Study of the EU-Turkey Bilateral Preferential Trade Framework, Including the Customs Union, and an Assessment of Its Possible Enhancement
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Study of the EU-Turkey Bilateral Preferential Trade Framework, Including the Customs Union, and an Assessment of Its Possible Enhancement Final Report 26 October 2016 Prepared by BKP Development Research & Consulting in consortium with Panteia and AESA [October 2016] The views expressed in the report are those of the consultant and do not present an official view of the European Commission. EUROPEAN COMMISSION Directorate-General for Trade Directorate E — Neighbouring countries, USA and Canada Unit E.2 — Russia, CIS, Ukraine, Western Balkan, EFTA, EEA, Turkey and Central Asia Contact: Petros Sourmelis E-mail: [email protected] European Commission B-1049 Brussels EUROPEAN COMMISSION Study of the EU-Turkey Bilateral Preferential Trade Framework, Including the Customs Union, and an Assessment of Its Possible Enhancement Final Report The information and views set out in this report are those of the authors and do not necessarily reflect the official opinion of the Commission. The Commission does not guarantee the accuracy of the data included in this study. Neither the Commission nor any person acting on the Commission’s behalf may be held responsible for the use which may be made of the information contained herein. The report reflects developments until early August 2016. However, the events in Turkey of 15 July 2016 and their potential implications are not reflected in the analysis. Directorate-General for Trade 2016 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission; however, it reflects the views only of the authors and the Commission cannot be held responsible for any use that may be made of the information contained therein. More information on the European Union is available on the Internet (http://www.europa.eu). Luxembourg: Publications Office of the European Union, 2016 © European Union, 2016 Reproduction is authorised provided the source is acknowledged. PRINTED ON ELEMENTAL CHLORINE-FREE BLEACHED PAPER (ECF) PRINTED ON TOTALLY CHLORINE-FREE BLEACHED PAPER (TCF) PRINTED ON RECYCLED PAPER PRINTED ON PROCESS CHLORINE-FREE RECYCLED PAPER (PCF) Study of the EU-Turkey BPTF Table of contents EXECUTIVE SUMMARY ................................................................................................ 10 1 INTRODUCTION .................................................................................................... 18 1.1 Summary Description of the EU-Turkey BPTF .................................................... 18 1.2 Comparison of the EU-Turkey BPTF to Other Agreements of the Parties................. 21 1.3 Review of the Literature on the functioning of the BPTF ...................................... 23 PART 1: EX POST ANALYSIS OF THE EU-TURKEY BPTF .................................................... 26 2 IMPACT OF THE BPTF ON TRADE AND INVESTMENT – DESCRIPTIVE ANALYSIS ............... 27 2.1 EU-Turkey Trade and Investment under the BPTF .............................................. 27 2.2 Impact of the BPTF on Market Access Conditions for Goods ................................. 50 2.3 Impact of NTBs on EU-Turkey Trade under the BPTF .......................................... 52 2.4 Impact of Tariff Barriers and NTBs in Sectors not Covered by the BPTF ................. 58 2.5 Welfare Implications of the BPTF Based on Trends in Trade ................................. 65 3 GRAVITY MODEL ANALYSIS OF THE BPTF’S IMPACT ON TRADE AND FDI ........................ 66 3.1 Trade in Goods ............................................................................................. 66 3.2 Trade in Services .......................................................................................... 67 3.3 The Impact of the BPTF on Bilateral FDI ........................................................... 68 4 CGE ANALYSIS OF THE ECONOMIC EFFECTS OF THE BPTF ........................................... 70 4.1 Simulating the BPTF ...................................................................................... 70 4.2 Results: Ex Post CGE Analysis of the BPTF ........................................................ 73 5 SOCIAL IMPACTS OF THE BPTF ................................................................................ 86 5.1 Employment ................................................................................................. 86 5.2 Household Income, Wages and Poverty ............................................................ 90 5.3 Job Quality and Working Conditions ................................................................. 93 5.4 Social Protection ........................................................................................... 96 5.5 Social Dialogue ............................................................................................. 97 5.6 Summary ..................................................................................................... 99 6 ENVIRONMENTAL IMPACTS OF THE BPTF ................................................................ 102 6.1 BPTF Impacts on Greenhouse Gas and Air Pollutant Emissions ........................... 102 6.2 Other BPTF Environmental Impacts ................................................................ 104 6.3 BPTF Impacts on Trade in Environmental Goods and Services ............................ 108 6.4 Summary and Inferences for the ECF/DCFTA Analysis ...................................... 108 7 THE BPTF’S REGULATORY AND INSTITUTIONAL EFFECTS .......................................... 110 7.1 Regulatory Convergence .............................................................................. 110 7.2 Commercial Policy Convergence .................................................................... 142 7.3 Performance of the BPTF Institutional Framework ............................................ 146 7.4 Summary ................................................................................................... 154 8 IMPACT OF THE BPTF ON HUMAN RIGHTS ............................................................... 160 8.1 Human Rights Impacts Flowing from the Legal Text of the BPTF ......................... 165 8.2 Indirect Impacts on Human Rights Flowing from the BPTF ................................. 167 8.3 Summary ................................................................................................... 170 9 SPILLOVER EFFECTS ON THIRD COUNTRIES ............................................................ 171 10 SUMMARY AND CONCLUSIONS CONCERNING THE BPTF ............................................ 174 10.1 Trade and Investment ................................................................................. 174 10.2 Output and Welfare ..................................................................................... 175 10.3 Sectoral Impacts ......................................................................................... 176 10.4 Economic development ................................................................................ 176 10.5 Consumer Impacts ...................................................................................... 177 Page 5 Study of the EU-Turkey BPTF 10.6 Social Impacts ............................................................................................ 177 10.7 Environmental Impacts ................................................................................ 178 10.8 Regulatory and Institutional Impacts ............................................................. 178 10.9 Human Rights Impacts................................................................................. 179 10.10 Spillover Effects .......................................................................................... 179 10.11 Potential improvements ............................................................................... 179 PART II: EX ANTE ANALYSIS OF POTENTIAL ENHANCEMENTS OF THE EU-TURKEY BPTF ..... 181 11 ECONOMIC EFFECTS OF ALTERNATIVE ENHANCEMENT OPTIONS ................................ 182 11.1 The Policy Scenarios .................................................................................... 182 11.2 Results: The ECF Scenario ............................................................................ 183 11.3 Results: The DCFTA Scenario ........................................................................ 191 11.4 Government Procurement ............................................................................ 196 11.5 Impacts on Consumers ................................................................................ 196 11.6 SME Impacts .............................................................................................. 197 11.7 Impact on Government Revenue and the EU Budget ........................................ 200 11.8 Summary ................................................................................................... 201 12 SOCIAL IMPACTS OF ALTERNATIVE ENHANCEMENT OPTIONS .................................... 202 12.1 Social Issues and Labour Rights in the Legal Texts ........................................... 202 12.2 Social Impacts of the ECF ............................................................................. 203 12.3 Social Impacts of the DCFTA ......................................................................... 206 12.4 Summary ..................................................................................................