EU enlargement to Turkey: Potential impacts on agricultural markets and how they are shaped by changes in macroeconomis 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 the accession impacts depends on the one hand on the way the CAP will be implemented in Turkey, while on the other hand impacts are expected to be also shaped by macroeconomic conditions (like exchange rates, GDP growth and inflation levels). In this paper we provide a comprehensive model-based assessment of the potential impacts on agricultural markets of a Turkish accession to the EU. We first assess the impacts under the assumption of standard macroeconomic projections, then we analyse how a different TL/Euro exchange rate, a doubling of the Turkish inflation rate or a doubling of the Turkish GDP growth rate would influence the accession impacts. Results of the Turkish EU-membership simulation show that the impacts on agricultural markets in Turkey are significant, while effects on EU markets are rather limited. The main impact on Turkish agriculture is a reduction of producer prices. With market prices and produced quantities declining, and as the coupled Turkish direct payments and the input subsidies will be replaced by lower payments of the CAP, agricultural income is expected to be reduced especially for Turkish crop producers (except for tobacco). In contrast, accession effects on the Turkish livestock sector are projected to be positive, mainly due to lower feed costs. Furthermore, the demand levels of most commodities are projected to increase due to lower prices, thus Turkish consumers are expected to gain from an accession to the EU. The further analysis reveals that in particular a depreciation of the Turkish lira alters the results of the accession scenario.(This abstract was borrowed from another version of this item.)