Economic implications for Turkey of a Customs Union with the European Union
Turkey and the European Union (EU) have agreed to implement a customs union. This means Turkey will eliminate its tariffs and levies on imports on manufactured products from the EU. Turkey will also apply EU's"common external tariff"on imports from third countries. Turkey will be obligated by 20001 to provide preferential access to its markets to all countries to which the EU grants such access. Since Turkey is both eliminating tariffs on EU imports and reducing tariffs on imports from third countries, it will become a rather open economy in nonagricultural sectors. And since preferential access agreements with third countries will typically be reciprocal, Turkish exporters can expect improved access to those markets. According to the authors, Turkey's biggest gains from the customs union arrangement will come from this improved access to third country markets. Using a comparative static computable general equilibrium model of Turkey, they estimate that Turkey stands to gain between 1 and 1.5 percent of gross domestic product (GDP) annually from the customs union arrangement with the EU, depending on what complementary policies it adopts. They also estimate that lost tariff revenues will amount to 1.4 percent of GDP. For Turkey to avoid worsening its fiscal deficit, it must find ways to reduce expenditures or increase revenues. Its best choice is to reduce expenditures through accelerating privatization of state-owned enterprises which will generate a number of macroeconomic and efficiency benefits in addition to the fiscal benefits. If a value-added tax (VAT) is used as a replacement tax, they estimate that VAT rates must increase 16.2 percent in each sector to compensate for the revenue losses from implementing the full customs union. But uniform application of the VAT would allow the VAT rates to fall while still compensating for the loss from reduced tariffs and would increase the welfare gain from the customs union.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014.
"Trade Reform in the Partially Liberalized Economy of Turkey,"
World Scientific Book Chapters,
in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 5, pages 95-121
World Scientific Publishing Co. Pte. Ltd..
- Harrison, Glenn W & Rutherford, Thomas F & Tarr, David G, 1993. "Trade Reform in the Partially Liberalized Economy of Turkey," World Bank Economic Review, World Bank Group, vol. 7(2), pages 191-217, May.
- Pritchett, Lant & Sethi, Geeta, 1994. "Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts," World Bank Economic Review, World Bank Group, vol. 8(1), pages 1-16, January.
- Pritchett, Lant & Sethi, Geeta, 1993. "Tariff rates, tariff revenue, and tariff reform : some new facts," Policy Research Working Paper Series 1143, The World Bank.
- Richard Baldwin, 1989. "The Growth Effects of 1992," NBER Working Papers 3119, National Bureau of Economic Research, Inc.
- Morris Morkre & David Tarr, 2014. "Reforming Hungarian Agricultural Trade Policy: A Quantitative Evaluation," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 3, pages 49-74 World Scientific Publishing Co. Pte. Ltd..
- Morris Morkre & David Tarr, 1995. "Reforming Hungarian agricultural trade policy: A quantitative evaluation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 131(1), pages 106-131, March.
- Morkre, Morris & Tarr, David G., 1993. "Reforming Hungarian agricultural trade policy : a quantitative evaluation," Policy Research Working Paper Series 1185, The World Bank.
- Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Economic implications for Turkey of a Customs Union with the European Union," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 16, pages 395-404 World Scientific Publishing Co. Pte. Ltd..
- Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1997. "Economic implications for Turkey of a Customs Union with the European Union," European Economic Review, Elsevier, vol. 41(3-5), pages 861-870, April.
- Harrison, Glenn W. & Rutherford, Thomas F. & Tarr, David G., 1996. "Economic implications for Turkey of a customs union with the European Union," Policy Research Working Paper Series 1599, The World Bank.
- Harrison, Glenn W. & Jones, Richard & Kimbell, Larry J. & Wigle, Randal, 1993. "How robust is applied general equilibrium analysis?," Journal of Policy Modeling, Elsevier, vol. 15(1), pages 99-115, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:eecrev:v:41:y:1997:i:3-5:p:861-870. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.