Transcript Ch 19 The economic case for further enlargement of the EU, with

The European Union
The economic case for further enlargement of
the EU, with special reference to Turkey
By Isabelle Rieder
Applicant Countries
Croatia
Macedonia
Turkey
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TURKEY
CROATIA
MACEDONIA
Accession Criteria
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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 issues
1.
2.
3.
‘An economically integrated Europe which offers growth and
prosperity through a single market and a single currency.’
Under the accession Criteria, future entrants to the EU require a
functioning market economy, which can deal with the market forces
of the EU.
This necessitates micro-economic reforms to extend the scope of the
free market in allocating resources.
Benefits to the UK
1. Strategic importance to European defense policy of its location
2. 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
imports
5. Large population could help to solve labour shortages
6. More consumer choice
7. 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 UK
1. 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.
2.
3.
4.
Fiscal costs of transition as there are a wide range of economic
conditions of entry
Whether their economies can compete with the rest of the EU,
threats to smaller scale domestic industries
Whether they can stand up to those who have benefited for years
from EU subsidies.
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 enlargement
3. 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