IMPACT OF EU MEMBERSHIP ON TURKEY IN AGRICULTURE

IMPACT OF EU MEMBERSHIP ON TURKEY IN AGRICULTURE: A SECTOR MODEL APPROACH WITH MAXIMUM ENTROPY Erol H. ÇAKMAK H. Ozan ERUYGUR Middle East Technical University, METU Department of Economics Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 1

METHODOLOGY Basic approach undertaken for calibration is Positive Mathematical Programming with Maximum Entropy following Paris and Howitt (1998) and, particularly, Heckelei and Britz (1999). Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 2

CHANGES Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 3

MODEL STRUCTURE Model permits an integrated analysis of the crop and livestock production. Single-period static optimization model. Non-linear optimization, maximizing consumers' and producers' surplus. Prices are endogeneous. Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 4

REGIONS The production side of the model is disaggregated to four regions (Coastal, Central, Eastern, and GAP Region). Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 5

REGIONS Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 6

REGIONS Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 7

REGIONS Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 8

REGIONS Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 9

REGIONS Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 10

REGIONS Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 11

PRODUCTION AND TRADE The crop and livestock sub-sectors are integrated endogenously, i. e. the livestock sub-sector gets inputs from crop production. Foreign trade is allowed in raw and in raw equivalent form for processed products Foreign trade is differentiated for EU, USA and ROW (rest of the world). Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 12

SCENARIOS EU INtegration. – – – No compensatory area payments of EU, EU intervention purchases, No input subsidy No deficiency payments, Restrictions on tea, tobacco, hazelnut and sugar-beet. CU in agricultural products. WTO: 15 % cut in all tariffs of Turkey in 2015, no integration. EU OUT Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 13

Assumptions to 2015 Population Growth: 1. 4 percent per year – Population growth rate is determined from FAOSTAT estimates (total 15. 2%). Per capita income growth: 1. 3 percent per year. – Linear trend of GDP per capita in 1987 prices. – Total growth 15. 3 % until 2015, 1. 302 % per year. 210, 000 ha increase in irrigated area: 150, 000 ha in GAP region and 60, 000 ha in rest of the Turkey. Prices are adjusted to 2015 using FAPRI (2005) price projections and FAO export unit values data between 1961 -2004. Yield Increases until 2015 included. The yield growths or decays 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. However, the simulations are performed following a “pessimist” approach, only the half of the estimated yield growths are used. Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 14

GENERAL RESULTS I Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 15

GENERAL RESULTS II Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 16

PRODUCTION VOLUMES Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 17

NET EXPORT PERFORMANCES FOR EU-OUT AND EU-CU Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 18

Export Performances of Fruits (& Nuts) and Vegetables Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 19

Conclusions Farmers suffer slightly from the EU membership, except the producers of some crops. Increased consumption will be realized with a lower level of expenditure. Livestock products will not competitive even at the EU prices. However, last 5 years’ increasing yield trends in livestock products shows better performances than before. The increase to be realized in the net exports of crop products will be far from compensating the change in the net imports of livestock products. Almost all imports of livestock products will be from the EU. The volume of trade with EU expands significantly. Erol H. CAKMAK Ozan ERUYGUR EU-MED Agpol May 2006, Montpellier 20