On 31 December 1995, a 6 March 1995 Decision of the EC-Turkey Association Council, established by the Ankara Agreement, to implement a customs union (Turkish: Gümrük Birliği) between Turkey and the European Union, came into effect.^[1] Goods may travel between the two entities without any customs restrictions. The Customs Union does not cover essential economic areas such as agriculture (to which bilateral trade concessions apply), services or public procurement.

In 1996 a free trade area was established between Turkey and the European Union for products covered by the European Coal and Steel Community. Decision 1/98 of the Association Council covers trade in agricultural products.

In addition to providing for a common external tariff for the products covered, the Customs Union foresees that Turkey is to align to the acquis communautaire in several essential internal market areas, notably with regard to industrial standards.

The customs union increased both imports and exports in Turkey,^[2] as well as its GDP per capita.^[3] Turkey's membership of the customs union is recognised as having played a significant part in its economy's transition from agrarian to industrial.^[4]

As Turkey is in a customs union with the EU, it has to adjust its tariffs and duties to match those of the EU. However, the free trade agreements (FTAs) signed by the EU do not extend to Turkey, so the EU's FTA partners can export to Turkey tariff-free, while maintaining tariffs on Turkish goods, unless they also conclude a separate FTA agreement with Turkey. During the negotiation of the Transatlantic Trade and Investment Partnership (TTIP), Turkey raised the prospect of leaving the customs union over the economic contraction it would suffer as American goods would enter Turkey tariff-free and Turkish goods would continue to face American tariffs. The EU and Turkey are in negotiations for amending the customs union agreement to add Turkey to the EU's present and future FTAs.^[5][6][7]

Turkey has been an associate member of the European Community (EC) since 1964, following the signing in 1963 of the Ankara Agreement (EEC-Turkey Association Agreement (1963)) with the EEC. Turkey applied for full membership on 14 April 1987.

The decision to consider Turkey's application was deferred until 1993, because the European Community was in the process of becoming the even (politically and economically) tighter European Union. The fall of the Soviet Union and German reunification delayed the decision on Turkish membership even more. During those years the European Community had also become reluctant to consider Turkey's application.

At the Helsinki summit in December 1999 Turkey was given the status of a candidate country. At the end of 2004, the European Commission has issued a report with positive recommendations to the European Council, indicating the degree of compliance by Turkey of the Copenhagen political criteria. On this basis, the European Council decided to start accession negotiations with Turkey on 3 October 2005. Since then, no significant progress has been made towards membership nor is there evidence of political will to do so.

Finally, Turkey is also member of the Euro-Mediterranean partnership and as such is interested in concluding free trade agreements with all other Mediterranean partners, with a view to the creation of a Euro-Mediterranean free trade area, originally aimed for by 2010.