The United Arab Emirates and the Republic of Turkey signed the Comprehensive Economic Partnership Agreement (CEPA) on March 3, 2023, marking a significant milestone in their bilateral economic relations. The agreement officially entered into force on September 1, 2023, following ratification by both countries in accordance with their internal legal procedures. This CEPA represents one of the UAE’s strategic initiatives to strengthen economic ties with rapidly emerging global economies and expand its network of international trade partnerships.
The relationship between the UAE and Turkey has historically been characterized by strong bilateral ties. In 2022, Turkey emerged as the fastest growing among the UAE’s top ten trading partners, with non-oil trade climbing 40 percent to reach USD 18.9 billion. The UAE’s non-oil exports to Turkey witnessed remarkable growth of 109 percent in 2022, reaching USD 5.6 billion. This robust economic relationship provided the foundation for a more comprehensive partnership through the CEPA framework.
Aim of the CEPA
The primary objective of the UAE-Turkey CEPA is to establish a free trade area in conformity with international trade rules. The agreement aims to liberalize and facilitate trade and investment between the parties through the elimination or reduction of customs duties, removal of trade barriers, and creation of a favourable climate for business operations.
Dr. Thani bin Ahmed Al-Zeyoudi, UAE Minister of State for Foreign Trade, emphasized that the agreement was strategically crafted to invigorate and streamline the movement of non-oil trade, ensure resilient supply chains, and foster opportunities for partnerships among business communities in both countries. The CEPA is designed to serve as a catalyst for channelling investments into promising sectors including energy, logistics, tourism, the Islamic economy, and agriculture.
The agreement plays a vital role in achieving the UAE’s national objectives outlined in “We The UAE 2031,” which seeks to double the UAE’s non-oil foreign trade to AED 4 trillion and elevate national exports to AED 800 billion. With the newly liberalized trading environment, bilateral non-oil trade between the UAE and Turkey is projected to rise to USD 40 billion within five years of the agreement’s implementation.
Key Features of the CEPA
Comprehensive Coverage
The UAE-Turkey CEPA is structured across 18 chapters, covering various aspects of economic cooperation. The agreement addresses trade in goods and services, technical barriers to trade, sanitary and phytosanitary measures, customs procedures and trade facilitation, rules of origin, digital trade, investment facilitation, government procurement, competition, intellectual property rights, and dispute settlement mechanisms.
Tariff Elimination and Reduction
The agreement has eliminated or reduced customs duties on 82 percent of product lines, which account for more than 93 percent of the value of bilateral non-oil trade. The CEPA provides better market access for UAE products to Turkey in a market covering more than 83 percent of tariff lines. The tariff treatment is organized into three categories:
Immediate tariff elimination applies to the majority of tariff lines, which are now subject to zero percent customs duty rates. Phased tariff elimination covers other tariff lines that will benefit from gradual elimination of customs duties over periods of three and five years. Tariff reductions apply to remaining products where custom duties will be reduced compared to existing rates.
Rules of Origin
To benefit from preferential tariff treatment, products must comply with the rules of origin stipulated in Chapter 7 of the agreement. A product qualifies as originating if it is wholly obtained in the territory of a party, or if materials have undergone sufficient working or processing in the territory of a party according to specific product rules. Compliance must be substantiated by proof of origin, which can take the form of a certificate of origin in paper or electronic format, or an origin declaration made by an approved exporter.
Trade in Services
Chapter 8 of the CEPA dedicates provisions to liberalizing trade in services, ensuring enhanced market access for service providers in both countries. The agreement covers twelve service sectors for Turkey and eleven for the UAE, including business services, communication services, construction and engineering services, distribution services, education services, financial services, health services, tourism and travel services, transport services, and other professional services.
The agreement guarantees that UAE service companies can access the Turkish market under fair and transparent conditions, presenting significant opportunities in key sectors such as finance, telecommunications, education, healthcare, and tourism.
Digital Trade
The CEPA incorporates provisions on digital trade to facilitate the growth of the digital economy. The agreement encourages electronic submission and processing of documentation, promotes paperless trading, and establishes frameworks for electronic signatures and authentication. It addresses online consumer protection, personal data protection, and establishes principles for access to and use of the internet for digital trade. The agreement also covers electronic payments, digital identities, and cooperation on artificial intelligence technologies.
Customs Procedures and Trade Facilitation
The agreement emphasizes reducing and simplifying customs procedures through adoption of international best practices for customs management. It encourages the digital transformation of trade administration, promotes the use of advance rulings for tariff classification and origin determination, and establishes commitments toward implementing Authorized Economic Operators mutual recognition arrangements. The agreement also provides for expedited shipments and simplified procedures for temporary admission of goods.
Investment Facilitation
Chapter 10 focuses on investment facilitation to ensure streamlined procedures for increasing direct investment flows between the parties. The provisions cover transparency in laws and regulations affecting investment activities, simplified application processes for investment authorizations, and mechanisms for appeal and review of administrative decisions. The agreement aims to create a better and safer environment for doing business while respecting each party’s right to regulate in accordance with national policy objectives.
Impact of the CEPA: Benefits and Gains
Enhanced Market Access
UAE exporters now benefit from greater market access to the Turkish market through preferential tariff rates. Many goods of UAE origin, including aluminium, heavy machinery, ceramics, polyethylene, and other petrochemical products, can enter the Turkish market duty-free or with reduced tariffs. This enhanced market access makes UAE products more competitive in the Turkish market and provides opportunities for expansion of export volumes.
Growth Opportunities for Small and Medium Enterprises
The agreement creates substantial opportunities for small and medium-sized enterprises, which form the backbone of the UAE economy. SMEs can now access the Turkish market more easily, benefiting from simplified procedures, reduced costs, and new networks for collaboration. The CEPA includes specific provisions promoting cooperation between SME support infrastructure, including dedicated centres, incubators, and export assistance facilities in both countries.
Service Sector Expansion
UAE service providers gain enhanced access to the Turkish market across multiple sectors. Financial services companies, telecommunications providers, educational institutions, healthcare organizations, and tourism operators can now operate under clearer and more favourable conditions. This expanded market access enables UAE service companies to diversify their operations and tap into Turkey’s growing consumer market.
Protection Against Trade Remedies
The agreement includes provisions ensuring that UAE products will not be subject to Turkey’s anti-dumping investigations when such products are merely transhipped through the UAE. This protection provides certainty and stability for UAE-based trading companies engaged in re-export activities.
Investment Channel Development
The CEPA establishes pathways for investment into priority sectors including logistics, energy, food production, financial technology, and e-commerce. The agreement creates a transparent and predictable legal framework for business planning that supports further expansion of trade and investment between the two countries.
Strengthening Supply Chains
The agreement contributes to building resilient supply chains by facilitating smoother movement of goods between the two countries. Simplified customs procedures, advance ruling mechanisms, and mutual recognition of conformity assessment results reduce delays and costs associated with cross-border trade.
Conclusion
The UAE-Turkey CEPArepresents a transformative step in the economic relationship between the two countries. By eliminating tariffs on the vast majority of traded goods, streamlining customs procedures, opening service sectors, and creating frameworks for digital trade and investment facilitation, the agreement establishes a comprehensive foundation for expanded economic cooperation.
The CEPA aligns with the UAE’s broader strategy of establishing strategic economic partnerships with key global markets. The agreement not only promises to increase bilateral trade to USD 40 billion within five years but also creates opportunities for collaboration in addressing global challenges such as food security, climate change, and technological development.
For UAE businesses, the agreement opens doors to a market of over 83 million consumers and positions them to leverage Turkey’s role as a strategic bridge between Europe and Asia. The streamlined procedures, reduced costs, and enhanced market access provided by the CEPA enable UAE exporters and service providers to compete more effectively in the Turkish market while contributing to the UAE’s goal of doubling non-oil foreign trade and elevating national exports.
As the third CEPA to come into force for the UAE, following agreements with India and Israel, and alongside Indonesia, this partnership with Turkey reinforces the country’s commitment to building a diversified, knowledge-based economy supported by strong international trade relationships. The successful implementation of this agreement will serve as a model for future economic partnerships and contribute significantly to the prosperity and economic growth of both nations.
