Abstract
This paper puts the spotlight on the absorption capacity of the European Union, which was always kept in mind of the EU during the historical evolution of the Community in every enlargement period even not with the same wording, and re-emerged especially when it came to Turkey’s membership in the early 2000s. The term has political, institutional and economic dimensions. For Turkey, the budgetary impact of the membership was highlighted and tried to show the fears of the member states of the EU with concrete numerical evidences. If Turkey were a European Union member, some countries like Germany, France (as being the net payer of the EU budget) and Spain, Cyprus (as being the net beneficiary of the EU budget and the future net payers with the Turkish membership) were mostly affected.
Keywords: Absorption capacity, Turkey, EU budget, net payer, net beneficiary
1. Evolution of the term “absorption capacity”
The term “absorption capacity” was at first not located in any official documents of the European Union. However, the notion behind the term was always in the minds of the Union’s ‘big guns’.
“The prospect of further enlargement at a time when the full consequences of the preceding one have not yet been absorbed must give rise to concern. The Commission considers therefore that any further enlargement must be accompanied by a substantial improvement in the efficiency of the Community’s decision-making processes and strengthening of its common institutions.”
The statements above were the response to Greek membership application in 1976. The wording may seem familiar. Whenever it comes to the Turkey’s membership, these words are mentioned. Enlargement is one of the most powerful policy tools of the EU. The fifth enlargement of the European Union was followed the accession of ten new members on 1st May 2004. These new EU countries were ex-communist countries and had different economic and political structures than of the EU. Enlargement policy is defined by Article 49 of the Treaty on European Union, which states that any European State, which respects the EU’s fundamental democratic principles, may apply to become a member of the Union.
In Copenhagen summit, the term was first seen in official texts in the conclusions:
“The Union's capacity to absorb new members, while maintaining the momentum of European integration, is also an important consideration in the general interest of both the Union and the candidate countries.”
After the big enlargement of the EU with ten new, ex-communist countries, and the rejection of the draft Constitution by France and the Netherlands in 2005, the term was reactivated. This is because of the prospects for further enlargement, especially for the largest candidate, Turkey. The rejection of the referenda in France and the Netherlands mostly based on the perception of the public of these countries that the European project was malfunctioned. The term took an official characteristic with the Enlargement Strategy Paper of the European Commission:
“The pace of enlargement has to take into consideration the EU’s absorption capacity. Enlargement is about sharing a project based on common principles, policies and institutions. The Union has to ensure it can maintain its capacity to act and decide according to a fair balance within its institutions; respect budgetary limits; and implement common policies that function well and achieve their objectives.”
In February 2006 upon the Commission’s enlargement strategy paper, the European Parliament highlighted the importance of the absorption capacity concept and wanted the Commission to prepare a report by 31 December 2006 that sets out the principles about the concept.
In June 2006 European Council Summit, Austria, Germany, the Netherlands and especially France forced this term to take place in the conclusions and be an additional criteria for for membership. However, the opposition of the UK, Spain, Italy and the new member states beat the forcing countries and the term finally did not become an additional criteria.
In 2006, the term took place in the conclusions of the European Council Summit as follows:
“The European Union reaffirmed that it will honor its exiting commitments and emphasized that every effort should be made to protect the cohesion and effectiveness of the Union. It will be important to ensure in future that the Union is able to function politically, financially and institutionally as it enlarges, and to further deepen the Europe’s common project. Therefore the European Council will, at its meeting in December 2006, have a debate on all aspects of further enlargements, including the Union’s capacity to absorb new members and further ways of improving the quality of the enlargement process on the basis of the positive experiences so far. It recalls in this connection that the pace of enlargement must take the Union’s absorption capacity into account. The Commission is invited to provide a special report on all relevant aspects pertaining to the Union’s absorption capacity, at the same time as it presents its annual progress reports on enlargement and pre-accession process. This specific analysis should also cover the issue of present and future perception of enlargement by citizens and should take into account the need to explain the enlargement process adequately to the public within the Union.”
The definition of the absorption capacity by the European Commission was as ‘whether the EU can take in new members while continuing to function effectively’. European Parliament adopted a resolution by a large majority, defining the absorption capacity as a criterion for accepting the accession of new countries and fundamental to understanding the concept of absorption capacity.
2. Dimensions of absorption capacity
The membership criteria (known as Copenhagen criteria) set by European Council Summit in Copenhagen in 1993 set forth the conditions for membership of the European Union. According to the conclusions of this summit:
“Membership requires that the candidate country has achieved stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities, the existence of a functioning market economy as well as the capacity to cope with competitive pressure and market forces within the Union.”
On the contrary, the absorption capacity has no official definition. The following classification can make clear the term to some extent when the EU’s objectives are taken into consideration:
· Capacity of the goods and service markets to absorb new member states
· Capacity of the labor market to absorb new member states
· Capacity of the EU’s budget to absorb new member states
· Capacity of the EU institutions to function with new member states
· Capacity of society to absorb new member states
· Capacity of the EU to assure its strategic security
Beside, during the summit in 2006, the French President Jacques Chirac who initiated the debate by highlighting that enlargement ‘should only continue in a process that is controlled and better understood’. He also defined the ‘absorption capacity’ of the EU as an institutional, financial and political capacity.
Institutional Dimension
Regarding to its high population of approximately 75 millions, the membership of Turkey will create a challenge in the decision making process of the European Union. After the institutional reforms in Amsterdam (1997) and Nice (2000), Turkey with its population of 73 millions in 2003, and as foreseen 85 millions in 2015, will have 99 MEPs and dominant place in the decision making process. This situation may cause crisis in the Union.
Political Dimension
Turkey’s membership has also political implications. Turkey has important geopolitical and geostrategic position in the world, as well as much more specific impacts on EU institutions, policies and internal political dynamics. Some of these impacts can be qualified now and some in the future. It depends on how Turkey and the EU will evolve in next 10-20 years.
Some have suggested that Turkey should be a ‘buffer area’ outside the EU, but not only is Turkey unwilling to accept and play such a role, Turkey may not be either stable or a cooperative EU partner if it remains outside the Union in the long run. The EU can influence Turkey’s external and internal security policies and foreign policies if it is a member, but will have much smaller influence otherwise.
In the EU-28, Turkey and Germany have both approx. 14,5% vote each.
Economic Dimension
Being a big, poor country with its large population and small economy, Turkey’s membership has various potential political and economic implications. Opponents to Turkish accession suggest that Turkey will be both too powerful and too costly in budget terms to join the EU. Size per se is not a criterion for EU membership but potential impact of size on the Union is an important and relevant factor in managing accession.
Table 3 sets out data for gross domestic product (GDP) at market prices and purchasing power parity for Turkey and a selection of EU member states and candidates. Although Turkey’s population of 70 million almost equals that of the ten new member states at 75 million, it is poorer. The new ten member states account for 16% of EU-25 population and 4.6% of EU GDP, while Turkey’s GDP in 2002 is only 1.9% of that of the EU-25. Turkey’s GDP per head (in purchasing power parity terms) is slightly below that of Romania, and is only 27% of the EU average.
An opposition for Turkey’s EU membership came from an Austrian leader, Wolfgang Schüssel, who was the President of the EU in 2005. He argued: “Turkey's EU accession would cost as much as the recent accession of all ten new members. Before saying there is full membership for Turkey, someone has to explain to me how to finance that. We have to keep the absorption capacity of the EU in mind. This is what we owe to the anxieties and worries of our citizens.”
3. European Union Budget
The budget of the EU is made up from a system of own resources. Import customs duties, agricultural levies or duties, part of Valued Added Tax (VAT) and revenue based on the gross national income (GNI) of the member countries constitute these “own resources” as they are known. The maximum amount to which member countries can contribute in own resources is limited to 1.27% of GNI of the EU. Among own resources there are some other less important sources of revenue that are classified into a group known as other revenue. The revenue of the EU budget is divided into the following:
- Customs duties – customs and other duties that are collected according to the Common Customs Tariff on the import of products of countries outside the EU;
- Agricultural duties, among which there are customs duties on the import of farm products and levies for sugar and glucose. These levies are collected during trading with extra-EU countries, as part of the CAP and of the production and storage of sugar and glucose.
- Revenue accruing from VAT. This revenue is established for each country by the application of a single rate on the harmonized tax base, which is established according to certain EU rules. From 1999, this base has not been allowed to exceed 50% of the GNI of the member states, and a reduction of the single rate year after year is anticipated (in 2002 it came to 0.75%, in 2004, 0.5%).
- Revenue as a percentage of the GNI of the member states. This revenue is calculated in such a way that a certain rate is applied to the difference between the GNI of every member state and the harmonized VAT base.
- Other sources of revenue consist of income tax and fees that are paid by the personnel of EU institutions, revenue from interest and guarantees, revenue from fines and other revenues.
The largest part of the EU budget is reserved for sustainable growth, in which the cohesion funds play an important role.
4. Tradeoff for Turkey in the EU Budget
The numbers calculated above in the table represent the maximum that would be achieved only after a considerable transition period, as in the case of the new member countries from Central and Eastern Europe, assuming current rules. The immediate post-membership transfers would be much lower, as in the case of all new member countries.
If Turkey were a member country in 2004, it could count on Structural Funds allocations, which would be capped at 4% of its GDP as decided at the Berlin European Council. Given that Turkey’s GDP has averaged around €200 billion in recent years, this implies immediately that its allocation would be around €8 billion annually. It has also been calculated that extending the current CAP to Turkey (with per hectare payments based on current yields) would cost around €9 billion. This implies that the total receipts of a hypothetical Turkish EU member today might be slightly less than €20 billion (Turkey would also receive funding under other programs). Turkey would then also have to contribute as all other member states to the EU budget. With a current contribution rate of around 1% of GNP (the ceiling for the EU budget is 1.25% of GDP, but the EU spends just slightly above 1% of GDP at present), this would mean around €2 billion annually, leading to a net financial benefit of around €16 billion annually. In 2015, the net benefit of Turkey from the EU budget will increase to the 0,20 % of EU GDP.
Table 6 shows the net payer member state in EU-27, EU-33 (EU-27 plus Albania, Croatia, Bosnia- Herzegovina, Macedonia, Serbia and Montenegro) and EU-34 (EU-33 plus Turkey). Accession of Turkey would bring burden for EU more than the sum of the six West Balkan countries.
Table 7 shows the net beneficiary member states of the EU-27 and changes in their situations with the forthcoming enlargements. The most outstanding is about the changes in the situations of Spain and Cyprus. They become net payers with the accession of Turkey while they are net beneficiaries in EU-27 and EU-33.
5. Conclusion
The discourse on the absorption capacity of the EU has been perceived as an alibi to turn backs to Turkey. The timing and the frequent reference to the case of Turkey throughout the debate have not been very helpful in that sense either. However, the fact that these are not entirely fictive concerns to sever ties with Turkey as a prospective member and that at least some of them are true. Turkey is indeed a major challenge for its counterparts due to its size, economic circumstances. In the same vein, the road to membership will also pose challenges for Turkey.
The figures in the range of 0.15% to at most 0.20% of EU GDP may seem to be small numbers but compared to national government expenditure, which is usually around 40-50% of GDP, they are negligible. However, a figure of 0.17% of EU GDP would not be negligible compared to the EU-budget ceiling of 1.25% of GDP. Net transfers in the €9-12 billion range in the first years of the membership and of about €15 to €20 billion in the 2020s would constitute an important amount for Turkey and a significant amount for the EU budget. But it is doubtful whether they will be negligible compared to the total of national budgets or the overall EU economy.
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