
MODERNIZING THE TURKEY–EU CUSTOMS UNION: ISSUES AND PROSPECTS
by instituDE, published in March 2025
The Turkey–EU Customs Union, established in 1995, has been a defining feature of trade relations between Turkey and the European Union. Over the past three decades, the global economic landscape has evolved significantly, necessitating a modernization of the agreement to address new trade realities, regulatory developments, and emerging geopolitical challenges. Updating the Customs Union would not only strengthen economic ties between Turkey and the EU but also enhance market access, promote regulatory alignment, and create a more resilient trade framework suited to contemporary global trade dynamics. The current Customs Union primarily covers industrial goods and processed agricultural products, excluding key sectors such as services, agriculture, and digital trade. This limited scope has resulted in inefficiencies, trade imbalances, and difficulties in aligning Turkey’s economic policies with the EU’s evolving trade framework. A major challenge stems from asymmetries in FTAs, where Turkey must adopt EU trade policies without gaining reciprocal access to new markets, creating obstacles for Turkish exporters. Geopolitical tensions, shifting supply chains, and increasing regulatory demands highlight the need for a comprehensive overhaul of the agreement. The application of the gravity model suggests that while the Customs Union has led to intra-trade creation effects within the EU–Turkey bloc, trade diversion effects are not significantly observed.