The European Union

The economic case for further enlargement of the EU, with special

reference to Turkey

By Isabelle Rieder

Applicant Countries

TURKEY

CroatiaMacedoniaTurkey

MACEDONIA

CROATIA

Accession Criteria Criteria established at the European Council meeting in

Copenhagen in 1993 and added to at the European Council meeting in Madrid in 1995. They are as follows:

Political criteria: stability of the institutions safeguarding democracy, the rule of law, human rights and respect for and protection of minorities;

Economic criteria: existence of a viable market economy, the ability to respond to the pressure of competition and market forces within the EU;

The ability to assume the obligations of a Member State stemming from the law and policies of the EU (or the acquis), which include subscribing to the Union's political, economic and monetary aims;

Having created conditions for integration by adapting their administrative structures.

Economic issues1. ‘An economically integrated Europe which offers growth and

prosperity through a single market and a single currency.’2. Under the accession Criteria, future entrants to the EU

require a functioning market economy, which can deal with the market forces of the EU.

3. This necessitates micro-economic reforms to extend the scope of the free market in allocating resources.

Benefits to the UK1. Strategic importance to European defense policy of its location2. Opportunity it would present democratically to build links with

the Muslim world. 3. Expansion of the single European market. Extract C:

enlargement will ‘bring down barriers to trade and business’ 4. UK is one of Turkey’s main trading partners, for both exports

and imports5. Large population could help to solve labour shortages6. More consumer choice7. Increased competition will increase productive efficiency and

dynamic efficiency. 8. Encourage GDP growth 9. Exploitation of competitive advantage 10. Foreign Investment provides interest profits and dividends.11. Positive externalities from environmental reforms

Costs to the UK1. Fear that Turkey, which is a major agricultural exporter

according to Extract F, will place a drain on the Budget for CAP.

2. Labour-intensive low cost producers may threaten some parts of UK manufacturing

3. Some UK regions may lose eligibility for securing EU regional funding under Objective 1, as they do not suffer from ‘relative poverty’ when compared to the less well-off new entrants.

4. Free movement of labour and capital, can result in capital moving to the east to take advantage of lower factor prices, leaving behind unemployment and reduced economic activity.

5. High population means enormous economic costs to acceptance into the EU

6. ‘EU has provided enormous financial and technical support to aid the transition of these economies’ [Extract B]

7. Migrants from these countries can increase welfare costs for the government, and exacerbate social tensions.

8. Lower levels of corporation tax in accession countries may reduce the level of foreign investment coming into the UK

Main economic problems 1. Fiscal costs of transition as there are a wide range of

economic conditions of entry2. Whether their economies can compete with the rest of the

EU, threats to smaller scale domestic industries3. Whether they can stand up to those who have benefited for

years from EU subsidies.4. Application is expensive: 2000-2006, the total expenditure

by the applicants in striving to meet standards for EU entry in the region of €200bn, in addition to EU assistance of €80bn.

Recommendation

1. Further enlargement of the EU should take place, as by creating a wider single market it can result in trade creation, and offer ‘growth and prosperity’. Turkey should be accepted as:

2. More than half of EU citizens are in favor of enlargement3. Whilst Extract D mentions that ‘Turkish membership could cost the

Union up to €14 billion a year’, there are substantial benefits to be had from trade creation.

4. Britain already imports Turkish goods, so it could now source these more cheaply leading to an improvement in her terms of trade.

5. Extract E: ‘It has a resilient economy and an entrepreneurial people’.6. Extract C notes the ‘dynamism of acceding countries relative to the

existing members’. Growth of GDP per capita 2001-2002: Turkey 6.1% vs. UK 1.4%

7. Turkey’s young population could act as a balance for the increasingly aging populations of the current EU, and the slow growth of the population of working age.

8. Extract F: Main trading partners- Exports: 5/6 in EU Imports: 6/9 in EU

9. However, institutional reform needed