In 1995, Turkey and EU finalized the talks started one year before and completed the CU, in the formal framework of the Association Council. Consequently, a Bilateral Preferential Trade Framework (BPTF) was created, encompassing the set of agreements covering trade in goods between the EU and Turkey.
Two years later, at the Association Council of April 1997, the EU reconfirmed Turkey’s eligibility for membership, on one side, but at the same time excluded it from the widest enlargement process in its history, announced in the Commission’s report entitled “Agenda 2000”.
Turkey officially became a candidate country to join the EU in 1999. The story of the 90s “reflects Turkey’s gradual approach to the adoption of the Community acquis”, as it has also been stated in the 1999 Report of the European Commission:
On the one hand, Turkish economy slowed down since mid-1998 due to Russian financial crisis’s negative effects. Interest rates and the costs for the financing of the public deficit increased; the level of investment and private consumption decreased. Prices were most of the time subject to administrative authorities rather than being determined by market forces. As far as macroeconomic stability is concerned, high inflation made the horizon of economic agents very short and bound to liquidity considerations;
On the other, in 1999, the Parliamentary elections brought to power a coalition government that worked to decrease the high levels of inflation. Market entry and exit were free. In 1998, the Independent Competition Authority had been created and started to ensure the right application of the rules of the game and to deal with competition infringements, as well as to manage mergers and acquisitions. The new government changed the Constitution, allowing for international arbitration. It was also established a Dispute Settlement Mechanism (DSM) for the solution of the inevitable “trade irritants” (1). All these measures facilitated the process of privatization of enterprises and incentivized FDIs.
The State was still playing an important role, especially in basic industries and banks, but the transformation of governance, bureaucracy and society had been initiated. Turkey achieved most of the “hallmarks of a market economy, … the proven considerable potential for growth and the shown great adaptability, especially in the context of the Customs Union, … should enable Turkey in the medium term to acquire a viable market economy able to withstand the pressure of competition” (2).
The Helsinki European Council, in 1999, produced a breakthrough in Turkey-EU relations: Ankara was officially recognised as a candidate State for accession, having met the first two Copenhagen criteria.
Meantime, the unsolved question of Cyprus (3) was shyly managed by the United Nations which, in 1999, merely invited the two parties to negotiate in order to reach a settlement.
1 Tariff and non-tariff obstacles which resist to the progress of the CU
2 1999 European Commission Report on Turkey
3 The Cyprus question originates by the contemporary presence in the island of Greeks (since the 13th century B.C.) and Ottoman Turks (16th century). At the end of the colonial domination of Great Britain (1925-60), the governance of the island was granted by a bi-ethnic agreement between Turks and Greeks. In 1974, the Greek Cypriots attempted a coup d’État (asking for the annexation of the island to Greece), provoking the reaction of the guaranteeing powers (UK, France, Greece and Turkey). Out of the 4 guarantors, Turkey decided to invade the Northern part of Cyprus, in order to protect their communities. Since then, the United Nations have developed several attempts to reunify the island, unsuccessfully, mainly for the Greek Cypriots responsibility. Between 2004 and 2017, Ankara accession process to the EU has been blocked several times because of the Cyprus issue. The last episode has been the failure of the Crans-Montana (Switzerland), July 7 negotiations, which collapsed because the Turkish Government refused to withdraw the 30,000 troops stationed in Northern Cyprus before having checked the well-functioning of a new agreement on the table for 15 years.