With news that the Government has opened a call for input on a new Free Trade Agreement with Turkiye, BCC Head of Trade Policy, William Bain, takes a closer look at the key areas for negotiation:

It is a welcome development to see the launch of the call for evidence on upgrading UK trading terms with Turkiye by the Department for Business and Trade. Bilateral trade is now worth £26.2bn per year, with Türkiye the UK’s 17th largest trading partner by volume, and bilateral investment stock from the UK in Türkiye is some £8.9bn. This is up by nearly a quarter over the past 3 years, so it is clearly a growing market. Türkiye is among the world’s 20 largest economies and GDP per capita is expected to exceed £13,000 this year.

Türkiye already has a partial customs union agreement with the EU, so existing and any future trading terms must be mindful of that overarching reality. That is why the forthcoming negotiations between the two countries are likely to focus on areas outside the EU-Türkiye agreement. Instead they will concentrate on market access on services, stronger digital trade provisions, business travel, and data flows.

There should be plenty for business to welcome here; if we can create a genuinely future looking and liberalising agreement in these areas. There is major scope for expansion in UK services exports to Türkiye in terms of business, transport, and travel services which these negotiations can facilitate. Chapters in the agreement on SMEs, intellectual property safeguards and provisions to ease e-commerce between the two countries could cut costs for traders and boost export flows in both directions.

Any agreement will have to put in place new provisions on rules of origin. This is a complex area. The continuity agreement reached a few days after the EU and UK agreed the Trade and Co-operation Agreement in December 2020 provided for extended cumulation of EU material into bilateral trade in goods between the UK and Türkiye. Of course, such an agreement cannot bind the EU and less generous rules on cumulation apply within the UK-EU Trade and Co-operation Agreement.

On many industrial goods, trade is based on zero tariffs, but there are different terms for agri-food trade. Tariffs on fruit and vegetable juices are still around 33%. Tariff rate quotas apply in terms of items like pasta, cheese and many fresh fruits and vegetables – offering zero tariffs within the limits of the quotas applicable. Turkiye’s current agreement with the EU means we are unlikely to see these shift.

One means of addressing the rules of origin issue in the round would be for the UK to re-join the Pan-European Mediterranean (PEM) Convention which provides for extended cumulation between the contracting parties involving 61 countries. That is unlikely to feature in these forthcoming negotiations, but should the UK seek to re-join the PEM system in the future, as the BCC advocates, it would necessitate further changes. 

UK companies are also assisting Türkiye with infrastructure reconstruction following the devastating earthquakes earlier this year. Modern provisions on investment facilitation will provide the certainty for this to continue and to generate an upswing in bilateral investment flows. 

Overall, UK business has good hopes for stronger trading terms to emerge from these negotiations, future proofing UK-Türkiye trade and investment flows and providing a stable platform for future growth in fast rising sectors of the economy.

The Government’s Call for Input on the trade negotiations can be found here.