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. 15. East-West Agricultural Forum January 18, 2008 - Berlin 2/26 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?

3. 15. East-West Agricultural Forum January 18, 2008 - Berlin 3/26 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 +

4. 15. East-West Agricultural Forum January 18, 2008 - Berlin 4/26 TSE/GDP

5. 15. East-West Agricultural Forum January 18, 2008 - Berlin 5/26 Percent PSE

6. 15. East-West Agricultural Forum January 18, 2008 - Berlin 6/26 Share of market price support in PSE

7. 15. East-West Agricultural Forum January 18, 2008 - Berlin 7/26 Bound and Applied Tariffs, 2007

8. 15. East-West Agricultural Forum January 18, 2008 - Berlin 8/26 Ag. Value-added, 1968-2007

9. 15. East-West Agricultural Forum January 18, 2008 - Berlin 9/26 Agro-Food Trade, 1999-2005

10. 15. East-West Agricultural Forum January 18, 2008 - Berlin 10/26 Trade in raw and processed agro-food products, 99-05

11. 15. East-West Agricultural Forum January 18, 2008 - Berlin 11/26 Accession implies competition-1/2 EU price level Source: calculated from OECD by Hauer & Bauer, 2007

12. 15. East-West Agricultural Forum January 18, 2008 - Berlin 12/26 Accession implies competition-2/2 EU price level Source: calculated from OECD by Hauer & Bauer, 2007

13. 15. East-West Agricultural Forum January 18, 2008 - Berlin 13/26 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

14. 15. East-West Agricultural Forum January 18, 2008 - Berlin 14/26 MODEL Model maximizes the sum of consumers' and producers' surplus –Output prices are endogeneous to the model. Partial equilibrium static optimization model. Non-ag treated exogenously Almost all ag products covered 4 regions Crop and Livestock sectors linked

15. 15. East-West Agricultural Forum January 18, 2008 - Berlin 15/26 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

16. 15. East-West Agricultural Forum January 18, 2008 - Berlin 16/26 Demand and Supply Interactions Trade is allowed in raw and in raw equivalent form for processed products. Foreign trade is differentiated for EU, USA and ROW.

17. 15. East-West Agricultural Forum January 18, 2008 - Berlin 17/26 Scenarios: EU-OUT, EU-CU, EU-IN Base Period Model (2002-04) 2004 Policies (Status Quo) Year: 2004 Model calibrated to base period values and 2004 policy parameters Baseline Scenario EU-OUT 2015 2004 Policies (Status Quo) Year: 2015 Model projected to 2015 Projection to 2015 Impose estimated changes in population, income, import and export prices, input prices, yields and resource endowments until 2015 GME-OLS 2-step estimation process to forecast the values of these parameters in 2015 Policy change in 2015 Integration with the EU EU-CU and EU-IN 2015 IMPACTS

18. 15. East-West Agricultural Forum January 18, 2008 - Berlin 18/26 Projection Assumptions to 2015 1.4 percent 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 and 60,000 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.

19. 15. East-West Agricultural Forum January 18, 2008 - Berlin 19/26 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)

20. 15. East-West Agricultural Forum January 18, 2008 - Berlin 20/26 General Results - 1/2 Almost no change in total welfare Without CAP slight reduction in producers’ welfare 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 Slight increase with CAP With CAP it increases by 2 %. Total consumption volume increase by 8%, but the expenditure declines by 5% More amplified in the case of livestock prodcuts

21. 15. East-West Agricultural Forum January 18, 2008 - Berlin 21/26 General Results - 2/2 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

22. 15. East-West Agricultural Forum January 18, 2008 - Berlin 22/26 Impact on Net Exports Apart from livestock products, net imports of cereals and oilseeds go up in CU or membership – wheat and maize

23. 15. East-West Agricultural Forum January 18, 2008 - Berlin 23/26 On the other hand, net exports of pulses, fruits and vegetables increase – chickpeas, peppers, tomatoes, cucumbers, hazelnuts, apples, apricots and citrus

24. 15. East-West Agricultural Forum January 18, 2008 - Berlin 24/26 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.

25. 15. East-West Agricultural Forum January 18, 2008 - Berlin 25/26 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.

26. 15. East-West Agricultural Forum January 18, 2008 - Berlin 26/26 Agricultural Cost Estimate of Turkey to EU