EU ENLARGEMENT TO TURKEY: POTENTIAL IMPACTS ON AGRICULTURAL MARKETS AND HOW THEY ARE SHAPED BY CHANGES IN MACROECONOMIC CONDITIONS

The potential accession of Turkey to the EU, and the related adoption of the CAP by Turkey,is expected to influence agricultural markets in both the EU and Turkey. The extent of theaccession impacts depends on the one hand on the way the CAP will be implemented inTurkey, while on the other hand impacts are expected to be also shaped by macroeconomicconditions (like exchange rates, GDP growth and inflation levels).In this paper we provide a comprehensive model-based assessment of the potential impacts onagricultural markets of a Turkish accession to the EU. We first assess the impacts under theassumption of standard macroeconomic projections, then we analyse how a different TL/Euroexchange rate, a doubling of the Turkish inflation rate or a doubling of the Turkish GDPgrowth rate would influence the accession impacts.Results of the Turkish EU-membership simulation show that the impacts on agriculturalmarkets in Turkey are significant, while effects on EU markets are rather limited. The mainimpact on Turkish agriculture is a reduction of producer prices. With market prices andproduced quantities declining, and as the coupled Turkish direct payments and the inputsubsidies will be replaced by lower payments of the CAP, agricultural income is expected tobe reduced especially for Turkish crop producers (except for tobacco). In contrast, accessioneffects on the Turkish livestock sector are projected to be positive, mainly due to lower feedcosts. Furthermore, the demand levels of most commodities are projected to increase due tolower prices, thus Turkish consumers are expected to gain from an accession to the EU. Thefurther analysis reveals that in particular a depreciation of the Turkish lira alters the results ofthe accession scenario.