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Wednesday, October 08, 2003

Why Turkey Should Be Put on the EU Fast-track

While I welcome the entrance of the new East European members into the EU, I recognise that, given their serious demographic problem, this is more justified by the need to 'extend a helping hand' than by cñear self-interest. On the other hand Turkey represents a clear opportunity for the EU, an opportunity which should be given the priority it deserves. Morgan Stanley's Serhan Cevik explains why:

We have long argued that the EU accession represents the last stage of Turkey’s 200-year-old modernisation venture and could be the ultimate policy anchor for economic and institutional development. Having said that, we think the process is likely to take no less than a decade to complete and face numerous structural and political challenges.

Recent administrative reforms help to meet the Copenhagen criteria, at least on paper. The ratification of a comprehensive array of laws and constitutional amendments further aligns Turkey’s institutional structure with European standards. Although the so-called ‘harmonisation’ reforms are not entirely adequate to meet the Copenhagen criteria, they address the EU’s primary concerns and cover most of the major issues specified in the Accession Partnership. In our view, there is a good chance that reforms herald the end of the ‘statist’ governing philosophy that has barricaded Turkey’s economic and institutional development and the coming of a truly democratic society that would also lay the foundation for a more competitive market economy. Particularly, improving civil liberties and the demilitarisation of the political landscape are revolutionary moves that are likely to bring a favourable assessment by the European Commission. Of course, there is still a gap between reforms on paper and rigorous execution. Thus, the government needs to complete the remaining legal requirements and establish a record of implementation in the next 12-month period to leave no ambiguity behind that could be used by Europe’s populist politicians again in evaluating Turkey’s progress.............

Turkey is a big challenge for the EU given the financial burden of accepting it into membership. In addition to a wide income gap, the agrarian nature of the society is a limiting factor. Over 40% of the labour force is ‘employed’ in the agricultural sector that produces barely 14% of the country’s gross domestic product. Europeans also perceive Turkey’s growing (young) population as a threat in terms of labour mobility. Indeed, income discrepancies may potentially lead to a wave of Turkish immigration into Europe and entitle today’s Turkey to get up to 15% of the EU budget. However, we believe this is unlikely to happen for two reasons. First, Turkey’s accession process is highly likely to include a phased approach to labour mobility. Second, Turkey’s income growth would naturally limit immigration flows. Though we believe Turkey’s labour force, with an average age of 26, is a demographic opportunity for aging Europe, the EU is likely to opt for an accession process that minimises the amount of transfers from the EU budget to Turkey.............

Turkey is the least popular candidate by virtue of its size and ‘cultural’ differences. Even beyond Hungtingtonian arguments on socio-cultural issues, Turkey is placed in the heart of the ‘widening versus deepening’ debate in Europe. The first-wave accession countries and the EU are already arguing over the fiscal and monetary implications of further enlargement. The political climate in Europe has clearly shifted toward a more reluctant stance on inviting new countries to join the club. Europeans are aware of the fact that once the accession process starts, there is no turning back. However, Europe’s anxiety over economic and social costs of the Turkish membership is based on a static analysis, in our view. Under the auspices of the IMF and the World Bank, the Turkish economy is already evolving toward meeting the core European standards, and by the time Turkey would become an actual member, the country’s economic, social and political conditions are likely to be far from what their erratic nature suggests today.

In our view, Turkey is not a liability, but a pivotal state for Europe’s geopolitical interests. Some Europeans may fundamentally dislike power politics and therefore see no ‘strategic’ value in the Turkish membership. However, we think European leaders would eventually base the accession decision on long-term considerations (such as economic potential and geostrategic capabilities). Turkey offers unique strengths in the Balkans, the Caucus and the Middle East, which are important geopolitical zones for the EU’s security and defence policy, and is also a bridge between Europe and the energy-rich countries of Central Asia and a cultural link to the Islamic world. On the economic front, we believe Turkey’s continuing trade integration with Europe and strong growth potential that could increase its international trade volume to US$250 billion over the next decade would make it an economic powerhouse in the ‘new’ Europe.
Source: Morgan Stanley Global Economic Forum

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