Conclusions and recommendations
UK Government View
1. All
too often it is suggested that Turkey does not 'belong' in the
EU. However, Turkey has long had a close relationship with the
EU and the EEC before it, it is a member of NATO and the OECD,
and although the majority of the population is Muslim, it is a
secular democracy. We agree with the Government that accession
offers strategic benefits to both parties. (Paragraph 7)
The economic case for membership
2. The
Turkish economy is large and until recently has been growing rapidly.
It would be foolish to discount the risks facing the Turkish economy,
such as its current account deficit and the possibility that inflation
may rise in future. However, we do not believe these risks are
an obstacle to continuing accession negotiations, especially when
set against the size of the Turkish economy and its rapid growth
rate. (Paragraph 16)
Migration
3. The
migration of labour from Turkey will inevitably be an important
issue in the accession negotiations. The lengthy transition periods
that have been suggested—seven years or more after accession—would
mean that, even if Turkey acceded in 2014, free movement of labour
would not come into effect until at least 2021. Given the understanding
and realism that exists on both sides, migration may be the negotiating
issue of greatest public interest, but it should not prove an
insuperable barrier. (Paragraph 20)
Progress in accession negotiations so far
4. The
progress of Turkey's accession talks has been slow—far slower
than Croatia's. We believe that with goodwill on both sides it
should be possible to speed up the process. We note that Turkey
will have to make significant reforms to meet the acquis communautaire
in many chapters, but we believe that the access negotiation process
promises benefits for both sides, provided that each side is confident
the other is acting in good faith. (Paragraph 25)
Turkey: internal reforms
5. All
parties understand that Turkey needs to reform both economically
and constitutionally before it can accede to the EU. It would
be naïve to underestimate the extent of the changes needed
or expect them to be accepted without debate or even some resistance.
It is extremely likely there will be further political and constitutional
difficulties in the years ahead. However, our own experience in
Turkey convinced us that there is a readiness to reform among
many businesspeople and politicians; Turkey has surmounted political
crises in the past. It is important to wait to see how events
unfold, rather than to assume immediately that progress is impossible.
Only the most extreme events would justify suspension of accession
negotiations with Turkey. (Paragraph 32)
The 'political block'
6. Turkey
began the EU accession negotiations in good faith. It is not prepared
to and should not be asked to accept some form of 'privileged
partnership'. Existing EU Member States should continue the talks
on the same basis as they began. To do otherwise is unacceptable.
Given some EU leaders' rhetoric about Turkey it is not surprising
that public enthusiasm for EU membership in Turkey has rapidly
declined. The issue is not whether Turkey should join the EU immediately,
but how vigorously to continue negotiations. Much will have changed
in both Turkey and in current member states before any final decision
is made. (Paragraph 37)
Cyprus: Chapters frozen
7. Turkish
accession to the EU is impossible while there is continued disagreement
over Cyprus, but encouraging efforts are being made to resolve
that situation. Although it is inevitable that some chapters will
be blocked until then, we support continued accession negotiations
in as many chapters as possible. (Paragraph 39)
EU-Turkey customs union and trade relations
8. Whatever
the problems with the customs union, there is little doubt that
it has led to far deeper economic integration between Turkey and
EU countries, to the benefit of both parties, than would have
happened without it. (Paragraph 41)
9. Although
the EU-Turkey customs union has been beneficial, problems remain.
The accession negotiations should produce reforms which overcome
these problems. For example, we note Turkey's frustration with
its exclusion from the EU negotiations that ultimately determine
its tariff levels. Accession would obviously resolve this problem,
as Turkey would then take part in EU trade policy on the same
basis as other Member States. However, this will not address Turkish
concerns in the short-term. The Government should work with the
EU to ensure Turkey is properly consulted on trade negotiations
which may affect it, particularly free trade negotiations with
countries such as India and South Korea. In its turn, Turkey
should address the problems arising from the way in which it has
implemented the union, and remove unnecessary barriers to trade.
(Paragraph 44)
10. Turkish
membership of the European Union potentially offers benefits for
both sides. There are strategic benefits in co-operation on security.
Economically, if Turkish growth is as impressive as predicted,
it will be an asset to the EU. The two economies are already highly
integrated through the customs union. Further integration would
open up markets on both sides. We are encouraged by the UK Trade
Minister's view that Turkey has committed to reform for its own
sake. Nonetheless, a decline in some EU member states' enthusiasm
for Turkish accession has reduced public support for change in
Turkey. More positive EU attitudes toward Turkish accession could
re-invigorate enthusiasm in Turkey for the reforms necessary to
meet the EU's acquis communautaire. We wholeheartedly agree
with the Government that "Turkey and the EU have a shared
destiny". It should be made clear that, as long as Turkey
is committed to achieving the acquis, the door to accession
remains wide open. (Paragraph 44)
UKTI resources and strategy
11. We
strongly support the Government's recognition of the opportunities
available in Turkey by its priority market designation. We also
welcome the consequent increase by a third of staff resources
in Turkey, and the appointment of the high-growth market adviser
focused on bringing mid-sized companies to the market. (Paragraph
48)
Raising awareness
12. We
strongly support UKTI's efforts to raise awareness of opportunities
in Turkey. We expect that an evaluation of the extent to which
this has worked will be produced and request a copy of the conclusions.
We would be particularly interested in an evaluation of the relative
effectiveness of the web presence, the programme of road shows
and the network of "Turkey champions" for different
sized companies. Upto-date market information is essential,
particularly where there is a need to raise awareness of the opportunities
available. (Paragraph 51)
13. We
support the aims of the Public Diplomacy Pilot, and the additional
funding of around £300,000 over two years. We note that evaluation
is central to the pilot, and look forward to the results of that
evaluation. (Paragraph 52)
Small and medium-sized enterprises (SMEs)
14. We
agree with the CBI and TBBC that Turkey is not necessarily a natural
market for 'small' SMEs in particular. However, given Turkey's
strong links to Europe, it is in many ways a more familiar market
than India, China or Brazil. There are undoubtedly barriers and
risks facing SMEs in trade with Turkey, but there remains ample
scope for involving smaller businesses in niche areas, or in supply
chains. Turkey may be a promising market for companies which already
have experience of exporting their goods. We welcome UKTI's regional
road show programme and regional champion network as means to
achieve greater SME involvement in Turkey. (Paragraph 54)
Turkish-British Business Council (TBBC)
15. UKTI's
Turkey strategy highlights the need to address institutional weaknesses:
a stronger TBBC could help. Our inquiry into Trade with India
demonstrated the extent to which business councils can play a
significant part in promoting bilateral relationships between
the UK and particular markets. We believe there is potential for
far greater involvement of the private-sector in UKTurkey
relations. The Government should work with UK businesses operating
in Turkey to establish what is needed for the TBBC to flourish.
It may be appropriate to offer it seed funding or a degree of
match funding. However, in our India report earlier this year
we expressed concern about the independence of business councils
as a result of their receipt of public funds; consequently we
believe that whatever public support it receives, the TBBC should
remain autonomous from Government. (Paragraph 58)
Trade Minister's visit, September
16. While
it is unfortunate that it has been at least fifteen years since
a UK trade minister went to Turkey, it is extremely encouraging
that this oversight will be addressed this September. Ministerial
involvement is essential to help overcome barriers to trade in
Turkey, and so enable greater British economic involvement. We
hope that the cycle of visits from UK ministers with portfolios
of interest—not least education—becomes more regular
after September and look forward to receiving the report on the
visit. (Paragraph 61)
A new inter-governmental forum
17. We
welcome the planned inter-governmental forum between the United
Kingdom and Turkey. It should both help to resolve bilateral problems
and enable discussion of wider problems which are unlikely to
be resolved early in the accession process. Rather than functioning
as a general 'talking shop', the Forum might best demonstrate
its effectiveness by first dealing with a limited number of the
most significant barriers to increasing the economic ties between
the United Kingdom and Turkey. The Forum needs to engage properly
with the private sector to be effective. The TBBC, as the 'voice
of business' in UK-Turkey relations, must have an important part
to play in this. We look forward to further details of how the
Forum will function in the Government's response, along with details
of how practical outcomes will be measured. We agree that the
multi-faceted JETCO model is—as yet—unsuitable for
Turkey. (Paragraph 65)
Opportunities in the Turkish market
18. We
were concerned to hear views expressed in Turkey that the UK is
losing out to its competitors in Turkey—although we have
not seen conclusive data to support this—just as we have
previously seen the UK losing out to competitors in India and
Brazil. The Germans and the French have certainly benefited from
historical links with Turkey, and are more accustomed to doing
business there. However, it was abundantly clear from our visit
that Turkey is very open to doing business with the UK, not least
because of the UK's unwavering support for Turkish membership
of the EU. As this report outlines, there are numerous opportunities
available in Turkey. These opportunities are not risk-free, but
businesses could benefit greatly from pursuing them. (Paragraph
67)
19. The
presence of a number of large and highprofile British companies
operating in Turkey, and the growing investment interest, should
encourage other companies considering this market. As noted above,
it may be a market more suitable for medium to large companies,
but opportunities exist across the board. (Paragraph 68)
Sectors of interest
20. The
strategic partnership document refers to a memorandum of understanding
between DESO and the relevant Turkish authorities, although it
is unclear whether this is proposed or signed and we seek clarification
on this point. (Paragraph 75)
21. The
sheer range of opportunity sectors raised in evidence and during
our visit demonstrates the ripeness of the Turkish market for
British business. We welcome the regular reassessment of UKTI
priorities in the market, and agree that the priority and opportunity
sectors chosen broadly reflect the evidence we have received.
We expect sectors that are not prioritised, but where significant
opportunities exist, will continue to benefit from the general
support and information awareness functions of UKTI. In general
we would support an expansion of the priority markets in Turkey,
but accept that this would require additional resources. (Paragraph
76)
Energy
22. The
energy sector clearly offers many opportunities, ranging from
those offered by the domestic market to plans for international
transit into the EU. The UK has much expertise to offer in this
sector. We recommend that the Government pushes for the energy
chapter of the accession talks to be opened this year, and to
be rapidly progressed. (Paragraph 81)
Education and training
23. We
are pleased that the Minister saw a British University in Turkey
as "an excellent idea […] a fabulous advertisement for
what we do". We were also encouraged to hear that the Minster
would be meeting the new UKTI/university working group before
his visit. (Paragraph 83)
24. We
strongly support UKTI's recognition of education and training
as an opportunity market in Turkey, particularly given the enthusiasm
for greater cooperation on education and training expressed
during our visit. We hope that interest generated from the opportunity
market designation by UKTI this year can lead to education and
training becoming a fully-fledged priority sector for Turkey in
2009/10. We believe that the British University in Turkey initiative,
which had the full support of the Trade Minister, should be pursued,
as this could act as an effective signal for other UK entrants
into the Turkish market. (Paragraph 84)
25. We
are encouraged by the Minister's positive reaction to our suggestion
of a reduction in costs for Turkish students coming to the UK
based on Turkey's EU candidate country status, which would increase
the attractiveness of United Kingdom higher education and send
a powerful message of the importance we attach to Turkish membership
of the EU. Investing in education links, at both individual and
institutional level, should increase and affirm the bilateral
ties between the countries, and be to the long term benefit of
the UK. We recognise, however, that reducing fee income from students
from specific countries may have a disincentive effect on university
admissions policies and so a perverse outcome. We also emphasise
the need for greater activity by UK higher education institutions
in Turkey. The Government should develop a clear strategy to ensure
that the mutual benefit to both countries of deepening education
links is fully realised. (Paragraph 86)
Turkey as a gateway
26. While
there are differing views about the scale of Turkey's potential
as a gateway to other countries in the Middle East and Central
Asia, there are certainly links between Turkey and the wider region.
Businesses and investors looking at Turkey should consider the
potential wider opportunities in these areas that basing themselves
in or investing in Turkey may bring. We are pleased that the inter-governmental
forum is going to look at co-operation in these third markets.
(Paragraph 89)
Barriers and issues in the Turkish market
27. The
difficulties being experienced over alcoholic drinks are longstanding,
unhelpful and disproportionately damaging for bilateral economic
relations. We appreciate the sensitivities involved for Turkey,
but the evidence we have received indicates that Turkey may well
be in breach of its customs union and WTO commitments. We hope
that a combination of pressure from UKTI, fasttracking through
the new inter-governmental forum, and the potential EU trade barrier
complaint will help produce a resolution. (Paragraph 95)
28. It
is unfortunate that the dispute resolution mechanisms for the
EU and Turkey customs union have proved to be slow and inadequate.
It seems reasonable to assume that the problems with the customs
union would be eased if more progress was made in accession negotiations,
but it is unlikely that any major changes can be expected in the
shortterm, not least because of the blocking of related
chapters due to the Cyprus issue. We hope that Turkey and Britain
can work bilaterally to deal with these issues more speedily,
and that the new inter-government Forum will be an avenue for
this. (Paragraph 97)
29. We
are positive about the opportunities in Turkey, but also mindful
that there are significant barriers and difficulties. If, as we
expect, Turkey continues to reform to meet the EU acquis
we are confident progress will be made in resolving difficulties.
This underscores the importance of rapid progress in the accession
talks. (Paragraph 102)
UK visas
30. We
agree with the British Chambers of Commerce in Turkey that the
UK must ensure the concerns of visitors to this country are heard.
The visa issues raised with us were not specific to Turkey, but
we think it is important that the process should be as straightforward
as possible. We welcome the opening of five new visa processing
offices in Turkey. (Paragraph 104)
Conclusion
31. We
agree with the Trade Minister's view that if Turkey is ultimately
not allowed to joint the EU "we will be paying the price
for a long, long time." (Paragraph 105)
32. The
economic consequences of Turkey's accession cannot be forecast
with any precision. Turkey is a large country and—at present—relatively
underdeveloped compared with its EU counterparts. But it should
continue to grow rapidly. Any accession agreement is almost certain
to include appropriate transition periods and/or safeguards for
the implementation of free movement of labour. (Paragraph 106)
33. As
this Report makes clear, we fully support Turkey's bid for full
membership of the European Union. We believe that the EU's door
should remain wide open to Turkey. The barriers are surmountable,
and accession can and should happen when the time is right. We
recognise this cannot take place before 2014, and that much reform
is needed before accession can take place, but we believe that
Turkish accession is ultimately politically and economically right
for the UK, and for Europe. (Paragraph 107)
34. The
Trade Minister observed that the UK alone has "from beginning
to end never wavered" in support for accession and now Turkish
EU membership. We congratulate the Government on its consistent
support for Turkey's membership, and hope that it will continue
to make the case for Turkey as a future EU member state—and
that it will do so both within the UK and throughout the EU. Our
strong support for Turkey's EU membership gives us a competitive
advantage over some of our European competitors, just as ties
of history and culture gives us an advantage in India. We believe
it prudent to strive for a greater UK market share in Turkey now,
in advance of accession and further economic reform, to avoid
'missing the boat' in Turkey as we only narrowly avoided 'missing
the last train' in India. (Paragraph 108)
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