By Astrid Goh

WASHINGTON—Growth in the Turkish economy could be stunted if it fails to modernize its 20-year-old customs union with the European Union, experts said at a Brookings panel Wednesday morning.

Turkey, a country of almost 76 million people, which had enjoyed rapid growth in the last decade has now seen a more than 2 percent decrease in economic growth since 2012. Growth could plunge further without trade reforms, and the country risks being stuck in a middle-income trap, according to a 2014 World Bank report.

The “middle-income trap” is a phenomenon of slow growth afflicting emerging markets just as they are about to reach into the high-income threshold, said Martin Raiser, director of the World Bank in Turkey.

“As economic growth has slowed and domestic politics become more turbulent, Turkey’s star has dimmed in the past three years,” Raiser said. “The country’s commitment to free markets and democratic principles—key features of its appeal in Western capitals—can no longer be taken for granted.”

Once a closed, largely agrarian economy, the majority-Muslim country first opened up to international trade in the early 1980s, and the customs union with the EU in 1996—which allows both countries to charge identical import duties and conduct free trade with each other—played a critical role in its successful trade integration.

But Stuart Eizenstat, former U.S. Ambassador to the EU, thinks the union is outdated and too narrow.

The customs union “only covers the manufacturing sector and fully processed industrial products,” Eizenstat said. “[We should] broaden it to include services in news areas. Further integration would do wonders for the Turkish and EU economies.”

Eizenstat also spoke of the benefits of a possible accession of Turkey into the EU. Turkey had first applied to join what was then the “European Economic Community” in 1959. Accession talks were officially launched in 2005 and 2006 but efforts have waned since then, and Eizenstat said there is “no practical likelihood in the near term of Turkey immediately acceding to the EU.”

But he said to close that window definitively would be a grave mistake, citing the 150,000 Turkish entrepreneurs that hire close to 600,000 workers in Europe, and Turkey’s stance as the EU’s sixth largest trading partner in 2013.


“It is important to keep the accession process alive and properly put it back on track after a period of stagnation, which has been a source of frustration for both sides,” Eizenstat said.