In the Black Sea town of Bafra, the talk is of President Ahmet Necdet Sezer's veto on July 6 of the controversial Tobacco Law. This is tobacco country, home of the unfiltered cigarette and the heady, aromatic leaf that goes into it. At the offices of the Chamber of Agriculture, the state-sponsored body that claims to represent farmers' interests, the mood is one of jubilation.

"It is a bad law," says the Chamber's secretary, Mehmet Ali Coskun, of the bill, which sought to introduce market reforms into Turkey's heavily subsidized and protected tobacco industry. "Over 4 million people depend on tobacco for a living, and this law would have destroyed domestic industry and delivered it into the hands of foreign monopolies. The President was right to use his veto," Coskun said.

It is a familiar argument for the continuation of Soviet-style planning in agriculture, and one shared by a coalition of influential academics, officials of the state-run tobacco monopoly TEKEL, and nationalists from both the right and the left of the political spectrum.

But it is not the view of a significant number of tobacco farmers in Bafra. "The state should stop interfering in Turkish farming, we want nothing more and nothing less," says Fazli Gorgec, president of the local Tobacco Growers Cooperative, a grassroots farmers' organization.

"We have had enough of populist policies that get us nowhere," Gorgec continued.. "We want the tobacco sector to be reorganized on rational lines." Gorgec believes that growers in Bafra could get a better price for their high-quality leaf under a true market system, if the state did not have to subsidize uneconomical production elsewhere.

He has a point. Turkey produces two-thirds of the world's Oriental tobacco, which is blended into many international brands. Until now, the government supported tobacco farmers by buying the whole of the crop at a fixed price every year. But the price was often set with political considerations in mind, at levels bearing no resemblance to the true market value. The difference was chalked up as "duty losses" to the state-owned Agricultural Bank, contributing to the black hole in public finances that is at the root of Turkey's current economic crisis.

The distorted price-support system also encouraged overproduction and the build-up of an 800,000-ton tobacco surplus in TEKEL's depots -- equivalent to more than three years of production. To keep prices stable, the tobacco will be left to rot, or, as has happened before, will literally have to go up in smoke.

The proposed Tobacco Law, a pre-condition for the IMF bailout of the Turkish economy, sought to address some of these abnormalities, by replacing the price support system with one based on competitive auctions and contract farming. [For additional information on Turkish economic reforms see EurasiaNet's economics archives]. It envisaged limiting the areas where tobacco could be grown, and also mandated the incremental privatization of TEKEL. It also called for the lifting of restrictions on imports of cigarettes made from Virginia tobacco, which Turkish consumers have come to prefer.

President Sezer cited the need to protect domestic growers and manufacturers as his reasons for vetoing the legislation. He also stressed the potential impact on society. "The law fails to set out how domestic growers and their families are going to compensated for their loss of income," Mr Sezer said. "This will inevitably have huge social consequences."

Hamit Genc, a Bafra tobacco farmer, says he doesn't buy the social argument, adding that many farmers are rewarded for producing an inferior product. "The government is paying out good money to growers for tobacco that is no better than straw," Genc says. "If the government wants to help poor farmers it should put them on direct income support, not force them to grow tobacco that cannot be sold."

It would not be so bad if the subsidy system had worked, but it has done nothing to alleviate rural poverty, as the average income of farmers is still less than one-third of average per capita GDP. Genc believes the President received bad advice on vetoing the bill. He and other farmers are eager to embrace free enterprise. "A lot of farmers have realized they can make more money growing other crops, like clover. Farmers have wised up to the way the world is going, but the same cannot be said of some of these politicians."

Farmers like Hamit Genc and Fazli Gorgec are merely articulating from their own experience what analysts have been saying for years -- that Turkish agriculture is at a crossroads. "Forty-five percent of Turkey's labor force is employed in agriculture, generating less than 14 percent of national income, and only 7 percent of exports," writes Morgan Stanley Dean Witter's Turkish analyst Serhan Cevik.

"In order to catch up with industrialized economies, Turkey must ... accelerate the transition from an agrarian economy to a modern industrial and services-based economic structure," Cevik added.

The scale of the challenge is enormous: To reach EU levels of productivity Turkey would have to reduce its agricultural workforce from 9 million to just 2 million. A number of World Bank programs are on offer to help deal with the shock.

Back in the capital, Prime Minister Bulent Ecevit has said that the government is determined to push through the Tobacco Law as it stands. If parliament resubmits the bill without alteration, the president will be obliged to ratify. Opponents have vowed that if that happens, they will seek to have the law overturned in the Constitutional Court. But before they go down that road, perhaps they should listen to farmers in Bafra.