Embassy, Canada

Canada-Europe free trade talks prompt Turkey to jump on board

By Anca Gurzu

18 August 2010

As momentum grows towards a successful Canada-European Union free trade deal, Turkey—an EU candidate linked by strong economic ties to the 27-member bloc—is now also seeking a free trade deal with Canada so its goods and companies aren’t put at a disadvantage.

The EU and Turkey have been linked by a customs union agreement since 1995, which ensures that goods can travel between the two without any customs restrictions. Although the agreement does not cover sensitive areas such as agriculture, public procurement or services, the European Commission decided in 2002 to start negotiating guidelines to liberalize those sectors as well. Several rounds of negotiations have taken place so far, according to reports posted on the Commission’s website.

"There is a very rational economic reason behind this, of course," said Yönet Tezel, deputy head of mission at the Turkish Embassy in Ottawa. "It’s certainly in our interest, because otherwise Canadian goods would enter the zone through Europe and Turkey, but it has to be reciprocal. [Without a free trade deal], the reciprocity would be damaged... There would be an imbalance in trade."

Canadian and EU officials concluded the fourth round of talks towards a Comprehensive Economic and Trade Agreement in July in Brussels, with the fifth round scheduled to take place in October. The CETA, when completed, will be larger in scope than the North American Free Trade Agreement that Canada negotiated with the United States in 1994.

It is the first time provinces and territories sit at the negotiating table with the federal government, as talks have centred on provincial and municipal government procurement, labour mobility, investment rules and the liberalization of services.

As an EU member candidate, Turkey has to harmonize many of its policies with existing EU ones, including the free movement of goods, and issues related to small and medium-sized enterprises, competition policy and services.

"When the EU signs these sorts of agreements with third countries, as a country which already has a customs union with the EU, we feel we have greater interest to do the same with that third country, in this case Canada," Mr Tezel said.

Turkey already has a record of following the EU’s path on free trade deals. Some of countries with which both the EU and Turkey have signed free trade agreements with are: Israel, Macedonia, Bosnia-Herzegovina, Tunisia, Morocco, the Palestinian Authority, Egypt and Albania.

"Overall, for balance, for equality, for fairness, for fair trade we would need [this free trade deal], and Canada and the EU recognize this," Mr. Yonet said.

Turkey, the world’s 16th largest economy and a G20 member, first indicated its interest to pursue a free trade deal with Canada in October 2009, according to information published on Aug. 7 in the Canada Gazette, the government’s official publication. This was just four months after the official start of negotiations between Canada and the EU. Canadian and Turkish officials met informally in February 2010 to discuss the feasibility of such a deal, and last May, the Turkish minister of state for foreign trade sent an official letter to International Trade Minister Peter Van Loan expressing the interest "towards a high-quality comprehensive free trade agreement," according to the publication.

Currently, the Canadian government is seeking the views of Canadians on the potential scope of such a deal.

Despite the interest, Turkey is not at the top of the list of countries with which Canada would seek closer economic partnerships with, said Patrick Leblond, an expert on international economic integration at University of Ottawa’s Graduate School of Public and International Affairs. Turkey is not at the bottom of the list, but countries like India or Brazil would be more obvious choices, he said.

Two-way merchandise trade between Canada and Turkey totalled $1.5 billion in 2009, about $900 million representing Canadian exports (coal, vegetables, iron, steel and paper) and about $600 million were Turkish imports consisting mainly of fruits and nuts, electronic equipment, woven apparel, vehicles and ceramic products.

Meanwhile, Turkey is Canada’s 29th largest investment market. Foreign direct investment in Turkey increased in recent years, the stock of Canadian investments having reached $1.8 billion at the end of 2009, according to government data.

At the same time, in 2009, Canada and Turkey concluded an air transport agreement, which saw the beginning of direct flight between Toronto and Istanbul. The two countries also signed an agreement to avoid double taxation. Furthermore, Mr. Tezel pointed out that Canada is about to open a trade-mandated consulate in Istanbul.

But trade numbers are still overall low, Mr. Leblond said. Rather, Turkey is important to Canada for geopolitical reasons, not so much economic ones. The G20 and NATO member state is often seen as facilitating the link between Europe and its Eastern neighbours, including Iran, Iraq, Armenia and Georgia.

From Turkey’s perspective, however, the interest to enter into free trade talks with Canada is a natural one, Mr. Leblond said.

"If [Turkey] didn’t have similar agreements with Canada, it would mean Turkish companies would not have the same level of access as European companies have to Canadian markets," he said.

It still remains unclear how comprehensive a free trade deal with Turkey would be, and whether Canadian provinces and territories would be invited at the negotiating table again.

"I understand it is a complicated matter for Canada and whatever solution the Canadians found for the EU would probably work for us too," Mr. Tezel said. "The agreement with the EU is much more comprehensive, it is beyond free trade. There are maybe more reasons for provinces to be involved. In our case, it could be less so, I don’t know, but this is for the Canadian and Turkish experts to decide."

Mr. Leblond was even clearer in his prediction.

"I would be surprised if we would go through a similar type of negotiation with Turkey," he said, adding that provinces wouldn’t really have high stakes in such a deal.

Mr. Leblond also pointed out that any free trade deal with Turkey is contingent upon CETA’s finalization.