customs Union 2.0? Certainly ! At stake: the official launch of a large-scale survey report on the opinions of the Turkish private sector regarding trade relations between the European Union and Turkey.

A total of 1,828 companies from all regions of Turkey participated in this venture and it is not surprising that the vast majority of companies are SMEs or small and medium-sized enterprises (92%), reflecting the fact that almost all companies operating in this country are SMEs anyway.

KOSGEB, the Small and Medium Enterprise Development Organization of Turkey, puts this figure at 99.83%; SMEs are classified as enterprises employing no more than 250 persons (micro enterprises having no more than 10 persons, small enterprises having less than 50 persons, respectively). The maximum turnover is capped at 125 million TL ($8.45 million). Over the past two decades, the country’s SMEs have completely restructured and increased their previously extremely limited share of exports and value added to the economy from just over 10% to well over 50%, a a development that allows observers to understand why the Turkish economy is doing better during this period. period of global crisis than most other European states. The Turkish economy is based on both family business and SMEs, and can therefore react faster to new challenges and adapt faster as well. If there weren’t a hurdle, as this only happens as long as adequate funding is provided, of course; we will come back to this below.

In favor of EU membership

Support for EU membership remains high in the Turkish private sector at 60%. 59% value environmental protection and 76% support the ratification of the Paris Agreement. Almost half of respondents are aware of the brand new EU Green Deal roadmap. Very interestingly, 74% of companies say they are in favor of strengthening EU-Turkey cooperation in the field of digitalisation.

Often a point of heated debate, the vast majority of respondents want to see a rapid upgrade of the customs union with the EU, including the addition of agricultural products into the mix.

The survey is the third of its kind and is part of a project called Turkey-EU Business Dialogue (TEBD). This undertaking is co-financed by the EU and is part of Turkey’s pre-accession programmes. The Brussels-based Association of European Chambers of Commerce and Industry (Eurochambres) and the Union of Turkish Chambers and Stock Exchanges (TOBB) in Ankara have joined forces to implement measures to foster cooperation economy and to support Turkey’s EU membership in broader terms.

Out of the ivory tower!

What makes this project – “EU-Turkey Trade Relations: Views from the Turkish Private Sector, Third Edition 2021” presented to the public at the TEBD SME Survey Launch Event – ​​and now the third such survey , so important is that it attempts to bring what most consider a subject reserved for academic circles and policy makers literally to the recipient. Only when owners, managers and staff of small and medium enterprises fully accept that change should be welcomed as something positive and not interpreted as a threat will the national economy continue to thrive. “Change” most certainly includes taking into account the broader and ever-changing global political, economic and monetary situation, but which, at the same time, also has a much more local dimension.

Let’s discuss an example. In order to not only enter the market but to stay there, entrepreneurs need to better understand the concept behind the term innovation. Innovation leads to products and services with better standards and higher quality, which in turn leads to higher turnovers. We will briefly return to this observation by referring to another term, competitive advantage.

Can we innovate something that already exists? Of course we can! Think of an office chair. Some have four legs, others five legs. They come in all shapes and colors. Innovation wouldn’t mean adding one more color to your product line, innovation would mean improving the usability of this chair. Changing the fabric so that it becomes flame retardant or more easily cleanable: these would be examples.

From office chairs to cars, everything we make or produce can theoretically be upgraded, improved, become more user-friendly and thus achieve a higher selling price, both at home and abroad, when it comes to of exports.

But explaining the need and the concept behind the innovation is not an easy task and, after all, it costs money because production facilities have to be upgraded or replaced altogether.

Money, money, money

The banking system has come a long way when you look closely at how financing SMEs via lines of credit has become a staple of a bank executive’s portfolio. Initially, it was more difficult to convince SME owners to take advantage of these new offers than to convince banks to approach this market segment.

But “going red” isn’t for all types of businesses, regardless of warranties; governments should also intervene in the financing circle.

In an ideal scenario, public and private funds would be made available to SMEs on a much larger scale; preparations for an investment platform appear to be underway as of this writing. Funds for expansion, funds for startups, funds for restructuring and innovation – perhaps joint ventures such as EU-Turkey trade relations – can create a lobbying roadmap to facilitate public funding and national and European private sector, especially for the ever-ready Turkish SMEs that can upgrade.

Peace, Growth, Benefit

Coming back to Slevogt once more before we come to the end of this brief summary, three overarching concerns were mentioned: when he asked many of his own nearly 1,000 German companies currently engaged in the Turkish market, peace and prosperity, economic growth and gaining competitive advantage are most prominently on respondents’ agendas. The first point has certainly gained prominence, but not in such a deliberate way that Russia’s invasion of Ukraine was unpredictable, but the other two topics clearly underscore the common vision and approach. . The term “competitive advantage” highlights the realization of Turkish and German business leaders that by working more closely together, more value will be added to both economies. Adding more value allows entrepreneurs to invest more per return. It creates jobs.

Germany is a strong partner for everything related to Turkey. Having the German Chamber as a proactive support among the very active EuroChambers should facilitate the realization of the modernization of the customs union. Particularly if the concerns expressed by both business communities are properly addressed, and these most certainly include, in addition to the broader picture presented in the previous paragraph, exchange rate volatility, monetary policies and the rising unhappy with the prices of energy and raw materials.

Customs Union 2.0? This will not happen overnight, but should happen sooner rather than later.

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About Eleanor Blackburn

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