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1.   Agreements

Formal  relations  between  the  EU  and Turkey  are  governed  by  the  1963
Association Agreement, the stated aims of which are:

- the gradual establishment of a customs union;
- alignment of  the parties' economic and social policies (to be achieved in
  three phases).

The   Agreement  also  explicitly  refers  to  the  possibility  of  Turkey's
eventually joining the EU (see preamble and Article 28).

The Agreement is  supplemented by the  1973 Additional  Protocol, which  sets
out the rules for:

- establishing a customs union over 22 years from the date of the Protocol's
  entry into force;
- free movement of goods;
- economic cooperation.

It  is also supplemented by Association Council Decision No 1/80 of September
1980, which  sought to revive the  relationship of  association. The Decision
specified the following:

- a timetable and other conditions for the EU to eliminate customs duties on
  primary agricultural products by 1 January 1987;
- guidelines regarding the employment,  free movement  and social rights  of
  Turkish workers and their families;
- the aims of economic, technical and financial cooperation.

When  the military took power and  accusations of serious violations of human
rights began  to  emerge,  EU-Turkey relations  cooled  considerably. The  EU
continued  to  apply  all  the  terms  of  the  Agreement,  but  it suspended
financial assistance. A  return to barracks  and the  gradual restoration  of
civilian government and most civil  liberties brought a revival  in relations
from 1986 on.

Protocols making  adjustments to the Association  Agreement in  order to take
account of the accession of  Spain and Portugal were signed by the Council in
July  1987 and  received the  assent of  the European  Parliament  in January
1988. A  similar Protocol was agreed upon in 1988 to take account of Greece's
accession.

The Association Council decided on 6 March 1995 that customs union should  go
ahead.  The  European Parliament  delivered  its  opinion  on  the matter  in
December 1995 and customs union came into force on 31 December 1995.

2.   Application for accession

On 14 April 1987,  Turkey made a formal  application to become a full  member
of the EU.

In  accordance with the  procedure set out  in Article  237 of the  Treaty of
Rome, the Council called  on the Commission (on 27 April 1987)  to deliver an
opinion on the application.

In  the opinion  it put to  the Council  on 18 December  1989, the Commission
reaffirmed  that Turkey  was  a natural  candidate for  full EU  Member State
status and took the view that closer relations should be encouraged.

The  Commission  pointed  out,  however,  that no  negotiations  for  Turkish
accession to the  EU should be contemplated  until 1993 at the  earliest; the
major political  priority  in the  meantime  should  be to  further  European
integration with the completion of  the internal market and  progress towards
economic and monetary  union. The Commission considered that until these aims
could be  judged to have  been successfully achieved,  it would  be extremely
unwise to begin enlargement negotiations.

In the particular  case of Turkey, moreover,  it emerged clearly from  an in-
depth  analysis  of  economic and  social  conditions by  an interdeparmental
working party  established by  the  Commission that  despite the  substantial
progress made since 1980 in restructuring  the Turkish economy and opening it
up to the outside world, there was still a considerable lag when  compared to
levels  of development in  the EU. In addition,  although Turkey had returned
to parliamentary  democracy,  there  were  still  problems  in  the  form  of
restrictions on  political pluralism,  constant human  rights violations  and
lasting  disputes with  one  particular Member  State,  plus, of  course, the
issue of Cyprus.

The opinion  was adopted as  it stood  at the Council  meeting of 3  February
1990, but the Council  simultaneously called on  the Commission to make  more
specific proposals for greater cooperation between  the EU and Turkey and  to
expand on the ideas contained in the final section of the opinion.

On 14  June  1990 the  Commission forwarded  to  the Council  and  Parliament
proposals for  a programme  of measures  to translate  into action  the ideas
outlined in its opinion.

In more precise terms,  the Commission advocated completion by Turkey  of the
customs union (with  regard to industrial products)  by 1 January 1996.  This
meant  that Turkey would  have to eliminate not  only all  the customs duties
which it applied to  imports from  the EU, but  also charges with  equivalent
effect,  and  that  it would  have  to  abandon  export  subsidies and  other
measures which jeopardized fair competition.

3.   Aid and cooperation

In order to promote economic and social  development in Turkey, the EEC  made
provision  for financial  assistance in  the Ankara  Agreement and subsequent
Protocols. 

               date      duration   amount      measure
               signed
 first         1963      1964-69    ECU 175     EEC loans at reduced
 protocol                           million     rates of interest

 second        1970      1973-76    ECU 195     EIB loans
 protocol                           million

 third         1977      1979-81    ECU 310     ECU 220 million of
 protocol                           million     EEC loans at reduced
                                                rates of interest;
                                                ECU 90 million of EIB
                                                loans

The sums involved were used  mostly to to develop industry and infrastructure
(coal mining, energy projects, etc.).

In  1980,  because  of  Turkey's  particularly  difficult  situation, the  EU
provided ECU  75 million of special  aid, entirely in the  form of grants, to
bridge the  gap between  the   third financial  protocol and  the fourth  (if
there was one).

A fourth financial protocol was indeed negotiated. It was initialled  in July
1981,   and provided  for ECU  600 million  of aid  (ECU 225  million of  EIB
loans, ECU 325 million of loans from  the Community budget and ECU 50 million
of grants). For political reasons, it was never implemented.

In 1995, the  Commission made a proposal to  the Council for a  special five-
year scheme to  run from 1996  and provide  ECU 375 million  of aid from  the
Budget.  The Council  Regulation implementing  the scheme  has  not yet  been
adopted. 

Turkey will  also be eligible for  financing under the MEDA  arrangements for
Mediterranean non-member countries and for additional EIB loans of up  to ECU
750 million over five years.

The  financial details  referred to  above  also  provide for  macro-economic
assistance under certain conditions if Turkey is in special need.

In July 1994,  the IMF approved a Standby  Arrangement with Turkey. This gave
Turkey access  to 610.50  SDR (Special  Drawing  Rights). Turkey,  meanwhile,
undertook  to adhere  to a number  of macro-economic targets  agreed with the
IMF. As a  result of the Arrangement, Turkey  received US$743 million in 1994
and US$358 million between  April and September 1995. Because  of the current
government crisis, the IMF  has not yet released the two final instalments of
the total sum.

Financial assistance to Turkey

 International financial        1993     1994     1995
 assistance                                       (Q2)

 (US$ million )
 Assistance from multilateral   765      1093     49
 agencies (IBRD, IFC, ERF,
 IMF)

 Bilateral aid (OECD and        6199     3796     1044
 other sources)

Source: Turkish Treasury

The European  Union has  long been  Turkey's biggest  trading partner  (about
half of  Turkey's trade  in 1995  was  with the  EU). Over  half of  Turkey's
exports to the EU  are textiles and clothing; other exports leather  goods or
skins, agricultural  products  and machinery.  EU exports  to Turkey  include
machinery and transport equipment, metals and  chemicals.  In 1993, there was
over ECU 18 billion  of trade  between the  EU and Turkey,  with the  balance
being  ECU 5.2 billion in the  EU's favour. In 1994,  the value  of trade was
just  over ECU 16 billion,  but successive  devaluations of  the Turkish lira
had restored a  more balanced situation (ECU 1.2 billion in the EU's favour).
Available data  for  1995  indicates  total  trade of  approximately  ECU  17
billion and a balance  of ECU 3 billion in  the EU's favour. The  balance for
1995 therefore promises to be  heavily in the Community's favour. The  advent
of the customs  union should  further widen the  prospects for trade  between
the two parties  because of the elimination (by  31 December 1995) of customs
duties,  charges with  equivalent effect  and  quantitative restrictions  and
measures with equivalent effect.

Trade between the EU and Turkey

million ECU

           1990   1991    1992   1993   1994   1995
                                               estimate for Jan-Oct
 imports   5936   6236    6589   6540   7604   6987

 exports   7720   8238    8275   11787  8867   9974

 balance   1784   2002    1686   5247   1262   2987

Sources: Statistical Office, Eurostat and Turkish estimates for 1995

Macro-economic indicators

                 1992    1993    1994    1995         1996 (government
                                         estimates    targets)

 GNP growth      6.4     7.6     -5.9    7.9 (Q3)     4.5
 per capita                              US$ 2.193
 GNP
 growth in                               12.1
 industrial
 output

 rate of         66      71.1    125     78.9         45 (wholesale
 inflation                                            prices)
 (consumer
 prices)

 unemployment    7.8     7.2     10.5    7.2
 rate                                    (April)
 budget          4.3     6.9     3.8     estimated    3.55
 deficit (% of                           under 3.3
 GNP)

 trade balance   -8.2    -14.2   -4.3    -10.1 (ten   -12.3
 (billion US$)                           months)

 current         -0.9    -6.4    2.8     -0.7 (ten    -2.37
 account                                 months)
 (billion US$)
 foreign debt    55.6    67.4    64.4    70           /
 (billion US$)

 TL/$ exchange   6.872   10.985  29,609  44.973 (EC   62.855
 rate (yearly                            estimate)
 average)

Sources: IMF, Turkey (for 1995-1996)

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