01 Sep 2004

Structural Change and Market Opening in Agriculture

Erol H. Cakmak

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EU-Turkey Working Paper No. 10, 40 pages

Turkey is endowed with rich natural and human resources, but its agricultural sector never reached its potential because of the increasingly inefficient agricultural policies adopted since the late 1980s. However, an important reform was started in 2000-01, which has improved the incentive structure. After the reform of the CAP, EU and Turkish agricultural policies are now slowly converging. The principal remaining obstacles in Turkey will be the effective implementation of the new, EU-compatible, policy regime.

Turkey has a comparative advantage in plant products that do not exhibit economies of scale and are relatively labour-intensive, i.e. fruits and vegetables Eliminating the existing border and non-tariff barriers to trade in agriculture would allow both sides to better exploit their comparative advantages. The models discussed here imply that an extension of the customs union agreement to agriculture would lead to substantial welfare benefits for both sides.