The Turkish economy and the European economies in transition

Since 1990 major changes have affected the future of the European Union (EU). At that time the future of the EU seemed set: a gradual deepening towards economic and monetary union. The collapse of communism radically shifted the challenge from deepening to widening. First to come were the EFTA countries. Since January 1995 Austria, Finland and Sweden have been members of the EU and the remaining EFTA countries, except Switzerland, have close ties with the EU through the Agreement on the European Economic Area. Then we have the potential applicants: the Czech Republic, Hungary, Poland, the Slovak Republic and Slovenia. These countries have laid a solid claim to membership. All have signed association agreements with the EU, called the Europe Agreements (EAs), but no timetable for membership has been set. The next group of potential applicants consists of Bulgaria and Romania. These countries, which have also signed EAs with the EU, are required to embark on reforms that will render them viable candidates. The fourth group of countries consists of the Baltic countries: Estonia, Latvia and Lithuania. They signed EAs during 1995. Finally we have the Mediterranean applicants: Cyprus and Turkey. The purpose of this chapter is to study comparatively the Central and Eastern European (CEE), Baltic and Turkish economies and analyse the implications of enlargement of the EU to include these countries. Section 2.1 compares these economies, with an emphasis on foreign trade. Section 2.2 is devoted to the study of the Turkey-EU Customs Union Decision (CUD) and the EAs, and Section 2.3 considers the potential for trade between the EU, the CEE and Baltic countries and Turkey. Section 2.4 discusses these countries' chances of EU membership.