TRANSFORMATION OF AGRICULTURE IN TURKEY

1. TRANSFORMATION OF AGRICULTURE IN TURKEY

2. InstitutionalandHistoricalChangesince 1923

3. 1923-1945 • Closed economy • Protectionism • Great Depression- decreasing agricultural prices • Self-Sufficieny oriented production due to war conditions

4. 1946-1980 • Multi-party politics- democratic party era • Mechanisation of agriculture (tractor) • Availability of marginal land • Partially protectionism • Efficiency oriented agricultural production, new fertilizers, chemicals, seeds, irrigation

5. 1980-present • Integration with and competing in international markets • Export promotion policy • Subsidized agriculture with old institutions • Uruguay Round and Customs Union • Doha Round, CAP* and ARIP*

6. URUGUAY ROUND 1994 • Aim: to achieve greater liberalization of trade. • Agriculture is for the first time included. • “tariffication”: all forms of restrictions tariffs • Removal of tariff and non-tariff barriers.Over six years these tariffs were reduced.(1995-2000)

7. Doha Agreements • Parallel elimination of all forms of export subsidies on all export measures to be completed by the end of 2013. • Reduction of agricultural domestic support. • Cuts in agricultural an non-agricultural bound tarrifs under various alternative market access packages

8. Agriculture of Turkey Why is Agriculture important?

10. Agricultural employment/total employment

11. AGRICULTURAL STRUCTURE

12. Fertiliser Industry • Total fertiliser production capacity is 5.3 million tons/year • total production is 3 million tons/year • Seed Industry • 93 private companies&31 public sector entities

13. FinancingAgriculture • The Agricultural Bank of Turkey - established in 1888 - provide agricultural credits - through Agricultural Credit Co-operatives ( ACCs )

14. AGRICULTURAL POLICIES so far ;  agricultural sector as a political football in the competition to gain votes  relationship between supports and elections  rather closed and inward-oriented sector  price supports, input subsidies...etc

15. AgriculturalPolicyInstruments in Turkey • Output price support • Trade Policies • Supply Control Measures • Direct Payments • Reduction in Input Costs • General Services • Income taxes • Consumer subsidies

16. ARIP(Agriculture Reform Implementation Project) • In 2001, with the help of IMF and World Bank • Main aim of ARIP; is to liberalise Turkish agricultural markets and market organisations, to remove input subsidies and to compansate farmers by means of nondistorting direct income support.

17. ARIP  reduction of price support  restructuring SEEs  decrease input subsidies  introduction of direct income support  restructuring agricultural production  observing effects of policy changes in a household survey

18. AGRICULTURAL TRADE

19. TURKEY’S FOREIGN TRADE The integration of the Turkish economy to global markets has been gradually escalating. The graph shows the share of foreign trade in Turkey’s gross national product (GNP). *BYEGM

20. Agricultural Trade Makeup of Turkey’s exports in comparison to the worldin 2005. 11.3% of Turkish exports are agricultural goods. *BYEGM

21. Net exports of agriculturaloutput

22. *BYEGM

23. ORGANIC AGRICULTURE • Turkey is a major producer and exporter of organic products. • Major product groups are dried fruits, edible nuts, spices and herbs, vegetables, fresh and processed fruits.

24. Major Products: • Dried Fruits, Edible Nuts, Spices, Herbs, Fresh and Processed Fruits&Vegetables *Organic-Europe

25. High shares in GDP • High number of people working in agricultural sector • Increasing food prices in the world • Importance in terms of EU accession • Problems in agricultural productivity • Problems in support policies

26. TURKISH AGRICULTURE&EUROPEAN UNION INTEGRATION

27. WHY? It is crucial to understand the evolution and main trends of European policies for agriculture since Turkey is on the path of being a member state. Assuming that Turkey will not deviate from the course of EU,many new measures and reforms should be put into practise to comply with ‘acquis communautarie.

28. RECENT REFORMS&CURRENT POLICY MEASURES IN COMMON AGRICULTURAL POLICY (CAP)

29. 2003-The most comprehensive and more market oriented reform package that places more importance on consumers and taxpayers • Policies began to place more importance on tax payers and consumers • Cross compliance Financial assistance linked to respect of environmental, food safety and animal welfare • Single Farm Payment System aimed to abolish the link between subsidies and volume of production • Modulation aimed to raise the funds available to farmers for environmental quality or animal welfare programmes, by reducing direct payments for bigger farms

30. Main Current Policy Measures of CAP Single Farm Payment Cross – Compliance Rural Development Financial Discipline

31. Single Farm Payment introduced in 2003 reform of the CAP introduced a new system of direct payments • DecouplingPrinciple financial assistance is no longer linked to production • Policy aimed at preventing large surplus of production, price distortions • Stable income for farmers independent of volume of production farmers produce according to demand preventing large surplus of production stored up in public storages • Serves in favor of international trade since policy creates downward pressure on prices

32. Payments are made according to Historical Model or Regional Model • Historical model Payments are calculated on the basis of the payments received by the farmer during a reference period • Regional model Payments are calculated according to the number of elligible hectares farmed during the first year of implemantation of the scheme • There exists some options in the model especially for NMS(New Member States)

33. Cross Compliance Farmers have to respect a set of standards to avoid reduction of their payments – direct payments and some rural development payments – from the European Union Cross Compliance was a major component of the 2003 CAP reform. Even though it was pronounced in earlier reforms, it became compulsory in CAP 2003. Covers protection of the environment, public, animal and plant health, animal welfare and the maintenance of the land in good agricultural and environmental condition

34. Rural development single farm payment and farm advisory system constitute major parts • Farm advisory system provides a service for farmers, as they will receive information on how standards and good practices can be applied in the production process. The system should help farmers to comply with cross-compliance standards. • Modulation More funds will be available to farmers for rural development by reducing direct payment for bigger farms and transferring these funds into rural development measures • The 2003 reforms – major emhasis on rural development policy • Modulation is a critique of early policies • Small enterprises are more dependent to financial assistance

35. Financial Discipline: Majority of CAP expenditure still goes towards direct payments to farmers and to market management measures but tight budgetary ceiling has been set However, spending will be strictly controlled CAP expenditure has been frozen (in real terms) until 2013 and this covers the enlarged EU of 25 Member States after 2004 which adds 4 million farmers Lisbon Strategy preparing competitive dynamic and knowledge based economy Ongoing trends creates downward pressure to funds available for CAP Trend towards to increase the amounts of funds for rural development policy Attempt towards a more market oriented CAP will probably increase in coming years

37. Comparative look to EU and Turkey in terms of Agricultural supports EU support policy followed a more stable path whereas support amounts are so volatile in Turkey We believe that high volatilies are matched with the years of crisis and periods before elections in Turkey. Populist policy measure&macroeconomic instability in Turkey It also shows that the weakness of regarding institutions in agricultural sector in Turkey

38. ‘ACQUIS COMMUNAUTARIE’

39. Period to reach ‘Acquis Communautarie’ Restrictions on the EU budget will impose tighter rules on an enlarging union Complications might also arise if Turkish crop prices do not get in line with EU prices Probable political pressure to increase Direct Payments Difference between Turkey and NMS’s Turkey higher prices compared to EU NMSlower prices compared to EU

40. Food Quality, during the pre-accession period, food quality issues become problematic • Rural policy • Rural and strucrual policy measures will be important for generating rural employment and income • Turkish rural development policy may special instruments aimed at education, job creation especially in rural areas • Strong tendency to invest in developed part of the country since the scale effect in countries like Turkey where regional differences are substantial Turkey should focus in rural areas

41. POSSIBLE EFFECTS OF MEMBERSHIP AND COHESION PERIOD TO EU STANDARDS

42. Turkey will adopt common external tariffs of the EUfor every agricultural products. Currently,Turkey has higher tariffs than EU • Doha Round which imposes less tariff reductions for developing countries might also increases the tariff gap between Turkey and EU • Price decreases especially in livestock sector • Borders implement all EU measures • Animal and Plant Health • Sanitory and Physosanitary regulations • Long standing disease-free status of EU • Long term policy

43. Environmental Effects: • Adopt legislation to avoid adverse impacts of agricultural activities on the environment • Consumers’ and producers’ low valuation of environmental issues • NGOs can play crucial role in the conservation and protection of the environment • Monitoring and enforcement structures should be improved • Conservation of biodiversity • EU can work as a catalyst for Turkey in terms of environmentalist development • Even financial assistance of EU used in an efficient way in Turkey, the level of environmental awareness is low in Turkish society compared to EU countries might slow down the process

44. Agri-Food Sector • Compettition with the rest of the union • Low profitability,fragmentation,weak integration and low consumer awareness of quality • Rigid, inefficient agri-food sector in Turkey • Role of supermarkets chains • FDI in restructuring and modernization of Turkish food industry • Small farmers may fail to compete • Competition Rules • Privatization process has been very slow • Related institutions should be designed to overcome bribery and corruption and to improve budget and tax collection to attract FDI

45. Expected consequences Decrease in the rate of corruption and bribery With EU membership agricultural producers lose but consumer gain Within producers and in consumers membership reduces income inequality Income transfer from rural to urban areas With EU membership, fruit and vegetables remain competitive but cereals and livestock products will lose competitive.

46. Overall Turkey’s agricultural position in terms of international trade will not change much Harmonisation with EU’s health and safety programs yields absolute welfare gains. In terms of budget transfers assuming that Turkey will be a full member in 2015 net expected budget transfers will be 20.6 billion Euro in 2015 prices.

47. In terms of agriculture, it is probable that EU Project will be a catalyst for Turkey to improve its agricultural production in an efficient and environmentalist way. On the other hand, the transformation will not be so easy to accomplish since acquis communautarie consists of very comprehensive policy packages aiming to reach high standards.