Since the initial Brexit referendum in June 2016, which saw 52% of voters cast their ballots in favor of the UK leaving the EU, the UK has faced turbulence in its domestic politics. Although British Prime Minister Boris Johnson has made an arrangement with Brussels, the parliament is not completely on board. Johnson still has his work cut out for him until Nov. 6.
Some form of Brexit will pass in the British parliament eventually, and after it does, many countries will have to reshape their relations with the UK due to the dramatic changes in economic, political and security arrangements. According to a recent report by the UN Trade and Development Organization, the countries that will be most vulnerable to changes caused by Brexit are the EU member states and Turkey. Why does Turkey need to rapidly reshape its relations with the UK? And why is the UK essential for Turkey's future when it comes to its economy and business world?
The UK is the second-biggest destination for Turkey's exports with a 3.7 billion dollar trade surplus. Turkey has trade privileges with the UK due to a Customs Union agreement. The Customs Union, signed in 1995, lets Turkey export products without any customs tariffs or taxes. However, the Customs Union agreement with the UK will end with Brexit, which means Turkey will lose its trade benefits, and moreover, Turkey will have to compete equally with the US, China and Japan. Since Turkey's economy is in turbulence, increasing or protecting its trade surplus is vital for the economy. Trade relations with the UK allow Turkey to collect foreign currency, which in turn helps the stability of the Turkish lira.
Another adverse effect of Brexit for Turkey is the possible dramatic change in the transit and transportation system. Right now, EU regulations apply for transportation inside the Union’s borders, which means that, after a vehicle’s documents are checked, within the EU, the vehicle can reach its destination without stopping. In other words, a truck loaded with automobiles from Bursa can have its documents checked in Bulgaria and the truck can continue its journey to London or somewhere else in the EU without issue. This transport system provides an opportunity for rapid transport, reduced bureaucracy, and a one-off preparation of paperwork. With Brexit, this convenience will also end.
The future of the Ankara Agreement, which was signed between Turkey and the European Economic Community in 1963, is another possible destructive aspect of Brexit. The Ankara Agreement grants freedom of movement for both British and Turkish citizens between the two countries for the purpose of establishing or joining a business venture. When you go to the UK, the restaurant or consultancy firm you see may have been founded due to this agreement. The free movement clause also allows Turkey to increase its direct foreign investment rate. There are 3,000 UK business enterprises in Turkey due to the convenience of the Ankara Agreement. In addition to that, the Turkish government has set the goal of attracting foreign investment from 17 countries, including the UK.
Many people assume that the EU-UK negotiation process will cover the Ankara Agreement and remove the undesirable consequences of the UK leaving the EU. Because Brussels and London are only focusing on the free movement of EU member citizens, the Ankara Agreement remains outside the agenda. Therefore, Turkey should take the initiative to secure bilateral trade relations with the UK. If action isn’t taken, a "wait and see" policy might cause many problems, ranging from customs tariffs to transportation difficulties.