Economic Aspects of Turkey’s Quest for EU Membership

Euractiv.com, 22 April 2005

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In a Policy Brief, Daniel Gros of the Centre for European Policy Studies explores the economic dimension of Turkey’s accession.
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The EU has now decided to open membership negotiations with Turkey in late 2005. Given the determination with which Turkey has pursued the goal of EU membership, it is likely that these negotiations will in the end lead to accession. But this will not happen quickly; 2015 is the most likely date of membership often mentioned on both sides. Nevertheless, even if one accepts this time frame, it is worthwhile exploring the economic dimension of Turkey’s accession.
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The EU has by now acquired a lot of experience in admitting poorer countries. Would Turkey pose any special challenges (apart from its sheer size)? In economic terms, Turkey’s accession would in some respects mean ‘just another enlargement’, but in others, it would be quite different. Accession of Turkey would be ‘just another enlargement’ in the sense that in terms of relative GDP per capita and the weight of agriculture in employment, Turkey resembles the less-advanced CEECs that have already or are about to become EU members. Moreover, in terms of economic mass and population, Turkey would represent a bit more than double the 2007 enlargement (Bulgaria and Romania). This applies also to the budgetary costs.
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In three aspects, however, the Turkish case is quite different:
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Advanced trade integration. Through its customs union agreement, Turkey is much further integrated than were the CEECs until they became members. For most practical purposes, it is already part of the internal market (for goods) and is scheduled to take over large parts of the Acquis.
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Low human capital. In terms of indicators of formal education, the CEECs are rather close to the EU average. Here Turkey clearly lags behind – with potentially important consequences for its growth prospects.
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Demographic dynamism. The workforce in Turkey will continue to grow by more than 1% p.a. for at least another generation, whereas it is declining in most CEECs, giving Turkey potentially more dynamism.
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There are also two areas in which some similarities at first sight cover qualitative differences:
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Duality of the economy. Turkey has a similar average GDP per capita as Bulgaria and Romania, the two CEECs scheduled for membership in 2007. But economy is more dualistic, with a small, but rather high-performing modern sector (which is as efficient its counterparts in the new member countries). But approximately half of the labour force has essentially not yet been touched by the modern economy.
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Migration. The spectre of mass-migration of poor Anatolian peasants is one of the most powerful obstacles inhibiting a rational discussion of the Turkey issue. A key difference in Turkey’s accession compared to the 2004 and 2007 enlargements lies the large stock of Turkish citizens already established for some time in the EU and their concentration in one country (Germany). Experience suggests that (given existing regulations on family reunification) substantial net flow of migrants takes place even present (with no formal mobility for workers).
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These are the issues that will be discussed in this contribution: Section 1 starts with the question that is on everybody’s mind: how much will Turkey’s accession cost? The next section then deals with the one area where Turkish-EU relations are already very deep, namely trade. This is followed by an examination of the human potential of the Turkish economy, its dynamic demography, its low level of human capital accumulation and its dual employment structure (Section 3). Section draws the analysis together for an evaluation of the longterm growth prospects. Section 5 deals with migration.
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The Economics of Turkish Accession
Katinka Barysch, Center for European Reform Essays
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* Many West Europeans fear that the accession of Turkey – poor, populous and often unstable –will harm the EU economy. But Turkey’s economy is tiny compared with that of the EU-25. And what little economic impact Turkey’s EU entry will have is likely to be positive.
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* Turkey already has a custom union with the EU, and in many ways it is better prepared than the Central and East Europeans were when they started accession talks. But Turkey’s accession process will be more difficult to manage than that of the East European countries. Turkey’s large pile of debt leaves it unusually vulnerable to swings in investor confidence. Moreover, Ankara will not be able to use EU accession as an anchor for economic reform in the way the East Europeans did.
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* Turkish workers will not gain the right to apply for jobs in other EU countries until after 2020. By then, many West European countries may well be wooing Turkish workers to help them compensate for the ageing of their own workforces.
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* Eastward enlargement is already forcing the EU to change in a way that will, eventually, make it easier for Turkey to join. By then, the EU will hopefully have more efficient institutions and decision-making procedures. And it will have sorted out its labour market problems. If not, the EU of 2015 or 2020 will be slow-growing, gridlocked and unwelcoming. Turkey would not want to join such a club.
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