Second Thoughts

Once, Europe was a sweetshop, and Turkey was an eager kid with his face pressed to the window. Just two years ago, polls showed that more than 70 percent of Turks wanted to join the European Union, convinced that following the road to Brussels would make them richer, healthier and freer. Now, only months after long-delayed negotiations finally began, support for the EU has slipped to just 43 percent, and is falling fast.

What caused Turkey's 40-year court-ship of Europe to go so sour so quickly? The most obvious frictions are over Cyprus: Turks feel they are being bullied by Brussels into making further concessions over the divided island. Wounded national pride has punctured the EU dream for many Turks. But a more fundamental point of contention has arisen in nuts-and-bolts economic issues. Slowly and quietly, Turkish leaders of small and medium-size businesses, who are responsible for 55 percent of Turkey's GDP and 70 percent of jobs, are losing enthusiasm for joining the EU.

Why? The cost and hassle of implementing the EU's 80,000-page Acquis Communautaire--the vast canon of rules and regulations on everything from air quality to the size and shape of bananas (imports must not be "abnormally bent"). A new study by the politically powerful Turkish Industry and Business Association estimates the cost of reforming Turkey's huge agriculture sector alone at up to $76 billion over the next decade, a significant hit for a $382 billion economy. Almost every clause of the Acquis Communautaire comes with a giant bill--for example, implementing European drinking-water standards will require digging up vast swaths of Turkey's often haphazardly planned cities to replace crumbling piping.

Worse, it's not clear what the upside of all that upheaval will be. Turkey is already in Europe's Customs Union, and enjoys largely tariff-free trade with the EU. Ankara's politicians continue to insist that Turkey will accept nothing less than full membership--yet those with their eye on the bottom line are starting to recognize that that may not be the best deal. "Farsighted people are realizing that it's not ultimately in Turkey's best interests to join [the EU]," argues analyst Attila Yesilada of the Istanbul-based news station Business Channel. "But at the same time everyone knows that it's important to maintain the façade."

Businessmen like Mehmet Yazici, head of the Altinok extractor-fan factory outside Istanbul, fear they'll go bankrupt complying with EU rules. If Altinok were to go by the book, its old East German-made stamp-pressing machinery would have to be replaced--it doesn't conform to EU safety standards. And under Brussels' labor laws, Yazici wouldn't be able to use teenage part-timers to package boxes after school or ask regular workers to pull 50-hour weeks. "If my labor costs become the same as in Germany, how will I compete?" complains Yazici. "And who will pay for all this new machinery?"

Already, wage inflation is eroding Turkey's main economic advantage over other EU countries--cheap labor. Turkey's minimum wage has gone up 41 percent over the past five years (from $180 to $254 per month), which is less than inflation but catching up to competitors like Romania and Bulgaria. Eczacibasi, a major Turkish ceramics company, plans to close its Vitra factory in Istanbul within two years and open a new one in Serpukhov, near Moscow, where wage costs will be lower.

Turkey's ruling AK Party, which came to power in 2002 promising to take the country into Europe, is sensing a major shift in the attitude of its grass-roots supporters, many of them conservative small businessmen. Publicly, the party remains committed to the EU project--indeed, Ankara's chief negotiator Ali Babacan warned recently that suspending the negotiations would have "consequences beyond the imagination." But privately, the party has acknowledged that "there's no more mileage to be gotten out of the EU process," says Yesilada. "As a consummate political operator, Prime Minister Recep Tayyip Erdogan sees there are no more votes to be got" from plugging Europe.

Instead, Erdogan has taken an increasingly nationalist line, refusing to allow Greek Cypriot vessels to use Turkish ports until Turkish Cypriot ports and airports are opened to international traffic. And last month, after Kurdish separatist attacks in the southeast, Erdogan signed a new antiterror law that increased police emergency powers and reduced detainee rights--reversing years of EU human-rights lobbying. "More and more Turks realize that [EU membership] won't happen," says British M.E.P. Daniel Hannan. "But they cling on to the illusion" in order to avoid the possible consequences.

Many Turks understand that allowing a collapse of negotiations could produce a serious economic shock. Earlier this summer the lira fell by nearly a quarter as worldwide jitters in emerging markets caused a temporary flight from the Istanbul Stock Exchange; this month it surged again on news that the U.S. Federal Reserve wasn't raising interest rates--making Turkey's 17.5 percent overnight borrowing rate seem extra attractive. But a serious crisis with the EU could produce a much sharper downturn. "In theory, investors know that Turkey could well be better off outside the EU," says Istanbul-based investment analyst Ismail Mina. "In practice, there may be a stampede."

For all its shortcomings, the EU has at least proved a steady compass for four years of unprecedented reform in Turkey. If the prospect of EU membership fades, says one EU diplomat in Ankara, Turkey will be in danger of backsliding into "inward-looking nationalism." Turks and Europeans will continue talking, but a major rethink seems to be in the offing. "Turkey would certainly not collapse without the EU," says Semih Idiz, a columnist at the centrist daily Milliyet. " [But] Turkey without the EU would be a different Turkey." Just how different remains to be seen, but it's already a country no longer infatuated with Europe and its ways.

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