30 May 2005

  Competitiveness[1]

The tendency in the recent years is to decrease tariff walls and the abolition of trade quotas. Efforts to liberalize global trade are underway through the World Trade Organization (WTO) and various other routes. Quotas will be annulled under the WTO in 2005. The EU and the US also support these projects. However, studies reveal that trade liberalization will cause problems to the EU that are not yet fully comprehended. Starting with employment, some economic items will come under pressure. Especially in the US, textiles entering this country from China will increase their share from nine percent (2001) to 65 percent with the removal of quotas. This suggests that the balance will change at the expense of other countries. Particularly with their cheap labor and lenient legal provisions, less-developed countries’ competitiveness and the potential for investments to move into these countries allures attention. Bearing in mind that unemployment is the biggest problem in EU countries, it will be understood that the EU’s competitiveness will come under severe attack in the near future.

While the competitiveness of a product is related to its quality, price, and reputation, the most important items for competitiveness, the ones most relevant to this study are these:

1)      A cheap, abundant, and reliable flow of raw material,

2)      A cheap, abundant, and reliable source of energy,

3)      A cheap, abundant, reliable, and trained workforce,

4)      Access to markets as easily, reliably, and cheaply as possible,

5)      Informal factors (culture, traditions, etc.)

When considering the three factors, it is safe to safe that the EU will experience problems in all three of them, in particular with prices. In comparison to great economies such as the US, Russia, and China, the EU has a distinctive problem of raw material and energy. Although EU economies are not self-sufficient in terms of energy, they still do not pursue an aggressive policy like the US. Notwithstanding its closer proximity to the oil-fields of the Middle East, the Caucasus, and Central Asia, the EU is less active in these regions than the US. China’s rapid-growing energy needs indicate that in the near future, China will also enter the Central Asian oil market. EU enlargement, particularly an enlargement towards Turkey will present several advantages in terms of raw materials and energy resources. Turkey is both the source of some raw materials and is also quite adjacent to those markets that offer raw materials. Turkey also has a special relationship with these markets and its membership will aid the EU in accessing these markets.

With respect to the third item in the list above, namely, a cheap, abundant, reliable, and trained workforce, the EU also faces significant challenges. While it is becoming harder for the EU to export its products to other countries as salaries and service costs are high, even production for domestic markets are being moved to East Asia. Moreover, due to the slow increase (even a decrease in some places) of the workforce caused serious hardships. The EU alleviated these hardships by moving into Central and Eastern Europe after the Cold War. EU investments into Czech Republic, Poland, and Hungary helped to cut costs and to maintain competitiveness for a while. Even though capital flow into these countries continues, the price indices in Central Europe are on the rise. With the accession of these countries into the EU, along with the valuation of the Euro, costs have risen considerably. It can be expected that Bulgarian and Rumanian accessions will bring about some relief. However, it can also be predicted their inclusion will not serve as a permanent example. For the rate of population growth in the new members and the ones about to join is quite low. Meanwhile, Turkey, with its steady population increase, as well as its abundant, reliable, and trained workforce offers an advantage to maintain the EU’s competitiveness. It can be said that with EU membership, costs, in line with workforce expectations, will increase. Even though this is partially true, it has to be stated that Turkish people have certain peculiarities regarding their way of life. Without going into detail, these peculiarities are family relations, tradition and viewpoint towards life. In other words, with Turkey’s full membership, the flow of EU capital to East Asia and other distant lands can be stopped. With its 75 million population, and bearing in mind the connections that Turkey has with the workforce in its proximity, EU’s need for skilled but cheap will be abundantly met with Turkey’s EU membership. Thus, investments will stay within the EU, while capital will accumulate in the EU.

With the fourth item, access to markets as easily, reliably, and cheaply as possible, Turkey’s boon will be with respect to its connections to Central Asia, Caucasus, Pakistan, Afghanistan, the Persian Gulf, North Africa, and the Middle East. There is an increase in the mergers between EU firms and Turkish firms, with the latter having increasingly close ties with the named markets. Many EU companies prefer to enter these markets with a Turkish firms or with Turkish professionals. This process will hasten with EU membership. Moreover, Turkey’s central location in the said area, its physical properties suitable for air, land, rail, and sea transport and the unimpeded connection of these routes to the EU all make transportation easier. It must be added atop all of these factors of the existence of a very dynamic transportation sector in Turkey.

Finally, informal factors can play an even more important role than basic factors. Sometimes, the most important determinant of the sale of a product in a market transcends elements such as price and quality. It is often more effective for the vendor to understand the customers and know their feelings and at times to be able to think like them. Turkey’s EU membership will bring a new perspective into the Union. In a sense, this owes to the different approach of the Turkish economic model than the models in EU members. Turkish businessmen share a common outlook and history, even a common religion, race, and language, with the businessmen of Central Asia, Iran, the Arab world, and the Balkans. Even a businessman from Greece or Bulgaria, whom Turkey was thought to have problems in the past, warmly greets a Turk as “dear neighbor.” Upon close examination, it can be seen that these people are the ones whose life-style mostly resembles those of Turks. In other words, even with its most problematic neighbors, Turkey carries a potential for great cooperation.

With Turkey’s membership, the EU will both attain new economic perspectives and also will be able to access markets that it previously had a difficult time in entering. In parallel with the liberalization of global economy, developed markets need to adapt to the new conditions as much as underdeveloped ones. Turkish membership will ease this transition. Cheap and skilled Turkish workforce, the flexible Turkish business approach, and the lower rates that Turkey can maintain in production costs can enable the EU to stand competition from markets such as China. In addition to the Turkish market of 75 million people, proceeding to the Central Asian, Middle Eastern, and Black Sea markets will be much simpler.

Energy

Energy is one of the basic components of political life as much as global economy. For energy to be cheap, reliable, and sustainable is an imperative for any international power. In this respect, Turkey emerges to the scene once again, with its initiatives in the past ten years. First of all, due to its massive energy consumption, Turkey has become a momentous market and the center of attention of the region’s energy-producing countries, especially that of Russia. Through the agreements with these countries, two natural gas pipelines have connected Turkey and Russia and Turkey and Iran. New plans are underway to transport natural gas from Azerbaijan and Turkmenistan to Turkey. Other than natural gas, the Kirkuk-Yumurtalık pipeline carries Iraqi oil to Turkey’s Mediterranean ports. The Baku-Ceyhan oil pipeline, expected to be completed in less than a year, will bring Azerbaijani oil to Turkey’s Mediterranean coast via Georgia. Also, Central Asian countries plan to carry their oil and natural gas reserves to Europe through Turkey. Another country that seeks to open to the West through Turkey is Iran. In addition to all these channels, Turkey’s proximity to the Middle East, the Caucasus, and the Russian Federation, all major producers of oil and natural gas, gives it immense advantages in terms of transportation, expenditure, time, and security. Turkey’s aim in the years ahead is to secure the flow of energy resources from these regions into Europe and to have a substantial role in the transportation. An important energy crossroads at present, with EU membership, Turkey will strengthen this feature. Turkey has already reached an agreement with Greece to transport energy from the Caucasus to Greece via Turkey.[2] In this respect, Turkey will have a vital role in the steady and secure flow of energy that the EU will require in the 21^st century. It is safe to say that with Turkey’s membership, energy will become more secure and stable. A more stable flow of energy will enhance the EU’s competitiveness in this sense. At the same time, the EU’s relationship with energy markets will be more institutionalized and these relations will undoubtedly aid in the solution of problems in other fields. Turkey’s cultural, religious, and racial similarity with energy-producing markets will give the EU a dominant position against other consumers.

As Loyola de Palacio, EU Deputy-Commissioner for Energy and Transportation, stated, “Turkey can act as the EU’s energy bridge.”[3]