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The European Union Economy’s Issues and Policies

The opinion of the EU citizens on the enlargement policy

The policy on the enlargement of the EU has continued to be a contentious issue for several years (Veen, 2009, p.1). Findings of a survey conducted to determine the citizens’ opinion on the enlargement of the European Union through the integration of ten Central and Eastern European countries revealed varied opinions. To understand the citizen’s opinions, the fieldwork was conducted between January 26, 2009, and February 1, 2009 (Bruce, 2001, p.46). The interviews were conducted on citizens from 27 European Member states. Fifty-three percent (53%) of Europeans consider the inclusion of their country into the EU to be a good thing, 15% are pessimistic while 27% are indifferent (Eurobarometer, 2009, p.1). Seventy-nine percent (79%) of the citizens interviewed thought that the enlargement of the EU would result in more freedom amongst European countries.

On the other hand, eighty percent (80%) of the respondents asserted that enlargement would enhance business opportunities amongst Western enterprises within the CEE region. Eighty-six percent (86%) of the respondents thought that the enlargement would result in free movement of goods and people amongst the EU member countries while 66% thought that it would improve the living standards of the citizens. Forty-four percent (44%) of the respondents said that it would result in the creation of new opportunities for the younger generations. The table below illustrates the responses of the citizens on some issues regarding the effects of the enlargement of the EU.

Agree Disagree Do not Know
Free movement 86 9 5
Improvement of business 80 9 11
More freedom 79 14 7
Better living standards 66 23 11
New opportunities for youth 44 46 9
Citizens opinion on enlargement of EU
Figure 1.

The 2004-2007 enlargements received massive support from the citizens. Ninety-two percent (92%) of EU citizens agreed that the integration of the countries has resulted in free movement. Additionally, 76% of the respondents asserted that expansion has contributed to economic growth and modernization (Eurobarometer, 2009, p.5).

Conditions for entering the EU

For a considerable duration, conditions for joining the EU were vague (Cini, 2004, p.4). The Treaty of Lisbon outlines the criterion which countries must meet to become members of the EU. However, the conditions for admission have been made formal and substantive (Kaczorawska, 2008, p.65). These conditions are commonly referred to as the ‘Copenhagen Criteria’ and were established in 1993 by the Copenhagen European Council (Citizens Information, 2009, para.1). The conditions are relatively stable which means that they do not change. Below is an outline of the conditions for joining the EU.

  1. Political requirements: Countries joining the European Union are required to have a democratic system of governance. The countries are also required to have stable institutions that guarantee and enhance the rule of law. Additionally, countries joining the EU are not only required to respect human rights and minority groups but also to protect them (Kaczorowska, 2008, p.65).
  2. Legal requirement: The candidate country must be able to adhere to the set membership obligations. Some of these obligations relate to economic, political, and monetary union.
  3. Economic requirements: A candidate country to the EU must be characterized by a well-implemented market economy. Additionally, the country must have the capacity to deal with the competitive nature of the market economy amongst the EU member countries.

The current relationship between Turkey and the European Union

Despite the above opinions regarding the enlargement of the EU, most EU members are reluctant to accept new members (Bromley, 2000, p. 233). Turkey has been involved in accession negotiation with the EU since 2005 (Gerhands & Hans, 2011, p.1). According to Morelli (2008, p.3), the relationship between the EU and Turkey has fluctuated over the past decades. This is evidenced by the decline in Turkey’s support for its future accession into the EU.

Most EU citizens are skeptical of Turkey’s accession into the EU (Providus, 2005, p. 1). Only one-third of the 27 EU countries considered in the study supported Turkey’s accession into the EU. Romania, Portugal, Bulgaria, and Sweden are only a few countries that give Turkey the greatest support. The graph below (figure 2) illustrates the degree of support given to Turkey by some EU countries. Some of the reasons for the minimal support relates to economic and cultural differences between Europe and Turkey (Kahraman, 2000, p.2).

A significant proportion of EU countries consider Turkey to be culturally different from EU member states for it to be admitted into the Union (Morelli, 2008, p.3). There have also been increased fears about the rate of a high rate of immigration emanating from Turkey’s growing population (Ruiz-Jimenez, & Torreblanca, 2007, p.3). Additionally, Turkey’s accession into the EU has also been clouded by increased uncertainties due to its Muslim population (Morelli, 2008, p.3).

Percentage Percentage
of support of support
EU-27 34.4 Slovakia 36. 7
Romania 78.3 Great Britain 36.3
Bulgaria 58.5 Belgium 36
Sweden 52.3 Estonia 32
Portugal 50.7 Czech Republic 32
Spain 49.5 Italy 29.9
Poland 48.9 Denmark 28.6
Hungary 45.6 Finland 25.3
Slovenia 44.7 Greece 24.6
Lithuania 44 France 24
Malta 39.4 Cyprus 19.9
Netherland 38.9 Luxembourg 17.7
Ireland 38.3 Germany 17.1
Latvia 37.9 Austria 5.6
Support for Turkey's membership into the EU by 27 countries
Figure 2.

Economic advantages from the EU’s perspective regarding Turkey’s accession

Turkey is ranked as a lower-middle-income economy (Commission of The European Communities, 2004, p.13). This is evidenced by the fact that it has a relatively low per capita income compared to that of the EU. Although it has a high population, it is Gross Domestic Product (GDP) is slightly above 2% that of EU-25. For example, in 2009, Turkey’s GDP per capita averaged $ 9,910 compared to that of Germany which was 3 times higher at $32,487. The chart below shows a comparison of trends in GDP per capita amongst 5 EU member states for the period.

GDP per capita
Source: (Penn World Tables, 2011).

From the above chart, it is evident that Turkey’s economic performance is relatively low amongst the EU countries. However, there is a high probability that the beneficial economic effects associated with Turkey’s membership into the European Union will be numerous (Commission of The European Communities, 2004, p.13).

The EU will benefit from Turkey’s accession through increased trade of various goods and services. Its accession will result in increased trade liberalization. According to the Commission of The European Communities (2004, p.14), the EU experienced an increment in the volume of machinery and road vehicles export from Turkey from 19% in 1998 to 29% in 2003. The EU also experienced an increment in the volume of textile exports from Turkey with a margin of 13%. Trade liberalization amongst EU countries will result in an increment in trade flows (Commission of The European Communities, 2004, p.13).

Currently, Turkey’s economy accounts for 1.9% of EU25 total Gross Domestic Product (GDP) (Hoekman & Togan, 2005, p.45). Upon its accession into the EU, it is estimated that the country’s GDP will grow at an average rate of 2.9% by 2015(Hughes, 2004, p.3). Because Turkey’s economy is relatively small, its accession into the EU will have minimal effect on the EU’s economy. It is estimated that its impact on the GDP of the EU25 will range between 0-3 percent (Hughes, 2004, p.3). However, its economic impact is expected to increase if there is a high rate of net migration flows from Turkey to the EU (Dobson, Sennikova & Carmichael, 2007, p.34).

Over the past decade, capital flows between Turkey and the European Union have been highly liberalized. However, there are some capital flows especially those associated with Foreign Direct Investment (FDI) which are still limited. The implementation of the EU’s enlargement policy will boost investor’s confidence thus triggering them to consider investing in new markets. One of the investment destinations which they will consider is Turkey.

Most FDI in Turkey will be undertaken by EU companies. By acceding to the EU, Turkey will experience high economic growth arising from increased spending of the EU Cohesion Fund and Structural Fund. Upon acceding into the EU, Turkey will receive EU transfers until its economy is fully restructured. For example, by acceding into the EU in 1981, Greece continued to receive transfers until 1997(Berument, Malatyali & Neyapti, 2009, p.56). Spending on these funds will significantly enhance the environment for private investment (Commission of The European Communities, 2004, p. 15).

Currently, Turkey’s FDI is extremely low. By acceding into the EU, there is a high probability that Turkey’s FDI will be increased through increased economic and political stability. To achieve this, Turkey must ensure that it tackles some of the problems it is facing such as corruption (Hughes, 2004, p.4). Additionally, Turkey needs to address the regional inequality that it is facing. If this is achieved, it is estimated that it will experience an increment in its annual FDI flows with a margin of 2 to 4 billion pounds (Hughes, 2004, p. 4).

Turkey’s integration into the EU will lead to an increment in demand amongst EU member states. This will enhance productivity within Turkey culminating in a decline in prices especially within the services sector. The resultant effect will be an increment in Turkey’s GDP. There has been a high rate of Turkish workers immigrating into other EU member countries (Commission of The European Communities, 2004, p.14).

Turkey’s accession into the EU would result in the removal of barriers amongst member states thus enhancing free movement of goods. The EU is ranked amongst Turkey’s major trading partners. Additionally, its accession into the EU will enhance the movement of people. This would further enhance the rate of immigration from Turkey to EU member states. This is beneficial in that it would mitigate the risk of a reduction in the EU’s economic growth as a result of a decline in its workforces’ productivity.

According to Hughes (2004, p.4), Turkey has a growing young population. Based on previous immigration into the EU from new members, it is expected that approximately 225,000 Turks will migrate into the EU annually. As a result, it would take time before the EU begins to experience the negative effects of an aging demographic profile (Hughes, 2004, p. 5). However, if the rate of immigration is uncontrolled, the EU’s labor market would be disturbed.

Economic disadvantages/problems from the EU’s perspective regarding Turkey’s accession

There are several problems associated with Turkey’s membership in the EU. One of the major problems that will be experienced relates to the cohesion policy. The major hindrance will emanate from the structural problems within Turkey (Commission of The European Communities, 2004, p.40). As a result of Turkey’s low GDP per capita and its broad regional disparities, the EU will be required to provide substantial support for Turkey to successfully accede into the EU through its Cohesion and Structural Funds (Jagasia, 2007, para. 1). This financial support will extend for a considerable duration. Based on the prevailing eligibility criterion and data, all regions within Turkey will be entitled to EU’s financial support under Objective 1 of the Union’s Structural Fund in addition to assistance as stipulated by the Cohesion Fund (Commission of The European Communities, 2004, p.40). Therefore, the EU will incur a significant amount of financial cost. The chart below illustrates an estimation of the financial cost the EU will incur by accepting Turkey into the EU.

Turkey is today’s Turkey 2015in
EU (Billion Euros) enlarged EU
(As a % of EU GDP)
Structural Funds 8 0.16
Common Agricultural
Policy 9 0.08
Total receipts 16 0.25
Contribution to EU budget 2 0.05
Maximum net receipt for Turkey 16 (0.16% of EU GDP) 0.2

Source: (Dervis, Gros, Oztrak, Isik, 2004, p.4).

The chart above illustrates that the estimated cost that the EU will incur as a result of Turkey’s accession to be approximately 0.2% of the EU’s GDP which is equivalent to 20 billion pounds (Dervis, Gros, Oztrak, Isik, 2004, p.4). On the other hand, considering Turkey’s economic state, it will only be required to contribute 1.04% of its GDP which is relatively small compared to the amount it will receive (Luff, 2008, p.129).

The cohesion policy will also be faced with the challenge of gradually integrating Turkey into the EU’s structural aid. Additionally, to maintain the economic growth required to attain union with the EU, Turkey will be required to ensure that its levels of income and employment are high. To achieve this, there are several changes that Turkey will be required to implement. Some of these changes include modernizing its training and education system, improving its infrastructure, and creating an environment conducive for investment. However, this is a long-term process and will demand significant effort and time (Commission of The European Communities, 2004, p.40). Additionally, to make these changes, Turkey will incur a huge financial cost. It is estimated that for Turkey’s political system to be fully integrated within the EU, it will incur approximately 21 billion Euros per year by 2014 and 27.6 billion Euros by 2025 (Belke, 2004, p.297).

Another problem that the EU will incur is associated with the income disparities between Turkey and other EU countries (Burrell & Oskam, 2005, p.237). Turkey’s accession will also result in welfare loss especially for the incumbent member states (Belke, 2004, p. 289). This scenario is likely to occur if there are tax increases or if Turkey receives its transfer from other EU member states. This arises from the fact that the old member states would be required to contribute towards aiding new members. Additionally, old members who are still eligible for EU’s financial aid would experience a decline in the financial aid as the funds would be channeled to other issues. However, the probability of EU member states accepting to pay for the cost of Turkey’s accession into the EU is minimal (Belke, 2004, p.289).

The degree of human capital in Turkey is relatively low. As a result, its total expenditure on economic issues such as education as a percentage of Gross Domestic Product (GDP) is relatively low. Additionally, Turkey’s performance about issues such as investment is very worse compared to that of the EU (Belke, 2004, p. 290).

There is also a perception that Turkey’s accession into the EU will have significant effects on EU monetary and economic policies. With the entry of the CEE countries, the union was transformed from being an association of rich industrial states to an association of heterogeneous countries. If Turkey enters the EU, there is a high probability that the EU’s economic and monetary policies will be faced with serious challenges to sustain internal coherence. The accession of Turkey will also hinder the EU’s focus from its goals.

Conclusion

The above overview indicates varied opinions amongst citizens of EU member countries regarding the expansion of the EU. Most of the citizens support the enlargement of the EU by citing the benefits associated with the enlargement policy. For example, some of the citizens think that the enlargement will result in freedom of movement of goods and people amongst the member states. The resultant effect will be increased business and investment opportunities. The citizens are also of the opinion that the enlargement of the EU will improve the living standards and enhance economic growth and modernization. Therefore, a significant proportion of EU citizens are supporting its enlargement policy. However, for a country to be accepted as a member of the EU, there are some conditions that it must meet. These include political, legal, and economic requirements. The political requirements assert that it must have a democratic system of governance, have stable institutions that guarantee rule of law, and respects human rights. Additionally, the candidate country must adhere to the legal obligations stipulated by member states. On the other hand, the country must have an operating market economy and be able to compete with the market forces.

One of the countries that are making effort to enter the EU in Turkey. However, one of the major challenges that it is facing relates to the minimal support that it has received from other EU countries. Most EU countries are opposed to the idea of Turkey joining the EU. The country’s major support comes from just a few countries which include Romania, Portugal, Bulgaria, and Sweden. Some of the factors which explain the minimal support include the fact that Turkey is culturally different from other EU member states. Additionally, most incumbent member states fear experiencing a high rate of immigration emanating from Turkey. The high rate of immigration from Turkey would affect the countries labor market by increasing the rate of unemployment. There are several economic benefits associated with Turkey’s accession into the EU. The accession will enhance Turkey’s economic growth through increased labor productivity and increased trade. However, there are also costs associated with Turkey’s accession. One of these relates to the cost the EU will incur to ensure that Turkey attains full membership. Additionally, the high rate of immigration into the EU will disturb the labor market by causing an increment in the rate of unemployment.

Recommendations

From the above analysis, it is evident that there are several long-term benefits and costs associated with the enlargement of the EU. The success of the EU will depend on the degree of solidarity and cohesion developed with the new member states. To ensure successful enlargement of the EU, the EU must consider several issues in its policy as outlined below.

  1. Because enlargement of the EU will encourage the free movement of products amongst member states, the EU must address the challenges associated with the free movement. One of the issues that the present members are concerned about relates to security. The EU enlargement policy should address how issues such as organized across national borders will be addressed. One of the ways through which the EU should consider addressing this is through the cooperation of internal security matters.
  2. The EU should also ensure that the enlargement policy focuses more on innovation and reform to enhance competitiveness, boost growth, and promote job creation amongst the member states. This can be attained by giving priority to issues such as research and investment, liberalization of transport, telecommunication and energy, and job creation. The resultant effect is that the new market will be able to operate more efficiently.
  3. The EU should ensure that the enlargement policy stipulates how understanding between member states will be promoted. One of the ways through which this should be attained is through exchange programs in various areas for example education.

Reference List

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Bromley, S., 2000. Governing the European Union. London: Sage.

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