Academic journal article The European Journal of Comparative Economics

Trade in Southeast Europe: Recent Trends and Some Policy Implications1

Academic journal article The European Journal of Comparative Economics

Trade in Southeast Europe: Recent Trends and Some Policy Implications1

Article excerpt

Abstract

Trade liberalisation in Southeast Europe (SEE) has been strongly promoted by the European Union (EU) in recent years, as part of its initiatives aimed at stimulating regional cooperation among the SEE countries. The Stabilisation and Association Process launched in 1999 for the five countries of the so-called western Balkans - Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia and Serbia and Montenegro - explicitly requires the implementation of regional cooperation as a condition for speeding up the process of EU integration. In the area of economic cooperation, trade liberalisation has become one of the principal instrument for promoting these objectives. A Memorandum of Understanding on Trade Liberalisation and Facilitation was signed on 27 June 2001 in Brussels by the Foreign Trade Ministers of SEE countries, which envisaged the conclusion of bilateral free trade agreements. The paper analyses recent trends in trade of the SEE countries. Some general features of the SEE region in 1989 are first presented (section 2). The impact of the political and economic events of the 1990s on trade relations among the SEE countries is then considered (section 3). Trade patterns of the SEE countries over the last five years are analysed in some detail (section 4). Some controversial issues raised in recent debates on trade liberalisation in SEE are also discussed, explaining why interpretations sometimes differ (section 5). The main conclusions and some policy implications are given at the end (section 6).

JEL Classification: P33, F13, F15, F53

Keywords: Trade flows, Trade liberalisation, Economic integration, Regional cooperation, EU policies towards Southeast Europe

1. Background

Trade liberalisation in Southeast Europe (SEE) has been strongly promoted by the European Union (EU) in recent years, as part of its initiatives aimed at stimulating regional cooperation among the SEE countries. Although regional cooperation in SEE has been a declared objective of the EU since as early as 1996, when the EU formulated its 'Regional Approach' for the western Balkan countries - Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia and FR Yugoslavia (Serbia and Montenegro) - due to adverse political conditions in the region very little progress had been achieved. After the end of the Kosovo war, in mid-1999, the EU launched the Stabilisation and Association Process (SAP) for the five countries of the western Balkans - or the SEE-5 - which explicitly requires that these countries implement regional cooperation in various areas.

In the economics field, trade liberalisation has become one of the principal instruments for promoting regional cooperation in SEE. The trade liberalisation initiative has been carried forward within the activities of the Stability Pact for SEE adopted in mid-1999 to help reconstruction efforts of the SEE countries affected by the 1999 conflict - in addition to the SEE-5, also Bulgaria and Romania (or the SEE-7). A Memorandum of Understanding on Trade Liberalisation and Facilitation (MoU) was signed on 27 June 2001 in Brussels by the Foreign Trade Ministers of the seven SEE countries, while Moldova has also joined in the meantime.2 The MoU envisaged the conclusion of bilateral free trade agreements (FTA) among the seven (today eight) SEE countries, providing for a substantial reduction or elimination of tariff barriers. After some initial delays, the process has by now been completed. Whereas at the end of 2003, some 23 (out of a total of 28) of these free trade agreements had been signed, of which a number of them were also waiting to be ratified, by early 2006 some 31 bilateral FTAs have been signed and ratified (only for UNMIK-Kosovo has the process been somewhat delayed).

Since these bilateral FTAs have been criticised as representing a 'spaghetti bowl' of differentiated trade relations, creating risks of trade diversion and trade deflection, another important agreement has been concluded among the SEE countries in April 2006 in Bucharest - the Bucharest Declaration. …

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