The effects of Customs Union on international trade of Turkiye: A gravity model analysis

According to the political and economic conjuncture that emerged after the Second World War, countries experienced both globalization and regionalization phenomena togehter.The supporters of globalization, who advocated the increase of international trade, pioneered the establishment of global organizations such as GATT with the aim of removing tariffs in international trade and IMF.Simultaneously with these global organizations, countries have made breakthroughs in the field of regionalization by establishing economic integrations among themselves.One of the most important integrations created is the European Coal and Steel Community, which was established in 1951.This community, which was established with the aim of ensuring lasting peace among European countries, developed over time and grew with new members.In the development and growth process, it has experienced the stages of economic integration sequentially, and first it has formed a customs union within itself. Afterwards, the common market was established and finally it came to the stage of economic and monetary union. Today, the union, which continues its life under the name of the European Union, constitutes one of the strongest structures in the world in terms of economic integrations.Turkey applied to this community in 1959, and the membership process started with the Ankara Agreement signed in 1963.The preparatory period between the 1963 Ankara Agreement and the 1971 Additional Protocol period was followed by the transition period between 1971 and 1996, and the last period continues from the Customs Union agreement that started in 1996 to the present day.Turkey's application for full membership to the European Union, which was accepted at the Helsinki summit in 1999, has still not been finalized with full membership status due to political reasons.Unfortunately a clear process for full membership cannot be foreseen The effects of the Customs Union between Turkey and the EU on Turkey's international trade have inspired many studies in both national and international literature.Although many studies have been carried out in terms of trade creation and trade diversion effects, which are the static effects of economic integrations, there are some gaps in the literature in terms of dynamic effects that emerge over a longer period of time.In this study, a special examination of the technology transfer effect, which is one of the dynamic effects, has been made. In this study, which was made with panel data analysis and the gravity model was used, technology transfer to Turkey through foreign direct investments from EU countries and technology transfer data to Turkey through imports from EU countries were analyzed.As a result of the analysis, it has been determined that the technology transfer to Turkey, both through foreign direct investments and through imports, has a positive effect on Turkey's exports to EU countries and is statistically significant.GDP, population and distances between countries, which were considered as the control variables in the study, were found to be statistically significant, while GDP and population had a positive effect, and distances had a negative effect, in accordance with the theory of the gravity model.