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Agreement liberalises trade between Macedonia and Serbia

Southeast European Times

Agreement liberalises trade between Macedonia and Serbia

With a free trade deal in effect as of 1 June, Macedonia and Serbia have eliminated trade barriers and established what some are calling a single market.

By Zoran Nikolovski for Southeast European Times in Skopje

20 June 2006

"Any Free Trade Agreement can only contribute to strengthening regional co-operation, and we only expect positive results from that," said Macedonian Economy Minister Fatmir Besimi. [Macedonia Government]

Under a free trade agreement that went into effect at the beginning of the month, Macedonian and Serbian businesses are now carrying out trade and co-operation in a fully liberalised market. The deal provides for eliminating trade barriers such as custom duties and quotas.

Originally signed in October 2005 by Macedonian Economy Minister Fatmir Besimi and his counterpart from the former state union of Serbia-Montenegro, Predrag Ivanovic, the deal went into effect on 1 June. It carries over to Serbia, as the successor of the now-defunct union.

Experts say the deal will help consumers in both countries by providing cheaper products, as well as improving competitiveness and helping to woo foreign investors — who will now be able to do business in what some analysts are describing as a single market.

"Both our and your producers will be able to prove themselves and compete with their price and quality in the new common market," Ivanovic said at the signing ceremony. "This is beneficial for both our and your economies since both need better competitive capacities."

His Macedonian counterpart said an important step has been taken towards the complete liberalisation of the Balkan market. "Any free trade agreement can only contribute to strengthening regional co-operation, and we only expect positive results from that," Besimi said.

Serbia is generally seen as having the advantage when it comes to dairy and wheat production, while Macedonia is more competitive in early vegetables. Consumers in both countries will benefit from cheaper products.

In Macedonia, opposition to the agreement comes mainly from food producers, who say they are being put at a disadvantage because their competitors in Serbia receive state subsidies.

Serbian dairies receive state subsidies for exports, amounting to 20 per cent of the price. This is complemented by production incentives, which on average amount to up to 10 percent of the production price. Macedonian dairy producers are lobbying for equal conditions.

Serbia is one of Macedonia’s most important trade partners. In 2004 alone, trade between the two countries was 346.6m euros. Trade in the first eight months of 2005 was 20 percent higher, according to the economy ministry.

Major turbulence in the market is not expected, as around 97 per cent of trade was already liberalised under a 1996 agreement. Macedonia protected agricultural products with customs duties, as did Serbia and Montenegro for its ferrous metal industry. The new deal also provides for protective mechanisms, such as temporary cessation of imports, if significant disbalances occur.

A committee consisting of representatives of the two countries is responsible for taking steps in that case.