Transcript 9th GTAP Conference, “Multilateralism, Bilateralism and

12th GTAP Conference, “Trade Integration and Sustainable Development: Looking
for an Inclusive World”, Economic Commission for Latin America and the
Caribbean, Santiago, June 2009
Turkey and the EU: Economic
Integration and Labour Migration
Scott McDonald
(Oxford Brooks University)
&
Yontem Sonmez
(Lancashire Business School, UCLAN)
&
Karen Thierfelder
(US Naval Academy)
Outline of the Presentation
Turkey – EU Relations
Aim
Data & the Globe_Mig Global CGE Model
Policy Experiments and Model Closures
Results
Concluding comments
2
• Global financial crisis: economies of
almost all countries in Europe, in the US,
etc affected
• No slow down in the pace of accession
negotiations between the EU and the new
candidate countries
3
Turkey – EU Relations
•
•
•
•
1959: First application to join
1963: Associate member
1987: Applied for full membership
Part of common EU Customs Territory since
1996
• 1999: Candidate country status
• 2005: Membership negotiations started (Turkish
Undersecretariat for Foreign Trade, nd)
4
%s of Total Imports and Exports by Regions
Turkey
Exports
Imports
EU27
Exports
Imports
EFTA
1%
4%
Turkey
1%
1%
NewEU12
4%
4%
NAfrica
1%
1%
RoW
4%
4%
China
2%
3%
France
6%
5%
UK
7%
6%
Russia
2%
3%
RoME
7%
7%
RoME
3%
2%
Asia
4%
8%
Japan
3%
3%
Italy
7%
8%
EFTA
3%
4%
Russia
4%
10%
Asia
5%
7%
NAFTA
13%
11%
RoW
5%
5%
RoEU15
14%
14%
NAFTA
13%
11%
Germany
15%
12%
IntraEU
58%
61%
EU27
53%
49%
5
Number of skilled and unskilled Turkish labour
in Europe
Skilled Labour
Unskilled Labour
Germany
63,459
706,771
UK
10,380
18,806
Greece
6,623
32,139
France
5,675
92,035
Netherlands
4,100
88,377
Switzerland
2,631
31,571
Sweden
1,923
15,766
Austria
1,616
62,280
Belgium
1,198
34,424
Denmark
944
14,550
Source: GMig2 Database, 2007.
6
Remittances received by Turkey from EU
countries, US$ billions
2001
Unskilled Labour
Skilled Labour
UK
0.02
0.01
France
0.03
0.003
Germany
0.36
0.04
Italy
0.002
0.0004
Rest of EU15
0.12
0.01
New 12 EU countries
0.003
0.001
Source: GMig2 Database, 2007
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Aim
• To study the economic implications of a
possible EU membership of Turkey
 How?
8
Policy Experiments
1. removal of bilateral import duties on all
commodities traded between Turkey and EU27
2. removal of bilateral export taxes …..
3. removal of both bilateral import and export
duties, i.e. FTA scenario
4. FTA plus the imposition of EU’s CET by Turkey
on commodity trade with third countries, i.e. CU
scenario
5. CU plus agricultural liberalisation
6. CU plus agr. lib. plus endogenous migration
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Macro Economic Closure
• FEX
-Flexible exchange rate
• Investment
-Investment driven savings
• Government -Absorption share fixed
-Value added tax flexible
- fixed internal balance
• Numeraire
-CPI
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Data
• Database: GTAP database version 6 & GMig2 data on
the number of skilled and unskilled migrant workers &
bilateral remittance flows
• Form of the Database: A SAM representation of the
GTAP database (McDonald and Thierfelder, 2004) &
Augmenting the GTAP database (McDonald and
Sonmez, 2004).
• Aggregation: 23-sector, 5-factor and 17-region
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Globe_Mig Global CGE Model
• Model: GLOBE_Mig global CGE Model (McDonald and
Thierfelder, 2009). ‘A Global CGE Model with
Endogenous Labour Migration’
• Production:
• 3 level CES
– Aggregate intermediaries, value added and labour
• All factors potentially unemployed
– MCP formulation for regime switching
• Taxes
– VAT on household demand
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RESULTS
13
% Changes in Turkish GDP
base
US$ bns FTA
GDP Exp.
CU
CU&Agr
lib
CU&Agr
lib&mig
147
0.02 -0.03
-0.04
-0.05
Private cons.
99.50
0.01 -0.36
-0.48
-0.49
Govt cons.
21.09
0.11
0.12
0.35
0.34
Investment cons.
24.59
0.30
0.29
0.58
0.57
Export Supply
46.57
0.46
1.61
1.59
1.58
Import Demand
45.19
0.65
1.16
1.19
1.20
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CU & Agr lib & Migration Scenario
• Due to the differences in relative wage rates, unskilled
and skilled Turkish labour move to EU27 subject to a
migration elasticity
% Change in Turkish unskilled and skilled labour in EU27
Germany
France
UK
Italy
Neu
Reu
Skilled L
1.60
1.59
1.58
1.59
1.54
1.59
Unskilled L
1.18
1.22
1.23
1.23
1.19
1.21
Remittances sent back to Turkey increase slightly
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Slutsky Approximation EV by Regions on
Consumption, US$ billions
Turkey
FTA
(%)
0.11
CU (%)
CU & Agri
Lib (%)
CU & Agri Lib &
Migration (%)
-0.27
-0.26
-0.27
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Tax Replacement, %s
Tax Revenue
Base
US$ billions
FTA
CU
CU&Agri CU & Agri Lib
Lib
&Migration
Value Added
0
0.27
0.86
1.52
1.52
Sales
9.17
-0.25
-0.46
-0.95
-0.96
Factor Use
1.41
-0.04
-0.27
-42.22
-42.22
Import
0.92
-13.12 -84.36
-84.48
-84.48
Export
0.20
-52.73 -51.90
-52.15
-52.15
Household
-15.40
0.01
-0.38
-0.52
-0.53
Factor Income
15.08
0.01
-0.38
-0.58
-0.58
Indirect
9.72
-0.09
-0.23
-0.65
-0.66 17
Changes in Trade Shares with CU
% Changes in Turkish Imports from EU
Reu
-2.71%
Italy
-3.10%
Germany
-2.82%
% Changes in Turkish Imports from ROW
Rest
0.72%
RoMidEast
-0.48
N Africa
0.22%
Russia
France
-2.25%
NAFTA
0.72%
Asia
UK
-3.08%
3.64%
9.59%
Japan
-4.00
-3.00
-2.00
-1.00
1.18%
0.00
China
-2.00
7.40%
0.00
2.00
4.00
6.00
8.00
10.00
12.00
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Concluding Comments
•
CU scenario has some important trade
implications:
–
EU’s share in total Turkish imports declines with the
imposition of the CET as they are replaced by
relatively cheaper imports from third countries.
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• Imposition of EU’s CET lowers import tariff
rates imposed by Turkey on imports from
third countries and causes changes in
trade regime of Turkey by removing ‘trade
diverting’ distortions
• The change in trade regime reduces the
degree of distortion in Turkish markets
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• Endogenous migration scenario also has
some important implications:
– Migration of Turkish labour force from Turkey to
EU27 has mixed effects;
– with a positive effect being generated by
increases in remittances and
– a negative effect due to the reduction in the
supply of labour in Turkey, particularly the
skilled labour, which is relatively scarce.
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