Turkey to set up NAFTA-like union with neighbors

Turkey launched a “zero problems with neighbors” policy in 2002. The first step was to waive visas with neighbors. Since diplomatic efforts have been launched, the number of countries offering visa-free travel to Turkish citizens has risen to 61. Twelve of these visa-free travel arrangements took place under the Justice and Development Party (AK Party) government’s new policy. These countries are Russia, Ukraine, Syria, Lebanon, Jordan, Pakistan, Albania, Bosnia and Herzegovina, Croatia, Georgia, Qatar and Tanzania.

Thanks to the advantages that come with the new visa-free regimes, Turkey has been able to increase the trade volume with its neighbors by three times. Now a customs union arrangement is on the horizon, with Turkey planning to start a new trade regime with Iran and Syria first, followed by other countries that have a high volume of trade with Turkey. Later, the arrangement will be expanded to include more countries. Diplomatic sources say Jordan, Lebanon, Georgia and Azerbaijan are the next countries likely to be considered for the new customs union deal. Due to its unstable politics, Iraq is not a candidate for the time being.

Meanwhile, the first step with Syria has already been taken. Prime Minister Recep Tayyip Erdoğan and Syrian President Bashar al-Assad took part in the foundation stone laying ceremony for a “dam of friendship” being built as part of a joint project between the two countries on Sunday. Syria and Turkey will be cooperating intensely in six areas, which will be followed by a customs union agreement. In the past two years, the two countries have signed 51 cooperation agreements.

Erdoğan announced last week in Damascus that the first of the six target areas will be the building of the Nusaybin-Kamışlı joint customs gate. Others are opening a bank with Syria, launching high-speed railroads between Gaziantep and Aleppo, connecting the two countries’ natural gas infrastructure, Turkey’s Eximbank providing loans to the Syrian government and the completion of the new Friendship Dam.

Turkey also has a customs union arrangement in mind with Iran. In this regard, Erdoğan on Sept. 19 made a proposal to Iran during a business forum in İstanbul between the two countries’ relevant agencies. Shortly after the business forum, the Foreign Economic Relations Board (DEİK) prepared a comprehensive report on the possibility of free trade with Iran, pointing out the problems that Turkish companies operating in the country experience. The major problems Turkish businesses in Iran face were listed as those in the banking sector, followed by the high costs of customs duties and high logistics expenses.

During meetings with Iran, steps to improve the situation in the banking sector were taken. The Turkish Eximbank and Ziraat Bank have opened a branch Iran to help solve the problems. Bureaucrats from both countries are still pondering how to deal with the other issues. Turkey is planning a gradual transition to a full customs union with both Iran and Syria.

Opening up gates

As part of its plans to form a customs union agreement, Turkey has decided to open seven new customs gates with Syria, Iraq and Iran. Iran has already agreed to use the Esendere customs gate jointly with Turkey. A similar arrangement will be applied to the Nusaybin gate with Syria. In addition to these points, Turkey will open up new border gates in Dilucu and Kapıköy for trade with Iran, two new ones in Şinova and Ovaköy for trade with Iraq and new gates in Öncüpınar, Akçakale and Karkamış for trade with Syria. All of these points are expected to start functioning by 2012.

Trade with close neighbors of Turkey accounted for only 5 percent of Turkey’s total foreign trade volume in 2002. By the end of 2010, this figure had grown to 16 percent. Turkey’s target is to increase this to above 40 percent by 2015.