Turkey and the U.K. Sign Free Trade Agreement

As the end of the Brexit transition period approaches, Turkey and the United Kingdom have signed a Free Trade Agreement ("FTA") to avoid any disruption and amendments to tariffs in place due to the existing E.U. Customs Union. The FTA maintains special tariffs from the Customs Union in industrial and agricultural goods and will take effect on Jan. 1, 2021, when the Brexit transition period ends and the U.K. leaves the E.U.'s trading arrangements.

The FTA will help the flow of goods between the two countries, which is worth USD 25 billion per annum. This volume of trade makes the U.K., Turkey's second-biggest trading partner after Germany, and the fifth-biggest investor, with investments in Turkey worth nearly 11.6 billion dollars.

The FTA will help U.K. businesses, particularly in the automotive and manufacturing sectors, especially diesel and semidiesel engines, motor vehicles, tramp iron, and steel. Medicinal and pharmaceutical products also create a considerable proportion of the U.K.’s exports.

In excess of 7,600 UK businesses benefited from preferential tariffs in the Customs Union, and it is worth noting that more than 3000 British companies currently operate in Turkey. 

The FTA will continue to boost Turkish exports in gold, made-up textile articles, garments, electrical and non-electrical machinery, motor vehicles and their parts, iron and steel products, insulated wires, cables and other electric conductors.

Turkish and, U.K. businesses are particularly interdependent in the automotive industry, with almost a third of engines manufactured in the U.K. exported to Turkey, and 20% of vans sold in the U.K. imported from Turkey.

The FTA will be a relief for both countries' automotive industries as they account for 16% of the total trade volume between the U.K. and Turkey.

With the FTA, for example, washing machines and televisions will be exported with 0% customs tax, which are 2% and 14% respectively for other countries under WTO terms.

Without the FTA, about 75 per cent of Turkish exports to the U.K. would have been subject to tariffs, causing a loss of some $2.4 billion.

To provide a level playing field in international trade, Turkey makes free trade agreements with third countries in parallel with the 1995 E.U. Customs Union agreement. It has FTAs with over twenty countries, including Israel, Serbia, Bosnia-Herzegovina and Singapore.