Impacts of Agricultural Trade Liberalization between EU and Mediterranean Countries on Turkish Agricultural Trade: An Armington Model

Free trade agreements (FTAs) have become popular in recent years. One of these agreements is Barcelona Agreement (EUROMED), signed between European Union (EU) and 12 Mediterranean partner countries (MPC), including Turkey. Accordingly, association agreements have been signed between EU and MPC. However, these agreements have not completely included agricultural trade yet. The aim of this paper is to analyze the potential trade creation and trade diversion impacts of agricultural trade liberalization between the EU and MPCs on Turkey’s agricultural trade by using Armington trade model. Contrary to the traditional trade model, goods are not homogeneous in Armington Model. Trade data of 209 agricultural goods classified at 4 digit level harmonize system (HS-4) were used in the present analysis. The global trade of Turkey was disaggregated into 28 regions to distinguish the regional impacts. All Mediterranean partner countries, including Turkey, were explicitly included. The structure of the model assumes perfectly elastic export supplies for imports and perfectly elastic import demands for exports, and hence the model simulates the maximum possible changes in the imports and export for each goods. Results show that Turkey’s agricultural export will increase 4,1 %, while agricultural import will increase 9,7 %