Erdogan Kumcu

James E. McClure

English

Research Papers in Economics

1 
 
The Common Agricultural Policy v. Turkish Admission to the EU 
 
By Erdogan Kumcu and James McClure 
 
 
 
Epigraph by James McClure: Erdogan Kumcu and I were colleagues, frequent co-authors, and close 
personal friends (I love it that his daughters have so long called me Uncle Jim). Because cancer so 
suddenly struck down a highly productive scholar and educator in his prime, it is no surprise that there 
were and remain professional “loose-ends” of various sorts.  For example, in 2005,  I published “A 
Reply to Stearns and Borna: Are the Partially Upward Sloping Demand Models Plausible?”; this was a 
reply to  a critique of an article that Erdogan and I had published as co-authors in 2003.  The writing of 
this reply was  bitter sweet: Bitter because I felt loss of Erdogan’s wit and insight; but sweet because the 
reply made it clear that a long-time professional rival of Erdogan’s had gone beyond reason in 
attempting to undermine the contribution of Erdogan’s and my article.  (By the way, partially upward 
sloping demand models are ridiculously implausible, notwithstanding the claims of Stearns and Borna 
(2005) to the contrary.)  A second “loose-end” was page proofing our co-authored article (McClure and 
Kumcu (2008)); it was accepted in January 23, 2004 (just a few months prior to Erdogan’s death).  The 
subject of this article is another “loose end”: Erdogan and I had a working hypothesis that perhaps 
financial fallout was the real reason that the European Union (EU) repeatedly rebuffed Turkish 
applications for membership: More specifically, given the tariffs and subsidies emanating from the EU’s 
Common Agricultural Policy, and given that Turkey is a regional superstar in  agricultural production & 
export, admitting Turkey into the EU would certainly threaten, pardon the pun, to  upset the “financial 
applecart” of the EU.  The analysis is presented below: It remains for future research to quantify its 
importance.  
 
 
 
 
 
  Turkey has been denied admission into the European Union (hereafter abbreviated as: 
EU).  A variety of explanations for Turkish brush-offs have emerged; non-financial “concerns” 
are the mainstay of these.  For example, in 2002 a long list of countries was being considered by 
the EU (Cyprus, Czech Republic, Estonia, Hungary, Malta, Latvia, Lithuania, Slovakia, and 
Slovenia); Turkey was noticeably absent.  According to the Wall Street Journal (10/17/02, p. 
A18): “The Commission, the EU’s executive arm, said Turkey didn’t meet the ‘political’ criteria 
even to get a possible date to start talks on membership.”   2 
 
This WSJ article went on to explain that Turkey had, contrary to the impression left by 
the EU commission, taken a range of steps at “political reform” such as abolishing the death 
penalty, granting Kurds greater freedoms of speech, and making “substantial” human rights 
improvements; and the article went on to speculate that: “The real problem here is that many 
Europeans don’t want Turkey in their club at all.  Their view is that Europe is for Christians . . .”  
It struck us as odd that the world renowned financial paper, the Wall Street Journal, said 
nothing about the financial consequences of admitting Turkey to the EU; again, the WSJ article 
concluded that the “real problem” was religion rather than the litany of other non-financial 
“concerns”, “problems”, and “criteria” it discussed.  This silence on the financial ramifications of 
Turkish admission is so peculiar and palpable precisely because of the fondness of the Wall 
Street Journal for the economic insight that: “When they tell you it’s not about the money, it’s 
about the money!” This insight in mind, we formulated this working hypothesis: Turkish 
admission would pose financial challenges to the EU due to tariffs and subsidies attending its 
Common Agricultural Policy.  
I.  Turkish Admission vs. CAP Finances: A Love Story Not 
 The  EU’s common agricultural policy subsidizes the export of some agricultural goods 
and imposes tariffs upon the importation of other agricultural goods.  From standard 
demand/supply analytics we will see that admitting Turkey would: 1) reduce tariff revenue 
inflows to the EU; and 2) increase EU subsidy payments to farmers.   
A.  Admitting Turkey would reduce EU tariff revenues 
The impact of Turkish admission upon the EU’s tariff revenue can be easily explained via the 
demand/supply diagram below: 3 
 
 
 
                           FIGURE 1: EU Tariff Revenues vs. Turkish Admission                
The quantity and price in the above pertain to some agricultural good that is imported 
into the EU; it is assumed in the above that the good could be imported (from Turkey and other 
countries) at the world price of PW, but the EU has a tariff on it of T per unit, so that PW + T 
becomes the tariff-inclusive price of the imported good.  In Figure 1 we see two demand curves 
and two supply curves for the EU: Without Turkey, as things stand currently, demand and supply 
for the EU are labeled DEU and SEU.  Given this demand and supply, and the tariff, the EU 
imports (Q3 – Q1) units, collecting total tariff revenue of T×(Q3 – Q1).   
Things would change if Turkey were made an EU member.  Because the assumption of 
this example is that the EU was importing this good from Turkey, Turkish admission will add 
more to EU supply than would be added to EU demand: In Figure 1, the EU supply and demand 
curves both shift to rightward to SEU+TURKEY  and DEU+TURKEY, but importantly (because Turkey 
Price
Quantity 
SEU
SEU+TURKEY 
DEU
DEU+TURKEY  
Q0  Q1  Q2 Q3 Q4 Q5
Pw+T 
Pw 4 
 
is a net producer of this good) with the shift in supply exceeding the shift in demand. (Look 
horizontally across from PW+T: Notice that (Q4 –Q1), which is the change in quantity supplied, is 
clearly greater than (Q5-Q2), which is the change in the quantity demanded.)  For our purposes, 
the key change is the decline in EU tariff revenue.  If Turkey were a member of the Union, 
imports of this good would fall from (Q3 – Q1) units to (Q5-Q4) units, thereby cutting EU tariff 
revenue from T×(Q3 – Q1) to T×(Q5-Q4). 
 
B.  Admitting Turkey implies increased EU subsidy expenditures 
The impact of Turkish admission upon the EU’s subsidy expenditures can easily be 
explained using the demand/supply diagram below: 
 
FIGURE 2: EU Subsidies and Turkish Admission 
Price 
PW + δ 
PW 
SEU 
SEU+TURKEY 
DEU+TURKEY
DEU
Q4  Q3 Q2 Q1 5 
 
 
In Figure 2, we show the impact of a simple export subsidy of δ per unit exported.  We 
begin with the demand and supply curves that do not include Turkey as an EU member: Demand 
is labeled DEU and supply is SEU.  Given this type of subsidy, (Q3-Q1) units are exported; this is 
because  putting the EU on the hook financially for a payment of δ×(Q3-Q1) to EU farmers.     
Things change in this analysis if we imagine Turkey becoming an EU member.  Because 
Turkey is the leading exporter of agricultural products to near Asia and northern Africa, it must 
be assumed that adding Turkey to the EU will shift the supply shown in Figure 2 to the right by a 
larger amount than the rightward shift in demand induced by Turkish admission.  The demand 
and supply curves have been shifted in this way from DEU and SEU to DEU+TURKEY and 
SEU+TURKEY: Sighting horizontally from the PW+δ price level notice that Turkish admission has 
increased quantity supplied at this price level by (Q4-Q3), but raised quantity demanded at this 
price level by only (Q2-Q1).   
For the purposes of illustrating the impact of Turkish accession to EU finances, what is 
important here is what happens to the amount of exports that will have to be subsidized.  As 
show in Figure 2, again based logically on the facts about Turkey’s agricultural exporting 
prowess, EU exports will rise: They increase from Given the shifts in demand and supply, the 
implication regarding EU financing is straightforward:  EU payments of farm subsidies rise from 
being (Q3-Q1) before Turkish admission to (Q4-Q2) after Turkey becomes a member.  With an 
export subsidy of δ per unit exported, EU payments obviously rise from δ×(Q3-Q1)  to   
δ× (Q4-Q2). 
 
 6 
 
 
II.  Conclusions 
Governmental interferences with market process often reduce wealth creation by turning 
circumstances that would naturally foster cooperation between diverse peoples into those that 
instead foster division and bitterness. Since as early as 1963, Turkish applications to join the EU 
“club” have been rebuffed via various and sundry non-financial rationales, explanations, excuses 
and conjectures: Religion, human rights, and political criteria are examples that have been 
highlighted in the Wall Street Journal.   This article suggests that “following the money” might 
provide an important financial explanation.  Straightforward demand/supply analyses show that 
admission of Turkey, a regional superstar in agricultural production and exports, would pose 
financial challenges to the EU due to its Common Agricultural Policy that interferes with free 
market process with tariffs and subsidies. (These tariffs and subsidies are a governmentally 
created Frankenstein; they grossly pervert the market processes that would naturally give rise to 
ever greater cooperation between the Turkish people and other Europeans.  Such monstrous 
political transmogrifications of economic freedom make all of Europe, Turkey included,  
poorer.)        
As noted in the epigraph, this article presents a working hypothesis developed by Kumcu and 
McClure.  Professor Kumcu died before it could be empirically assessed.  We have lighted a 
torch to cast a clearer light upon a historic opportunity that has long been eschewed by the EU; it 
is hoped that the torch will be carried farther still via empirical assessments that can only emerge 
from future research.      
 
 7 
 
 
References 
“Cold Turkey” (2002).  The Wall Street Journal, 10/17/02, A18. 
 
Kumcu, Erdogan and James E. McClure (2003).  “Explaining Prestige Pricing: An Alternative to  
 Back-Bending  Demand,”  Marketing Education Review, 13, 49-57. 
 
McClure, James E. 2005. Reply to Stearns and Borna: Are the Partially Upward Sloping Demand 
Models Plausible? Marketing Education Review. 3(15): 73-75. 
 
McClure, James E. and Erdogan Kumcu (2008). Promotions and Product Pricing: Parsimony 
versus Veblenesque Demand. Journal of Economic Behavior and Organization. 65: 105-
117. 
Stearns, James and Shaheen Borna (2005).  “Beyond Prestige Pricing: Coverage of Counter-
Intuitive Demand in Marketing Education,” Marketing Education Review, 15 (3), 65-71. 
 
 

and Erdogan Kumcu

Beyond Prestige Pricing: Coverage of CounterIntuitive Demand

Reply to Stearns and Borna: Are the Partially Upward Sloping Demand Models Plausible? Marketing Education Review.

The Wall Street Journal, 10/17/02, A18. Kumcu, Erdogan

The Common Agricultural Policy v. Turkish Admission to the EU

http://econfac.iweb.bsu.edu/research/workingpapers/bsuecwp201011kumcu.pdf

The Common Agricultural Policy v. Turkish Admission to the EU

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics