The UK-Turkey Free Trade Agreement (the “FTA”) was signed on 29.12.2020 by the UK’s International Trade Secretary Liz Truss and Turkey Minister of Commerce, Ruhsar Pekcan in a video-conference call and will be effective as of January 1st, 2021. Although Turkey is not a member of the EU, it has been a member of EU Customs Union and has been benefiting from terms of this Customs Union with the EU for 25 years. Therefore, Brexit transition of the UK brought some uncertainties in terms of trade relations and particularly the tariffs to be applied between Turkey and the UK after the end of the Brexit transition period. Considering the UK is Turkey’s second-biggest export market partner after Germany, securing an FTA with the UK has been deemed critical for Turkish manufacturers, particularly carmakers, textile factories and white goods producers.
This FTA, the very first free trade agreement executed by the UK after agreeing on a Brexit deal to leave the European Union, is of great importance in terms of securing and developing trading relationships of Turkey and the UK worth £18.8 billion in 2019. Thanks to this FTA, no ambiguity due to Brexit transition has been left and it has been ensured that the existing tariff-free flow of goods between Turkey and the UK will not be affected when the UK formally leaves the EU at the end of the year. In this vein, all industrial and agricultural products are covered in the FTA and will be free from tariffs accordingly.
Turkey Minister of Commerce, Ruhsar Pekcan, called this FTA a landmark in UK-Turkish relations in her statements and stated that the risk of losing $2.4bn (£1.78bn) have been avoided with the FTA since about 75% of Turkish exports to the UK would be subject to tariffs without a free trade agreement.
The International Trade Secretary of the UK, Liz Truss has drawn attention to the certainty brought by the FTA particularly for the businesses and employees across the UK in the manufacturing, automotive and steel industries in her comments to the FTA and stated that this agreement clears the way for a new, more ambitious deal with Turkey in the near future and supports their plans for putting the UK at the center of a network of modern agreements with dynamic economies.
This FTA is particularly crucial in terms of protecting vital UK-Turkey supply chains in the automotive and manufacturing sectors such as Ford, which employs 7,500 people in the UK. In 2019, UK car exports to Turkey hit £174m which is almost 10% of the total trade volume between the UK and Turkey. Car parts are imported from the UK to Turkey to assemble the Ford Transit range of vehicles, a third of which are then exported to the UK. Therefore, maintaining tariff-free flow of the goods between the UK and Turkey is critical for the car industry.
Also commenting on the deal, Stuart Rowley, the president of Ford of Europe has expressed their appreciation towards the FTA between Turkey and the UK and the significance of this FTA for Ford and automatise industry pointing out that Ford and [Ford-Turkish Koc Holding co-owned] Ford Otosan businesses constitute more than 10% of the total trade volume between the UK and Turkey. It is also important to note that both Turkey and the UK have also committed with this FTA to working towards a more ambitious free trade agreement in the future, which will extend the scope of the existing deal in a way that it includes services, investments, and advanced agricultural concessions.
@Kesikli Law Firm
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