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FOOD AND AGRICULTURE IN TURKEY: Developments in the Framework of EU Accession

FOOD AND AGRICULTURE IN TURKEY: Developments in the Framework of EU Accession. Erol H. ÇAKMAK Department of Economics Middle East Technical University ( METU ) , Ankara. Policies and Perform a nce Domestic support and trade policies Ag. Value added and trade

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FOOD AND AGRICULTURE IN TURKEY: Developments in the Framework of EU Accession

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  1. FOOD AND AGRICULTURE IN TURKEY: Developments in the Framework of EU Accession Erol H. ÇAKMAK Department of Economics Middle East Technical University(METU), Ankara

  2. Policies and Performance • Domestic support and trade policies • Ag. Value added and trade • Impact assessment of EU on Turkey • Model & Scenarios • Results • Concluding Remarks • Ag cost of Turkey? January 18, 2008 - Berlin

  3. Support to Agriculture • Breaking point in 2001 due to macro crisis • Intention: shift from price distortionary to market friendly intruments • Could not last long • No significant change in the overall structure: Predatory policies has started to emerge • However, still better than before 2001 • Transparency big + January 18, 2008 - Berlin

  4. TSE/GDP January 18, 2008 - Berlin

  5. Percent PSE January 18, 2008 - Berlin

  6. Share of market price support in PSE January 18, 2008 - Berlin

  7. Bound and Applied Tariffs, 2007 January 18, 2008 - Berlin

  8. Ag. Value-added, 1968-2007 January 18, 2008 - Berlin

  9. Agro-Food Trade, 1999-2005 January 18, 2008 - Berlin

  10. Trade in raw and processed agro-food products, 99-05 January 18, 2008 - Berlin

  11. EU price level Accession implies competition-1/2 Source: calculated from OECD by Hauer & Bauer, 2007 January 18, 2008 - Berlin

  12. EU price level Accession implies competition-2/2 Source: calculated from OECD by Hauer & Bauer, 2007 January 18, 2008 - Berlin

  13. Turkey and the EU • Turkey’s journey to EU started in 1963. • Membership, if it ever happens, will involve full liberalization of trade in agricultural products with EU. • Impact of liberalization on Turkish agriculture depends on: • the path of agricultural policies in Turkey and EU, and also on accession negotiations. • EU’s MED policies • Multilateral negotiations January 18, 2008 - Berlin

  14. MODEL • Model maximizes the sum ofconsumers' and producers' surplus • Output prices are endogeneous to the model. • Partial equilibriumstatic optimizationmodel. Non-ag treated exogenously • Almost all ag products covered • 4 regions • Crop and Livestock sectors linked January 18, 2008 - Berlin

  15. I/O Structure in Production-4 regions • covers 95% of agriculture (96.3%); Crop and livestock sub-sectors are integrated endogenously • 200 activities to produce 55 commodities with ~250 equations and 350 variables January 18, 2008 - Berlin

  16. Demand and Supply Interactions • Trade is allowed in raw and in raw equivalent form for processed products. • Foreign trade is differentiated for EU,USAand ROW. January 18, 2008 - Berlin

  17. Year: 2004 Year: 2015 Impose estimated changes inpopulation, income, import and export prices, input prices, yields andresource endowmentsuntil 2015 2004 Policies (Status Quo) Policy change in 2015 2004 Policies (Status Quo) Base Period Model (2002-04) Baseline Scenario EU-OUT 2015 Integration with the EU EU-CU and EU-IN 2015 Projection to 2015 GME-OLS 2-step estimation process to forecast the values of these parameters in 2015 Model calibrated to base period values and 2004 policy parameters Model projected to 2015 IMPACTS Scenarios: EU-OUT, EU-CU, EU-IN January 18, 2008 - Berlin

  18. Projection Assumptions to 2015 • 1.4percent population growth per year • Population growth rate is determined from FAOSTAT • 1.3 percent net per capita income growth per year. • GDP per capita in 1987 prices (linear trend) • 210,000 ha increase in irrigated area (150,000 ha in GAP and60,000 ha in ROT) • Prices are adjusted to 2015 using FAPRI (2005) price projections and FAO export unit values data (1961-2004). • Yield Increases until 2015:The yield growths are estimated using last 10 years data with GME taken last 45 years data estimates with OLS as support vector center points, i.e., a priori information. January 18, 2008 - Berlin

  19. to 2015... • EU-OUT: Baseline • EU-CU: CU extended to agro-food products • EU-IN: CU+ • Intervention purchases • Compensatory payments (cereals, oilseeds and protein crops and set-aside) • Other supports (durum, olive oil, coton, milk, beef, mutton) January 18, 2008 - Berlin

  20. Almost no change in total welfare With CAP it increases by 2 %. Without CAP slight reduction in producers’ welfare Slight increase with CAP Significant increase in the consumers’ surplus Limited impact on total production Membership brings 11% decrease in prices Significant decrease in the prices of livestock prodcuts Total consumption volume increase by 8%, but the expenditure declines by 5% More amplified in the case of livestock prodcuts General Results - 1/2 January 18, 2008 - Berlin

  21. Membership makes Turkey net importer in agricultural products Boom in the imports of livestock products can not be compensated by the increase in the exports of crop products Membership changes the volume of production and trade General Results - 2/2 January 18, 2008 - Berlin

  22. Impact on Net Exports Apart from livestock products, net importsofcereals and oilseeds go up in CU or membership – wheat and maize January 18, 2008 - Berlin

  23. On the other hand, net exports of pulses, fruits and vegetables increase – chickpeas, peppers, tomatoes, cucumbers, hazelnuts, apples, apricots and citrus January 18, 2008 - Berlin

  24. CONCLUSIONS - 1/2 • Overall welfare effect is small. • Consumers will definitely benefit from EU integration due to declining prices. • Increased consumption will be realized with a lower level of expenditure. • CAP supports are important for the welfare of producers. January 18, 2008 - Berlin

  25. CONCLUSIONS - 2/2 • Customs Union without CAP supports can be more problematic for some producers. • Livestock products will not be competitive. However, recent increase in the livestock productivity improved the performance of the sector • Net exports of crop products will be far from compensating the change in the net imports of livestock products. January 18, 2008 - Berlin

  26. Agricultural Cost Estimate of Turkey to EU January 18, 2008 - Berlin

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