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Alexandroupolis, Greece 5-7 December 2004 The Emergence of a Free Trade Area in SEE: Why, How, What and Where to? Per Magnus Wijkman Technical Expert to Working Group on Trade Liberalisation and Facilitation of the Stability Pact. I. Why liberalise and facilitate trade?. - PowerPoint PPT Presentation
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Alexandroupolis, GreeceAlexandroupolis, Greece
5-7 December 20045-7 December 2004
The Emergence of a Free Trade Area in SEE:The Emergence of a Free Trade Area in SEE:
Why, How, What and Where to?Why, How, What and Where to?
Per Magnus WijkmanPer Magnus Wijkman
Technical Expert to Working Group on Trade Technical Expert to Working Group on Trade Liberalisation and Facilitation of the Stability Pact Liberalisation and Facilitation of the Stability Pact
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I. Why liberalise and facilitate trade?
To ’join Europe’ requires postwar reconciliation and reconstruction in the region
Trade contributes importantly to both objectives
Good neighbours make good traders and vice versa
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Trade liberalisation may:
triple intra-regional trade
quadruple trade between Western and Eastern Balkans
between Western Balkans and Romania (8x)
between Western Balkans and Bulgaria (3x)
double trade within Western BalkansSource: World Bank
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Potential growth of intra-regional trade Source: World Bank
MacedoniaGDP 3,401 US
AlbaniaGDP 3,665 US
BiHGDP 4,387 US
CroatiaGDP 20,211 US
SaMGDP 12,020 US
RomaniaGDP 34,027 US
BulgariaGDP 12,403 US
518
243
320
74
2
367
24
11500
112
22 MacedoniaGDP 3,401 US
MacedoniaGDP 3,401 US
AlbaniaGDP 3,665 US
AlbaniaGDP 3,665 US
BiHGDP 4,387 US
BiHGDP 4,387 US
CroatiaGDP 20,211 USCroatiaGDP 20,211 US
SaMGDP 12,020 US
SaMGDP 12,020 US
RomaniaGDP 34,027 USRomaniaGDP 34,027 US
BulgariaGDP 12,403 US
BulgariaGDP 12,403 US
518
243
320
74
2
367
24
11500
112
22
MacedoniaGDP 3,401 US
AlbaniaGDP 3,665 US
BiHGDP 4,387 US
CroatiaGDP 20,211 US
SaMGDP 12,020 US
RomaniaGDP 34,027 US
BulgariaGDP 12,403 US
1,524
1,869
225
411
200
284
218
285321
287
147 MacedoniaGDP 3,401 US
MacedoniaGDP 3,401 US
AlbaniaGDP 3,665 US
AlbaniaGDP 3,665 US
BiHGDP 4,387 US
BiHGDP 4,387 US
CroatiaGDP 20,211 USCroatiaGDP 20,211 US
SaMGDP 12,020 US
SaMGDP 12,020 US
RomaniaGDP 34,027 USRomaniaGDP 34,027 US
BulgariaGDP 12,403 US
BulgariaGDP 12,403 US
1,524
1,869
225
411
200
284
218
285321
287
147
2000
Potential
Potential
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II. How to liberalise trade
Big Bang (A single agreement)
OR
Evolutionary process (A network of bilateral agreements)
…the first is easier to negotiate, to administer, and to apply
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Six bilateral Free Trade Agreements existed prior to June 2001
Croatia
BiH
Albania
S & M
Macedonia
Moldova
Romania
Bulgaria
One country had three bilaterals,One country had three bilaterals,three countries had two bilateralsthree countries had two bilateralsand one had one agreement. and one had one agreement.
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Uncertain of success and risk avert, countries chose the network approach
Seven SEE Ministers sign Statement of Intent to liberalise trade in Geneva, January 2001 and Memorandum of Understanding at Ministerial meeting in Brussels, June 2001. Moldova joins.
Target: free trade in SEE region.
Milestone: conclude at least 1/2of the agreements and open negotiations on all by Ministerial in June 2002.
Deadline: conclude 21 bilateral trade agreements by end of 2002.
…… a tight schedule but all 28 agreements are now in force.
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Network of Free Trade Agreements February 22, 2002
Croatia
BiH
Albania
S & M
Macedonia
Moldova
Romania
Bulgaria
Existing before June 27 2001 Signed after June 27 2001 Under negotiation
Initial scepticism lead to slow start. Only 2 negotiations concluded and 8 opened in 8 months. Most activity in Western Balkans.
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Network of Free Trade Agreements as of May 8, 2002
Croatia
BiH
Albania
S & M
Macedonia
Moldova
Romania
Bulgaria
Existing before June 27 2001 Signed after June 27 2001 Under negotiation
Breakthrough at Washington? Only 2 more negotiations Breakthrough at Washington? Only 2 more negotiations concluded and 3 more opened. But Eastern Balkans catching up-concluded and 3 more opened. But Eastern Balkans catching up-greater balance. Concern focuses on Bulgaria and FRY. greater balance. Concern focuses on Bulgaria and FRY.
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Network of Free Trade Agreements as of mid October 2002
Croatia
BiH
Albania
Yugoslavia
Macedonia
Moldova
Romania
Bulgaria
5 existing before June 27 2001 6 signed after June 27 2001 10 under negotiation(Numbers exclude Moldova)Commitment: 21 signed by end of 2002.
June milestone met in October. FRY and Bulgaria negotiating with all. But June milestone met in October. FRY and Bulgaria negotiating with all. But 10 negotiations to be completed in 2 months!10 negotiations to be completed in 2 months!
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Chairman of WT II in November calls a crisis meeting
Show-and-tell time set for December 2002 registers major progress
Establish which countries would fail to meet their commitments by Ministers (only two agreements – 3 countries)
Stop the clock over at year end to allow one remaining agreement to be finalised
Success in February 2003
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Reasons for success
SEE ownership, small countries lead
Dedicated WG leadership, high-level representation, concrete targets, deadline and milestones, peer pressure, professional expertise, entrepreneurial secretariat
Donor country support, essential for candidate countries
EC overcame SEE scepticism by SAAs and by Thessaloniki Declaration 2003
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III. What do the FTAs provide?
Free trade in goods within six years –tariffs and non-tariff barriers abolished Almost Completed
Harmonisation of trade-related legislation based on EU acquis and WTO rules and procedures In full progress
Evolutionary clause for liberalising trade in services Just starting
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High-tariff countries and productsAverage Tariff Rates for Agricultural and
Industrial Goods
0,0
5,0
10,0
15,0
20,0
25,0
0,0 5,0 10,0 15,0 20,0 25,0
Agricultural Tariffs
Indu
stri
al T
ariff
s
Bosnia
Albania
Moldova
Croatia
Bulgaria
Serbia & Montenegro
Macedonia
Romania
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Eliminate tariffs on 90% of traded goods1. Zero tariffs for manufactures in almost all
agreements.
2. Zero tariffs for agricultural goods in only five agreements. Virtually no liberalisation of agriculture in six agreements. Limited in rest.
3. Thus, about half the agreements pass the overall 90 % test. Seven fail the overall test, rest borderline.
4. Agriculture is the critical sector for 5-10 agreements to conform to Mou.
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Seven agreements fail both criteria of trade coverage – ten pass bothGem report, July 2004
Alb-Mol, Alb-MacAlb-S&M, BiH-BulBiH-Rom, Cro-Mac, Cro-S&M
Alb-Bul, Alb-Cro Bul-Mac, Bul-Mol Cro-Rom, Mac-Rom Mac-Mol
Alb-Rom, Bul-S&M Cro-Mol, Rom-S&M,
Fail import-weighted coverage test
Fail HS-lines coverage test test
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Measures under way to facilitate trade
Simplify customs procedures
Implement common rules of origin
Adopt EU competition policy
Implement international SPS procedures
Improve regional transport infrastructure
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Customs procedures
The MoU requires countries to ”simplify customs procedures, …harmonise legislation, documentation and procedures with those of the EU; engage in mutual assistance between customs administrations…”
Queues and problems at border crossings are costly for business. Time is money.
Considerable TA being provided, EC, World Bank also by USA, Ireland in SP
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Rules of origin
The MoU calls on the countries to apply a ”common set of preferential rules of origin”.
Major activity for 2005/6 is to implement Pan-european preferential rules of origin
Target is to cumulate origin diagonally within the SEE region – crucial for domestic and foreign investors
This will prove to EU that SEE countries are ready to participate in cumulation of origin on a Pan-European basis
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Competition policy
MoU requires the countries to ”harmonise their competition law with that of the EU” and to strengthen the enforcement capacity of the relevant authorities.
If SEE countries adopt EU rules they will not use countervailing duties or anti-dumping measures against each other
CARDS/OECD assistance in 2005 on implementing competition rules.
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Sanitary and phytosanitary standards
The MoU requires that legislation inter alia ”relating to plant, animal and human health … are compatible with the provisions of WTO, EU…”
Meeting SPS is essential for boosting agriculture exports and improving farmers income.
Major programmes for Food Quality and Infrastructure in 2003-07 by Sweden
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Transport and communications infrastructure
Transport infrastructure essential to facilitate trade
Credible commitment to the SEE free trade area is crucial to obtain funding for regional infrastructure projects
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Services
The MoU requires a clause in FTAs ”foreseeing the future liberalisation of trade in services”
Sweden funded a major study by the OECD to assess the ”prospects for regional co-operation”
EC CARDS is funding a major programme to harmonise regulatory regimes for key services on the EU acquis.
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IV. Where is trade liberalisation going?
Increase transparency for business through one agreement rather than 28
Inform business and consult with it
Create new institutions to manage a more extensive and complex agreement
Increase regional ownership of the process and its institutions
..The Working Group on Trade Liberalisation and Facilitation is currently considering these issues
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Congratulations to the countries of the region and good luck!
www.stabilitypact.org
