Select Committee on Trade and Industry Ninth Report


II. RELATIONS WITH EU

16. In 1963 Turkey signed an Association Agreement agreeing in principle that Turkey eventually would join the then EEC. Turkey applied for full membership in 1987. Part of the 1963 Association Agreement was the establishment of a Customs Union, accomplished in 1996. The Customs Union requires Turkey to meet parts of the acquis communautaire. In 1998 the Cardiff European Council announced a European Strategy to bring Turkey closer to European standards in all areas.

17. The Helsinki European Council in December 1999 accepted Turkey as a candidate country. Before the country can be invited to open accession negotiations, however, it must meet the Copenhagen political and economic criteria. These require a country to have stable institutions; a functioning market economy and the ability to cope with market forces and the capacity to take on the obligations of membership, including the aims of political, economic and monetary union. It is hard to estimate how long it will take before Turkey is ready to join: the Turkish government aims to be ready by 2010. On 8 December 2000, despite some disagreements regarding the short and medium term aims laid out in the document, Turkey signed an Accession Partnership agreement with the EU. There is now a framework for action in opening chapters. Turkey has prepared a detailed plan for dealing with each of the thirty one chapters of the acquis. We understand this has now been published.

18. There are major obstacles to Turkey's accession. Human rights and social affairs legislation are far from meeting the EU's requirements. The treatment of the Kurdish people in the South East of the country continues to raise concerns internationally. The issue of Northern Cyprus remains in dispute; Greece has stated its objection to Turkey's accession unless the situation is resolved. There is strong resistance within the Union to the accession of Cyprus being delayed as a result of the division of the island. Only 10 percent of the acquis is in place in the agricultural, social and environmental sectors.

19. There are also possible economic obstacles to Turkey's membership of the EU.

  • All new EU members must agree to adopt the euro as part of the accession process, following membership of the Exchange Rate Mechanism for two years beforehand. Although Turkey's reform programme has brought inflation and interest rates down dramatically, and seems set to create a moderately stable economy, it is hard to envisage the lira reaching a level which would enable it to weather membership of the ERM in the short or medium term. Turkey intended the currency rate to depreciate steadily over six month periods until the lira is floating. In February 2001, it became necessary to unpeg the lira exchange rate, which immediately devalued it by 25%. It remains to be seen what long term effect the February upheaval will have. Recent events have demonstrated the ease with which Turkey's economy destabilises. This presents doubts about Turkey's ability to keep within the economic margins required for EU membership

  • The current account deficit, which had increased throughout 2000 even before the December 2000 crisis, presents Turkey with a potential handicap. Other applicant nations with similar problems are able to concentrate on reducing their national debt as part of the accession process. Turkey must continue to borrow for some time to come to maintain its reform programme.

During our visit, in meetings with both political and business figures, we sought to discover what economic benefits were expected from proceeding beyond the point of the Customs' Union. Most saw it as a mainly political issue, membership was also widely seen as a useful spur to economic and social modernisation. There are good reasons to believe that Turkey would benefit from membership of the European Union. The Turkish people regard themselves as Europeans and would welcome accession as confirmation of their status. Efforts to meet the acquis are helping to preserve political stability. Any feeling that the goalposts are being moved for Turkey in the accession process engenders a strong negative reaction in politicians and public. In 2000, 80% of the population supported joining the EU, but this has declined since the debate over accession issues in November 2000.

CUSTOMS UNION

20. The Customs Union is an important part of the accession process. Customs Union requires Turkey to meet parts of the acquis communautaire relating to trade and to conform with EC trade legislation by December 2000. Turkey's membership of the Customs Union has had a profound effect on its trade with the EU. Figures rose from $27.9 billion in 1995 to $35.8 billion in 1999.[6] Since 1995, the share of Turkish imports has been redirected from third countries towards the EU. Free trade in coal and steel is covered by a separate agreement which will be integrated into the Customs Union in 2002. Agricultural produce is not covered by the Customs Union; there are tariff concessions. Since the Customs Union came into being, Turkey has made good progress towards meeting the acquis in areas such as free movement of goods, protection of intellectual property rights and customs regulation.[7]

21. The Customs Union Joint Committee is not meeting as often as planned. The Turkish Government feels it is unfair to be excluded from internal EU discussions, and from negotiations on trade, including trade with third parties, even though they must accept the outcome as policy. The Commission's 2000 regular report on Turkey noted that "the Turkish customs system basically complies with the Community Customs Code. Differences remain in regard to free zones."[8]

EU FUNDS

22. As Turkey has not opened accession negotiations, they have not been receiving any funds from the EU, beyond an annual grant, an average of _90m, received as part of the EU's pre-accession strategy. As part of the Accession Partnership, funding arrangements will be changed to orient funds into a single pre-accession budget. We found some dissatisfaction with the current EU funding situation while in Turkey and can only hope that this is resolved under the new arrangements.

23. From 2000 the overall EU allocation of funds to Turkey will be _177m. _50m each year will come from two funding Regulations recently established to aid Turkey, and the remaining _127m will be taken from MEDA II, which is an external EU fund for the Mediterranean and North African countries. Half these funds will be destined for structural and sector reforms helping Turkey to move towards meeting the acquis; the programme for achieving this will be developed in co-ordination with the World Bank. The remaining half will be aimed at helping Turkey to meet the acquis through investment in administrations and institutions. EIB-pre-accession funds and _600m of Earthquake Reconstruction funds are also available to Turkey. In January 2001, to help Turkey consolidate the Customs Union, the EC proposed an EIB special action programme to the value of _450m from 2000 to 2004. [9]

24. We found some dissatisfaction with the current EU funding situation while in Turkey. It was felt that Turkey was receiving less funding aid than other applicant countries. In part, there is a suspicion that Greece is blocking the allocation of more substantial grants. We hope that the funding arrangements for 2000 onwards allay some of these concerns. Turkey is moving towards overcoming economic barriers to accession, and will no doubt make good use of the variety of pre-accession funds now available. The political problems may be more difficult to solve, but with adequate support from the EU we believe they are surmountable.


6  Ev p 3 Back

7  Ref 2000 progress report Back

8  Regular Report, p 65 Back

9  Decision 2000/24/EC Back


 
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