By Cengiz K. Fırat
The European Union’s push to conclude free trade agreements (FTAs) is reshaping the economic landscape around its periphery. Chief among these is the long-negotiated EU–Mercosur Trade Agreement, alongside accelerating talks with India. While these agreements are formally bilateral between the EU and third parties, their implications extend well beyond signatories. For Turkey, which is bound to the EU through a customs union covering industrial goods, these deals carry direct consequences—despite Ankara not being a negotiating party.
This exposes the asymmetry at the heart of the EU–Turkey Customs Union and raises questions at a time when global norms are under strain due to President Donald Trump’s tariff wars and the erosion of multilateral discipline.
EU’S NEW DEALS
The EU–Mercosur agreement, politically concluded but awaiting ratification, aims to eliminate tariffs on approximately 90% of goods traded between the EU and Mercosur members (Brazil, Argentina, Uruguay, and Paraguay). The agreement is ambitious in industrial goods, including automobiles, machinery, chemicals, and pharmaceuticals—exports central to Turkey. In exchange, Mercosur gains expanded access for agricultural products such as beef, poultry, sugar, ethanol, and soybeans, albeit under quota and safeguard mechanisms designed to protect European farmers.
Parallel to this, the EU–India FTA, approaching a political conclusion, is expected to liberalize trade in manufacturing, services, digital trade, pharmaceuticals, and green technologies. India’s strengths—low-cost manufacturing, pharmaceuticals, textiles, IT services, and automotive components—overlap significantly with Turkey’s own.
IMPACTS ON TURKEY
Under the customs union, Turkey is obliged to align its external tariffs with those of the EU for industrial goods. This means that when the EU signs an FTA with a third party, Turkey must lower its tariffs on imports from that partner—even if that partner does not grant reciprocal market access to Turkey.
In practical terms, once the EU–Mercosur and EU–India FTAs enter into force:
- Mercosur and Indian industrial goods will enter the Turkish market at reduced or zero tariffs.
- Turkish exports to those markets will continue to face tariffs unless Turkey separately negotiates FTAs—often a slow and complex process.
- Turkey risks becoming a passive trade liberalizer, absorbing competitive pressures without enjoying equivalent export gains.
This asymmetry has long been acknowledged by both Ankara and Brussels, with the EU committed to consulting Turkey before concluding new FTAs. However, consultation does mean consent, nor veto power.
SECTORAL IMPACTS
The immediate pressure will be felt in manufacturing. Turkish automotive, machinery, white goods, and chemicals sectors—deeply integrated into EU supply chains—will face increased competition from Brazilian and Indian producers benefiting from preferential EU access and scale advantages.
Textiles and apparel, where Turkey competes on speed, quality, and proximity, face rising pressure from India’s lower labor costs combined with tariff-free EU entry. Over time, this could erode Turkey’s relative competitiveness, especially if rules of origin favor Indian producers in EU value chains.
While agriculture is formally excluded from the EU–Turkey Customs Union, indirect effects are unavoidable. Increased Mercosur agricultural exports to the EU could depress prices and displace Turkish agricultural exports in European markets, particularly in products where Turkey already competes at the margin (processed foods, fruit products, and agri-industrial inputs). Moreover, lower-cost imports into the EU can reshape supply chains, indirectly squeezing Turkish agri-exporters.
President Trump’s renewed tariff wars have weakened WTO enforcement, normalized unilateralism, and reduced the political cost of sidelining partners’ concerns. In such an environment, commitments — such as EU consultation with Türkiye — risk becoming secondary to speed and strategic alignment.
For the EU, Mercosur and India are part of a strategy to diversify supply chains, reduce dependence on China, and secure access to raw materials and growth markets. Turkey’s sensitivities, while acknowledged, are not central to this calculus.
WHAT TO EXPECT?
Turkey faces three risks. First, competitive erosion in key industrial sectors without compensatory market access. Second, trade diversion, as EU firms source inputs from FTA partners rather than Turkish suppliers. Third, a weakening of Turkey’s bargaining position within the customs union itself.
Policy responses remain limited. Turkey could accelerate parallel FTAs with Mercosur and India, though political and economic asymmetries make rapid success uncertain. Alternatively, Ankara could push harder for modernization of the customs union, including agriculture, services, and dispute settlement—though this remains politically blocked within the EU. A more unilateral response—selective safeguards or industrial policy measures—would carry its own risks amid global trade instability.
The reality is that Turkey’s economic fate remains coupled to EU trade policy, yet its voice remains marginal. In a world where trade is increasingly geopolitical, the costs of this asymmetry are rising. Without institutional reform or strategic recalibration, Turkey risks becoming an involuntary shock absorber for Europe’s global trade ambitions—at a moment when economic resilience is more critical than ever.
*Cengiz K. Fırat (b. 1970) is a retired Turkish ambassador. He joined the Ministry of Foreign Affairs in 1993 and retired from diplomatic service in 2024. Throughout his career, he served in several key Turkish missions abroad, including the EU Delegation in Brussels, the Embassy in Algiers, the OECD Delegation in Paris, and the Embassy in Stockholm. He later served as ambassador to Kyrgyzstan and Poland.
