The economic impact of Turkey's accession to the EU

These days, the possible enlargement of the European Union with Turkey is a major issue ofdiscussion. With the accession of ten new member states in May 2004 and after Bulgaria and Romania, Turkey is the thirteenth candidate member state of the EU. At the Council in Copenhagen in December 2002, European leaders have, however, promised to decide about a starting date for the negotiations in December 2004, at the end of the Dutch Presidency. In particular, the Copenhagen Council concludes that: “If the European Council in December 2004, on the basis of a report and a recommendation from the Commission, decides that Turkey fulfils the Copenhagen political criteria, the European Union will open accession negotiations with Turkey without delay”. These political criteria, formulated in Copenhagen in 1993, require a candidate country to have achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities. Turkey has applied for EU membership already in 1987. To pave the way for its accession, it agreed upon a Customs Union with the EU in 1995. Between 1996 and 2001, tariffs and quantitative restrictions on trade between Turkey and the EU were gradually removed. Moreover, Turkey aligned its trade policies with the EU vis-à-vis third countries and started to implement common standards, rules and regulations. In 1999, Turkey attained the status of candidate for membership of the EU. As a result, the EU is now cooperating with Turkey to enable the adoption of the acquis communautaire, i.e. the rules and regulations that make the EU. Despite progress in the economic integration between the EU and Turkey, a number of Europeans seem reluctant to accept Turkey as a member of the EU for a variety of reasons. Some people argue that Turkey is too different from the rest of Europe. They refer to the different culture of the Turkish society, the Islam religion among the majority of the population, and the fact that Turkey is largely an Asian rather than a European country. The main official reason for keeping Turkey fromnegotiating with the EU could be the argument that the political criteria spelled out above have not yet been met. Meeting them would require, among other things, a fundamentally different role for the military in Turkey, and the recognition of individual and collective rights for minority groups. Another reason why countries are reluctant about the Turkish accession to the EU is related to its size, although this reason is often used in combination with the subjective views. In particular, population forecasts suggest that the Turkish population will exceed that of Germany by 2020, implying that Turkey would become the biggest country in the EU. Accordingly, it would obtain substantial power in EU decision making, at the cost of the powers of existing members. Countries also fear the economic implications of Turkey’s accession to the EU. In particular, Turkey would become a net recipient of EU funds, which implies a net cost for existing member states. In addition, people in Western Europe fear massive immigration flows from Turkey and cheap imports at the cost of workers and producers in the EU. A particular attention is to have on the economic implications of the Turkish accession to the EU. Although these are not official criteria for the decision about its accession, they do play an important role in the discussion. In particular if the official criteria do not lead to a clear-cut decision, the economic arguments could become decisive. There are different existing studies that have assessed the economic effects of economic integration of Turkey with EU. They show that enlargement will probably yield substantial gains for the States, as Turkey, that want to join Europe. For EU countries, the effects are typically more modest but still positive. But, there are several differences between the accession of Turkey and other candidate countries. First of all, the EU and Turkey already form a Customs Union in manufacturing and services, and a number of standards and regulations have already been harmonised. Hence, the extent to which accession of Turkey to the EU will deepen the integration differs from that of the Central and Eastern European countries. Moreover, the structure of the Turkish economy differs from that of Central and Eastern European countries, e.g. with respect to its degree of openness, its sectoral structure, and its level of welfare. These differences can affect the increase in bilateral trade and GDP of further integration with the EU. Then, in the process of accession Turkey has to comply with the acquis communautaire. This could act as a catalyst for improving institutions in Turkey. Many institutional indicators show that these institutions are less market-oriented in Turkey than in the EU member states or the other accession countries. we do this by deriving the potential trade between Turkey and other countries if the institutions would be improved. In exploring these aspects, I consider the story of relations between Turkey and UE and his development over time stressing the various agreements from Ankara Agreement today. Then macroeconomic policies for accession to the EU are displayed in various aspects and considering various sectors: agricultural, industry and utilities. The most important part of this work takes into account the economic effects of a possible final admission of Turkey in Europe especially the effect on budget and its division and trade flows between Turkey - EU and Turkey – Italy. At last are considered Turkey’s Foreign Direct Investment Performance.