Analysis of the effect of the Customs Union on Turkey's foreign trade (1980-2019)

The second half of the 20th century witnessed intense efforts by countries to compensate for the destruction caused by the wars. Economic integrations and accordingly, the rapid development of foreign trade have been the saviours of industrialized countries and countries that are trying to industrialize. In this way, while the industrialized countries had the opportunity to sell their production surpluses more easily, the countries that wanted to make progress on the way of industrialization had great convenience in reaching new production opportunities. Turkey applied to join the European Economic Community (EEC), one of these integrations, on 31 July 1959. The association agreement proposed by the Council was signed on 12 September 1963 as the Ankara Agreement and entered into force on 1 December 1964. The Additional Protocol, which regulates the membership process to the Community, was signed in December 1970 and entered into force in 1973. The Customs Union Agreement between Turkey and the European Union (EU) was approved with the Decision of the Association Council dated 6 March 1995 and numbered 1/95 and this agreement entered into force on 1 January 1996. Thus, Turkey, as the only country that became a member of the CU without being a member of the EU, completed the Transition Period, which lasted for 22 years, and passed into the Final Period, which is the final stage on the road to full membership, determined by the Ankara Agreement. In this study, the effects of the Customs Union Agreement, which is an important turning point for the Turkish economy, on Turkey's foreign trade have been examined. In this sense, the 24 January 1980 Decisions, which are accepted as the beginning of the transition to liberal economic policy implementation, was chosen as the beginning of the pre-CU period and this period was discussed until the end of 1995. The post-CU period, on the other hand, has been discussed from January 1, 1996, when the agreement entered into force, to the end of 2019. In the first part of the study, economic integrations and customs union theory are given, and in the second part, the Customs Union process between Turkey and the European Union and the arrangements made are discussed. In the third part of the study, the theoretical framework of foreign trade theories is specified and the effect of the CU on Turkey's foreign trade is examined by transferring the TSI data of the relevant periods to graphs and tables. In the empirical part, which is the fourth part of the study, the effect of the Customs Union on Turkey's foreign trade is revealed by using the data of the years 1980-2019. Within the scope of Time Series Analysis, Johansen Cointegration Analysis, Granger Causality Analysis, Impact Response Analysis and Variance Decomposition Analysis were used in the study. The results obtained in the study reveal that the Customs Union has an impact on Turkey's foreign trade and economic growth. Export supported by imports directs economic growth. This situation supports the export-led economic growth thesis. In addition, it can be stated that after the Customs Union membership, static and dynamic effects of membership to the union occurred in Turkey.