Eu And Turkey

Introduction

In 1923 Mustafa Kemal AtatÐ"јrk founded the modern Republic of Turkey which emanated from the Ottoman Empire. It is a western-style secular state and AtatÐ"јrk realized wide-ranging reforms which marked the start of Turkey's European orientation (Redmond, 1993, p. 21 - 22). In 1959 Turkey applied for associate membership in the EU вЂ" then EEC вЂ" but it took decades to start the official negotiations, which happened in October 2005. Today a potential EU membership of Turkey is the most important foreign policy issue of the country. Joining the EU is not only expected to function as a further catalyst for the economy by boosting change and reforms, beyond the materialistic gains the supporters of a membership see it as a symbol for the completion of the long-lasting AtatÐ"јrk revolution. But the accession talks are not considered to necessarily lead to a Turkish membership, they are predicted to last 10 to 15 years with an uncertain outcome (Carkoglu and Rubin, 2003, p. 1). On the one hand, the Western states wish good relations with Ankara and support democracy and modernization of the country. On the other hand, they fear Turkey for a range of reasons: Size, human rights, income levels, and differences in the culture are the most mentioned ones (Hill, 2002, p. 109). The following works assesses the contention that Turkey should focus on global business economy than rather EU membership. It starts with a brief overview of the Turkish economy and highlights its strengths and weaknesses. It is followed by an analysis of the statement with reference to the Turkish point of view, the government declaration of Prime Minister Erdogan and followed by a conclusion.

Economic structure

The last devastating economic crisis in 2001 resulted in a "Standby-Programme" from the International Monetary Fund IMF with the aim to stabilize Turkey's economy and a significant recovery since then can be noticed. From 2002 until 2005, output increased by a third which is the strongest growth among OECD countries (OECD, 2006, p. 3). Economic growth is expected to slightly decrease but still remain at 5.2 % in 2007 and at 4 % in 2008. (Economist, 2008) Consumer price inflation was reduced to nearly a third compared to 2003 but is expected to stay high with 8.5 % in 2007 (annexe).This is clearly above the target from the IMF (4%) and slows down economic growth. (Economist, 2008) Like a lot of other developing countries, the economic structure has changed steadily over the last years. The agricultural sector decreased and accounted in 2005 for 10.3 % of the Gross Domestic Product (GDP). At the same time it still employs significant one third of the working population. The industrial sector decreased slightly and had a 29. 8% share. The service sector grew and amounts to 59. 9% share of the GDP. (annexe)

Traditionally, Turkey has strong trade relations with European countries and tightened

these by joining the EU customs union CU in 1996. This allowed duty free circulation of goods between the states and Turkey adopted the legislation of the EC. In 2007, Turkish exports are expected to amount to 105,861 US$ m and exports to 151,303 US$ m. (annexe). Its main export products are textiles, motor vehicles and parts, metals and mechanical machinery. The main trading partners for exports are the EU (52.3 %) and the US (6.7 %). Most of the EU exports are going to Germany, UK, Italy and France. The main imports are chemicals, oil and gas, motor vehicles and metals and most imports come again from the EU (42.2 %), Russia (11%) and the US (4.6%). (annexe) The trade pattern illustrates that Turkish exports are mainly low skilled, low wage goods whereas the imports are rather high skill and high wage ones (Togan, 2004, p. 1013).

In terms of the GDP, Turkey has the biggest economy compared to the European Union member states. Its large domestic market accounts for over 71,000 million persons which puts it at second place after Germany. (Stratenschulte, 2007, p. 125) It has a skilled, flexible and business-oriented workforce which compares favourably with European countries. Turkey has a highly dynamic private sector which consists mainly of small and medium-sized companies which are family-run (Lake, 2005a, p. 64). Its strategic outstanding position between Europe and the Middle East provides it with access to other markets. (Hill, 2002, p. 109)

Despite these strengths and the progress made, there are still weaknesses that make reforms urgent necessary. Firstly, there exists a large informal and therefore unregistered sector consisting of mainly small companies. On the one hand they contribute to the resilience of the Turkish economy on the short term because their costs are lower and they are more flexible under difficult conditions. On the other hand they prevent themselves from becoming larger and more efficient companies, for example because they don't have access to the capital market. (Lake, 2005a, p. 73) As a result, they reduce economic growth and narrow the tax base. Another negative effect is that the average productivity level is relatively low compared to other countries (OECD, 2006, p. 5). Secondly, Turkey has a low rate of Foreign Direct Investment (FDI) compared to the new EU members and other candidates. One reason for that is that many Turkish companies have long been privatised, in contrast to former communist countries like Poland or Hungary. Conditions like economic and political uncertainty, government intervention, bureaucracy, regulation and corruption is also discouraging foreigners to invest in Turkey (Lake, 2005a, p. 69). But the rate is expected to increase as Turkey is a �converging’ economy and in 2004 FDI rose by 52 %. (Lake, 2005b, p. 12) Thirdly, the economy is burdened by a high debt, combined with a negative current-account balance. (annexe) The high debt is still due to Turkey's worst economic crisis in 2001 which lead to a break-down of the financial markets. The public finances suffered significantly and the debt increased by 40 per cent of the GDP (Lake, 2005a, p. 67).

EU Membership criteria

Turkey has to fulfil the membership conditions, the so-called Copenhagen criteria if it wants to become a member of the EU. They are:

• Stable framework of institutions which ensure democracy, the rule of law, human rights and protection of minorities

• Functioning market economy which is capable to handle competition and market forces within the European Union

• Ability