Agenda Item 4: Bilateral Relations Under the Associatıon Agreement and the Customs Union, Including Financial Cooperation

Statement By H.E. Mr. İsmail Cem,
Minister of Foreign Affairs of Turkey

40th Session of the Turkey - EC Associatıon Council

Mme President,
Distinguished Colleagues,

In the more technical fields as well, Deputy Prime Minister and Minister of State Mr. Yılmaz in his letter of June 4, 2001, outlined the state of play in answer to Commissioner Verheugen's letter of May 11, 2001.

Turkey has aligned herself with the Common Trade Policy since the completion of the Customs Union. However, this has not been an easy task and in certain cases the Commission has been instrumental in helping resolve them. Currently we are encountering serious difficulties in our negotiations for concluding free trade agreements with certain third countries. It is necessary that the Commission participate in these negotiations. It is also essential that joint consultation mechanisms be established on a bi-monthly basis in order to exchange views and inform Turkey on the Common Trade Policy.

In the same vein, when the new round of talks regarding the World Trade Organization starts, close consultation between Turkey and the Commission will be necessary.

Turkey has been participating in certain technical committees of the Commission since the onset of the Customs Union. Now it is even more urgent that Turkey takes part in these activities. We are pleased that Turkey was invited to attend committee meetings in the automotive sector. Last month we provided a list of the committees that we deem it useful to participate in. We expect the Commission to assess our request in its customary pragmatic way.

Following last year's Association Council decision, negotiations on the liberalization of services and public procurement started. We find the EU proposals, in particular those for trade in services inadequate. Turkey has altered the draft to match our current and future levels of integration. We are pleased to note that the EU has assessed Turkey's requests positively and is preparing new proposals. Turkey, for its part, is conducting studies in each sub-sector in services and public procurement, which would highlight their competitive powers and levels of alignment with the EU.

We understand the importance the EU attaches to harmonization by Turkey in public procurement. This is a priority not only in Turkey's National Programme for the Adoption of the Acquis, but also a part of Turkey's new economic programme. The fine-tuning of the draft state procurement law is continuing with the valuable inputs of the EU and the World Bank. When the work is completed, we trust that the law will reflect the most essential EU and WTO provisions.

On the other hand, in the negotiations for liberalization of trade in services, we must avoid the erosion of the various legal instruments between Turkey and the EU in the field of movement of persons, particularly in the Association Council Decisions No. 1/80 and 3/80. Turkey is aware of the sensitivities that the issue carries for the EU side, but believes that in the perspective of accession, the topic will need to be addressed. We hope that negotiations in this sphere are resumed soon.

Financial cooperation

We welcome the Conclusions of the Göteborg European Council that invited the Council to adopt by the end of year the single financial framework for pre-accession assistance to Turkey. We expect this regulation to be adopted as it stands. We also welcome the provisions in the draft proposal of the Commission to enable Turkish companies to participate in project tenders financed through the PHARE, ISPA (Pre-accession Instrument for Structural Policies) and SAPARD (Special Accession Programme for Agriculture and Rural Development) funds.

These are positive developments, but these are also important problems. Turkey is placed under the budget heading "Pre-accession", but the funds available to it are under the heading "Relations with the Mediterranean and Middle-Eastern countries". This makes Turkey the only candidate for which the funds are kept under a heading other than "Pre-accession". This discrimination needs to be corrected.

I wish to point out that, since we have reached an agreement with the IMF, the procedures for Turkey's utilization of the structural adjustment facility for the amount of 150 million € that have been committed should be accelerated.

Furthermore, although, financial commitments to Turkey have improved after Helsinki, they are still modest in comparison with the other candidates. We believe the level of support should be improved.

The Swoboda report concerning the framework regulation for Turkey states that "Turkey should be included in the ISPA and SAPARD financial instruments in order to ensure that all the applicant countries are treated equally." We were glad to note that the Parliament continues to favor Turkey's inclusion in ISPA and SAPARD. We expect the Commission to follow-up this crucial point.

I understand the constraints in the budget until 2006, but I am sure that there are funds available where new possibilities could be created for Turkey. We note in this connection the exceptional surplus of around 10 billion € in last year's EU budget.

We welcome the opening of the Pre-accession Facility to Turkey. Yet, we are concerned about the pre-requisite credit ratings rendering Turkey practically unable to benefit from facility. In fact, currently, none except for a few of the candidates can satisfy the criteria. The other candidates have an alternative financing mechanism, but not Turkey.

Turkey is aware of the institutional requirements for an efficient use of financial cooperation. We have been working to set up a CFCU (Central Financing and Contracting Unit), and we are about to appoint a National Aid Coordinator and a National Authorising Officer. We hope to have the new structures operational before the end of this year.