Discussion on a freetrade agreement between the United States and the European Union and its effect on turkey. Hosted by the brookings institution, this is an hour and a half. Ladies and gentlemen, if everyone will find a seat. There are a couple of seats in the front for those of you who were standing in the back unless you would refer to stand next to the cookies and coffee which i can relate to. I am the director of the center of the United States and europe. We are delighted to see so many people turning out. It shows we are all ready for action and work and in Good Washington d. C. Mode. We have a very interesting event today on turkey and the Transatlantic Trade Investment Partnership which is a bit of a mouthful. I had to practice several times in the elevator. Not to trip myself up over q tip. It is perhaps not the most promising acronym for a major trade negotiation. Nonetheless it is one that has gained a lot of scrutiny and attention around town, which is testament to why there are so many of you who turned out today. We are going to take a look at the transatlantic trade avestment partnership from more unusual angle from the role of turkey. Senior fellow here at brookings and a director of the center on u. S. And europes turkey project. It looks like most of you have wanted to get a copy of the interest andkeys potential role in the transatlantic trade negotiations. For those of you, just in case you didnt get a copy, you will be able to download this from the brookings website. As i know from coming in the office today we have boxes of it sitting around. If you did not get a copy get in touch with us. He is launching the report today and we will be talking to him about his conclusions from having spent several months now looking at turkeys interest in the negotiations and how this is likely to unfold and the challenges that this will pose them and not just for europe and the United States but for turkey itself. Very interested to see how the trade deal between europe and the United States may unfold. Delighted touch have our new neighbor and colleague from the carnegie endowment, who is one of the u. S. s leading experts on economic and trade topics. He is the rector of International Economics program next door at carnegie. The format is going to be that he will give a review of his report and then some, tree based on his experience in his own expense on this issue. 10 they will open it up to the audience for more discussion and questions. Finally, i would like to thank our colleagues from the Turkish Industry and business association. We have the u. S. Are presented sitting here in the front row. We thank them for their support for this project, overall the turkey project, but also the work that kemal has been doing on this topic. We hope that this will also be of use to people in istanbul, im kara and others as well. Much look forward to having interaction with all of you have come today. Thank you very much. Thank you, fiona. I wasnt very sure whether we were going to do this from standing on the stage, sitting on the stage or standing at the stage. I would like to thank you for joining us this afternoon. Is a topic i became exposed to and encountered as i arrived at brookings earlier in the year. I cant say that i had heard of it before. Topic that involved to be one close to my heart. I feel very committed to the topic and am delighted that youre he is able to join us because i can tell he is going to try to bring me down to earth on solid grounding. July was a very interesting month because the transatlantic trade and investment ownership first round of negotiations took thee and in the same month 18th round of the transatlantic, Transpacific Partnership negotiation took place. When you put the two together on the basis of the 2012 statistics, they constitute just about, just under two thirds of the worlds gdp, the gross to mastic product. At the same time, a little bit under 50 of the worlds trade. I think when you put these two figures together, one can begin to understand why turkey is very much interested in joining, in finding a way of participating in t tip. What i got to observe soon after i became interested in the topic, is that government bureaucracy and the Business World appear to be on the same. Avelength on this topic the Prime Minister himself has written a personal letter to obama, the minister of foreign was happy to receive his counterpart john kerry in march. Meantime, major turkeys from theassociations union of chambers of commerce, whose representatives are here too, have expressed interest in turkeys participation in ttip. I believe out there in government bureaucracy and business circles, there is an, if i dare say, an intuitive feel why this is important in terms of turkeys future economy future Economic Performance. All this is happening against the following background. Turkey has been part of the western economic order since the very beginning, since the. When imf, world bank, all started. Also taking it is place against the background of turkey becoming a trading state. I need this. You may have heard that once churchill at the house of commons when he pulled up his watch, people yelled at him saying that he needed a calendar not a watch. But i doubt i will perform at his level here. Last 20 or 30 years, the turkish economy has been transformed dramatically and trade has come to lay a very important role. I will return to this issue, but we have also entered since january, since i took an interested essence it took an interested in this topic an interest in this topic. I need not go into the details of it, but many would agree that turkeys democracy has taken an and there aret the early signs of economic difficulties on the Horizon Building up. Part of the background is also that turkey is in a very atant to your graffiti very important to geography were two forms of governments, what we could call the transatlantic form of government that relies on democracy, liberal democracy, free markets and human rights and on the other hand there is the governments model that is that puts more emphasis at best on sovereign democracy and states involvement in capitalism , one way or the other. What i would like to say in the remaining time is that what is at stake here, why is turkey so keen, go into the details of it. What has been so far the u. S. And eu responses, and let me say they have not been very exciting so far. What should be done and what are the challenges and opportunities there. About the quick words Transpacific Partnership and itself. Very simplistically again, i see these two exercises as exercises that are trying to pick up from failed, to deepen liberalization of trade with what they call a wto plus agenda. Not just the removal of tariffs, but also directing the issue of nontariff barriers, much more importantly begin to harmonize rules to do with investments, public procurements, label rules and much more importantly, particularly for the u. S. , harmonizing rules that govern intellectual property. Author, one of one expert in the area, this is an attempt to create a new trade rulebook for the coming decades, if not the century. Jobims both to achieve creation and growth. Much more interestingly, what the european commissioner responsible for trade called the Tipping Point strategy. Anyway, get a number of like minded countries together that constitute an important part of the world trade and development is rules in a way to compel others to come on board if they want to benefit from the more open and liberalized markets. Stateder secretary of also made reference alluding to nato. As an economic u. N. Is strong, the u. S. Is going to be stronger in international relations. I cant help but think that that reminds me of the. Immediately after the second world war. Few words about where turkey stands these days. I believe turkey in the last two or three decades has gone through a massive economic transformation. We actually had an event in the spring here that looks at this phenomenon here at brookings. I was still a junior student at university in you stumble, turkeys Foreign Trade was just a mere 6 billion. In 2012 last year this had gone billion which is a huge change. The best way of capturing and other was fake statistic is that back in 1975, Foreign Trade correspondent to just about nine percent of turkeys gdp. Today it corresponds to 50 of turkeys gdp and i think this should give you a rough idea of the significance of foreign s recentar as turkey Economic Performance. In terms of ttip, what is significant here is that turkey has incorporated 55 of the European Unions key rules that govern the internal market. You could say that for all intents and purposes, turkey is part of the internal market there. Even though the European Unions lace in turkeys overall foreign 4749 infallen from the late 1990s to the early today, thebout 38 eu is still the largest partner of turkey as far as Foreign Trade goes. Through the interviews that i made i came to realize how businesses in turkey are trying to give priority to what they call the one and a half percent profit theyre going to make with business in the european 80 , 90 , 100 profit in other places in the world. Investment that comes to turkey is from the European Union. 65 of turkish investment over investment abroad goes to the European Union as well. This is also a. During which turkeys engagement with the neighborhood in economic terms increased significantly very it this has important implications forttip. I wont go into the details for benefit of time. Thirdly, for all the criticism we major act these days to the turkish government, the Prime Minister as well as minister, there was a very clear vision about what he wanted to achieve in the middle east in terms of economic and regional integration. These are liberalized nations. He envisaged a middle east that would be a bit like europe. Free movement of goods and people from the most eastern city to the atlantic ocean. However, as you are all aware, that has turned sour. Lastly, with obama coming to power and then his famous visit in the very early stage of his first term, a Model Partnership was launched. One of its important likes being improving economic relations. In that context the framework for economic and commercial cooperation was set up. Background, what is it that is at stake. The studies of the impact of what ttip will be in countries participating in it and third countries will come up. Thee countries are still at preliminary stage. There are some more substantial ones that are in the pipeline and whose results are expect it about the end of this year. Will impact differently whether you are part of it or outside it, but when you look at these studies, and i must admit that some of these studies are being challenged and questioned, but that is what is available at the moment, turkey is going to be one of the losers. It is almost cut and dried. Correspond going to , and that 20 billion is about the trade that occurs between turkey by laterally, or occurred in 2012 between turkey and the United States. This is not surprising. It has a lot to do with the Customs Union and the way in has been Customs Union formulated. I believe uri will be reflecting on that. Each time the European Union signs a Free Trade Agreement with a third country, it automatically binds turkey, which means that turkey has to lower its tariffs, customs tariffs and open up its markets to this third country, whoever it may be. In the case ofttip it would be the United States. Whereas the third country is not obligated to open up its market, instead turkey has to engage this third country in an effort to negotiate its parallel treaty. I realize to some of you this might be a funny deal, but we can always go back into the details of it. This arrangement had been ok until a couple of years ago because most of the Free Trade Agreements that turkey had signed, that the eu had signed, were ones with relatively smaller economies. As the eu began to engage bigger and bigger economies and as turkey began to have difficulties in persuading these countries to come to ranging fromable, algeria, mexico, south africa hasmore recently the eu started negotiations with india, japan and a number of other important countries, alarm bells began to ring in turkey with respect to this particular arrangement of the Customs Union. Ttipdoes that mean if comes into effect in terms of u. S. turkish relations . St of all turkish runs and first of all turkey runs in eight and a half billion dollar trade deficit with United States. It means that trade deficit is going to increase because American Companies are going to to thefreer access turkish market. The Turkish Companies will continue to face similar restrictions. Is goinge , ttip to lead to trade negotiations. Koreans as a result of the South Koreans u. S. Free trade agreement and then members of tt countries will have easier access to the u. S. Market and then Turkish Companies will be squeezed out. The outcome is a greater trade deficit for turkey. Albright and Stephen Hadley last year with the council of Foreign Relations published a very interesting and rich report on turkish american relations. They point out that this is the sort of problem that would fuel already high levels of anti americanism in turkey. One impact study that i made reference to has actually calculated that turkey would be losing 95,000 places of employment as a result of ttip. You are of course welcome to challenge the statistics, but it does suggest that it could lead to unemployment while generating and thent within the eu United States. Similar outcomes would be observed in the case of turkey s trade relations with the European Union. Turkey runs a large deficit. That deficit would continue to expand. American companies would compete, would have a better deal in competing against Turkish Companies. The companies with which the eu has been signing these Free Trade Agreements. It is no wonder that we have ministers him i would choose not to name these ministers, who have been using, unfortunately, somewhat integrating language towards the European Union. I think this is very much a function of this frustration and grievance that has been felt towards the way the Customs Union is operating and the way the eu is responding to these grievances. To such an extent that i am sure you have heard our Prime Ministers revealing at a tv program that he would like to take turkey out of the european in two another shanghai corporation. Having a shanghai blues mood of life. Would turkey actually leave the European Union . It is probably very doubtful, but the grievances are there and the moreances are growing intense. And is the cost to the eu it u. S. Of the seattle is going to be very difficult for turkey to maintain its growth rate that has attracted so much attention and praise internationally . It will mean loss of jobs, but it will also mean loss of jobs for the neighborhood for the very reason that i cited earlier on that the neighborhood has a growing art in turkeys economy. Migration pressures will increase. Turkeyd to 20 years ago, has moved from an emigration to an immigration country. People coming to turkey, they would most likely be going elsewhere. It would lead to turkey being less stable. The inclusion of turkey is the other side of the dollar. I need not stress the mechanisms would work in the other direction. Can be done in this respect . Of scenariosumber that could be followed. The one that the government, turkish bureaucracy, and the aprilss world throughout it was pushed very hard, the inclusion of turkey into the negotiations it sells. The reasons that they could maybe go back to the q a, that session, and the best that this was thele to promise to be informed about ttip negotiations. As you might imagine, the word of the eu in turkey does not carry as much credibility. Ttip, there are those countries that have very few custom unions with the European Union or who are negotiating with full membership. The could be admitted, or door would be kept open. Also not aat one is very highly likely avenue that will materialize, and a third idea that has been talked about which isntext of ttip, called docking, the idea that you reach an agreement that leaves the door open to third countries who might want to join and apply forhips membership. We will yet see if this will be the case for ttip 2. In mind in to bear this case that if it was made , turkeyswith ttip membership would still have to go three congressional and eu and imaginecesses, or if theat failed, negotiation has turned into grievances and the negative items it would generate. Lastly, there is the possibility of the turkey u. S. Negotiation of the agreement. Referencing the a port the report i brought up, they called it an interesting turkish american partnership, tap, however, that idea could not be pursued because of the way in which it works the other way around, that tur