New trade connections: Developing a new bilateral trade agreement between the UK and Turkey

Turkey is now a candidate for joining the EU due to the UK’s departure at the end of the complex Brexit process. Brexit has placed the UK in a position where the country has to rebuild its international trade network: the UK lost the free trade agreement it had with all EU members after its departure. Although Turkey has not received its full membership, the country has been an eminent partner for the EU members, with its role of being a bridge between the East and the West and essential logistic advantages. Due to the effects of Brexit, the UK needs to rebuild trade relations with Turkey so they do not lose the benefits acquired by cooperating with Turkey. 

Turkey is located between the EU and the Eastern countries. The geographical location of the country provides essential opportunities for producers and exporters, and many multinational companies have production plants in Turkey, including BSH Hausgeräte GmbH, Foxconn, Coca Cola, Hyundai, Nestle, Microsoft, and Ericson. The location of Turkey provides companies the opportunity to optimize their costs and essential advantages of reaching their target markets in the East. The labor cost in Turkey is relatively lower than the developed countries’ labor cost. In contrast, the quality of the labor force is relatively higher than the average of the developing countries. Subsequently, Turkey is a suitable location for international companies to minimize their production costs by reducing their distance from their production plants to the Eastern markets.

Turkey’s geographic location lends significant logistic advantages. A ship coming from the East can reach Europe faster through Turkey in comparison to alternative routes. The customs union agreement between Turkey and the EU and the logistic advantages of using routes through Turkey provide essential opportunities for European companies to minimize their logistic costs. Exiting the EU requires the UK to make a new customs agreement with Turkey to benefit the logistic advantages of Turkey. 

A trade union between Turkey and the UK wouldn’t be one-sided, however. Turkey makes its second-highest export to the UK with a value of USD 12 billion in 2019, and the trade volume between the UK and Turkey has increased in the last decade. Considering that the Turkish economy has been in political turmoil for the past five years, Turkey needs to protect its export to the UK. The export is necessary to achieve the desired economic growth rates and avoid a possible recession in the future. Considering that it will take longer for Turkey to join the EU, it is vital to manage trade relations with every single European economy. 

Turkey is a bridge for the UK to reach essential markets in the East, including the Turkish markets, while the UK is a place where the Turkish producers receive relatively higher returns on their sales. Both countries have been experiencing critical time in their economies, and both countries have relatively higher risks. Thus, it is essential for both countries to consider drawing up a bilateral trade agreement to continue to reap the benefits they offer each other.

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