Economic Aspects of Economic Aspects of Turkey’s Accession to the Turkey’s Accession to the

EUEU

Presented by:Presented by:

Hristiana Pencheva and Iliyan Hristiana Pencheva and Iliyan Iliev Iliev

Overview of Turkey and its Overview of Turkey and its relations with the EU relations with the EU

applied for associate membership in 1959 applied for associate membership in 1959

became part of the Association Agreement became part of the Association Agreement in 1963 in 1963

economic and political turmoileconomic and political turmoil

became a candidate country in 1999 became a candidate country in 1999

Main concerns of the EU policy-Main concerns of the EU policy-makers makers

Turkey would have the largest number of Turkey would have the largest number of council votes within 20 years council votes within 20 years

Turkey would receive the largest budget Turkey would receive the largest budget transfer transfer

Large number of Turkish immigrants Large number of Turkish immigrants internal problems with the minority rights internal problems with the minority rights excessive political strength of the military excessive political strength of the military The “Cyprus” questionThe “Cyprus” question

The Budgetary QuestionThe Budgetary Question If it sustains a 5-6% growth it will reach 4% If it sustains a 5-6% growth it will reach 4%

of the EU GDPof the EU GDP It will become the largest beneficiaryIt will become the largest beneficiary Structural Funds – 4%*4%=0.16% of the EU Structural Funds – 4%*4%=0.16% of the EU

GDP=22.4bn EUR/yearGDP=22.4bn EUR/year CAP expenses – agricultural sector is 10% of CAP expenses – agricultural sector is 10% of

its GDP – expenses equal to 0.08% of the EU its GDP – expenses equal to 0.08% of the EU GDP=11.2bn EUR/yearGDP=11.2bn EUR/year

Contribution – 0.048% (1.2% of its GDP) of Contribution – 0.048% (1.2% of its GDP) of the EU GDP – 6bn EURthe EU GDP – 6bn EUR

Overall budgetary expense – 25-28bn Overall budgetary expense – 25-28bn EUR/yearEUR/year

Turkish Immigration – Turkish Immigration – expectations and fearsexpectations and fears

Expected between 1.5 and 4.5mln Expected between 1.5 and 4.5mln immigrants in the first 10 years of immigrants in the first 10 years of membershipmembership

Fear of depressed wages, higher Fear of depressed wages, higher unemployment in all levels, social unemployment in all levels, social frictions and political upheavelsfrictions and political upheavels

Turkish Immigration – real Turkish Immigration – real economic effects economic effects

Complementary work force - highly skilled Complementary work force - highly skilled local workers complemented by unskilled local workers complemented by unskilled immigrants immigrants

Highly skilled immigrants are acting as Highly skilled immigrants are acting as economic boosterseconomic boosters

No change in the job opportunitiesNo change in the job opportunities Increased wages for the high-skilled Increased wages for the high-skilled

spheresspheres ““old” Europe needs fresh work force due to old” Europe needs fresh work force due to

the demographic crisisthe demographic crisis

Turkish Immigration – Turkish Immigration – Demographic EffectDemographic Effect

Turkish EconomyTurkish Economy GNI/capita close GNI/capita close

to Bulgaria and to Bulgaria and Romania in 2000Romania in 2000

Economic Economic disparities across disparities across the territorythe territory

Large rural Large rural populationpopulation

Large Large agricultural agricultural sectorsector

Lack of Lack of diversified diversified investmentinvestment

Turkish EconomyTurkish Economy

-4,00-2,000,002,004,006,008,00

10,0012,0014,0016,00

GDPGrowth1990

GDPGrowth2005

ExportsGrowth2005

ImportsGrowth2005

BulgariaRomaniaTurkeyLithuaniaMacedonia

Turkish EconomyTurkish Economy

-5,00

0,00

5,00

10,00

15,00

20,00

25,00

30,00

35,00

AgricultureGrowth

IndustryGrowth

ServicesGrowth

ConsumerPrice Index

Growth

BulgariaRomaniaTurkeyLithuaniaMacedonia

EU-Turkish TradeEU-Turkish Trade For Turkey, the EU is a major trade For Turkey, the EU is a major trade

partner, mainly in agriculturepartner, mainly in agriculture 70% is with preferential treatment 70% is with preferential treatment

without import barriers and duty freewithout import barriers and duty free Only CAP-sensitive goods do not Only CAP-sensitive goods do not

receive preferential treatmentreceive preferential treatment Tariff-quota schemesTariff-quota schemes A future accession would create a A future accession would create a

more competitive market, better more competitive market, better quality of the goods and a more quality of the goods and a more flexible price systemflexible price system

EU-Turkish TradeEU-Turkish Trade

Foreign Direct InvestmentForeign Direct Investment

$15 FDI/capita in 2000, in Poland it was $15 FDI/capita in 2000, in Poland it was $256 FDI/capita$256 FDI/capita

bureaucratic barriers bureaucratic barriers

high levels of corruption high levels of corruption

extensive regulation extensive regulation

Positive Characteristics of the Positive Characteristics of the Accession Accession

Use of Use of EU fundsEU funds in Turkey for major projects in Turkey for major projects Higher FDI levelsHigher FDI levels Decreased unemploymentDecreased unemployment Increased competitivenessIncreased competitiveness Stabilization of the economy Stabilization of the economy Attractive market for the EU companies – 70 Attractive market for the EU companies – 70

million consumers million consumers A strategic position – connected to crude oil A strategic position – connected to crude oil

and natural gas networks and natural gas networks Fresh labor forceFresh labor force

BibliographyBibliography Harry Flam - Turkey and the EU: Politics and Harry Flam - Turkey and the EU: Politics and

Economics of Accession, 2004 Economics of Accession, 2004 Daniel Gros - Economic Aspects of Turkey’s Quest for Daniel Gros - Economic Aspects of Turkey’s Quest for

EU Membership, 2005 EU Membership, 2005 Stéphanie Jung and Stanislav Kubacek - Economic Stéphanie Jung and Stanislav Kubacek - Economic

Aspects of Turkey’s Accession to the EU - How Aspects of Turkey’s Accession to the EU - How Turkey’s Membership is Challenging the EU, 2005 Turkey’s Membership is Challenging the EU, 2005

Dr. Bahadir Kalegasi - What Turkey Could Bring to the Dr. Bahadir Kalegasi - What Turkey Could Bring to the EU, 2004 EU, 2004

UNCTAD, 2002 UNCTAD, 2002 Eurostat, 2006 Eurostat, 2006 The World Bank, 2006 The World Bank, 2006 European Commission data European Commission data International Monetary Fund, 2004 International Monetary Fund, 2004 US Census Bureau, 2005 US Census Bureau, 2005

Thank you for the attentionThank you for the attention