The failure to modernize the three-decade-old customs union between Türkiye and the European Union is a lose-lose scenario, a top business body head said on Monday, while also warning of risks from growing protectionist measures.
"We are talking about a union that has reached its 30th year, and we are still discussing its update," Foreign Economic Relations Board (DEIK) President Nail Olpak said.
"If this update does not happen, it is not only Türkiye that loses. The EU loses as well," Olpak told an interview with Anadolu Agency (AA).
Türkiye has long urged the EU to break the impasse on updating the trade agreement, whose overhaul Ankara says would be a win-win.
The deal was struck in 1995, before the European Commission formally proposed revamping the pact in 2016. But the Council of the EU never gave it a mandate to start negotiations amid a host of disagreements.
Turkish officials and businesses have long argued that the current agreement is outdated and no longer reflects global trade realities or the depth of today's economic relationship.
The pact was the first substantial customs union between the EU and a non-member country, covering industrial goods and processed agricultural products. A modernized agreement would expand the scope to services, agriculture in full and public procurement.
The discussions about the long-delayed update come as the EU rolls out new industrial and climate policies.
The EU’s emerging "Made in Europe" agenda, said to be aimed at protecting European industry from Asian competition, could pose a risk if Türkiye is left outside the framework, according to Olpak.
"Our goal is to ensure that products manufactured in Türkiye are included within this scope," he said. If the EU applies these protectionist measures in a way that excludes Türkiye, "we will have a major risk ahead of us," he added.
"The negotiations, how the process will unfold, have come onto the agenda rather quickly; we shall see, but I want to express that there is a significant risk."
He also urged accelerated preparations for the EU’s Carbon Border Adjustment Mechanism (CBAM), which came into force this month. Olpak said pilot schemes for emissions trading need to be fast-tracked, noting that four export-driven sectors would be directly affected.
Trade between Türkiye and the United States climbed to $35 billion last year, Olpak said, suggesting that a long-standing bilateral target of $100 billion is now realistic amid positive momentum in relations.
"This shows that we are capable of achieving nearly twofold growth ... Why shouldn't we increase it fivefold?" Olpak said, adding that improving political momentum on issues such as the S-400 air defense system and F-35 fighter jet disputes could further support commercial ties.
However, Olpak warned that the U.S.-China trade dispute also carries risks for Türkiye.
The U.S. managed to significantly reduce the trade deficit with China last year, Olpak noted. But he cautioned that as long as China does not slow production, the $300 billion worth of goods it cannot sell to the U.S. will be redirected to other markets.
That could be a challenge for Türkiye, which Olpak says already has a sufficient trade deficit with China. "There is no way they can send another $300 billion worth of goods to Türkiye," he said.
Olpak said 2026 is likely to bring some economic relief compared with 2025, but warned against excessive optimism.
"There will be relative relief in 2026, but we should not expect all problems to disappear overnight," he said. "The business world should make its calculations accordingly."
Türkiye has pursued tight monetary and fiscal policies for more than two years in order to reduce price pressure. But high financing and borrowing costs have weighed on businesses and households.
Inflation eased steadily over the last year and ended 2025 at 30.89% annually, the lowest rate since November 2021. That compared to 44.4% posted a year earlier.
The government projects inflation to dip as far as 16% by the end of this year, within a 13%-19% range, and falling to 9% in 2027. The Turkish central bank forecasts inflation between 13%-19% by end-2026.
Encouraged by the downward trend, the central bank eased policy through most of last year, shaving 950 basis points off its benchmark policy rate to bring it down from 47.5% to 38%.
"It would not be a realistic expectation to think that interest rates will immediately reach our desired levels or that inflation will drop significantly," said Olpak.
"We know there will be a relative relief."
Pointing to Türkiye's $1.5 trillion economic size and over $800 billion foreign trade volume, Olpak argued that current levels of foreign direct investment (FDI) are insufficient.
Stating that "predictability" is the most critical threshold for attracting investors, the DEIK chair said: "We have seen levels of $20 billion before; with our current economic size, we need to multiply these figures."
