ECONOMIC ASPECTS OF

TURKEY’S EU ACCESSION

Abdullah Akyüz
President
TUSIAD-US
TÜSİAD Washington Representative Office

February 10, 2007

 TUSIAD: Turkish Industrialists’ and
Businessmen’s Association
• FOUNDED IN 1971; VOLUNTARY; 500+ MEMBERS
• CEOs & EXECUTIVES (Similar to US Business Roundtable)
• TOTAL SALES OF MEMBERS: 40% of GDP
• POLICY FOCUSED. NO BUSINESS DEVELOPMENT!
• RESEARCH, POLICY & ADVOCACY ORIENTED
• COMMITTED TO DEMOCRACY & MARKET ECONOMY
• PRIMARY FOCUS: EU ACCESSION
• ORGANIZES NATIONAL QUALITY, TECHNOLOGY,
E-TURKEY & ENTREPRENEURSHIP CONGRESSES &
AWARDS PRIZES
• ORGANIZATION
– MEMBER DRIVEN COMMISSIONS
– HQ & GENERAL SECRETARIAT IN ISTANBUL
– REP. OFFICES: ANKARA, BERLIN, BRUSSELS, PARIS,
WASHINGTON, DC
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 MAIN ISSUES on
TUSIAD AGENDA
• DEMOCRATIZATION • ECONOMIC
– Constitution LIBERALIZATION
– Election laws • PUBLIC SECTOR REFORM
– Political parties law • TAX REFORM
• JUDICIAL REFORM • SOCIAL SECURITY
• HUMAN RIGHTS • INCOME DISTRIBUTION
• EU ACCESSION • CORPORATE GOVERNANCE
• US-TURKEY RELATIONS • COMPETITION
• CORRUPTION • ECONOMIC GROWTH
• EDUCATION & HEALTH – PRODUCTIVITY
• GENDER INEQUALITY – INNOVATION
• PHILOSOPHY, HISTORY & – UNEMPLOYMENT
GEOGRAPHY TEXTBOOKS – FINANCIAL SYSTEM
FOR HIGH SCHOOLS – AGRICULTURE
– FDIs

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 EU ECONOMICS:101
• The EU started as an economic entity
• EU-25 is 460 million people and $12.3
trillion strong economy (=NAFTA)
• Single market & currency provide
significant economic opportunities
• Average per capita GDP $23,400 ( an
increase of 54% over the last decade in spite of
enlargement)
• Trade within EU accounts for 2/3 of total
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 EU: BACKGROUND
• Search for peace
• 1951: European Coal and Steel Community (EU6)
• 1957: Treaty of Rome: EEC ⇒ Common Market
• 1973: 3 new members ⇒ EU9
• 1979: First direct elections for EP
• 1981-95: 6 new members ⇒ EU15
• 1986: Single European Act
• 1992: Maastricht Treaty ⇒ European Union
• 1993: Integration of E. Europe: Copenhagen Criteria
• 1995: Schengen pact ⇒ Borders come down
• 2002: EMU ⇒ Euro & European Central Bank
• 2004: 10 new members ⇒ EU25
• 2007: 2 new members ⇒ EU27
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 Turkey vs Select Countries
(2004)

TR POL MEX GR EGYPT USA

• POPULATION* 70 39 106 11 77 296

• GDP (PPP)** 509 463 1,006 226 316 11,750
• PER CAPITA GDP (PPP)*** 7,400 12,000 9,600 21,300 4,200 40,100

• GDP COMPOSITION(%)
– AGRICULTURE 11.7 2.9 4.0 7.0 17.2 0.9
– INDUSTRY 29.8 31.3 27.2 22.0 33.0 19.7
– SERVICES 58.5 65.9 68.8 71.0 49.8 79.4

* Millions
** US$ Billions
*** US$

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 TURKEY Ranks…
• 37th in size • 30th in stock
• 17th in population market
• 18th in GDP capitalization
• 23rd in # of • 12th in tourist
households arrivals
• 38th in R&D • 5th in foreign debt
spending
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 IMPRESSIVE PROGRESS:
LAST SIX YEARS

• Growth without inflationary pressure

• Fiscal discipline maintained
• Inflation: Down from + 65% to < 10%
• Real interest rates declining
• Sharp decrease in public sector borrowing
• Major productivity gains
• Significant increase in foreign trade
• Privatizations leading to a surge in FDIs
• Most of the structural reforms have been completed
• 4 areas of concern: EU process, current account deficit,
global volatility & unemployment

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 TURKEY: Foreign Trade
EXPORTS* IMPORTS* (X+M)/GNP
(X) (M) (%)
===============================
2005 73.5 116.8 .53
2000 27.8 54.5 .41
1995 22.0 35.1 .34
1990 13.0 22.3 .23
1980 2.9 7.9 .16
1970 0.6 0.9 .08

*US $ Billions

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 TURKEY: Main Economic Partners
(2003)

TRADE INVESTMENTS (FDI)

• Germany • Netherlands
• Italy • Germany
• USA • UK
• UK • USA
• France • Switzerland
• Russia • France
• Spain • Italy
• Switzerland • Japan
• Netherlands • Panama
• China • Luxembourg
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 TURKEY:
A Major Energy Transport Hub
Natural Gas Oil
A. Existing A. Existing
• Russia-Turkey (2 pipelines) • Baku-Tbilisi-Ceyhan (BTC)
• Iran-Turkey • Kirkuk (Iraq)-Ceyhan

B. Under construction B. Projected

• South Caucasus • Kazakh oil (BTC)
• Turkey-Greece-Italy • Samsun-Ceyhan

C. Projected
• Trans-Caspian
• Nabucco
• Samsun-Ceyhan-Haifa
• Iraq-Turkey

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OIL PIPELINES

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GAS PIPELINES

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 MAIN DRIVING FORCES BEHIND
TURKEY’S DYNAMISM
• UNSATURATED LOCAL MARKET
• YOUNG & INCREASING POPULATION: CHANGES IN
LIFESTYLES AND CONSUMPTION PATTERNS
• DYNAMISM DUE TO INCREASED COMPETITION (EU
PROCESS)
• INFORMAL ECONOMY
LOW TAX COLLECTION
HIGH CONSUMPTION
• AGILE PRIVATE SECTOR
• EXPORTS TO & INVESTMENTS IN EMERGING REGIONS:
RUSSIA, BALKANS, CAUCASUS AND CENTRAL ASIA
• ACTIVE PARTICIPATION IN TRADE & RECONSTRUCTION
EFFORTS IN IRAQ & AFGHANISTAN
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 CUSTOMS UNION - CU
(since 1996)

• The only candidate country entering into

CU before becoming a full member
• CU has considerably increased TR’s
foreign trade deficit
• CU has led the TR manufacturing sector
to compete with European firms
• This competition has created a new
dynamism and impulse for the TR
economy
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 ONLY 29% OF THE TURKISH ECONOMY ENTERED THE
CU WITH THE EU AND OPENED TO GLOBAL COMPETITION

TURKEY’S GNP (2003)

Agriculture
12%

Services
Industry
Agriculture
Industry
29% Services
59%

THE REMAINING 71 % IS STILL EXPOSED TO NEITHER

EU DISCIPLINE NOR COMPETITION. FULL MEMBERSHIP
WILL MAINLY IMPACT THIS SIGNIFICANT PART OF THE
TURKISH ECONOMY
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 TURKEY-EU
• Foreign trade: 60%
• Investments: 65%
• Tourist arrivals: 70%
• Turks in EU: 3.8 million
• Turkey has been a member of all major
EU/Western institutions since their
inceptions (NATO, OECD, Council of Europe, …)
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 EU-25 TRADE
Top 10 countries (2006)

EU EXPORTS EU IMPORTS BALANCE

1. USA USA USA
2. Switzerland China Switzerland
3. Russia Russia Canada
4. China Norway Turkey
5. Turkey Japan India
6. Japan Switzerland S. Korea
7. Norway Turkey Japan
8. Canada S. Korea Norway
9. India India Russia
10.S. Korea Canada China
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 HOW WOULD TURKEY BENEFIT
FROM EU?

• Main political benefits

– EU has been the main catalyst in this entire
transformation process
– All previous accession countries have
benefited from EU objectives & standards
(Copenhagen criteria)
– EU represents not only the world’s largest
economic bloc, but also a powerful union of
democracies promoting stability in both
member and accession countries
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 HOW WOULD TURKEY BENEFIT
FROM EU?

• Main economic benefits

– Single market
– Competitive pressures
– Free movement of capital/FDI
– Common agricultural policy (CAP)
– Reduced exchange rate volatility
– Coordinated monetary policy
– Overall increase in living standards
– Financial assistance
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 WHAT COULD TURKEY
BRING INTO THE EU?

• EU’s global economic competitiveness

– Large & unsaturated market
– Dynamic private sector & flexible labor markets
– Gateway to the East and South
– Energy security
– Significant welfare effects on EU citizens
• Social Europe
– Shrinking & aging populations
– Sustainable social security
• EU as a global player
– Political & military aspects
– Contribute to dialogue between West and East
– Fighting terrorism 22
 CONCLUSION
• POLITICAL/CULTURAL CONSIDERATIONS DOMINATE
THE PROCESS
• ECONOMIC COMPONENT OF EU IS MASSIVE DESPITE ITS
OFTEN UNDERESTIMATED SIGNIFICANCE
• ENLARGEMENT IS A MAJOR DRIVER IN INCREASING
WEALTH IN EU
• EUROPEAN BUSINESSES SUPPORT TURKEY’S
MEMBERSHIP
• TURKEY IS A NET BENEFICIARY IN THE SHORT RUN
• IN THE MEDIUM/LONG-TERM, TURKEY IS A GREAT
ECONOMIC ASSET WITH A SIGNIFICANT CAPABILITY TO
CONTRIBUTE TO EU’S ECONOMIC GROWTH
• EU LEADERS NEED TO THINK BIG & MAKE THE CASE
FOR TURKEY’S INCLUSION

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