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Economic Analysis of Turkey for EU Membership

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INTRODUCTION:

The main purpose of this study is to provide an economic evaluation of Turkish economy in the context of requirements of The European Union which accepts new members with decisive criteria.

Enlargement process of The European Union is complex issue and consists of several political and economic arguments. This study organized as follows.

The first chapter of this study explains the past enlargement waves of The European Union which must be studied to comprehend the enlargement process of the European Union. Therefore, the first concept to explain is the methodology of the past enlargement waves.

Each of these past enlargement waves had different characteristics. Economic factors and politic factors were the main arguments in these processes. Union accepted new countries sometimes in respect to their economic strength; however, sometimes political benefits were under consideration. Determinants of these factors were explained in the first chapter.

The second chapter provides highlight points of Turkish economy and Turkish political agenda. It explains the historical background of Turkey-European Union relations in economic and political perspectives. There are two steps in this chapter.

At the first step, political dimension of the relations between 1960 and 1999, and summits related to Turkey are examined. 1963 Ankara agreement, 1970 Additional protocol, 1987 membership application are explained in details. Changing political structure of Turkey after 1980 is also summarized.

Afterwards, summits which are effective on Turkey are explained. Several political summits convened and important decisions were taken as the results of these summits. In 1993, Copenhagen Summit, accession criteria were determined which should be fulfilled by the candidate countries for the full membership to European Union, In 1999, Helsinki Summit declared Turkey as a candidate for membership of EU. Moreover, in some summits Turkey and its candidacy were negotiated. Second chapter explains important results of these summits in the perspective of Turkey.

At the second part of second chapter economic situation of Turkey is evaluated between 1960-1999 in the context of relation with European Union. Turkish economy experienced several fluctuations in this period.

Changing economic and political issues of Turkey describe unstable relationship between Turkey and European Union. After 1960, Turkey did not have stable economic and political environment. Many fluctuations were recorded in these years These case are explained in the second chapter.

Finally, the third chapter examines important arguments after the acceptance of the candidacy of Turkey by European Union in 1999 Helsinki Summit.

European Union determined several criteria for the full membership in 1993 Copenhagen summit. One of these criteria is related to economic conditions. Existence of a functioning market economy and capacity to cope with competitive pressures and market forces within the Union are the required conditions for fulfilling the economic Copenhagen criterion.

In order to analyze these conditions several aspects of the Turkish economy is examined between 1999, acceptance of its candidacy, and 2004. Growth performance, public finance, government foreign debt, employment structure and unemployment, current account, inflation, exchange rate and monetary policy, trade relations with European Union constitute general framework about the required Copenhagen economic criteria. Moreover, comparisons of Turkey's case with 10 new members are added to each section.

Additionally, Union determined four criteria for the convergence to European Monitory Union which are named as Maastricht criteria. In the relevant section, these criteria are explained by making comparisons with the new 10 members.

1) ENLARGEMENT PROCESS OF THE EUROPEAN UNION

After second world war, there had been seen a transformation in the state and relations between some European countries. Bitter hostility and division were replaced by closer economic and political cooperation and integration. The economic devastation of the war was tied to replaced by the calm wind of the peace and by economic prosperity. A treaty was signed by six countries and it was named as European coal and steel community. Economic integration was confined to two sectors. 1( Dennis swan, European integration, The common market, European union and beyond)

In six countries federalist views were dominant .these countries were: France, Germany, Italy, Holland,. Belgium and Luxemburg. There was a desire to establish agencies with some supranational powers. This caused to the setting up of the ECSC established by the Treaty of signed in 1654. The aim was to integrate the coal and steel industries of Germany, the heart of its war machine into an interdependent European industrial structure. By this processes it was tried to prevent wars between West European countries.2( Frank Mcdonald and Stephen Dearden, European economic integration)

Afterwards, the European economic community and the European atomic energy community were founded by the treaty of Rome in 1957. These there entities were merged in 1965 when a common institutional structure to govern the work of these three agencies was established. This was called European community. The term European Union came Into common use in 1993 after the council of ministers renamed itself the council of the European union. This name stems from the Maastricht treaty which formed the term to encompass the variety of cooperation and integration work than was carried out by the current member stated, The Maastricht treaty formed three pillars, The E, justice and home affairs, foreign and security policy, and named the umbrella structure for these three pillars of EU. 3( Frank McDonald and Stephen deaden, EE integration) Background of the Union may be summarized as above.

However, it should not be forgotten that from the beginning of the history of the community to the current days of the union, there has recorded many changes.

European integration project was mostly economic at the begging; it gradually expanded to involve political and social aspects and specifications. 4( Muzaffer Dartan, The EU enlargement process and turkey.)

After several years from the ECSC treaty, some countries started to apply to become a member of this cooperation/community/union and these applications continued as a current issue Some of them were accepted and the union enlarged with its new members. In this section, these enlargement periods are going to be studied.

1.1) First Enlargement Wave

The first enlargement period consists of three members. These are United kingdom, Ireland and Denmark. It is intended to evaluate, first, United kingdom. UK kept itself away from the community according to its own desire which appeared after the second world war. However, after a while, UK politicians changed their mind.

The reasons of the desire of UK for adhesion to the community may be roughly classified into two groups: Economic and political. Politically, it was clear that UK was no longer a world power of the first rank. This country had lost its old effectiveness in the world.

At the economic side, on all the usual economic indicators, such as growth in trade, in GDP. In investment, in income the member countries of the European community were outperforming UK.

UK attempted in 1961 to become a member of the European community. On 31 July 1961, Prime minister Harold Macmillan declared the desire of UK for membership to the community. In November of the same year, government declared a white paper. This paper was stating the intention of the government and also declaring the reasons of staying away from the community and also was declaring the end of this period. With this paper UK was accepting the 2nd and 3rd articles of the treaty of Rome. Moreover, this paper was expressing that UK was approving the abolishment of internal tariffs in terms of a common custom union, a common commercial policy, and a common agricultural policy. 5 ( Christopher Preston, Enlargement and Integration in the EU.)

In fact this declaration might be counted as the acceptance of the general mentality of the community on the part of the UK. However, the process was not finishing with this statement and many other problems were occurring to UK`s desire of adhesion to the community by the Gaulle, president if France. By the defenses of De Gaulle, UK was rejected from the community twice in 1963 and also in 1967. However, this was not the end of UK`s attempts for joining the community.

After the election in France, De Gaulle had lost the presidency. New president, Georges Pompidou was thinking different form the previous president. He believed that enlargement could strengthen the community. Afterwards, the commission revised its opinion about rejection of UK and in October 1969 recommended that negotiations should start with all four applications immediately.

The new French government supported the application of UK to the community. After the developments the community started to the negotiations with the UK government in June 1970 in Brussels.

However, with the start of negotiations there was seen that UK had a hard manner in the acquis of the community. Afterwards, community decided not to discuss acquis if the community with a country which desires to access to the community. This decision became a rule for the following enlargement negotiations. 6 (Irfan kaya ulger, Avrupa Birliginin abc si)

In the fisrt enlargement period, economically wealthy countries became new members. However, this enlargement wave did not occur without any problem even though the premature structure of the community in comparison with the current structure. There may be stated several factors as the problematic areas; first, the economic crisis environment of the 1970s was effective during the first enlargement period of the community. Dollar shock, petroleum shock forced the countries of the community to follow protective policies and caused to remove the community from its aims. This issue became more problematic with the accession of the new countries. A second factor about problematic area was the comprehension of the slow processing of the community's structure. This problem increased with the adhesion of the new members. Third factor was about the budget of the community. This was more important than the others. After the accession of UK, arguments had started about budget revenues and expenditures which were prepared according to the balance of the six country of the community. 7(IBID)

After the negotiations and their completion, on 22 January 1972 the treaty of Brussels was signed. With this process, UK became a new member of the European community on 1 January 1973.

Ireland and Denmark became new members of the community with the first enlargement period. Irish trade was expanding rapidly, especially with UK and economic growth increased at the end. It became essential for Ireland to join to EEC when UK's third application was finally accepted in 1973. 8 ( Larry Neal, The economics of the European union and the economics of Europe)

The Irish application was submitted on 31 July 1961. Because of the effects of the UK`s problems whit the community, Irish application was influenced negatively. However, in line with the process of UK, negotiations with the community finished in January 1972. 9( Christopher Preston, enlargement and integration in the European union) At 2 October 1972, 63,5% of the public accepted the adhesion decision in the referendum. 10( Irfan kaya, avrupa birligi ansiklopedisi)

Another country of the fist enlargement period was Denmark. On the same day the UK`s application Danish government declared its intention to apply for the membership. This country's negotiations were broken down the collapse of the negotiations of UK in 1963. However, afterwards Denmark became a new member of the community with the other two countries of the same enlargement wave. 11( IBID)

At 22 January 1972 Denmark, Ireland, Norway and UK signed the treaty which was making them members of EEC. Afterwards, in a referendum which was held at 26 September of the same year, the Norwegians decide not to join EU. 12 ( Philip Toddy, an historical introduction to the European union)

1.2. Second Enlargement Wave

During the years 1974-1975, in Greece, Spain and Portugal, the military governments were collapsed and the relations between the European community and these three countries had moved to another dimension. The region, Mediterranean zone, and these three countries were possessing diverse and different features in comparison with the member countries of that period. In contrast to the former enlargement period, European community was confronted with three different candidates. The new candidates which were wounded by weak economic structure with high tensions of military and political securities and three democratic countries which acquired their democracy recently were constructing general view of the second enlargement period of the community. 13( Christopher Preston, Enlargement and Integration in the European Union)

The implementation degree of acquis of the new applicant countries and the domestic interests sensitivity caused this enlargement period to occur with more strict and stronger conditions. Because the community was preparing itself to welcome new members whose economic conditions were not sufficient as the former ones, and also they had democracies which were suffered from the dictatorship recently.

The commission of the European communities on 20 April 1978 stated in general consideration on the problems of enlargement of the positions of the new applicants as:

“When Greece, Portugal and Spain, newly emerging as democratic states after a long period of dictatorship, asked to be admitted to the community, they were making a commitment which is primarily a political one. Their choice was significant, both reflecting the concern of these new democracies for their own consolidation and protection against the return of dictatorship and constituting an act of faith in a united Europe. In this respect, Greece completed this difficult period by passing through diverse stages. From the beginning of 1960s, application of Greece in June 1959 to the European community, un accordance with the article 238 of the Rome treaty, brought about two contrary questions which took up time on the agenda of the community. In case of Greek adhesion to the community, its political and economic effects started to be discussed. Also, European community had fears, and hopes about Greece's negative and positive political and economic effects on the community” 14( IBID)

Briefly stating, by opening its gates to Greece the community was accepting a relatively different geography, which was far away from the countries accepted with the first enlargement wave in terms of economic and political dimensions.

First enlargement wave was containing of closer new members economically and geographically and, in economic areas there were not huge differences with the new three members but this time Greek economy was not so brilliant and this was carrying new economic burdens, and also then problems of harmonization.

In July 1961, the association agreement signed between the community and Greece. By this agreement, a customs union was established between two sides. Also, it was tried to determine the conditions of financial assistance and process of policy harmonization. And it is worthy to mention that, the signature of the association agreement had two meanings; Fist, to formalize the relations with a country which had not possibility for full membership. Second meaning was to fix a first step on the way to the full membership. It was understood from the article 72 of the Athens agreement that Greece was installed on the second group. Regarding on the conditions and decisions of the treaty, the restrictions on industrial products would be lifted during 22 years, nevertheless, tariffs and quotes would be abolished in a 12 year period except the goods manufactured in Greece. Familiar interpretations were valid in agriculture sectors. 15 ( IBID)

At April 1967, Greece experienced a military coup. Afterwards, the community froze the interpretation of the Athens Agreement. 16 (IBID)

After the collapse of military dictatorial, as soon as the previous governing model was coming back, the government desired to reactive the interrupted relations with the community. On the 1st of November 1974, the transition period started. By this process, it was estimated that full membership of Greece might be in year 1984. 17(Jean-Francois)

But Greece didn't evaluate it sufficiently and after the reconstruction of the democratic regime, the negotiations with the community for the associate status had applied for the full membership without any delay.

Karamanlis government applied in accordance with the article 75 in June 1975. However, before all, Greece would face some problems on the way of the full membership status. But in general sense the problem was political. Even though the Greek economy was not able to integrate smoothly with the community, Karamanlis was looking for a swift adhesion to the community. He was considering that adhesion to the community would reinforce the Greek democracy which was recently constructed.18(IBID)

However, Greek candidacy was not welcomed with the excite in Brussels nor with the enthusiasm. Its economy was still weak an inadequate and underdeveloped for adapt itself to the common market. But the ‘nines' were not incentive to the political aspects. 19( IBID)

The response of the community to the Greece's possible membership was including some different and diverse manners. Germany and United Kingdom had stated more anxious replies in comparison with France. They were worried about the security problems which might occur in case of Greece's membership. The warmest response had received from France. President Valery dasting had formed close relations with karamanlis and actively supported the membership of Greece. 20 (Christopher Preston, Enlargement and integration in The European union)

Commission declared its opinion on 28 January 1976, and accepted the start of the negotiations with ‘half-hearted', however, described a pre-accession period before a specific transitional period. Commission stated its decision because of the effects of three factors:

‘The European community did not desire to injure its relations with Turkey, and even in different time periods, for a second reason, it may be stated economic factors. In total, even though Greece economy had small effects on the community, structural weakness of the economy of Greece and especially the size of the agriculture population and non-sufficient industrial base would marking that important part of the resource transfers from European Community's budget would go to Greece in case of its full membership. Finally, Commission declared its decision in that manner because of the possible full membership of Greece would made effects on decision making and policy development of the European community with an undesired form of community. In fact, this reason may be added for all members and community or union experience. It was a factor during the welcome period of any new member. As it might be predicted, Greek government answered with a great reaction to the commission's decision. Greek government was claiming that association agreement had to be substituted as a pre-accession period. Greek government had also respected that decision as a cause of the delay of the full membership.” 21(IBID)

Council of ministers rejected the commission's opinion. Moreover, Karamanlis threatened the community with the withdrawal of the Greece's application and commenced to lobbying. In addition to these events, French government rejected the pre-accession period. Dutch and German foreign ministers declared commentaries in favor of the start of negotiations as soon as possible. Finally, on 9 February 1976, at the meeting of council, member states rejected the opinion of the commission and had been decided to ask for from coreper to prepare a negotiating mandate. Afterwards, it might start the negotiations.22(IBID)

Even though its burdens, the full membership of Greece was worth its small size23(Jean-François) according to the community.

Accession negotiations took 34 months which was longer than the negotiations of the first enlargement period. Moreover, any of the member states were not so enthusiastic about the membership of Greece. Germany considered geopolitical stabilization issues in the eastern Mediterranean region more important than the economic problems of Greece. French, during this period, was more complex and changeable however, the desire to become a bridge between north Europe and south Europe cause it to approach to the membership of Greece more optimistic. UK was uncertain in this decision. 24(Christopher Preston, Enlargement and integration in the European union)

The adhesion agreement was signed on 28 May 1979 and came into effect on 1 January 1981. Greece was a new member of the community.

1.3. Third Enlargement Wave

Spain and Portugal were the adherents of the third enlargement wave of the European Community.

However, one can not reveal that during this period the relations between EEC and these countries were improved too much. Main developments, in Portugal, with 1974 revolution, in Spain, after the death of Franco in 1975, were started to be recorded and the context of European integration commenced to change. Moreover, this enlargement proves, the third one, was carrying a different and critical importance. Briefly speaking, the Community, confronted with a historic shift in its balance to power by opening toward Eastern Europe which set off the founders of the community and its associates from north to a journey with new democratic neighbors Spain and Portugal named as integration with south Europe. Because of all these factors, this enlargement wave would testify the community whether it would be able become a stabilization factor in the region and to bring up pluralist political and economic structures and to catch economic diversifications with different countries which had different economic stages around the region.25(IBID)

Regarding the Spain's relations with European economic community, a preferential agreement between the two sides is observed.

Spain applied to the community, in 1962, for an association agreement. The objective was to construct an association which includes a full membership in future. European community replied two years later, in 1964, with a positive manner. The agreement was envisaging, as the first stage, 70% reduction of tariffs of EC on industrial goods of Spain and 40% on citrus fruit, also Spain decided to decline EC export tariffs up to 1977 throughout six stages. After the collapse of the dictatorial, in Spain, full membership became a current issue. On the other side, Portugal after The Hague Summit which tried to decide about the post-enlargement relations with EFTA countries, applied for association agreement in November 1970. The special relations agreement came into effect between the community and the remaining members of EFTA on 1 January 1973. Portugal was one of the states which would benefit from it. Elimination of all barriers on exports of the Portugal, even fir sensitive sectors, except textiles, to the community by 1977 was the commercial facilities the agreement put forward.

After the Free Trade Agreement signed in 1972, Portugal attempted for negotiations to reach an additional protocol in 1976. Consequently, in September 1976 Protocol signed about which the Portuguese government awarded afterwards that it was not the best choice for Portugal. They decided that the full membership was the “best long-term” and Prime Minister, Dr. Mario Soars applied to the community with a formal application when the date was 28 March 1977.26( IBID)

New applicant caused different voices among the member states. The member countries globally were in favor of the adhesion of Spain. Northern countries awarded that the possibility of entering to the markets which were still closed. For instance, Italy welcomed, positively, access of the new two partners which would yield close benefits. France was particularly pleased because of opening of its boundaries to the Southeast.27(Jean-Francois Drevet)

Also, the rich men club was not pleasant for the wealthy members of the community.28( European Documentation)

As a consequence, two countries had applied for full membership by the consequences of resembling procedures, formerly, signature of the association of the association agreements, subsequently, applications for full membership which indicates and reveals an improved point for relations.

Commission submitted its interpretation to the council for the start of the negotiations and its submission yielded for this wave of enlargement for Spain and Portugal in 1978. Commission's decision for Spain was affirmative and stated as follows:

“It is useless to pretend, however, that Spain's accession will pose no problem. Success implies that Spain's economy should be integrated with the economy of the community without intolerable strains on either side. When the process of integration is complete, the community should emerge strengthened and not diluted.”(29 Christopher Preston)

Commission's response which was submitted to the council in May 1978 had a positive approach for Portugal. Even though its economy was worse than Spain, it was easily understood that in case of its adhesion to the community its effects would be restricted. Portuguese's GDP was 1% of total GDP of community. Therefore, Portugal was not carrying a huge burden on the community economically. However, its economy was not indicating a brilliant appearance. Because of this reason, commission's “opinion” for Portugal was built around the bearing of “structural weakness” before the accession period to the community. 30( IBID)

Mentioned two economies made their biggest modifications with the EFC. Even though Spain was considered strong to overcome the adhesion shock it had still vulnerable industrial sectors and the regions which were on retard would have adaption problems. However, Portugal was evaluated more fragile than Spain. Many experts was worried about that Portugal could not overcome the adhesion shock. But, with all these, it was difficult to separate it from its neighbor, Spain. 31( Jean- François)

After the presentation of Portugal's demand of accession, the negotiation commenced on 17 October 1978 and Spain applied for adhesion on 28 July 1977, afterwards the start if negotiations on 5 February 1979 were the processes of these two countries toward to the full membership. 32( Philippe Deloire)

Adhesion agreements were signed on 12 June 1985 between the applicant countries and community. Spain and Portugal were new members on 1 January 1986.

1.4. Fourth Enlargement Wave

It is worthy to state that the prospect that the rich EFTA countries would be net contributes to the EC budget was counted as one of the main attractions of this enlargement wave.33(Helen wallece and William wallece)

Main point of the forth enlargement wave, which we may also name as EFTA enlargement, was that the a;; new members were from EFTA countries. Because of this, it is intended to make a brief summary of the relations between EFTA and EC, then, we want to examine three new members of the community respectively.

Another point which deserves importance is the arguments of the period when these new members adhere to the community. This period was representing the post-transition period of the Community to a union.

Union witnessed the single act in 1992, and also decided some new decisions in Maastricht at 1993 and united three different treaties coming from the past of the community. This process also made clear the faults of the union. These were some if the arguments which indicated easily the changing structure of the union.

Relations between EC and EFTA commenced to rise at the beginnings of 1960s. And with the completion of the customs union of EC it had started searches for free trade agreement. This agreement was signed in 1972 and by 1977, it abolished all duties for the industrial goods. With time, because of some trade successes these abolishment of trade duties were carried to other areas.34( Christopher Preston)

On 2 May 1992, old twelve members and six members of EFTA, Austria, Finland, Norway, Sweden, Island and Lichtenstein whose population had reached nearly 380 million, signed the agreement which established European Economic Area (EEA). It would go into effect on 1 January 1994 without Swede which rejected it by referendum on 6 December. EEA was an association which was structured institutional degree. EEA was aiming to determine the rules of access to the single market and the rules of concurrence of the community. 35 (jean- luc sauron)

The agreement constitutes EEA formed world's biggest integrated area. This area comprised 18 countries in a single market with 380 million person, 30 percent of world GDP and 47 percent of world trade. 36( Theo Hiltiris)

Nevertheless, with the candidacy of EFTA countries to European Union. EEA lost its importance and it turned towards to be a step towards European Union.

Moreover, with the collapse of the Soviet Union neutrality of certain members, Sweden, Austria, Finland, Switzerland, changed.

During this new enlargement period, the candidates which desire to be the new members of the union started to declare their candidacy. EFTA's loss of its old importance may be stated as the reasons of the going towards of the EFTA countries to candidacy.

Austria was the first country that declared its candidacy. Its application date was 27 July 1989. After this, in 1 July 1991 Sweden, in 1 March 1992 Finland followed the same process. Switzerland's application date was recorded as 26 March 1992 and also Norway's was 25 November 1992.

Lisbon summit in June 1992 had a critical importance in sense of statement of some basic pillars of the future enlargements which were considered. EEA agreement constructed an accelerated period for the start of negotiations with EFTA countries. For Edinburgh summit in December 1992, it was asked for from the commission to prepare general negotiation framework. Commission responded to Swedish application in August 1992, to Finland's application in November 1992, to Norway's application in March 1993. On 12 December 1992, Edinburgh summit confirmed the general framework of negotiations for enlargement. Council, in the beginning of 1993, accepted the start of the negotiations with Austria, Sweden, and Finland. Switzerland rejected the EEA agreement with a referendum on 6 December, and that was to say that this country was resigning from the candidacy. At the same time, this was a reasonable negotiation timetable because the new candidates had accepted approximately 60% of the acquis of the Union. Afterwards, negotiations commenced under the presidency of Denmark in February 1993. 37 (Christopher)

Union recorded its easiest negotiation period since it had experienced during that time. New three members' position was really close to the acquis of the union. As a matter of fact, they were in a good and untroubled manner in terms of economic conditions compared with the second and third enlargement countries. Because of these they were able to adapt themselves to the acquis of the Union swifter.

If it is necessary to express some details. Negotiation period of EFTA enlargement lasted 13 months. This time period was quite short for the completion of this process. Some reasons of this short period mat be stated as follows: First, EFTA benefited from the close trade and economic relations between them and EU before the adhesion period. Because of this reason, negotiations did not focus neither the technical subjects which express implementation and enforcement of acquis, nor on substantive level which express policy alignment. Difficult points of the negotiations were the areas in which candidate countries were interested in . This may be stated as the first reason. Second reason may be recorded as the treatment of the Union more flexible, relative to the previous enlargement waves, in the subject of the implementation of acquis. This loosened treatment was caused by the economic states of the candidate countries. This time candidates were not so much “dangerous”. EFTA countries which were making contributions to the budget of the Union were welcomed with a warmer mannr.38(IBID)

These reasons may be counted as the economic reasons and economic position of this enlargement period. The next enlargement was after 9 years.

1.5. Fifth Enlargement Wave

We shall evaluate this enlargement wave broader than the others because of several reasons. First, this wave consists of different events which were firstly encountered in the history of the Union like the establishment of the criteria for adhesion to the Union, declaration of the White Paper, and the announcement of the agenda 2000. Another side is about the new member of the candidates. There were 10 candidates for the full membership to the Union. Broadly speaking, Union was not accustomed to this kind of enlargement wave.

EU membership helped these countries to consolidate their return to pluralist democracy and market economy. This is another factor.39 (Wim Kom)

Shortly after the fall of the Berlin Wall in 1989, the European Community established some diplomatic relations with the new democratic countries of the Eastern Europe. Also, Community removed quatos, extended the Generalized System of Preferences, and concluded several agreements for trade and cooperation. 40 John Gillington

Relations between EU and Central and Eastern European Countries (CEEC) started to accelerate. At the end of this abolishment, it had been come to a point where it was representing a reconstruction period in terms of Europe's security and economic benefit. And the other institutions, like European Council started to negotiate and discuss about new Europe. 41 Erhan Ercin

After these processes, Union and CEECs desired to integrate mutually with the free market conditions and experienced it. With this desire, Union tried to keep away a returning of the CEECs to the communism.

Afterwards, Hungary, Poland, and Czech Republic signed with the European Communities the European Agreements in 16 December 1991. These agreements came into force in 1 March 1992. The aim of the European Agreements was making these countries member of the community.

1.5.1. Phare

In 1989, with the decision of Strasbourg Council, there was constituted an aid program under the name of PHARE( Poland, Hungary: aid for restructuring of economies). PHARE program was, previously, consisting of only Poland and Hungary. However, subsequently, Bulgaria, Czech Republic, Yugoslavia and Romania had been taken into this process. In September 1991, Albania, in January 1992 Estonia, Latvia and Lithuania, in August 1992 Slovenia had been included to the program.

PHARE program was designed to support the reform proves in the recipient states. It was initially targeted at Hungary and Poland, by EC, 500 million ECU was allocated in 1990 budget and afterwards, the other countries were included and this amount was raised to one billion dollar ECU in 1992.

PHARE program are the ones which focus on aiding in form of financial and technical platforms. By PHARE, it was aimed to constitute the progressive conditions which encourage investments and also encourage the free market conditions. Priorities of the program were the encouragement of the development of private sector and encouragement of trade.

In fact, PHARE was the main financial aid for the CEECs which was used as the pre-membership strategy. Since 1994, use the PHARE was determined according to the priorities of CEECs and to their needs.

1.5.2. European Agreements

After these, European Agreements were extended to other countries. Signature period of European Agreements was between December 1991 and June 1996.

European Agreements were signed to determine the frame of the relations between states and associate members. 42 (IBID) The European Agreements intended beyond the scope of traditional association agreements in making provision for political and cultural dialogue and cooperation. 43( IBID)

EU removed its trade barriers before than the partner countries remove theirs, though the actual timetables and the sectors to which they apply vary with each agreement, largely depending on the sensitivity of the products involved. 44 ( Christopher Preston)

Afterwards, EU abolished all tariffs starting from 1995 but not the sensible products.

In the mentioned agreement, five main scopes were contained: Free movement of goods, free movement of labor, services and capital, the appropriation of the competition policy and the laws, economic cooperation, the arrangements about the fiscal cooperation.

European Agreements estimated the free trade of industrial goods after a definite transition period. From this perspective Europe allowed the circulation of the industrial goods from 1995, but restricted the agricultural goods and textiles goods and some few sectors.

Afterwards, the European Agreements were re-regulated for facilitating the process of the full membership of these countries.

1.5.3 Copenhagen Summit

Copenhagen Summit is a turning point in the history of the enlargement of the European Union. After this summit well-known Copenhagen criteria were announced. These criteria were about the conditions for a country which desires to start accession negotiations and also desires to be a full member to the Union.

After the Copenhagen Summit in 1993, the relations between EU and CEECs was transformed into a different and precise manner.

In fact, already by 1993, the EU was under increasing pressure to set out its policy on the further enlargement to the east even before the enlargement were completed and this was what the Union made definitely, clarified the responsibilities which required the enlargement.

It was taken and clarified and stated the Copenhagen criteria during this summit. Moreover, these criteria would be moved for the other enlargements. They were stated as: “ Membership requires that the candidate country has achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressures and market forces within the Union. Membership presupposes the candidate's ability to take on the obligations of memberships including adherence to the aims of political, economic and monetary union.” 45 (IBID)

It was the most precise shape of the procedure of the full membership conditions in the history of the Union which had three enlargement periods before. It was decided that countries which are desirous for full membership, and which fulfill the Copenhagen criteria would access to the Union as full membership.

Moreover, the Union recommended to the CEECs a structural relationship with the institutions of the European Union. Also, the Union declared that it would continue to the financial assistance within the frame of the PHARE.

Although it was greeting with gladness, the decisions taken from the Copenhagen Summit 1993 caused to an uncertainty from the side of the CEECs because it was not given a concrete schedule on the road to the full membership.

This fact indicated two different situations. With the Copenhagen summit in 1993, it was given new gains to the countries which were on the process of the integration with the union, and the relations were moved to a closer manner. However, the protections carried out by the Union to the agricultural goods and the anti-damping applications affected the CEECs negatively.

1.5.4. Essen Summit and Essen Straregy

In December 1994, at the Essen European Council, the member states accepted a broad pre-accession strategy. The council recognized that negotiations on the future enlargement of the Union would go beyond those states already associated but would encompass other CEECs. It called for European Agreements (EA) to be concluded with the Baltic States and Slovenia. 46 IBID

Essen Strategy, or it is called pre-accession strategy, was based on four basic pillars: Coming into force of the European Agreements, supporting of the reforms made in candidate countries on the frame of the PHARE, the harmonization of the laws of the candidate countries to the single market, and forming a structural dialogue with the candidate countries.

At the Essen Summit, the member states met the Central and Eastern European Countries which were associated with the EU through the European Agreement.

With this pre-adhesion strategy, it was pointed out the main road of the adhesion of the candidate states, CEECs, t the Union.

It was decided, in Essen Summit, to prepare a report which aimed to facilitate the integration of the countries that signed cooperation agreements with Commission.

1.5.5. White Paper

The most important part of the pre-accession strategy was the White Paper, which was prepared by the Commission and presented it to the Cannes European Council in June 1995. That report named as ‘ White Paper' and it was concluded in May 1995.

The White Paper provided both a conceptual framework for the definition and delineation of the internal acquis and a detailed list of all the relevant legislation and policies in different sectors.

White Paper was presenting an enriched content. And it was also bringing up the differentiated manner of the Union in this enlargement process, different from the past enlargement experiences, and also was indicating the more programmed frame of the Union for this enlargement period.

First of all, the White Paper stated the main features of the internal market, its legislative areas and the administrative and technical structures ehich are necessary to ensure that the legislation is effectively implemented and enforced 47 ( IBID) and also it was completed the free movement goods and the lifting up of the barriers.

Also, on this frame, it was examined the available acquis, applications of the CEECs and stated also the special difficulties which might be met by CEECs. 48(IBID)

Commission recommended to the candidates the precautions they should take and mentioned about the benefits of the applications in case of putting them into practice according to the view of the Union.

It may also add that, ‘ alignment with internal market' is not the same issue with the accession to the union. White Paper is not a part of the accession negotiations and it does not contain the acceptance of the acquis communitarian are whole.

White Paper, does not constitute a legal enforcement for the candidate countries. But it states the responsibility for adjustment. Moreover, it is among the reasons of the report that the increasing integration and trade between the Union and the CEECs.

With the regulations of the White Paper, it was aimed to facilitate the trade by fixing industrial standards and by acknowledging the appropriateness of the commodities mutually, by constituting the conditions in advantage of these countries.

1.5.6. Agenda 2000

In the 1995, Madrid European Council, the European Council asked from the Commision to submit its opinions about the situatuons of the CEECs for the membership. The Commission's report was ‘Agenda 2000' and it was ready in June 1997.

Agenda 2000 was consiting of the Commision's recommendations for the Union's financial framework for the period 2000-2006. It consists of the future development of the Union's policies, and in partuclar two most important sepnding policies- the cohesion and structural funds, and the Common Agricultural policy (CAP); and the strategy for enlargement of the Union.

It may be classified in three main areas; the principal questions which arise for all applicant countries on the way to enlargement, the strategy for enlargement, including accession negotiations and the strengthening of the pre-accession strategy, final recommendations.

Agenda 2000 is a strategy paper which states the growing and strengthening perspectives of the European Union and consists of 1300 papers?... European Commision published it on 16 July 1997. It consists of four main frameworks: Enlargement, CAP, changes in structural funds, finance of European Union.

EU Commision's reports of the candidates are related with Bulgaria, Slovakia, Slovenia, Romania, Latvia, Lithuanina, Estonia, Hungary, Poland and Czech Rebublic. Commission proposed to the European Union Council of Ministers to start negotiations with Poland, Czech Republic, Hungary, Estonia, and Slovenia in 1998.

Also, EU commission proposes to sign of a strategy paper which will prepare the candidates to the full membership; named as accession partnership.

In 1998, Union decided to monitor these 12 countries by the regular reports which evaluate their political and economical positions and their harmonization to the acquis of that year.

On 3 April 1998, except Malta, screening period of 11 countries, including Bulgaria, started. Malta's screening period finished on 11 December 1999. Negotiations started with Poland, Czech Republic, Hungary, Estonia, Slovenia and Cyprus on 31 March 1998. Negotiations with Bulgaria, Lithuanina, Malta, Romania and Slovakia started on 15 February 2000. 49 (Basbakanlik dis) These countries completed their harmonization period and became new members of the Union in May 2004 except Romania and Bulgaria. These two countries process is going on!!!!!

2. HISTORICAL BACKGROUNG OF TURKEY- EUROPEAN UNION RELATIONS: ECONOMIC AND POLITICAL PERSPECTIVES

2.1. Political Dimension of the relations between 1960-1999

In this section we shall talk bout the relations between Turkey and European Union with a historical and political sense to understand the development of the whole process. Also, we shall evaluate some important summits which are related to Turkey, its candidacy, and its adhesion to the enlargement process.

Turkey applied for Associate Membership of the European Economic Community on 31 October 1959. This application was shortly after the Greek application (15 July 1959). With this application and its results, Turkey desired to make an economic alliance with the “West”. However, during this period, there were, inside the Community, critical problems against Turkey: “ Turkish application was at a time when the EC had focused on its own problems under Gaullist pressures. Moreover, several members of EC, notably France, showed reservations about Turkey's European identity and cultural issues.”1 Erkan Erdogdu

Turkey was the second country which applied for Associate Membership, after Greece, and the most important factor for this application was the desire of Turkey not to leave Greece alone with its application. 2 (Ridvan Karluk)

The Council of Ministers approved applications and afterwards, negotiations starred on 29 September 1959 between Turkey and the Community. After a short period of time, the negotiations had been ceased because of the military intervention on 27 May 1960 in Turkey and they could start again on 14 October 1660. Finally, Ankara Association Agreement was signed between Turkey and EC on 12 September 1963 and this agreement became effective on 1 January 1964.

The Turkey-EC Association Agreement was designed as a stage by stage integration process towards eventual full membership in the EC 3( hadi selefi) and projected three stages for Turkey-EC relations:( Preparatory, transitional and final. 4 Erkan Erdogdu

Preparatory stage was intended to be a period in which the Community would hive unilateral concessions and financial aid to Turkey while turkey would take appropriate measures to improve its economy and prepare itself for the transitional stage. 5(IBID)

After preparatory stage the transitional stage was on the aim of forming a customs union between EC and Turkey which takes 12 and 22 years. Also, the agreement included the possibility of a third final stage, which would bring Turkey to full membership. 6( IBID) After a successful completion of the two stages, prepatory and transitional stae, a stage by stage integration process would reach to a customs union. Also, the agreement stated a vague promise of full membership of the Community at some undefined date provided that the appropriate conditions had been satisfied. 7( Ziya Onis)

But the important point was that there was not stated any specific date for full membership. With Ankara Agreement the process had started with preparations for lowering of trade barriers and afterwards at later stages would be allowed for free mobility of labor between Turkey and the Community. But the timing of this agreement was interesting and was also ironic because during that period, Turkish policymakers were instituting import substitution industrialization (ISI) policies. 8 Hadi Salehi Esfahani

During the preparatory stage (1964-1972), Turkish economy indicated a swift and stable economic growth. EEC yielded the foresighted economic aid. 9 Orhan Morgil. During 1960s, Turkey's economic relations with the Community did not show big changes but the structure of the Turkish economy was changing; industrial sector and services were rising, meanwhile, agriculture sector was declining.

The second stage between Turkey and EC was including the establishment of customs union and for this aim the Additional Protocol was signed between two sides on 23 November 1970. It was more important, in practical terms, than the Ankara Agreement. According to this protocol, the EC would abolish tariffs and quantitative barriers to its imports from Turkey ( with some exceptions), whereas Turkey would do the same in accordance with a timetable contaning two calendars set for 12 and 22 years. 10 Erkan Erdogdu. At the end of the period, it wanted to establish a full customs union between Turkey and EC.

And after a short period of time, Greece was accepted as a new member within the second enlargement wave. Interestingly, in 1978 and 1979 the EC suggested that Turkey should apply for membership along with Greece, but Turkey declined this suggestion. During the following period, Greece caused to some difficulties on the way of Turkey's membership to the EU.

Turkey did not apply, but the end of 1970s with Greece; it may be evaluated as a slef-exclusion. In addition, Turkey's exclusion form the Community at the time of its southern enlargement constituted a case of self-exclusion as opposed to exclusion by the community itself. 11(ziya onis)

But it is impossible to know the answer of the Community whether Turkey would applied during that process. One of the significant problems was Cyprus. Turkley …….

By 1980, Turkey was economically, and also politically, in a huge crisis, the blame should go to the country's political institutions that failed to motivate prudent policy making and lacked the potential for systematic reform when their failures became apparent. 12 Hadi Salehi Esfahani.

Finally, on 12 September 1980, the military intervention hampered the relations between Turkey and EC for six years, up to 1986.

During the 1980s, Turkish economy and political environment experienced huge structural changes. Between 1980-1983 military forces was governing. In 1983, after general elections military forces left the government. The new government, Ozal's government was aiming to start close relations with EEC.

Relations remained more or less frozen until the mid-1980 when Turkey indicated both its stability and readiness to make domestic reforms. 13 Erkan erdogdu. Among these opportunities for economic reforms Turkey submit an application to IMF.

After these periods, the government appied for full membership of the European Community on 14 April 1987. The application was accoding to article 237 of Treaty of Rome, article 98 of the European Coal and Steel Community. This application was a surprise dfor the community.

The Turkish request was defined rather diplomatically, as ‘bold' in Europe and evaluated as a tactical move to overcome the deadliock in Turkey=EU relations. 14 (IBID)

The answer was declared after two and half years, and the European Council rejected the application. We may evaluate the refuse with the perspectives of the inner dynamics of the Union and with the position of Turkey economically and politically.

As for the Turkey's position for membership, Commision stated some obstacles which can be summarized as: “Major structural disparities between EC and Turkey, high levels of inflation, unemployement and industrial protection, low levels of social protection, inadequate problems with one member state of the community.

The second branch of the negative response if the community was related to its ‘inside' problems. The community was trying to integrate with the new members of the Union. So, the community closed its doors to new members for a period of time; therefore , the EC could not initiate any new accession negotiations before 1993 at the earliest/ 16(ibid)

More specifically, the response pointed to a number of deficiencies of Turkey's record both on the economical and political side which rendered Turkey an unlikely candidate for the full membership/ 17(Ziya onis). Turkish government was well aware that EC integration would be a long drawn-out process and this process would require a huge effort. 18 (Mary Starng)

EC suggested Turkey to improve relations within the framework of the association agreement, signed in 1963, and to conclude with the customs union. With this suggestion, EC, finally, decided on a new strategy to keep Turkey within, the sphere of influence while postponing indefinitely the opening of accession negotiations. In this context, the E regarded the customs union as a necessary price and tool to keep Turkey pro=European while denying membership.

2.2. Political Relations Related with rthe csandidacy of turkey for full membership

2.2.1 Amsterdam Summit

Before the Luxembourg Summit, the presidents and prime ministers of the 15 member counties came togetherin Amsterdam Summit on 27 June 1997. Turkey was also invited to the meeting with the participants of CEECs. But it was not forgotten the statement of the information that; with this invitation, Turkey's applicant country status was not changing and it was not transferred to a candidate member status.19(Muhsin Kar) During that period the relations between Turkey and Union was seriously blocked and trobled.

2.2. Luxembourg Summit

The Luxembourg Summit was a turning point in the relations between Turkey and European Union.

In this summit, the Union desired to give an end to the ‘divided' Europe. Before the Luxembourg Summit, Agenda 2000 was established and, in this report, Turkey was excluded even from the candidacy of the membership. The report repeated the classical political and economic arguments against Turkey and made no reference to Turkey's full membership objective. 20 erkan erdogdu

Start of the negotiations with 10 CEECs and also with Cyprus and Malta for the full membership had been approved as a decision of this summit. Moreover, with six countries it was decided to start the adhesion negotiations from arrive of 31 March 1998. These six countries were Portugal, Czech Republic, Hungary, Slovenia, Estonia and finally Cyprus. Moreover, for Turkey , they were not provided a pre-adhesion program.

Turkey was invited to the European Conference but Turkish authorities rejected this invitation. The Turkish government found the Commision's approach discriminatory and emphasized the contrast between the pre=accession strategy devised for other candidates and the ‘ European strategy' for Turkey which consisted simply of a set of ideas whiose fainancin=g remained uncertain. 21 IBID

EU Commission established this strategy on 4 March 1998 and it was including 4 areas: Adhesion Cooperation, National Program, Adaption Schedule, Adhesion and Control System to the EU programs.22 Ridvan Karluk.

One of the decisions that were taken in Luxembourg Summit was the preparation of the regular reports about the candidate countries, As it can easily guessed Turkey was not included to this process.

It will be useful to mention briefly about some aspects of the subject. During 1980s and 1990s, political elements started to gain more importance in the structure of the Union. And deficiencies of Turkey about human rights much more restricted the relation between Turkey and the Union. Political and economic deficiences were brought to Turkish side after the customs union period when Turkey desired to accelerate the full candidacy process. However, as it will be evaluated later, political problems were brought to Turkish side more than economic ones. European Union expressed political criterion of Copenhagen criteria which obstructs the full membership desire and the wish of Turkey for the start if the full membership negotiations much more than the economic criterion. EU gave more importance to this side of the picture.

2.2.3. Cardiff Summit

After the Luxembourg Summit, Union excluded Turkey from the candidacy status. And after a period of time EU started to accelerate the relations and for a closer perspective declared the ‘European Strategy' in March 1998. In fact, this may be evaluated as correction which made on the Cardiff Summit on 15-16 June 1998 after the Luxembourrg Summit. The conclusion may be summarized as follows: “ The European Strategy which had an aim of the preparation of Turkey for the full membership was ratified by the European Commission, the Commision was charged in the preparation of a regular report about Turkeu like the candidate countries/” 23 Muhsin Kar,

2.2.4. Koln Summit

European Common Defence Union's basis was constituted during Koln Summit on3-4 June 1999. In this summit, a text was apreapred by Germany which was regulated according to the expectations of Turkey. It could not be from one of the decisions of the summit, however, refuse of some members, especially refuse of Greece, stopped the ratification of this text.. However, conclusuion of the Summit was as follows: EU will contunie to the preparation of turkey to the full membership. It will designate a calendar for preparation.

Turkey stated after this summit its pleasure from the efforts of the summit on the subject of getting an equal status with other candidates, but did not fond it sufficient.

2.2.5. Feria Summit

Feria Summit came together on 19-20 June 2000. TheEuropean Council declared that they were observing Turkey's harmonization with the accession criteria. 24 IBID

2.2.6. Nice Summit

Presidents and prime ministers of the member countries came together, in Nice, on 7 December 2000. In this summit, structural reforms

2.2.7. Helsinki Summit and the Candidacy

In december 1999, Helsinki Summit came together and Turkey was accepted as candidate country for the full membership to European union. This summit was full of fluctuations and finally with this decision a new era had started for both Turkey and European Union in their relationship.

Only two years after from the Luxembourg Summit which was refusal, Turkey was accepted as a candidate country with an opinion change, in Helsinki Summit in 1999. Structure of the Union and diverse factors were effective on this decision.

Historically, the foreign policy of the EU has always been characterized by paradoxes and ambiguities. This is , in part, due to the obvious fact that EU is not a unitary actor in the traditional sense and sometimes conflicts between individual member states can inevitably occur in contradictory foreign policy behaviour. 27 Ziya Onis Moreover, Turkey was not outside of these conflicts and the Union may take contradictory decisions about Turkey. But in detailed form we can observe some reasons about the acceptance of candidacy of Turkey.

On the other side, in 1999, the union was consists of 15 members and these countries were in voting process according to their own politics and also according to their situation in EU politics.

The foreign policy of the Union was oscillating between the principles of idealism and the perspectives of benefit decisions. Idealist part of the Union excluded Turkey form potential membership. In Luxembourg because of Turkey's deficient records in terms of democracy and human rights.

On the other side, Turkey was an important economic and strategic partner. Moreover, in 1998 and 1999, there was recognition by the European Political authorities that Europe's economic and security interests would not be adequately served if Turkey was allowed to be isolated. 28 IBID

The domestic politics of key member states such as Germany, but also Holland and Belgium, give an idea, especially in Germany, about the changing decisions of the Europe and the acception of Turkey's candidacy. A large Turkish minority has started to make known their influence in German political scene. During 1960s'years that Turkish workers started to migrate to germany, Turkish workers were interested in and were working in the manual tasks which the Germanswere not willing to accomplish, But the formation of the Turkish workers in Germany started to change compared to the first generation of workers. The second or third generation was more active in economic life and some of them were feeling themselves as a part of German society, and they do not have feelings abot returning to Turkey. these groups ‘economic power in Germany seemed to be influential force between the two countries' relationship. This factor should not be forgotten on the road to Helsinki between the 1997-1999 period. 29 IBID

Another factor about the establishment of 1999 Helsinki candidacy approval was, ironically about Greece. After Greece addition to the Community in 1981, there occurred many problems between Turkey and Greece; however, in 1999 Helsinki. Greece support was effective for the Union's opposite decision. We may count some reasons about this close and affirmative attitude for Turkey's membership. First, we should state the effects of the earthquakes in 1999, and their effects which caused to closer relations. Certainly, this emotional effect was one side of this support. On the other side, Greek politicians realized that it would not be advantageous platform for Greece's economic and strategic interests if Turkey had left isolated. Also, two countries had trade relations, tourism and they could be frustrated in the event of isolation of Turkey, or even they would not be improved. Moreover, the effect and pressure of the United States can also be added to that decision. UNITED states persuaded and pressed for the candidacy of Turkey, because its interest in the middle east and the Central Asia. It was given to turkey candidate status but without a timetable for accession. 30 IBID

And as a part of this pre-accession strategy, the Commission prepared the first detailed report on Turkey, and it was presented and accepted at the NICE EUROPEAN COUNCIL in December 2000.

4th, 9th and 12th articles of the Helsinki summit were related to Turkey. It was intended to include Turley, like the other candidate countries, from the adhesion cooperation strategy. For this cooperation it was necessary to determine th


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