Select Committee on Business and Enterprise Seventh Report

 
 

 
2  Turkey and the European Union

5.  Turkey has a long history of engagement with international institutions. It joined the Council of Europe in 1949 and has been a member of NATO since 1952. It was a founding member of the Organisation for Economic Cooperation & Development (OECD) in 1960. The political relationship between the EU and Turkey dates back at least as far as September 1963, when Turkey became the first country to sign an association agreement—the 'Ankara Agreement'[5]—with the then European Economic Community (EEC). This included a commitment to eventual Turkish membership. Nonetheless, almost 45 years on Turkey has yet to become an EU member, and there are suggestions from some quarters that it should not do so. It is often claimed that Turkey is not 'geographically within' Europe: only around 3% of its land area is on the European continent, the vast majority in Asia Minor. As one commentator noted, Turkey's detractors claim that it is "too big, too poor and too alien", so much so that it "can never be a happy member" of the EU.[6] Although we are the Business and Enterprise Committee, we cannot ignore the wider political context in which Turkey's application to join the EU sits. This chapter therefore examines the political and economic case for Turkish membership of the EU.

The political case for membership

UK GOVERNMENT VIEW

6.  The Government told us that the UK is "strongly committed to Turkey's accession", which it sees as being in the "strategic interests of a prosperous and secure Europe."[7] The Minister for Europe, Jim Murphy MP, outlined the broader political case in a recent speech. He saw the decision of whether to admit Turkey to the EU as "as important for the EU's relations with the Islamic World as the accession of the countries of Central and Eastern Europe was for closing the final chapter of the cold war", and as "about engaging the forces of globalisation rather than retreating from them."[8] He highlighted mutual benefits for both sides, but noted it was "crucial […] to map out how both will benefit from Turkish accession." He said:

The first mutual benefit is strategic: Turkey as a crossroads between East and West, Islam and Christianity, has more than symbolic value. Turkey has a better set of relations in the Middle East than any existing EU member. This will bring a new dimension to the EU's foreign policy. And both of us, Europe and Turkey need security in the region.[9]

As the Minister noted, in addition to security benefits, accession offers political stability to Turkey and greater influence for Turkey through the EU. We fully acknowledge the current political crisis in Turkey and look at it in more detail in paragraphs 29 and 30. It does not, though, change our basic view.

7.  All too often it is suggested that Turkey does not 'belong' in the EU. However, Turkey has long had a close relationship with the EU and the EEC before it, it is a member of NATO and the OECD, and although the majority of the population is Muslim, it is a secular democracy. We agree with the Government that accession offers strategic benefits to both parties.

The economic case for membership
Table 1: Turkey: selected economic indicators, 1997-2009   
  GDP  Real GDP Inflation  Current account balance  
  Turkish Lira, bn  % annual change  % annual change  % GDP 
1997 68.1  7.5 85.7  -0.8 
1998 70.2  3.1 84.7  0.8 
1999 67.8  -3.4 64.9  -0.5 
2000 72.4  6.8 55.0  -3.7 
2001 68.3  -5.7 54.2  1.8 
2002 72.5  6.2 45.1  -0.7 
2003 76.3  5.3 25.3  -2.6 
2004 83.5  9.4 8.6  -4.0 
2005 90.5  8.4 8.2  -4.7 
2006 96.7  6.9 9.6  -6.1 
2007 101.5  5.0 8.8  -5.7 (est.) 
2008 (est.) 105.5  4.0 7.5  -6.7 
Source: IMF, World Economic Outlook, April 2008  
     

8.  It is clear that there will need to be considerable economic reform within Turkey before it can join the EU, but there are no insurmountable economic barriers to its eventual accession. The picture is mixed. Turkey's GDP was $663 billion in 2007, making it the 17th largest in the world and the 7th largest in Europe. Turkey's economy is well over half the size of the states which joined the EU in 2004 and 2007 combined, and two-thirds bigger again than Poland, the largest economy in that group (which ranks 22nd globally).[10] On the other hand, on a per capita basis Turkey's GDP ranks only 53rd , above only Mexico in the 30-member Organisation for Economic Co-operation and Development (OECD), and slightly below Poland.

9.  As the table shows, Turkey's GDP has fluctuated over the last decade, but with average annual growth of 6.8% since 2001 its economy is now almost 50% larger than it was then.

10.  However, growth is now slowing, although this still exceeds the expected rates for Western European economies by some margin. Recent IMF and OECD projections forecast that real growth in Turkey will fall, from 5.0% in 2007 to 4.0% in 2008, or even slightly below, before rising slightly to around 4.5% in 2009.[11] A recent PricewaterhouseCoopers assessment suggested that in the years up to 2050 average annual per capita GDP growth in Turkey would be 3.4%, which would bring its GDP to around 70% of the UK's by mid­century.[12] While this level of projected growth is lower than for India and China, it is above Brazil and Russia. It also compares very positively with the projected average rate of 1.9% for the G7 group of developed economies.[13]

11.  Although over the medium to long term Turkey's economy looks likely to increase in size relative to most others, the country faces real problems. Concerns over Turkey's large current account deficit were raised both in evidence and on numerous occasions during our visit to Turkey, as well as by economic commentators. Turkey's Economy Minister has said that the current account deficit could widen to $50 billion in 2008—equivalent to 7% of GDP—up from $37 billion in 2007.[14] A BERR official said that that Turkey's trade balance was "rather worrying".[15] The Department's submission highlighted "bouts of financial instability" in 2004, 2005 and 2006, and that the "large current-account deficit and heavy reliance on short-term capital inflows could leave the economy vulnerable to sharp changes in investor sentiment."[16] The British Chambers of Commerce in Turkey (BCCT) warned that there was "no guarantee that there will not be another correction in the future",[17] and as the current global economic crisis has developed over recent months, fears for Turkey have increased.

12.  Turkey is also struggling to contain inflationary pressures. The central bank has stated that inflation, driven by energy and food prices (as in other countries), could reach 9.3% in 2008,[18] although the IMF has forecast 7.5%, and the bank has recently almost doubled its inflation target for next year to 7.5%, and also increased targets for 2010 and 2011.[19] However, this should be considered in the context of an inflation rate in Turkey of 65% only nine years ago.[20]

13.  As that change shows, significant reforms have already taken place. The country responded vigorously to the economic crisis at the beginning of the current decade, restoring macroeconomic stability with support from the International Monetary Fund (IMF).[21] The banking sector was reformed, state industries privatised, and inflation and national debt brought under control.[22] As the UK Trade and Investment Minister, Lord Jones of Birmingham, noted, Turkey has made "huge progress over the past few years"; he believed that Turkey would be able to "weather the storm" of the global economic crisis.[23]

14.  There is already a strong trading relationship between Turkey and the EU. The EU is Turkey's largest trading partner: 52% of Turkey's exports went to the EU in 2006, while EU countries supply almost 42% of Turkey's imports.[24] From the EU perspective, Turkey is the 7th largest source of EU imports and its 5th largest export market.[25] Some 60% of foreign direct investment (FDI) in Turkey comes from the EU.[26] Turkey has a customs union with the EU, which is discussed in more detail in paragraphs 40 to 44 below. The integration already achieved through the customs union is likely to soften the economic effect of accession for both parties. Indeed, the European Commission told us there would not be "a sort of big bang upon accession", and that "both trade and investments will increase progressively over the next years up to the accession."[27]

15.  The UK Government has little doubt that Turkey's accession would be economically beneficial to both parties. BERR told us that the "direct net economic benefits would be positive but asymmetric", with Turkey benefiting proportionately more than the EU.[28] BERR acknowledged that there are inherent difficulties in predicting the economic impact of accession, given the lack of a definite timescale for Turkey's accession, and consequent "obvious difficulties in predicting the precise economic impact".[29] Nonetheless, it observed that that accession would "increase the size of the EU internal market and will enable further trade integration through the removal of trade restrictions [and] the abolition of customs controls and some other technical barriers to trade."[30] It would also increase the population of the EU's internal market, increasing the number of customers for EU firms and offering economies of scale and gains from competition.[31] EU consumers would gain from cheaper imports.[32] Lord Jones noted that "Turkey would clearly benefit enormously economically from a trade and investment point of view, creating employment and increasing the rate of growth of their economy", as well as from investment from EU structural funds.[33]

16.  The Turkish economy is large and until recently has been growing rapidly. It would be foolish to discount the risks facing the Turkish economy, such as its current account deficit and the possibility that inflation may rise in future. However, we do not believe these risks are an obstacle to continuing accession negotiations, especially when set against the size of the Turkish economy and its rapid growth rate.

Migration

17.  Turkey has a population of 73 million, nearly double that of Poland, the most populous of the recent EU accession countries. Two-fifths of the population are aged under 22,[34] and 50 million live in urban areas.[35] An FCO official told us that by 2015 Turkey was projected to have a population of 82 million, and this was expected to rise to 87 million by 2025, which would give Turkey the largest population of any country in the EU.[36] Agriculture remains economically important, accounting for 26% of Turkish employment,[37] but BERR also noted the highly-skilled, competitive labour­force in Turkey.[38] However, employment rates are low, and appear to be falling.[39] This naturally increases concerns about the effects of accession on EU migration. After the experience of large-scale migration to established EU countries following the accession of the eight Eastern European countries in 2004, free movement of labour, as a BERR official told us, will be a "a very big issue" in the accession negotiations.[40]

18.  There were mixed views about the level of labour migration from Turkey to the EU which might be expected. One view was that an economically successful Turkey would offer sufficient opportunities at home to make migration less attractive. However the TBBC suggested that even growth faster than the EU's "probably will not be sufficient to fulfil the aspirations of all young Turks certainly."[41] Another view, expressed by an FCO official, was that migration could be the "single biggest economic benefit" to the EU, given its aging population.[42] Some observed that migrating Turkish workers were less likely to choose the UK over Germany, which with its historical connections could expect a disproportionate share of any migration.[43] Others saw the UK as a natural destination for young Turkish people to come to learn English, living and working here but only for a short period before returning home.

19.  While the CBI did not take a view on the politics of Turkish EU membership,[44] they said

If Turkey were to become a member of the EU then the CBI would support free movement in relation to Turkey, as we have done with the A8 and the A2. However, as with the A2 we believe that it would be prudent to assess quite carefully at the point of accession the impact of free movement and to look at ways of addressing any concerns that may arise at that time.[45]

BERR states that the implications of free labour movement:

would depend on the economic situation in the UK, Turkey, and the wider EU at the time of accession; the level of access granted to the UK labour market; decisions of other Member States on labour market access; and historical patterns of migration from Turkey to the UK and other EU member states,

and that "it would be premature to attempt to assess the impact" at this time.[46] During our visit to Turkey we found widespread appreciation of the sensitivity of EU countries on this issue, and acceptance that transition periods might be at least as long as for some of the newly acceded countries. We gathered that the seven year safeguards for Romania and Bulgaria on accession would be accepted as part of any eventual agreement for Turkey, and perhaps even ten year safeguards. However, Turkey would not accept permanent safeguards, which the European Commission has in the past said it was considering.[47] The Trade Minister told us that, given that Turkey would be the "most populous nation" in the EU, there "would have to be" transitional arrangements,[48] although he said that the Government did not yet have a view on how long these might be.[49]

20.  The migration of labour from Turkey will inevitably be an important issue in the accession negotiations. The lengthy transition periods that have been suggested—seven years or more after accession—would mean that, even if Turkey acceded in 2014, free movement of labour would not come into effect until at least 2021. Given the understanding and realism that exists on both sides, migration may be the negotiating issue of greatest public interest, but it should not prove an insuperable barrier.

Progress in accession negotiations so far

21.  The opening of EU accession talks with Turkey in October 2005 came after a difficult process: after its initial application for EU membership in 1987, negotiations were conditional on Turkey meeting the economic 'Copenhagen criteria' that were laid down in 1993 and Turkey was not designated an official 'candidate country' until 1999. Formal talks did not begin until 3 October 2005, some 18 years after the original membership application.

22.  The EU's acquis communautaire, the body of law that must be adopted before a country can become an EU Member State, is split into 35 policy areas, or 'chapters'. Negotiations on these began after the initial 'screening process' was completed in October 2006. However, progress has been slow. To date, only eight chapters have opened, one of which has been provisionally closed As one commentator noted: "Obstacles to Turkey's path towards the European Union lie within Turkey as well as within the borders of the EU."[50] There are three reasons for the slow progress (each discussed more fully below):

  • the progress of internal reforms in Turkey;
  • attitudes within the EU, in particular France which is apparently exercising an informal political block on the opening of five negotiating chapters; and
  • the Cyprus issue, which has seen the opening of eight chapters being formally frozen.

The following table summarises progress in the negotiations by chapter:

Table 2. Progress in accession negotiations

23.  When BERR submitted its evidence in 2007 there was optimism that two chapters (education and culture; judiciary and fundamental rights) would open under Portugal's EU presidency in the second half of 2007.[51] There was also optimism that two or possibly three further chapters (intellectual property rights and company law, and possibly free capital movement) might open in the first half of 2008,[52] and a further two (potentially including energy) could open under the French Presidency in the second half of 2008.[53]

24.  In the event, no new chapters were opened in the second half of 2007, and an EU-Turkey accession conference in April was cancelled on grounds of incomplete "necessary technical work".[54] At the EU-Turkey accession conference on 17 June the company law and intellectual property negotiating chapters were opened. During our visit to Brussels, the European Commission observed that, unless progress was made by Turkey in addressing the concerns which had led to the blocking of certain chapters, it might be difficult to maintain the momentum of the talks in 2009.

25.  This pace of negotiation compares poorly with the progress in negotiations with Croatia, which opened at the same time as Turkey's. Over half (20 out of 35) of the negotiation chapters have now opened with Croatia,[55] and the President of the European Commission, Jose Manuel Barroso, has even expressed a view that Croatia might complete accession negotiations in 2009, enabling accession in 2010.[56] In contrast, no realistic assessment of the likely date of Turkey's accession can currently be made, except that it cannot happen before 2014 for reasons associated with the EU's budgetary cycle. One Government official suggested that accession agreement in 2014 would require "very, very good progress",[57]suggesting instead "hopefully within the decade".[58] The progress of Turkey's accession talks has been slow—far slower than Croatia's. We believe that with goodwill on both sides it should be possible to speed up the process. We note that Turkey will have to make significant reforms to meet the acquis communautaire in many chapters, but we believe that the accession negotiation process promises benefits for both sides, provided that each side is confident the other is acting in good faith.

TURKEY: INTERNAL REFORMS

26.  Before accession can take place, it is clear that more economic and political reform in Turkey is needed. European Commission President Barroso has said that:

the pace of negotiations will depend first and foremost on Turkey's own progress in these reforms. This is the underpinning principle of the enlargement policy of the EU. We are all aware of the overall political realities in EU Member States, but we should seek to avoid fuelling them with further reasons for unnecessary delays.[59]

An EU ministerial statement in December 2007 welcomed some progress on internal reforms, but also criticised "the limited progress achieved in political reform in Turkey in 2007", urging quicker action on protecting freedom of expression and religion.[60] An FCO official told us that in February Turkey had adopted new legislation giving greater religious freedom, the 'Foundations law', "for which the UK has strongly lobbied".[61]

27.  Economic reform after 2001 was driven by an IMF programme which expired in May,[62] and while there are reports of a possible new IMF arrangement, this is likely to be somewhat less strict than the previous one.[63] During our visit to Turkey we heard mixed views as to whether an 'external anchor' for reform was needed once the IMF programme was complete. The TBBC suggested that the EU accession programme "really comes on where the IMF finished."[64] A BERR official also saw the EU accession process as "a kind of flight path to reform".[65] Turkey is committed to reform: the Economy Minister has said that Turkey would be able to adopt the acquis by 2014 "very comfortably",[66] while its Foreign Minister has said that by 2013 Turkey will be "able to say, we are ready and then probably ready to wait for the European Union to be ready for Turkey".[67]

28.  Opposition within the EU, which leads Turkey to believe the probability of accession is diminishing, does nothing to help the case for reform. There is no doubt that Turkey has reformed considerably since the economic crises in 2000-2001 for which it deserves considerable credit, but the recent political problems have slowed the pace of internal reform considerably.

29.  Two issues, the constitutional court case against Turkey's ruling party and Article 301, indicate the importance of reform. The constitutional court case brought by Turkey's chief prosecutor against the ruling Justice & Development Party (AKP) for violating the country's secular constitution dominated conversations during our visit to Turkey, where many of the people we met in Turkey saw it as the country 'shooting itself in the foot'.[68] We also note that many of those we met were relatively unconcerned, since they considered Turkey was used to dealing with such crises, which were relatively normal. The court is now considering the case. Since 1962, 24 Turkish political parties have been closed down, but they have not had the AKP's level of electoral support and it would also "be the first party ever to be shut while in government".[69] The British Trade and Investment Minster called the case a "distraction"[70] which "feeds the prejudices and the views" of Turkey's opponents.[71] However, he did not see it as fatal for Turkey's case.[72] The EU Enlargement Commissioner has noted that in the EU such issues "are debated in the parliament and decided through the ballot box, not in court rooms."[73] The recent overturning of legislation lifting the headscarf ban, which the constitutional court considered a breach of the secular constitution, has been seen by many as an indication that the court is likely to ultimately uphold the proposed ban on the ruling AKP.[74] Whatever the outcome, however, we also think it notable that Turkey's current political crisis has come about because of reforms to allow a degree of freedom of religious expression permitted in most EU countries. Turkey may be a country in which Muslims make up the majority of the population, but the balance between secular society and religion is as fiercely contested as it is in France.

30.  Article 301 is the part of Turkey's penal code that outlawed insults to "Turkishness", and has been deemed incompatible with the EU acquis; Turkey's Foreign Minister noted that this had become an "emblematic" issue for the EU.[75] Turkey recently amended the article,[76] which was seen as "a welcome step forward" by the European Commission,[77] and by the UK Foreign Secretary as "a clear demonstration of Turkey's commitment to reform" and "a significant endorsement of the fundamental rights and freedoms of all Turkish citizens."[78] However, concerns have been raised that the changes are not sufficient to protect free speech, or that the reforms will not be implemented in practice.[79]

31.  The UK Trade Minister told us that he had seen a shift in emphasis from:

"We have got to do this if we want to be in the European Union" more to, "We have got to do this because it is a very good thing because economic reform is going to make for a more stable and wealthy Turkey, period."[80]

The Minister also saw a "double good effect" from economic reform under the accession process, putting it in "better shape to join" while ensuring a "more successful economy".[81]

32.  All parties understand that Turkey needs to reform both economically and constitutionally before it can accede to the EU. It would be naïve to underestimate the extent of the changes needed or expect them to be accepted without debate or even some resistance. It is extremely likely there will be further political and constitutional difficulties in the years ahead. However, our own experience in Turkey convinced us that there is a readiness to reform among many businesspeople and politicians; Turkey has surmounted political crises in the past. It is important to wait to see how events unfold, rather than to assume immediately that progress is impossible. Only the most extreme events would justify suspension of accession negotiations with Turkey.

THE 'POLITICAL BLOCK'

33.  Although accession negotiations continue, there are concerns that some EU countries are fundamentally opposed to Turkish membership of the EU. While the German Chancellor, Angela Merkel, has expressed opposition to Turkish accession, her coalition partners favour it and Germany has continued to observe the commitment to Turkey made by the EU at the outset of the accession negotiations.[82] Some other EU countries are also thought to oppose Turkish accession, though this opposition remains, for the moment at least, latent.

34.  However, opposition from France is currently seen as the greatest political barrier in the EU to Turkish accession. President Sarkozy made his opposition to Turkey's EU membership clear during his election campaign. France has indicated that it would prefer a 'privileged partnership' for Turkey, which would stop short of full EU membership; but Turkey has indicated that it would find this unacceptable.[83]

35.  We were told that France has instigated an informal 'political block' on the opening of certain negotiation chapters it believes 'pre-judge' accession, or as an FCO official put it there are "potential French political reserves on the five chapters that [the President] deems to imply eventual full membership of the European Union."[84] The blocked chapters are: agriculture and rural development; economic and monetary policy; regional policy and structural instruments; financial and budgetary provisions; and institutions.[85] (One of these (agriculture and rural development, which covers the Common Agricultural Policy) is also formally blocked due to the Cyprus issue.) The French position has apparently led to "a backlash against French commercial interests in Turkey."[86] The FCO official noted that the role of French corporate sector could prove important "if they perceive some of their interests to be negatively affected, such as perhaps Gaz de France."[87] However, during our visit the European Commission noted that despite France's concerns it was content for the accession negotiations to proceed. Indeed, one commentator observed a 'softening' of France's tone in recent months,[88] and more accession negotiation chapters are expected to be opened under France's EU Presidency which runs from July 1st 2008.

36.  The Turkish Prime Minister, Mr Erdogan, has noted that reduced support for EU membership in Turkey, and therefore for the reform necessary to achieve it, is a direct result of the negativity emerging from some EU countries: "Our EU allies are responsible for this diminished trust".[89] Asked about the accession process from Turkey's perspective, an FCO official said that in Turkey there was "a sense that there is not a level playing field in terms of the speed in progressing accession."[90]

37.  Turkey began the EU accession negotiations in good faith. It is not prepared to and should not be asked to accept some form of 'privileged partnership'. Existing EU Member States should continue the talks on the same basis as they began. To do otherwise is unacceptable. Given some EU leaders' rhetoric about Turkey it is not surprising that public enthusiasm for EU membership in Turkey has rapidly declined. The issue is not whether Turkey should join the EU immediately, but how vigorously to continue negotiations. Much will have changed in both Turkey and in current member states before any final decision is made.

CYPRUS: CHAPTERS FROZEN

38.  The division of the island of Cyprus, dating back to 1974, continues to obstruct progress in Turkey's accession talks.[91] Turkey faced the difficult issue of extending the customs union to Cyprus after it acceded to the EU in 2004.[92] It failed to meet its customs union commitments by not opening its ports and airports to Cypriot vessels,[93] an issue that had threatened to completely derail Turkey's accession negotiations. However, in December 2006 the EU decided to block the opening of eight chapters, broadly customs-union related,[94] and the closure of any chapters until Turkey meets these commitments. An FCO official noted that the opening of the energy chapter in the accession talks was also being affected by the Cyprus issue,[95] with Turkey disputing Cyprus's plans to drill offshore within its own territorial waters.[96]

39.  The election of a new President of the Republic of Cyprus, Demetris Christofias, in February has been followed by some progress. Since then, there have been initial talks between the leaders of the Greek south and the Turkish north, the opening of the long­blocked Ledra Street crossing in Nicosia, a visit from the UN special envoy, the establishment—and initial meetings—of study groups and technical committees under UN auspices, and a further meeting of the two leaders on 23 May.[97] The EU also recently amended a regulation regarding the Green Line in Cyprus, the line dividing the Greek south from the Turkish north, to encourage trade.[98] This removes tariffs on agricultural goods from the north and almost doubles the value of personal goods that can be taken across the line. Turkish accession to the EU is impossible while there is continued disagreement over Cyprus, but encouraging efforts are being made to resolve that situation. Although it is inevitable that some chapters will be blocked until then, we support continued accession negotiations in as many chapters as possible.

EU-Turkey customs union and trade relations

40.  The EU and Turkey already have strong economic and trade links. The 1963 Ankara Agreement envisaged an EU-Turkey customs union, and in 1970, an Additional Protocol to the Ankara Agreement set a timetable for abolishing tariffs and quotas. In 1995 the economic relationship developed further with the Customs Union Agreement, which took affect the following year. The customs union covers most industrial products and processed agricultural goods, and allows these to circulate tariff-free between the EU and Turkey.[99] However, it does not cover services.

41.  Since implementation of the customs union in 1996, EU exports to Turkey have tripled to $58 billion a year, and Turkish exports to the EU quadrupled to $48 billion.[100] The Trade and Industry Committee's 2001 Report came five years after the customs union was created. While it noted progress on meeting some customs union requirements, it drew attention to deficiencies in the institutions established to govern the customs union.[101] Seven years on from that Report the TBCCI note that the customs union "has made Turkish firms more efficient and competitive."[102] A BERR official shared this view, saying that the customs union had "opened up competition into bits of the Turkish economy which had not faced it previously", and so "has been very popular with some and extremely unpopular with others" in Turkey.[103] One businessman we met in Turkey called the customs union a "'good school to prepare Turkey for competitiveness". However, twelve years after the customs union entered into force, numerous problems persist and its rules are not fully or consistently adhered to. These issues—including certification requirements, discriminatory taxation, and customs processes—are explored in paragraphs 92 to 95. Whatever the problems with the customs union, there is little doubt that it has led to far deeper economic integration between Turkey and EU countries, to the benefit of both parties, than would have happened without it.

42.  If there are concerns on the EU side, there is also dissatisfaction in Turkey. Turkey's customs union membership means that it must impose the EU's common external tariff on its imports. Preferential tariffs offered by the EU to certain trade partners, for example through free trade agreements or unilateral preferences granted to developing countries, must be applied in Turkey.[104] This situation was highlighted by the Trade and Industry Committee Report in 2001,[105] and remains unresolved. BERR highlighted the fact that Turkey sees this situation as unfair,[106] and Turkish officials also raised the issue during our visit. This problem has the potential to become more acute since the EU is pursuing several 'new generation' free trade deals which threaten to lead to the lowering of Turkey's tariff barriers to competitive exports from countries like India and South Korea. However, neither BERR officials nor the Trade Minister thought it likely that the issue was serious enough to undermine the customs union,[107] by for example leading Turkey to seek to 'downgrade' the customs union to a simple free trade agreement.

43.  The CBI noted that Turkey's trade defence policy—covering anti-dumping tariffs, anti-subsidy measures and safeguards—was operated independently of EU policy, and was "often not as rational, business friendly or as compliant with WTO norms as the EU's".[108] It singled out Turkey's measures against Chinese textiles and footwear imports,[109] an issue also raised by Debenhams, which sources 45% of its products from China, and said these were imposed without warning and prevented plans to open another store in Turkey.[110] There are also anti-dumping cases on both sides,[111] and a pharmaceutical­related EU Trade Barriers Regulation case against Turkey.[112] Accession should see these issues resolved because, as BERR state, trade would then "be subject to internal market and competition disciplines not trade defence."[113] Accession would also open up trade in services, to which the customs union does not apply.

44.  Although the EU-Turkey customs union has been beneficial, problems remain. The accession negotiations should produce reforms which overcome these problems. For example, we note Turkey's frustration with its exclusion from the EU negotiations that ultimately determine its tariff levels. Accession would obviously resolve this problem, as Turkey would then take part in EU trade policy on the same basis as other Member States. However, this will not address Turkish concerns in the short-term. The Government should work with the EU to ensure Turkey is properly consulted on trade negotiations which may affect it, particularly free trade negotiations with countries such as India and South Korea. In its turn, Turkey should address the problems arising from the way in which it has implemented the union, and remove unnecessary barriers to trade.

Conclusion

45.  We share the view expressed recently by one commentator, the Financial Times' Europe editor, John Thornhill, that:

it is clear that further convergence between the EU and Turkey benefits both sides. For the moment, it is better to travel hopefully together than to squabble about the final destination. To impede Turkey's accession process is therefore folly, turning the EU's magic potion into poison and threatening the instability it was created to prevent.[114]

Turkish membership of the European Union potentially offers benefits for both sides. There are strategic benefits in co-operation on security. Economically, if Turkish growth is as impressive as predicted, it will be an asset to the EU. The two economies are already highly integrated through the customs union. Further integration would open up markets on both sides. We are encouraged by the UK Trade Minister's view that Turkey has committed to reform for its own sake. Nonetheless, a decline in some EU member states' enthusiasm for Turkish accession has reduced public support for change in Turkey. More positive EU attitudes toward Turkish accession could re-invigorate enthusiasm in Turkey for the reforms necessary to meet the EU's acquis communautaire. We wholeheartedly agree with the Government that "Turkey and the EU have a shared destiny".[115] It should be made clear that, as long as Turkey is committed to achieving the acquis, the door to accession remains wide open.


5   "Agreement Creating an Association Between the Republic of Turkey and the European Economic Community",
12 September 1963, entering into force the following year (Relations Between Turkey and the European Union, Turkish Ministry of Foreign Affairs; http://www.mfa.gov.tr/relations-between-turkey-and-the-european-union.en.mfa).Turkey had applied for EEC associate membership in 1959. 
Back

6   John Thornhill (Editor, FT Europe), "The danger in dashing Turkey's European dream", Financial Times, 28 April 2008, p11 Back

7   Ev 49 (BERR), summary, para 1 Back

8   "Why Turkish Accession is important for the European Union's future", Speech by the Europe Minister, Jim Murphy MP to Wilton Park Conference on Turkish accession, 1 April 2008;
http://www.fco.gov.uk/en/newsroom/latest-news/?view=Speech&id=3120417 
Back

9   Ibid Back

10   IMF, World Economic Outlook, April 2008 (database) Back

11   "IMF Regional Economic Outlook for Europe Sees Slower Growth", IMF Press Release 08/89; 21 April 2008;
http://www.imf.org/external/np/sec/pr/2008/pr0889.htm , OECD Economic Outlook No. 83 - Country summaries, http://www.oecd.org/ 
Back

12   Pricewaterhouse Coopers, UK Economic Outlook, March 2008; www.pwc.co.uk/pdf/UK_Eco_Outlook_mar_08.pdf?utr=1  Back

13   Ibid., table 4.5, p29 (Note: long-term forecasts for GDP per capita at PPPs). Back

14   "Economy minister paints mixed picture", Turkish Daily News (website), 30 April 2008; http://www.turkishdailynews.com.tr/article.php?enewsid=103226 Back

15   Q2 Back

16   Ev 51 (BERR) para 13 Back

17   Ev 136 (BCCT) Back

18   The target range is 4.1%-6.9%, see "Turkey bank says inflation will be double its target", Financial Times, 1 May 2008; and "Inflation goal unreachable", Turkish Daily News (website), 1 May 2008;
http://www.turkishdailynews.com.tr/article.php?enewsid=103334.The main measure of consumer prices increased from 9.2% a year in March 2008 to 9.7% in April, again due to energy and food prices ("Caution at Turkey inflation data", Financial Times, 6 May 2008, p23) 
Back

19   "Turkish targets for inflation almost double", Financial Times, 5 June 2008, p6 Back

20   Ev 52 (BERR) summary para 19; the general point was also made by the BERR official (Q3) Back

21   Ev 100 (CBI) para 4 Back

22   Ev 100 (CBI) para 6 Back

23   Q203 Back

24   Ev 100 (CBI) para 9 Back

25   All from European Commission DG trade Turkey page http://ec.europa.eu/trade/issues/bilateral/countries/turkey/index_en.htm Back

26   Ev 100 (CBI) para 8 Back

27   Ev 109 (European Commission) Back

28   Ev 49 (BERR) summary para 3 Back

29   Ev 51 (BERR) para 3 Back

30   Ev 49 (BERR) summary para 5 Back

31   Ev 50 (BERR) para 1 Back

32   Ev 56 (BERR) para 25 Back

33   Q196 Back

34   Ev 125 (TBBCI), para 3.1 Back

35   UKTI, Turkey home page, "Why You Should Choose TURKEY Now?"
https://www.uktradeinvest.gov.uk/ukti/appmanager/ukti/countries?_nfls=false&_nfpb=true&_pageLabel=CountryType1&navigationPageId=/turkey 
Back

36   Q73 Back

37   Ev 55 (BERR) para 13 Back

38   Ev 125 (TBCCI) para 3.1 Back

39   See http://www.oecd.org.dataoecd/39/45/34486779.pdf p115 Back

40   Q66 Back

41   Q188 (emphasis in original) Back

42   Q65 Back

43   Q70 Back

44   Q127 Back

45   Q128 Back

46   Ev 49 (BERR) summary para 7 Back

47   "Turkey: the Commission recommends opening accession negotiations", European Commission website; http://europa.eu/scadplus/leg/en/lvb/e50015.htm  Back

48   Q221 Back

49   Q220 Back

50   Ann Dismoor, Turkey decoded, 2008, p213 Back

51   Ev 70 (BERR) annex B Back

52   The European Commission expressed similar optimism during our visit.  Back

53   Q53 Back

54   Turkey Analyst Vol 1 No 5, 23 April 2008, citing Milliyet Back

55   6th meeting of the Accession Conference at ministerial level with Croatia", Council of the EU press release 10814/08, 17 June 2008; http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/er/101245.pdf and Slovenian EU Presidency "Accession negotiations with Turkey and Croatia" http://www.eu2008.si/en/Policy_Areas/General_Affairs_and_External_Relations/Enlargement/Accession_negotiations.html Back

56   "EU says Croatia on course to join the bloc in 2010", International Herald Tribune, 13 March 2008; http://www.iht.com/articles/ap/2008/03/13/europe/EU-GEN-EU-Croatia.php Back

57   Q68 Back

58   Q67 Back

59   "Turkey: Master of the Straits, Master of its Destiny", European Commission President Barroso speech to the Turkish Grand National Assembly, Ankara, 10 April 2008; http://www.avrupa.info.tr/Files/Barroso_Speech_EN.doc Back

60   "France wins EU concession on Turkey", FT.com, 11 December 2007;
http://www.ft.com/cms/s/0/d66887c6-a72e-11dc-a25a-0000779fd2ac.html 
Back

61   Q53 Back

62   Ev 51 (BERR) para 17 Back

63   "Turkey to increase spending ahead of IMF deal", Financial Times, 5 May 2008, p6 and "Doubts as Turkish IMF deal ends", Financial Times, 12 May 2008, p8 Back

64   Q169 Back

65   Q7 Back

66   "EU hails progress in Turkey talks", Financial Times, 20 Dec 2007, p8 Back

67   Transcript of interview with Turkey's Foreign Minister, Ali Babacan, Financial Times, 14 April; He said that 188 laws and 576 pieces of secondary legislation would be needed to meet the acuis, and that so far 20 and 98 respectively had been completed (11% and 17% of the total). Back

68   "Turkish government and old guard in showdown", Financial Times, 24 March 2008, p6 Back

69   "Secular strains: Turkish political Islam comes under new fire", Financial Times, 23 April 2008, p13 & "Not the first ban, not the last: Explainer History of closures", The Guardian, 11 June 2008, p18 Back

70   Q198 Back

71   Q197 Back

72   Q198 Back

73   "Statement by Enlargement Commissioner Olli Rehn on the latest development in the prosecution case against the AKP in Turkey", 31 March 2008; http://ec.europa.eu/commission_barroso/rehn/press_corner/statements/index_en.htm Back

74   "Turkish court upholds headscarf ban", Financial Times, 6 June 2008, p6 & "Fears for Turkish ruling party as court overturns headscarf law", The Guardian, 6 June 2008, p22 Back

75   Transcript of interview with Turkey's Foreign Minister, Ali Babacan, Financial Times, 14 April;  Back

76   These replaced Turkishness with the "Turkish nation" and reducing jail terms from three to two years, and making prosecutions the decision of the Justice Minister. Amended text at http://turkishembassylondon.org/canon/pressreleases_12May2008.htm Back

77   "Ankara eases free speech law to pacify EU", Financial Times, 1 May 2008, p11, and "Parliament approves 301 amendment, eyes on implementation", Turkish Daily News, 1 May 2008; http://www.turkishdailynews.com.tr/article.php?enewsid=103289 Back

78   "The Foreign Secretary welcomes greater freedom of expression in Turkey", FCO press release, 30 April 2008; http://www.wired-gov.net/wg/wg-news-1.nsf/lfi/160408 Back

79   "Turkish free speech Erdogan's reform of Article 301 is still profoundly illiberal", Financial Times, 2 May 2008, p10, "Parliament approves 301 amendment, eyes on implementation", Turkish Daily News, 1 May 2008; http://www.turkishdailynews.com.tr/article.php?enewsid=103289, and "Ankara eases free speech law to pacify EU", Financial Times, 1 May 2008, p11 Back

80   Q196 Back

81   Q 210 Back

82   The Trade and Investment Minister also made this point (Q207), as did the FCO official (Q54). Back

83   France's 'Mediterranean Union' proposals have been seen as a way to deliver privileged partnership. Turkey has not yet confirmed whether it will take part, its involvement will likely depend on the details of the proposals ("Turkey in no hurry on Med Union", Turkish Daily News, 6 May 2008; http://www.turkishdailynews.com.tr/article.php?enewsid=103755 Back

84   Q62. The Financial Times reported that President Sarkosy only agreed to the opening of two chapters in December 2007 in return for a 'reflection group' on the EU's long term future challenges ("EU hails progress in Turkey talks", Financial Times, 20 Dec 2007, p8). Back

85   Q62 Back

86   John Thornhill (Editor, FT Europe), "The danger in dashing Turkey's European dream", Financial Times, 28 April 2008, p11 Back

87   Q54 Back

88   John Thornhill (Editor, FT Europe), "The danger in dashing Turkey's European dream", Financial Times, 28 April 2008, p11 Back

89   "EU allies to blame for diminished support", 12 April, Turkey Analyst Vol 1 No 5, 23 April 2008, p18  Back

90   Q81 Back

91   Between the 'Turkish Republic of Northern Cyprus', ('TRNC', being recognised only by Turkey) and the Greek Republic of Cyprus in the south of the island. Back

92   "Cyprus in frame as Ankara weights customs move", Financial Times, 26/27 March 2005, p7 Back

93   Ev 51 (BERR) summary para 5 Back

94   Q62 Back

95   Q53 Back

96   Q79 & Q81 Back

97   "Substantial issues covered in talks", Turkish Daily News (website), 1 May 2008;
http://www.turkishdailynews.com.tr/article.php?enewsid=103298. Study Groups: Administration and Power Allocation, EU issues, Guarantees and Security, Land, Property and Economical issues. Technical Committees: Crime/Issues Related to Crime, Economical and Commercial issues, Cultural Heritage, Crisis Management, Humanitarian issues, Health and Environment. (according to Turkey Analyst Vol 1 No 5, 23 April 2008, p19) 
Back

98   "Conclusions of General Affairs and External Relations Council, 16 June 2008", EU Council press release (10725/08) - provisional, 16 June 2008, p20;
http://www.consilium.europa.eu/ueDocs/cms_Data/docs/pressData/en/gena/101235.pdf 
Back

99   Tariffs on other agricultural goods were to be addressed through further negotiations. Back

100   Ev 100 (CBI) para 9 Back

101   For example, the Customs Union Joint Committee, had not met as often as planned HC(2000-01) 360, para 21 Back

102   Ev 125 para 3.1 Back

103   Q36 Back

104   European Commission, Directorate-General for Trade, Bilateral trade talks, Turkey http://europa.eu.int/comm/trade/issues/bilateral/countries/turkey/index_en.htm Back

105   HC (2000-01) 360 Back

106   Ev 50 (BERR) para 6.7 & Q38 Back

107   Q46 and Qq230-232, and Qq233-234 Back

108   Ev 103 (CBI) para 34 Back

109   Ev 104 (CBI) para 41 Back

110   Ev 109 (Debenhams) Back

111   Ev 50 (BERR) para 2 Back

112   Ev 103 (CBI), para 35 Back

113   Ev 50 (BERR) para 4 Back

114   John Thornhill (Editor, FT Europe), "The danger in dashing Turkey's European dream", Financial Times, 28 April 2008, p11 Back

115   "Why Turkish Accession is important for the European Union's future", Speech by the Europe Minister, Jim Murphy MP to Wilton Park Conference on Turkish accession, 1 April 2008;
http://www.fco.gov.uk/en/newsroom/latest-news/?view=Speech&id=3120417 
Back


 

 
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