Turkey's Economic Integration with the EU: An Evaluation of Current Status and Future Prognosis

ABSTRACT In this paper, we study Turkey's current and future economic conditions and shade some prospects into the prognosis of its probable European Union (EU) membership. Turkey's most recent effort to enter the European Union has been denied on the ground of not achieving union's standard on various aspects. Turkey's socio-political standing is so unique that it offers a very interesting model for economic integration. Turkey's drive to join the union has faced numerous challenges over the years. Primary inspiration for European Union integration transpires from the idea of creating a single market for goods, services, and capital among the union members. Since this is the intention of EU integration, we have evaluated Turkey on the basis of their economic profile for integration into the union and investigated a prognosis for future prospect by analyzing the similarity of their economy with that of eleven other longstanding European Union (EU) member countries. Multivariate analyses of Mahalanobis squared distance, canonical correlation, and canonical discriminant analysis show that currently Turkey do not have similar economic status nor the prognosis in near future for them to be a member of the union on the basis of economic profile that we have considered in this paper. Given that, Greece is also drifting apart in the future from rest of the union member countries and can be classified as a separate group provides an opportunity in Turkey's favor. Therefore, Turkey would like to place a considerable emphasis on their long-term economic stabilization in a cohesive manner by implementing necessary policy modifications and win their spot in the union. (ProQuest: ... denotes formulae omitted.) INTRODUCTION Socio-political standing of Turkey is so unique that it offers a very unique and interesting model for European Union integration. Its desire to enter Single Market Europe was intensified in recent years with the enlargement of the European Union. Turkey has been seeking to become a member of the European Union (EU) for nearly four decades. Most likely, Turkey's integration with the EU will remove the distortions in their price system, which in turn will boost the efficiency of their economy. This economic efficiency will make the country a better place for foreign direct investment. Thus, the efficiency gains from integration will be boosted by induced capital formation. However, Turkey's most recent effort to enter the EU in 2002 has been denied by the EU. Although, countries such as Poland, Hungary, Czech Republic, Greece, Cypress, Slovenia, Malta, and many others entered the EU in May of 2004. Bulgaria and Romania also got admitted to EU effective January 1, 2007, while Turkey still remains outside. Therefore, it will be beneficial to study the future prognosis of Turkey's economy using forecasted data on economic factors. Turkey has been a very faithful and loyal NATO member. During World War II, Turkey remained neutral until February 1 945, when it joined the Allies. During the Cold War, Turkey allied itself with the western world. Turkey's long standing economic relationship with the western world is undeniable. Its capital city is located in Europe. In 1963, European Community signed an association agreement with Turkey that envisioned the mutual lowering of trade and migration barriers. In 1 973 , a protocol addendum was signed and a joint commission was established for removing migration barriers between the EC and Turkey by 1986. But, no advancement has been made to lower the trade and migration barriers until 1982 due to a military coup that took place in 1980. As a result, the EC suspended its relations with Turkey. In spite of all these negative developments, Turkey applied for EU membership in 1 987 and it was rejected by the EU. Latest attempt by Turkey to join the union was blocked at the Copenhagen Summit in December of 2002. However, EU pledged Turkey that if it carries out certain criteria on human rights and democracy by December 2004, accession talks could begin soon. …