EUROPEAN UNION AND TURKISH COMPANIES

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European Union and Turkish Companies

Introduction
There are nine main questions we tried to answer in our research. These are:
•   What is European Union?
•   What conditions made Europe to create this unity?
•   What is the history of the European Union?
•   What are the main points of the European Union?
•   What are the advantages of the single market?
•   At what level are the relations between Turkey and the European Union?
•   What conditions are wanted from Turkey to join the European Union?
•   What is the importance of Turkey for the European Union?
•   How do Turkish companies look to the European Union? (Importance, advantages and    disadvantages of the European Union according to the interview made with the Türk Tuborg for them)

We are interested in this research because; as the businessmen of Turkey in the future, we wanted to learn if Turkey joins the European Union, under what circumstances we are going to work.
           
And also it is a very day-to-day headline which is still being argued by most of the journalists and economists both in Turkey and Europe. Most of the newspapers in Turkey often write about this topic because of its economic significance. This topic is important for the future of Turkey as important as Europe’s future.
















A Brief Description of the European Union
           The European Union (EU) was set up after the Second World War. The process of European integration was launched on 9 May 1950 when France officially intended to create the first concrete foundation of a European federation. Six countries (Belgium, Germany, France, Italy, Luxembourg and the Netherlands) joined from the very beginning. Today, after four waves of accessions (1973: Denmark, Ireland and the United Kingdom; 1981: Greece; 1986: Spain and Portugal; 1995: Austria, Finland and Sweden) the EU has 15 Member States and is preparing for the accession of 13 eastern and southern European countries.
           The European Union is based on the rule of law and democracy. It is neither a new state replacing existing ones nor is it comparable to other international organizations. Its member states delegate the right to judge to common institutions representing the interests of the union as a whole on questions of joint interest. All decisions and procedures are derived from the basic treaties approved by the member states.
Principles of the European Union
•   Establish European citizenship: Fundamental rights; Freedom of movement; Civil and political rights;
•   Ensure freedom, security and justice: Cooperation in the field of Justice and Home Affairs;
•   Promote economic and social progress :Single market; Euro, the common currency; Job creation; Regional development; Environmental protection;
•   Assert Europe's role in the world: Common foreign and security; The European Union in the world.
History of the European Union
           At the end of the Second World War the economic and industrial structure of practically all countries of Western Europe had been gravely damaged because of the six years of struggle between the Axis powers, Germany and Italy, and the other countries of Europe supported by the United States, the Soviet Union and many countries of the Commonwealth. Apart from the loss of millions of lives and the destruction of the European economy, the Second World War created a deep unhappiness with the political system under which unbridled national ambitions had twice harmed Europe within a generation. The European people who had fought to defeat fascism now searched new ideas and a new political system to replace the politically and economically ineffective governments of the 1930s.In particular, it was hoped that the post-war Europe would be organized in such a way that war between Western European countries could not repeat.
           The Marshall Plan accelerated the reconstruction of the European economy and led to a very much higher level of intra-European trade. After the Organization for European Economic Co-operation (OEEC) eliminated most of the quota restrictions on intra-European trade, the formation of the three communities of the Six (Belgium, France, the Federal Republic of Germany, Italy, Luxembourg and the Netherlands), in particular the European Economic Community or Common Market (EEC), has led the participating states far beyond co-operation in economic matters to the creation of a customs union and towards a full economic union. The European Free Trade Association (EFTA) has provided European countries, which are not members of the EEC with a mechanism for expanding their intra-area trade and a base from which they hope eventually to negotiate their membership of the EEC.
            Driven together by common ideas and common interests but most of all by common disasters and fears, the countries of Western Europe have also in the Brussels Treaty Organization, the North Atlantic Treaty Organization (NATO), and Western European Union (WEU) jointly organized their military resources and constructed a complete common defence system which has effectively feared the Soviet Union from any expansionist adventures into Western Europe. The United States and Canada have co-operated closely with the countries of Western Europe in assuring the defence of the West. These conditions forced some of the European countries to get together and form a union.
            The union is an advanced form of multisectoral integration, its competence extending to   the economy, industry, politics, citizens' rights and foreign policy of its fifteen member States. The Treaty of Paris establishing the European Coal and Steel Community (ECSC) (1951), the Treaties of Rome establishing the European Economic Community (EEC) and the European Atomic Energy Community (Euratom) (1957), as changed by the Single European Act (1986), the Maastricht Treaty on European Union (1992) and finally the Amsterdam Treaty (1997), form the constitutional basis of the union, binding its member states more firmly than any conventional agreement between sovereign states.
            Initially the community's activities were limited to the creation of a common market in coal and steel between the six founder members (Belgium, France, Germany, Italy, Luxembourg and the Netherlands). In that post-war period the community was primarily seen as a way of securing peace by bringing victors and vanquished together within an institutional structure which would allow them to cooperate as equals.
            In 1957, three years after the French National Assembly had rejected a European Defence Community, the Six decided to create an economic community, built around the free movement of workers, goods and services. Customs duties on manufactured goods were duly removed on July 1 and common policies, notably an agricultural policy and a commercial policy, were in place by the end of the decade.
           The need for economic unity and monetary union became clear in the early 1970s when the United States postponed dollar exchangeability. This marked the beginning of a period of worldwide monetary instability, aggravated by the two oil crises of 1973 and 1979. The launch of a European Monetary System in 1979 helped stabilise exchange rates and encourage member states to pursue strict economic policies, enabling them to give each other mutual support and benefit from the discipline imposed by an open economic area.
           The Community expanded southwards with the accession of Greece in 1981, Spain and Portugal in 1986. These enlargements made it even more necessary to implement structural programmes designed to reduce the inequalities between the Twelve in terms of economic development. During this period, the Community began to play a more important role internationally, signing new agreements with the countries in the southern Mediterranean and countries in Africa, the Caribbean and the Pacific, which were linked to the Community by four successive Lomé Conventions (1975, 1979, 1984 and 1989).With the agreement signed in Marrakesh on 14 April 1994, between all the members of GATT, world trade started a new phase of its development. The European Union, negotiating as a bloc, endeavoured throughout to put its stamp on the negotiations and to have its interests prevail.
           World recession and internal fighting on the distribution of the financial burden led to a stage of "Europessimism" in the early 1980s. This gave way, from 1985 onwards, to a more hopeful view of the prospects for revitalizing the Community. Because of a Whitedrawn up in 1985 by the Commission chaired by Jacques Delors, the Community set itself the task of creating a single market by January 1, 1993. The Single Act, signed in February 1986, confirmed this ambitious target and introduced new procedures for adopting associated laws. It came into force on July 1, 1987.
           The collapse of the Berlin Wall, followed by German unification on 3 October 1990, liberation from Soviet control and subsequent democratization of the countries of central and Eastern Europe and the disintegration of the Soviet Union in December 1991, changed the political structure of Europe. The Member States determined to strengthen their ties and negotiated a new Treaty, the main features of which were agreed at the Maastricht European Council on December 9-10, 1991.
           The Treaty on European Union, which entered into force on November 1, 1993, sets the member states an ambitious programme: monetary union by 1999, new common policies, European citizenship, a common foreign and security policy and internal security. Applying the review clause in the Maastricht Treaty, the member states negotiated a further treaty, signed in Amsterdam on 2 October 1997, which adapted and strengthened the union's policies and powers, particularly in judicial cooperation, the free movement of persons, foreign policy and public health. The European Parliament, the union's immediate democratic voice, was granted new powers, confirming its role as joint legislator. On January 1, 1995, three further countries joined the European Union. Austria, Finland and Sweden expanded the union with their specific characters and opened up further dimensions at the heart of central and northern Europe.
Main Parts of the European Union
           Five institutions, each playing a specific role, run the EU:
•   European Parliament (elected by the peoples of the Member States);
•   Council of the Union (composed of the governments of the Member States);
•   European Commission (driving force and executive body);
•   Court of Justice (compliance with the law);
•   Court of Auditors (sound and lawful management of the EU budget).
            The European Parliament provides a democratic forum for debate. It has a watchdog function and also plays a part in the legislative process. Elections for the European Parliament are held by direct universal voting every five years (the first were held in June 1979).
           Parliament normally meets in plenary session in Strasbourg. Brussels is the usual venue for meetings of its 20 committees, which prepare the ground for meetings in plenary, and of its political groups. Parliament's Secretariat is in Luxembourg. Parliament shares the legislative function with the Council: it has a hand in the selecting of directives and regulations, putting forward regulations, which it invites the Commission to incorporate into its proposals.
            The Council of the European Union is the main decision-making institution. It is made up of ministers from the 15 member states with responsibility for the policy area under discussion at a given meeting: foreign affairs, agriculture, industry, transport, the environment and so on. The council, which represents the member states, enacts union legislation (regulations, directives and decisions). It is the union's legislature, as it were, although it shares this function with the European Parliament. The council and parliament also have joint control over the union's budget. The council adopts international agreements negotiated by the commission. Lastly, the council is responsible for coordinating the general economic policies of the member states.                                                                                                           
            Parliament also shares budgetary powers with the council. It can adopt the budget or reject it, as it has on several occasions in the past. When that happens, the whole procedure begins again from scratch. The commission prepares the budget. It then passes backwards and forwards between the council and parliament, the two arms of the budgetary authority. While the council's opinion prevails on "compulsory", largely agricultural expenditure, parliament has the last word on "non-compulsory" expenditure, which it can alter within the limits set by the treaty. Parliament makes full use of its budgetary powers to try to influence policy
           The European Commission is another key community institution. A single commission for all three communities (the ECSC, the EEC and Euratom) was created when the treaty merging the executives entered into force on July 1, 1967. The commission enjoys a great deal of independence in performing its duties. It represents the community interest and takes no instructions from individual member states. As the guardian of the treaties, it ensures that regulations and directives adopted by the council are properly implemented. It can bring a case before the Court of Justice to ensure that community law is enforced. The commission has only right of initiative and can get into the action at any stage in the legislative process to facilitate agreement within the council or between the council and parliament. It also has an executive function in that it carries out decisions taken by the Council - under the common agricultural policy, for instance. In addition, it has important powers in relation to the conduct of common policies in areas such as research and technology, development aid and regional cohesion. The commission can be forced to resign en bloc by a motion of censure in Parliament, but this has yet to happen. A civil service, mainly located in Brussels and Luxembourg, backs the Commission. It comprises 25 departments, called Directorates-General, each responsible for implementation of common policies and general administration in a specific area. In contrast to the secretariats of conventional international organizations, the commission, as guardian of the treaties, has complete independence in exercising its rights.
            The Court of Justice, which sits in Luxembourg, contains 15 judges and 9 advocates-general appointed for a renewable six-year term by agreement between the Member States, which select them "from persons whose independence is beyond doubt". The court's role is to ensure that community law is interpreted and implemented in line with the treaties. The Court of Justice is also the only body with the power to give an opinion on the correct interpretation of the treaties or the validity and interpretation of instruments determined by the community institutions when requested to do so by a national court.
            The Court of Auditors, set up by Treaty on July 22, 1975, has 15 members appointed for a six-year term by agreement between the member states after consultation with the European Parliament. Its role is to check that revenue is received, expenditure incurred “in a lawful and regular manner”, and that the Community's financial affairs are properly managed. Its findings are set out in annual reports, drawn up at the end of each year.
The Magical World: Single Market
             However single market term seems to be complex, it has a very simple mechanism. At the start of this action, getting rid of the barriers that are not in the tariff is the key point. After that, this will create a shock in the community economy, which is called the integration of the European market. Benefits of the single market in the main points are:
•   From the supply side effects, cost savings that have gotten by getting rid of the barriers at the custom operations, public purchases and fiscal services will increase the revenues.
•   For a big market in the production, monopoly profits and irrationalities can be decreased by heading towards the economies of scale.
•   There will be an intense competition environment.
•   More funds will be able to be used for searches and improvements.
•   From the demand side effects, lower prices will increase consumer demand and less spending will be made for public intervention and various goods’ production from the budget.
Relations between Turkey and the European Union
           Historically, Turkish culture has had a profound impact over much of Eastern and Southern Europe. Turkey began westernizing its economic, political and social structures in the 19th century. Following the First World War and the proclamation of the republic in 1923, it chose Western Europe as the model for its new secular structure.
           Turkey has ever since closely aligned itself with the west and has become a founding member of the United Nations, a member of NATO, the Council of Europe, the OECD and an associate member of the Western European Union. During the cold war, Turkey was a part of the western alliance, defending freedom, democracy and human rights. In this respect, Turkey has played and continues to play an important role in the defence of the European continent and the principal elements of its foreign policy have come close with those of its European partners. Having thus entered into very close cooperation with Western Europe in the political field, it was therefore only natural for Turkey to complete this in the economic area. Thus, Turkey chose to begin close cooperation with the fledgling EEC in 1959.
            In July 1959, shortly after the creation of the European Economic Community in 1958, Turkey made its first application to join. The EEC's response to Turkey's application in 1959 was to suggest the establishment of an association until Turkey's circumstances allowed its accession. The negotiations that came then resulted in the signature of the agreement creating an association between the Republic of Turkey and the European Economic Community (the "Ankara Agreement") on September 12, 1963. This agreement, which entered into force on December 1, 1964, aimed at securing Turkey's full membership in the EEC through the establishment in three phases of a customs union, which would serve as an instrument to bring about integration between the EEC and Turkey.
             The Additional Protocol of November 13, 1970 set out in a detailed fashion how the Customs Union would be established. It provided that the EEC would get rid of tariff and quantitative barriers to its imports from Turkey (with some exceptions including fabrics) upon the entry into force of the Protocol, whereas Turkey would do the same in accordance with a timetable containing two calendars set for 12 and 22 years, and called for the harmonisation of Turkish legislation with that of the EU in economic matters. Furthermore, the additional protocol envisaged the free circulation of natural persons between the parties in the next 12 to 22 years.
               On January 24, 1980, Turkey shifted its economic policy from an autarchic import-substitution model and opened its economy to the operation of market forces. Following this development in the economic area and the multiparty elections in 1983, the relations between Turkey and the community, which had come to a virtual freeze following the military intervention of 12 September 1980 in Turkey, began returning to normal. In the light of these positive developments, Turkey applied for full membership in 1987. Turkey's request for accession, filed not under the relevant provisions of the Ankara Agreement, but those of the Treaty of Rome, underwent the normal procedures. The council sent Turkey's application to the commission for the preparation of an opinion. This has reconfirmed Turkey's appropriateness, given that the council turned down a similar application by Morocco because Morocco is not a European country. The commission's opinion was completed on December 18, 1989 and approved by the council on February 5, 1990. It underlined Turkey's appropriateness for membership, yet deferred the in-depth analysis of Turkey's application until the emergence of a more favourable environment. It also mentioned that Turkey's accession was prevented equally by the EC's own situation on the eve of the Single Market's completion, which prevented the consideration of further enlargement. It went on to underpin the need for a detailed cooperation yazýlým aiming at facilitating the integration of the two sides and added that the Customs Union should be completed in 1995 as planned.
            Under these circumstances, Turkey chose to complete the planned Customs Union with the community. Talks began in 1994 and were finalised on 6 March 1995 at the Turkey-EU Association Council. The Association Council is the highest-ranking organ of the association and is composed of the Foreign Ministers of Turkey and the 15 EU Member States. At the same meeting, another resolution on accompanying measures was adopted and the EU made a declaration on financial cooperation with Turkey as part of the customs union package.
             With the entry into force of the Customs Union, Turkey abolished all duties and equivalent charges on imports of industrial goods from the EU. Furthermore, Turkey has been harmonising its tariffs and equivalent charges on the importation of industrial goods from third countries with the EU's Common External Tariff and progressively adapting itself to the EU's commercial policy and preferential trade arrangements with specific third countries. This process is to be completed in 5 years.
Requirements of the European Union from Turkey
               Turkey's efforts towards harmonising its legislation with that of the EU are under way. These efforts include, in commercial matters, monitoring and safeguarding measures on imports from the EU and third countries, the management of quantitative restrictions and tariff quotas and the prevention of dumped and subsidised imports. As to competition rules, subsidies through State resources in any form whatsoever which distort or threaten to distort competition will be banned. A special Competition Authority has been set up for this purpose. Assistance to promote economic development in Turkey's less developed regions and assistance intended to promote cultural heritage conservation and which does not adversely affect competition will however be allowed. Furthermore, Turkey is progressively adjusting its legislation regarding state monopolies of a commercial nature to ensure that no discrimination exists in the conditions under which goods are produced and marketed between nationals of Turkey and EU member states. Turkey is also in the process of harmonising its laws with EU legislation eliminating technical barriers to trade during a transitional period, which is expected to last five years, as foreseen in the Customs Union Decision. Effective cooperation between Turkey and the EU in the fields of standardisation, calibration, quality, accreditation, testing and certification will be achieved as part of this process. Harmonisation of Turkish legislation to that of the EU on intellectual, industrial and commercial property has been realised and laws for consumer protection are now being put in place. It is also notable that both parties are banned from using internal taxes as indirect protection mechanisms and from using tax rebates as export subsidies.
Importance of Turkey for the European Union
             Turkey attached particular importance to the EU's current enlargement process for two main reasons. Firstly, having played an active role in the demise of the Soviet bloc, it was only natural for Turkey to aspire for inclusion in the new European architecture, which it helped to build. Second, the association between Turkey and the EU aims at Turkey's full membership in the EU, as underlined once again with the Customs Union. This is why Turkey kept the question of inclusion in the EU's enlargement process on the agenda of Turkey-EU relations. At the last Association Council of 29 April 1997, the EU reconfirmed Turkey's appropriateness for membership and asked the Commission to prepare recommendations to deepen Turkey-EU relations, while claiming that the development of this relationship depended on a number of factors relating to Greece, Cyprus and human rights.
The European Union from the perspective of Turkish Companies
To listen to the views of a Turkish company, we went to Tuborg for an interview. However, Tuborg’s main centre is in Denmark, they are working under regulations of Turkish laws. They are not able to work as if they are a company, which is in the European Union. We asked them whether they wish Turkey to enter the union. In some cases, they said “yes”, but in some cases, they said “no”. Numbers of yeses were nearly equal to nos.
First of all, all the companies will get the right to make free trade with the other countries in the European Union without paying any tariff. This will decrease the cost of exports made to European Union countries and will increase the consumer of each Turkish company. There are nearly 250 million people living in the European Union countries. This very big market can easily strengthen a company. And also competition rules that prevent one company from being the biggest power in the union can ease the job of small companies. Because in Turkey laws that protects small businesses newly got under way and these laws are still insufficient to defend the rights of small companies. However a Competition Authority is set up, this authority does not enough power to prevent unfair competition
Worries about the European Union are as much as expectations. The Turkish companies’ first worry is about the euro. Türk Tuborg’s executives told us that they are making exports by using dollar. If Turkey joins the European Union, every trade will be made by euro instead of dollar. Another anxiety is about the people’s living standards. Wages in European Union is much higher than wages in Turkey. Companies in Turkey may not afford to pay wages so high like that. The other bad factor that is going to affect the Turkish companies is the better standard of living in Europe that will impress qualified workers in Turkey to go to bigger companies. This is an inevitable reality if Turkey enters the European Union.
Summary
As a result of our survey about the EU and Turkish Companies we have discovered that Turkey and EU both has important issues for themselves. After the questions we have asked, we learned that Turkish companies and Turkey have lots of problems on the competition area of global world of trade. One of the most important problems of Turkish firms is not having a brand (This includes small companies). Without a brand our nation’s companies are not well enough to compete with EU based countries. As a result we are not going to have the same profit although we sell the same amount at the same quality. Not having a brand causes to be distributor or licensee of other companies who have good brands and well known products. By that way we sell our goods by giving the name of foreign based countries brands to our products and share the profit. And at this point it also shows that Turkish people do not buy any good which does not have a brand. This case also points out the interest of Turkish people to famous brands which discourages Turkish companies to participate any market. This is an inevitable reality of the Turkish people.
     
         Another problem is having an emigration of well educated and skilled workforce to foreign countries. As a result of this situation Turkish Companies are not be able to find the suitable and skilled person for the position they look for. The reasons of brain emigration are the good standards of living in EU and in other developed countries. Also decreasing demand for the needed workforce is another problem. In order to avoid this we need to create new job areas for young and skilled population. Also giving the same standards of living to the most skilled people will make Turkish Companies to become better. This situation also shows that Turkish companies and Turkish government must work together to provide the standards for Turkey to join the European Union which will be in favour of both Turkey and Turkish companies. If Turkey uses the potential force of Turkish youth then we can be a worldwide giant.

         Turkish firms have especially the problem of energy used for production. Electricity problem is becoming a more important because the price of the electricity which is very high causes companies not to make profits. Without profits firms are not going to invest money for new business areas so GDP will not increase. Entering the European Union may cause the cost of production to fall which will raise the chance of Turkish firms to compete with the European Union companies in the single market area.

         Also having high levels of inflation is a big problem for our companies. It affects all the prices appositively. As a result companies will not be able to sell their goods and services that will hinder Turkish companies to spend their money on investment and production of innovated goods. If Turkey fulfils the conditions to join the European Union then there won’t be a problem of inflation. Because European Union will never accept a country which has such a high rate of inflation. One of the conditions includes the rate of inflation to be dropped.

         We have a problem of having not enough infrastructure and technology for production of new goods and services. Especially companies can not reach their goals of production and expected productivity because of the insufficient technology. We have problems of producing the goods in a high-quality way. This also prevents our companies to race with the European Union’s giant companies. It is not that easy to become an enormous power in the world economy. If we fulfil all the conditions wanted from us to join European Union it seems that we are a nominee to become an important force worldwide. But this is just a guess with the facts we searched. Nobody can know what the time will bring to us. All we can do is to hope and wait.