ABSTRACT
Overall, the Customs Union (CU) has had a positive impact on Turkish economy. Through an increase in import penetration, the CU increased the competitive pressure on Turkish manufacturing industry, forcing it to improve productivity in the long-run. It also contributed to the transformation of the Turkish economy through the implementation of a competition policy. With increased productivity and competitiveness, the manufacturing industry was able to weather the storm during the 2001 economic crisis and in the wake of China's entry into world export markets. However, following the successful initial adaptation phase and the significant changes in the European Union's trade policy framework towards preferential trade agreements, the CU has recently started to generate some strains on Turkish trade.
