Turkey and UK 'very close' to a trade deal - so what will this mean?

Legislation | | MIC Customs Solutions |

It has been reported that the next trade deal with Britain could come from Turkey.

Britain is keen to keep trading seamlessly when the Brexit transition period ends on December 31st 2020, and that means building new relationships in the form of free trade agreements with a host of other nations.

If recent reports in the media are to be believed, it may be one step closer to doing so with its long-term ally Turkey, as bilateral talks apparently come to fruition.

Turkish foreign minister Mevlut Cavusoglu visited Britain earlier this month to hold discussions with prime minister Boris Johnson and foreign secretary Dominic Raab.

He told the Financial Times the group spoke on the post-pandemic era, the defense industry, healthcare and free trade, adding that preliminary probes into manufactured goods, agriculture and services are "going very well".

"We are close to finalizing it," Mr Cavusoglu said on the potential for a free trade agreement.

The UK has not yet organized a deal with Turkey so, as it stands, it would not have preferential trade arrangements for exports to Turkey once it leaves the EU.

Instead, it would export on Most Favoured Nation terms under World Trade Organization (WTO) rules, with duties also applying to a selection of products once they reach Turkey.

Both sides are keen to avoid this, with more than 2,500 UK companies currently operating in Turkey and Britain representing Turkey's second-biggest trading partnership after Germany.

Mr Cavusoglu has said there are not currently any differences in opinion concerning a free trade agreement (FTA), but some technical issues will need to be finalized.

Indeed, one particular hurdle will be the fact that Turkey and Britain are only able to sign an agreement once one is in place with the EU and the UK.

This is because Turkey must adhere to its membership of the customs union, despite it not being a fully-fledged EU member state.

Although British prime minister Boris Johnson has insisted there will be no extension to the Brexit transition period and that the 'divorce' will go ahead as planned, Turkey could find itself in breach of EU rules should it push ahead with a deal and find this is not in fact the case.

Mr Cavusoglu acknowledged in the Financial Times interview that this would be a "bizarre situation", but expressed optimism that progress will be made.

Meanwhile, British representative in Turkey Judith Slater said: "Our strategic bilateral relationship with Turkey will continue to be of great importance."

There would be numerous benefits to the UK of reaching a deal with Turkey, as it is a large, rapidly developing country with a determination to join the EU proper.

According to the HSBC World in 2050 report, Turkey will be the world's 12th-largest economy in just 30 years' time, as well as the fourth largest in Europe.

It is also a gateway to markets in Asia and the Middle East, yet boasts European business ethics and modern practises.

Currently, it is the UK's tenth-largest European export market, while Britain is behind only Germany and Iraq in terms of biggest markets for Turkish goods.

However, the World Bank has expressed concern about Turkey's ability to sustain progress amid slowing per capita income, rising immigration from Syria and uneven momentum in reforms.

It is therefore eager for UK companies to enter its supply chains, particularly in healthcare and the provision of goods such as devices for operating theaters and intelligent IT.

British investment and access to items that can help it develop more rapidly would be a key advantage in terms of becoming a major economic player on the world stage.

Clearly, there are definite benefits for both sides when it comes to getting a free trade deal signed. It may be, therefore, that these latest reports are accurate and that we see progress on an agreement sooner rather than later.