New UK-Turkey FTA Must Rise to the Opportunity
1 May 2024
In March, the UK and Turkey have announced their intention to begin negotiating an “ambitious, modern, and upgraded” bilateral Free Trade Agreement.
UK businesses have helped to shape negotiation objectives in advance of the June meetings through a public call for input, and will be keen to see how the new FTA improves on the current one, when talks begin in earnest in London, on 10 June 2024.
The current FTA was rolled over when Britain left the EU; its replacement will need to respond to the needs of businesses in both countries, taking account of how technology, society and markets have changed, and anticipating how they are likely to develop in coming years.
Around 8,200 VAT-registered UK companies exported to Turkey in 2023. UK exports to Turkey have been growing strongly, up 18% to £10 billion, with low or zero tariffs applying for goods that can demonstrate they satisfy the rules of origin. In terms of goods exports, the categories worth most to the UK economy are currently power generation equipment, vehicles, and metals (including ores and scrap).
Speaking last year, British Chamber of Commerce head of trade policy William Bain said, “Issues around rules of origin are being consistently raised by UK companies trading in the European neighbourhood. The BCC would like the UK to join the Pan-Euro Mediterranean (PEM) Convention which would offer greater flexibility for traders seeking to sell manufactured goods in the EU, Turkey, and the rest of the European neighbourhood within the Convention”.
Opportunities for the Service Sector
Goods only comprise 28.4% of Britian’s exports to Turkey, though. Services make up more than twice that, so it is vital the new FTA delivers for the service sector, as well as manufacturers and goods exporters.
“An upgraded free trade agreement must focus on being match-fit for the twenty-first century. This means negotiating new arrangements on services, business and labour mobility, green trade and digital trade”, said Bain.
Turkey is one of the fastest-growing economies in the OECD group of nations and, as such, offers great potential as a trading partner and export market for British service providers and manufacturers alike. Some of the UK’s biggest companies operate in Turkey, including Vodafone, GlaxoSmithKline, BP, Marks & Spencer and HSBC.
Vodafone has been highly successful in Turkey since first launching into that market 17 years ago. Built on total long-term investments estimated at £4.2 billion, its annual revenues there are now rapidly approaching £2 billion, with 28% revenue growth recorded in 2023. Many SMEs have found Turkey to be a valuable export market too.
Total trade between the two nations in 2023 was worth £26.3 billion – an increase on 8% year-on-year.
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