Does Turkey meet the Copenhagen criteria?

1963: Association Agreement1970: Additional Protocol1980: Freeze1995: Customs Union1997: Rejection1999: Acceptance2004: Green light2006: Partial suspension

1. Economic criteria2. Political criteria3. Other criteria

1. Functioning market economy2. Capacity to compete3. Economic and Monetary Union4. Acquis Communautaire

1.1. Economic Policy Essentials 1.2. Macroeconomic stability1.3. Free Interplay of Market Forces1.4. Free Market Entry and Exit1.5. Adequate Legal System1.6. Sufficiently Developed Financial

Sector

GDP per capita in PPS (EU-25=100): 27.6

Human Development Index: 0.75 (EU: 0.94 ~ 0.79)

Income inequality: 40 (EU: 24.6 ~ 38.5)

Global competitiveness: 59 (EU: 2 ~ 72)

Economic growth:

-10

-8

-6

-4

-2

0

2

4

6

8

10

12

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

Inflation

0%

20%

40%

60%

80%

100%

120%

Turkey

EU-15

UnemploymentUnemployment:

Participation rate: 51.5 % (EU-25: 70.6)

Employment rate: 45.5 % (EU-25: 62.9)

Employment rate women: 25.2 % (EU-25: 55.1)

Balance of Payments

Current account (million dollar): -8,036 (2003)-15,604 (2004)-23,155 (2005)

Privatization (65% of value added; 80% of employment)

Price liberalization (share of administered prices in the CPI is 10% of total weight)

Liberalization of entry and exit of firms (progress yet restrictions on foreign ownership)

Imposition of hard budget constraints on both public and private enterprises

Liberal trade regime (Customs Union; WTO)

Privatization (slowed down)Enterprise restructuring (high

concentration ratios; large holdings)Small and medium-size enterprises

(27% of value added; 75% of employment)

“A well-functioning and stable public administration built on an efficient and impartial civil service, and an independent and efficient legal system” :

- Time lag is long- Not familiar with (intellectual)

property rights - Bias against foreign investors

Turkey 3.11 (85)Belgium 2.11 (22)Estonia 1.75 (7)Finland 1.85 (12)France 2.51 (44)Germany 1.96 (19)

Bank reform is the cornerstone of the IMF aid program

The Turkish Central Bank was accorded a status of independence

State and private banks were put under the supervision of an independent institution

Increased foreign participation

In recent years Turkey has concentrated its efforts on privatization while not enough attention has been paid on creating fair competition in domestic markets.

Turkey’s domestic industrial structure is too much concentrated, with large family-run companies dominating the scene.

Turkey should stimulate private entrepreneurs to set up new companies.

In order to attract new investors, both foreign and domestic, more legal transparency is required.

Turkey’ financial sector is on the road of deregulation, yet requires sufficient attention from the government.

2.1. Positive physical infrastructure related factors

2.2. Sufficient investment in physical capital 2.3. Sufficient investment in human capital

2.4. Structural transformation of the economy

2.5. State Influence on competitiveness and enterprise restructuring

2.6. Growing trade integration of goods and services with the EU

Share of households with internet access: 7 (EU-25: 42)

Mobile phone subscriptions per 100 inhabitants: 40 (EU-25: 81)

Number of hospital beds (per 100,000 inhabitants): 262.1 (EU-25: 639.1)

Environmental expenditures by public sector in % of GDP: 0.22 (EU-25: 0.58)

Gross capital formation as percentage of GDP: 17.8 (EU-15: 20.4)

FDI intensity: 0.4 (1997) 0.5 (2000) 0.6 (2004); EU-15: 1.1 (1997) 3.5 (2000) 1.0 (2004)

Total expenditure on education as % of GDP: 3.74 (EU-15: 5.20)

% of adult population with tertiary education: 2.7 (EU-15: 3.1)

% of tertiary graduates in science and technology per 1000 of population aged 20-29: 5.6 (EU-25: 12.7)

Sectoral distribution of value added in Turkey: Agriculture: 16%; Industry: 24%; Services: 60%

EU: Agriculture: 2%; Industry:27%; Services: 71%

Voice and accountability: -0.04Political stability/No violence: -0.54Government effectiveness:

+0.27Regulatory quality: +0.18Rule of law: +0.07Control of corruption: +0.08

Trade integration of goods: 16.9 (1995); 26.2 (2004); 55% (variation); EU-15: 7.9; (1995);10.5 (2004); 33% (variation)

As far as specialization is concerned, we can see a tendency of upgrading, although the bulk of Turkey’s trade with the EU consists of traditional and low-technology product groups and is still disadvantaged in terms of quality.

The average Specialization index increased from 0.48 (1995) to 0.51 (2005)

After 1995 Turkey has maintained it comparative advantage in food products and beverages, other non-metallic mineral products, textiles and wearing apparel. Moreover it has developed a comparative advantage in new sectors: fabricated metal products, rubber and plastic products, communication equipment and furniture, jewels and other products.

Trade integration with respect to services: Turkey: 5.8 (1995); 7.4 (2000); 5.5 (2004); EU-15: 2.5 (1995); 3.6 (2000); 3.6 (2004)

Outsourcing and in-sourcing of services: +1068 (1993); +4420 (2000); –104 (2005)

Turkey should invest more in human capital.

Compared to other developing countries, Turkey has only attracted a very limited number of foreign investors.

Turkey is on the right track as regards the structural transformation of its economy. Industry and services become more important to the detriment of agriculture.

Trade integration of goods between Turkey and the EU is strong. Both the Intra-industry Specialization and the Revealed Comparative Advantages Indexes prove that Turkish firms will be able to compete with European firms in the large internal market.

Trade integration of services is weaker. From a net outsourcer of services Turkey turned into a net insourcer.

Inflation rate (%): 9.85 (norm: 2.9) Budget deficit (% of GDP): -1.2

(norm: -3)Government debt (% of GDP): 69.6

(norm: 60) Interest rates, 10-year bonds: 28.5

(norm: 6.2)Exchange rate against parity: 16.3

(norm: 15)

4.1. The free movement of goods4.2. The right of establishment + freedom to

provide services4.3. Competition policy and state aid4.4. Freedom of movement for workers4.5. Agriculture4.6. Regional policy 4.7. Budgetary provisions4.8. Foreign, security and defense policy4.9. Justice, freedom and security4.10. Education and culture.

Turkish trade integration with the EU has remained stable

Still problems remain with respect to anti-dumping procedures and technical and administrative barriers to trade

Although the principle of free trade in services is mentioned in the Ankara agreement and subsequently in the Additional Protocol signed with Turkey it was left out of the Customs Union on EU insistence

Whereas in the field of competition legislation in the view of the Commission, Turkey has made significant process, in the field of state aid, Turkey has still a long way to go

In Turkey high markups go together with a highly concentrated industrial sector.

Turkey realized that only as a Member State its workers might gain free access to the German labour market.

Member States remain extremely reluctant

The existing mechanisms for importing labor to supply European business work well enough.

Contrasts between Turkey and the EU are significant

EU: moved from a production support scheme to income support system and structural policies (Single Payment Scheme + Cross compliance)

Land consolidation poses serious problems

In contrast to the EU, Turkey does not have a structural policy

The agricultural sector is left out of the Customs Union with Turkey

Turkey would need considerable time to make a number of agricultural sectors more competitive in order to avoid substantial income losses for its farmers.

There is a pronounced east-west divide in Turkey with the main centers of economic activity located in the western part of Turkey

The inclusion of Turkey would seriously increase the socio-economic disparities across the EU

Annual Budget Appropriations for Turkey (billion Euros): Hoekman et al: 7.756 Oskam et al: 10 to 26 Dervis et al: 15 Hughes: 13.630 Griffiths: 6.400 to 8.120

Turkey prioritizes regional and bilateral relations. Delegation of sovereignty to supranational EU organs and substate authorities inside the country is anathema to the Kemalist state elite

According to the Commission Turkey aligns itself with significantly fewer EU declarations than other acceding and associated countries

Turkey’s accession can help to secure better energy supply routes for the EU

Turkey dreads the idea of the EU playing a role in matters of defense if it is not included in the EU Security Policy itself

Member states have to apply the Schengen acquis in full before accession

Turkey has about 2500 km of land borders and 8000 km of coastal borders and a large informal sector: it is a hub for illegal migrants

The EU is expecting Turkey to adopt a series of measures to enhance the protection of its borders, thereby disregarding particularities of the Turkish case

Implementing these measures would represent a major shift in Turkey’s immigration policy

EU opponents of Turkey’s membership argue that Turkey is not of Europe: it does not share Europe’s Judeo-Christian heritage and rationalist tradition, seen as the roots on which European identity is founded

The three most widespread fears in Turkey with respect to the EU are: abandoning language, end of national currency and loss of national identity and culture

In Turkey the consensus on EU membership is much weaker than it was in East- and Central Europe and nationalist voices are much louder

The EU wants Turkey to adopt the complete Acquis Communautaire before its accession

Progress has been made in the fields related to the Customs Union

There are at least three sensitive areas: free movement of workers, CAP and Regional Policy

Turkey’s integration in the EU Common Foreign and Security Policy and in the EU Home Affairs and Justice Policy will be difficult because of conflicting visions.

Public opinion in Turkey has not yet been sufficiently prepared for EU membership.

1. Democracy and the rule of law2. Respect for human rights and the protection of minorities.

Parliament: progressGovernment: progressPublic Administration: progressCivil-Military Relations: no progress Judicial System: progressAnti-corruption measures: limited

progress

Observance of international law: progress Torture and Ill-treatment: progress Freedom of Expression: limited progress Freedom of Assembly: progress Freedom of Association: progress Freedom of Religion: no progress Women’s Rights: progress Children’s Rights: progress Trade Union’s Rights: progress Minority Rights: no progress Cultural Rights: no progress Protection of Minorities: no progress

Turkey’s unequivocal commitment to good neighborly relations with Greece and Armenia

Progress in the normalization of bilateral relations between Turkey and Cyprus.

The fulfillment of Turkey’s obligations under the Association Agreement and its Additional Protocol extending the Association Agreement to all new EU Member States

Enlargement should strengthen the process of continuous creation and integration in which the Union and its Member States are engaged.

One should observe either small unions that centralize many prerogatives, or large unions in which few prerogatives are delegated above the national governments.

By absorbing continuously new Member States who were not in favor of political integration the EU implicitly decided to abandon the federal model.

Negotiations should focus on the economic Copenhagen criteria and on what is essential in the enlargement process: international trade, common market and business relations and in second order environment and monetary matters.