THE PLACE OF BALCAN COUNTRIES IN EUROPEAN UNION AND THE COMPARISON OF THEM WITH TURKEY. Fatma Cesur

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1 УПРАВЛЕНИЕ И ОБРАЗОВАНИЕ MANAGEMENT AND EDUCATION TOM VI (2) 2010 VOL. VI (2) 2010 THE PLACE OF BALCAN COUNTRIES IN EUROPEAN UNION AND THE COMPARISON OF THEM WITH TURKEY Fatma Cesur МЯСТОТО НА БАЛКАНСКИТЕ СТРАНИ В ЕВРОПЕЙСКИЯ СЪЮЗ И СРАВНЕНИЕТО МЕЖДУ ТЯХ И ТУРЦИЯ Фатма Чесур ABSTRACT: European Union has an important place in the unifications which are stick out in the second half of 20th century. Geographically the larger spread of the union increases its importance more and more. European Union had no common industry policy in the 1960 s and the member countries had executed their own policies. Industry policy had first been considered in the memorandum named EU Industry Policy in In 1973, The Balkans Council had accepted first activity program belonging to industry policy. European Union has aimed to improve the industry by putting some goals like; to strengthen the competition, to improve the work conditions and to support the industrial change. In this study, the economic structure and the industry improvements of the Balkan countries in European Union will be explicated and a comparison with Turkey will be made. Keywords: European Union, Economic Improvement, the Balkan Countries, Industry Policy A brief overview of the European Union Initially established as the European Economic Community, the European Union has gained the status of a de facto and de jure international organisation with the Treaty of Rome on 1 st January Having 6 members at the beginning, the community has reached to 25 member states on 1 st May 2004 at the end of the successive enlargements. This number is now 27 following the accession of Bulgaria and Romania to EU in Furthermore, negotiations has been continuing with other states. Final objective of EEC was the political integrity of the Europe. In order to fulfill this objective, a common market and customs union through which the goods, services, capital and labour circulate freely were created to strike an economic balance as a priority. Thus, the member states have aimed to lift any restriction in front of the trade and to ensure the growth of their foreign trades by abolishing tariffs between themselves and applying a common tariff to the outside world. Although EU had a certain emphasis on the economy, its structure was renewed one more time in 1990s. With the Maastricht Treaty which was signed on 7 th February 1992 and entered into effect on 1 st November 1993 and whose official name is Treaty on European Union, the Treaty of Rome has been amended comprehensively and pivotal political objectives have been set out. These objectives have been based on the collective security and foreign policy as well as justice and internal affairs, have foreseen an integration in all fields from the economic and monitary parthership to the environment, consumer rights, health and communication. Thus, the European Union (EU) of today emerged following this last arrangement. ( Maastricht Criteria The Maastricht Criteria include the requisites for the member states of the European Union to be able to join into the economic and monetary union. These requisites; Difference between the inflation rate of the relevant member state and the average of the annual inflation rates of three countries with the lowest inflation rates (showing the best performance) within the community shoul not exceed 1.5 points. The ratio of the member state s state indeptedness to its GDP should not exceed 60 %. 208

2 The ratio of the member states budget deficit to its GDP should not be more than 3 %. Long-term interest rates of any member state shall not exceed the interest rates of three countries showing the best performances in terms of the price stability for the 12-months period more than two points. The value of a member state currency should not be devaluated against another member state currency as of the last two years. Customs Union Customs Union refers to the partial (under certain quotas) or complete free circulation of goods within a single customs area without any restrictions and the application of the same external tariff and trade policy by the contracting parties on imports from the third countries. At the broadest sense, the Customs Union is defined as a kind of economic integration where the present customs duties, equivalently effective taxes and quantity restrictions as well as every equivalently effective precaution are abolished and a common customs tariff is also applied to the third countries outside the union. Trade among the Balkan Countries Within the framework of the Export Strategic Plan of the Undersecretariat for Foreign Trade of the Republic of Turkey, it is targeted to increase the export with Balkan countries as a part of the strategy to increase the export with neighbouring countries as of Even though Bursa has always strong kinship relations as well as cultural and historic relations with Balkan countries, it can be easily seen that these strong relations has not had an enourmous impact on our foreign trade when the export between Bursa and Balkan countries is considered. When the export figures of 2006 are examined, it is observed that the export to the Balkan countries (Albania, Bosnia-Herzegovina, Bulgaria, Crotia,Montenegro, Kosovo, Macedonia, Romania, Serbia and Greece) comprises only a small part of the total export of Bursa with a rather low ratio of 8.5 %. Bursa-Balkan Countries Foreign Trade Development Platform has been established. The abovementioned platform contains the relevant public institutions and organisations, balkan cultural associations, industralists and businessmen assocations as well as the local administrations and local press institutions. The last activity organised within the scope of Bursa- Balkan Countries Foreign Trade Development Platform took place in Sofia, Bulgaria on April ( Foreign trade has a key role in the development of a country and the promotion of relations between two countries. The stronger the foreign trade is between two countries, the stronger the cultural and political relations become between them. Industrial Policy of the European Union Let s look at the basic economic problems encountered by the union before discussing the industrial policy of the European Union. Basic economic problems of the European Union can be summarized as following (Morgil, 2000:248): Ever-increasing unemployment in the members of the European Union holds the first rank among the economic problems. While the unemployment rate was 4.5 % in 1975, it has reached to the ratio of 8-9 % in 2000s. A considerable excess capacity has emerged in the traditional industrial branches (textile, ship construction, iron-steel etc.) of the European Union beacuse of the wrong investment decisions of the past and especially the drastic competition caused by the newly industrialised countries in the global markets. Discarding of these industrial branches is not possible as they provide two out of three of the total employment of the industrial sector in the European Union economy. European Union has fell behind the United States of America and Japan in terms of the technological development. It can be argued that EU s current industrial policy that is developed by taking into consideration these three problems is based on three fundamental elements: Development of new industrial branches that are based on advanced technology and that can generate a considerable amount of employment in the future, The support, protection and promotion of the traditional industrial branches, Attaching a special importance to Small and Medium Sized Enterprises (SMEs) to reduce the unemployment and encourage entrepreneurship. European Union s industrial and SME policies have been developed independently for long years. However, Directorates-General responsible for these fields was united under the name of Directorate-General for Enterprises in the early 209

3 2000 and policies regarding these issues were started to be addressed together under the name of EU Entrepreneurship Policy (Schmahl and Koch, 2001:8). A more effective structure has been targeted. In 1960s, the Community had no common industrial policy. The member states had followed their own industrial policies freely (Soyak, 2005:63). EU industrial policy was first addressed offcially with the memorandum titled EU Industrial Policy in Council of Ministers adopted the first action programme regarding the industrial policy in This programme includes sectoral precautions like aviation, informatics, ship building and paper production industries as well as the precautions such as reducing the intra-community restrictions for the trade, harmonisation of company law and procurement rules (Schmahl and Koch, 2001:9). At this period, EU had taken precautions restricting the foreign trade (quota for steel, restriction to the textile products etc.) and had also strived to refocus on the industrial policy. In 1980s, the European Commission tried to solve the structural changes towards the regions through sectoral policies. On the other hand, they started to pay importance to the precautions needed for the EU companies to gain international competitiveness. Because meanwhile the USA and Japan who introduced new technologies to the market at a fast pace and the developing countries of Southeast Asia who produced the traditional industries more cheaply became rivals to the EU. Under these circumstances, completion of the European Single Market, promotion of the industrial cooperation of the European companies with the third country companies and putting emphasis on research and development have became top priorities (Schmahl and Koch, 2001:10). Industrial competitiveness became one of the basic objectives of the European Union in the Treaty of Maastricht dated In the article 157 of the treaty, it is stated that: Community and the Member States will provide the necessary conditions for the Community industry to acquire competitiveness. This article confers the responsibility to promote the competitiveness of the industry to EU and the member states. At the same time, this article states that the industrial policy practices should not lead to effects distorting the competition in the market (Schmahl and Koch, 2001: 11). EU Industrial Policy has such objectives as strenghtening the competition, improvement of the work place and the support of the industrial transformation. Industrial sector holds a crucial role in the European Union. After the industrial revolution, it became an important sector throughout the Western Europe. But in the transition period to the information society, the industrial sector was replaced by the service sector. Nonetheless, the industrial sector in EU has been continuing to develop for the member states at a certain level. Table:1 Gross Value Added (GVA) of the Industrial Sectors (2004) GVA (%) Agriculture Industry Services EU EU Germany France England Ireland Source: Euroepan Union, Energy and Transport in Figures 2006 According to the table, the industrial sector is at the second rank in the European Union. When EU is considered with 25 member states, its share in the gross added value is 26.1 %. This is nearly same for the evaluation of EU with 15 member states. The country where the industrial sector has the highest added value share is Ireland. The Place of the Balkan Countries in the EU Crotia, Macedonia and Turkey still have the status of canditate country to the European Union. The status of Albania, Serbia, Bosnia-Herzegovina and Montenegro are potential candidacy. Crotia and Turkey continue to conduct the accession negotiations. The development potential of the economic and commercial relations between Turkey and European Union is considerably high. Slovenia is the country that has the best economic indicators among the Central European countries wits its low population of 2 millions and high production volume. Furthermore, it is a good economic partner thanks to its qualified labour force, advanced infrastructure and communication services and consumer market in the western norms. Economic regression suffered throughout the Europe has put an impact on the economy of Slovenia. Slovakia has acquired a 210

4 strong economy by entering into the best 20 countries in terms of the investment environment thanks to its reforms realized during its accession process to EU. COUNTRIES Gross Domestic Product (GDP)(Billion $) Table:2 Economic Indicators (2008) Reel GDP Growth Rate (%) Inflation Rate (%) (Consumer Prices) Albania Bulgaria Bosnia-Herzegovina Crotia Macedonia Romania Serbia Slovenia Slovakia Greece TURKEY Balkan countries that are members of the European Union Source: Population (Million people) Although Albania has changed significantly as of the Communist Party period, it is still a poor country. Eurostat research released only a short while ago put Albania at the lowest rank in terms of procurement standards and GDP in Europe. While the average GDP of 27 member countries of EU is 100, this ratio is 26 % in Albania. In Crotia that is another canditate country, GDP is much higher (63 %). Similarly, GDP rate is 64 % in Hungary, 46 % in Turkey and 41 % in Bulgaria. Commerce Agreement and many other agreements have been signed between Turkey and Balkan Countries. The objectives of these agreements have been to make new investments and to facilitate the trade among them. Many Balkan Countries have reduced taxes in order to draw foreign investments to their countries. Global economic crisis effects the member states of EU significantly. Their economies are shrinking. Balkan countries are also effected by this crisis dramatically. As can be seen from the Table:2, the population densities of Balkan Countries are rather low except for Romania in Europe. On the contrary, Turkey s population density is considerably high. Table:3 Distribution of GDP into the Sectors (%) COUNTRIES AGRICULTURE INDUSTRY SERVICE Albania (2007) Bulgaria (2006) Bosnia-Herzegovina(2006) Crotia(2006) Macedonia(2008) Romania(2007) Serbia(2007) Slovenia(2004) Slovakia (2004) Greece (2006) TURKEY Source: (AIINet) As can be understood from the table, service sector has moved ahead of the industrial sector in Balkan countries. Industrial sector holds the second rank. In Balkan countries which are members of the European Union, service sector has a bigger share in their GDPs. When we look generally to the Balkan countries, we can see that an important part of the GDP is composed of service sector. While the last economic crisis has leaded to the decrease of EU s 2009 GDP at the 211

5 proportion of 4 %, the regression of the industrial production to the level of the year 1990 and the increase of the unemployment rate to 10 %, EU has started to experience diffuculty in competing with economies developing at a high pace, in particular with China and India. Similarly, Balkan Countries which are not members of EU suffered greatly from the last economic crisis. Unemployment rate and inflation rate have increased. Conclusion Basic objectives laying in the foundation of the European Union are to facilitate the economic development by establishing a common market among the member states, to promote the living standards and to ensure a political unity in its real sense through a balanced development. This unity is made possible thanks to the Customs Union which facilitates the trade by providing free circulation of goods economically. EU which will hold an important place in the world economy has reached to a consensus regarding the importance of the joint act in the industrial policy. An institutional framework has been developed for the industrial policy with the Maastricht Treaty. Positive improvements have been observed concerning the accession of new countries to the Union, the promotion of the market and cooperation and the transition to the information-based economy. Balkan Countries constitute a signficant part of the European Union. They contribute to the dynamism of the economy. However the last global economic crisis has been effecting the economies of the Balkan countries and EU member states in a negative way. As of today, the crisis has caused the regression of the GDPs and the increase of the unemployment and inflation rates. In recent years, economies has a inclination of shrinkage. References 1. Morgil, O. (2000), Avrupa Birliği nde Sanayi Politikası ve KOBİ ler, H.Ü.İktisadi ve İdari Bilimler Fakültesi Dergisi, Cilt 18, Sayı 1, ss Schmahl, M. ve M. Koch (2001), Avrupa Birliği nin Girişimcilik Politikası vetürkiye nin Uyumu: Sanayi Politikası ve KOBİ ler, İktisadi Kalkınma Vakfı Yayınları, İstanbul. 3. Soyak, A. (2005), Avrupa Birliği Sürecinde Türkiye Sanayi Politikası Üzerine Eleştirel bir Yaklaşım, TMMOB Ölçü Dergisi, Aralık, ss (AIINet) Assist. Prof. Dr. Fatma CESUR Trakya Üniversitesi İktisadi İdari Bilimler Fakültesi İktisat Bölümü Balkan Yerleşkesi Edirne / TÜRKİYE fatmacesur@trakya.edu.tr 212