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CEFTA after Croatia Joins the EU: Commotion at the Top

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Even though talks have formally not started yet, all the participants – the remaining CEFTA members, states and their regional players are “strung tight” because Croatia’s departure from this group and its joining of the EU are opening up combinations of “large figures” in the redistribution of the markets of tobacco, sugar and other goods and agricultural products. It is on the skillfulness of the negotiators to protect their interests in that process that the future order of players from certain branches on the regional market will depend, writes Biljana Vukajlović in the may edition od the Business & Finance Magazine.

Where there is Smoke…

As things now stand, Croatia, as an EU member, should have more favorable access to the Serbian market, for example, for pork and poultry meat, fresh milk and certain types of cheese, fresh and processed eggs, onions, cauliflower, carrots, cabbage, watermelons, apples, apricots, southern fruit, wheat, crude sunflower oil, sausages and other canned meat products, jams, water, including mineral water. On the other hand, less favorable access is awaiting, for example, Croatian producers of cattle and pigs, baby beef, lamb and sheep meat, yoghurt and butter, fresh vegetables and certain types of fruit, , corn hybrids, wheat and corn flour, white sugar, fruit juices, wine, certain strong drinks and cigarettes.

It is precisely over the size of the customs duties on imports of cigarettes that the biggest “battle” could be waged during the upcoming talks with the European Commission. At the Ministry of Foreign and Internal Trade and Telecommunications they expect the biggest pressure in the talks to be in the field of the tobacco industry because Croatia, according to the CEFTA agreement, has several times lower customs duties on exports of cigarettes to Serbia than the EU. The customs duty on imports of Croatian cigarettes in Serbia is currently 15 percent (with a quota of 25 tons to which the customs of 10 percent is applied), while, according to the SAA, Serbia will be able to export cigarettes to Croatia customs free.

“With the intention of preparing as best as possible for the upcoming talks, already during the summer we invited all the representatives of Serbia’s tobacco industry and heard their stands regarding the adaptation of the Agreement. In that sense we are absolutely ready, and we will insist on the business conditions for our businessmen not deteriorating when Croatia enters the EU”, says Bojana Todorović.

It is quite certain that the Croatian tobacco industry will not easily give up on the Serbian market on which the largest quantity-wise cigarette imports over the past few years were precisely from that country. According to data of the Serbian Chamber of Commerce (PKS), in 2011 Serbia imported from Croatia 1,385 tons of cigarettes in the value of 10.5 million dollars, which accounted for 16 percent of the total value of Serbian cigarette imports or around three percent of the value of total imports from Croatia.

The customs duties on imports of Croatian cigarettes should be raised in Bosnia-Herzegovina as well from zero to 15 percent, and in Macedonia from 27 to 42 percent, which opens up space for other regional producers also to join in the battle for a larger part of the market pie.

smesna jaja

On the other hand, Serbia’s biggest problem as regards exports will be sugar. For exports to the EU Serbia has a quota of 180,000 tons. When Croatia joins the EU, the quantities of sugar sold on the market of that country will enter the EU quota. This means that without an increase in the quota Serbia will not be able to maintain sugar exports to Croatia at the present level, which, according to PKS data, was more than half a million dollars in 2011.

The other products to which the regime of quotas in exports to the EU applies (wine, beef, trout and carp) will not have a major impact on the balance of trade with Croatia in view of the fact that their share in retail trade is small, they explain at the Serbian Chamber of Commerce.

Battle for the Market

In the campaign for a better position in the CEFTA region after Croatia joins the EU, Serbia’s first challenge could be the market of Bosnia-Herzegovina which is currently, according to the value of the exported goods, the second most important for Croatia, right behind Italy. On that market, in accordance with the SAA, customs duties on Croatian products will be higher for milk and milk products, meat and meat products, wheat, confectionary products, beer, honey, tobacco products, fruit, vegetables, water, juice, sugar, alcoholic beverages… The food producers from Bosnia-Herzegovina which are exporting to Croatia today do not have, however, certificates for exporting to the EU, due to which a surplus could appear, which they will try to sell in other CEFTA countries, including Serbia.

On the markets of Macedonia and Montenegro, the range of products to which higher customs duties will be applied is similar as in Bosnia-Herzegovina and it opens up an opportunity for producers from Serbia in those sectors.

Imports of agricultural products from CEFTA countries to Croatia after it enters the EU will, in most of the cases, be without any quantity limits and customs free. At the Croatian Ministry of Agriculture, however, they remind of the special European regulations (veterinary, for example) which the CEFTA countries will have to meet in order to trade on that market in the future.

“According to preliminary assessments, with the joining of the EU and the change of the trade regime with the CEFTA countries expected is an increased in operating costs because of the growth of the customs duties. Nevertheless, already today, the Croatian food industry has enormous investments in certain neighboring CEFTA countries so that, in that way too, through production in it its own plants, it will manage to mitigate part of the negative effect. That is why we do not expect major disturbances on the market and major losses of our companies”, they say at the Croatian Ministry of Agriculture.

Those responsible in Serbia’s trade expect, on the other hand, domestic businessmen to make maximal use of the fact that, when Croatian enters the EU, the customs duties for that market will be lower than they are today and that all the non-customs barriers that have existed until now, especially in exports of cigarettes to Croatia, will be abolished.

To what extent will Serbia and the other CEFTA countries manage to make use of the new circumstances will depend, nevertheless, on many more factors. Some of them, according to Bojana Todorović, are for lifting the numerous barriers in trading in goods and services, the improvement of the logistics in trade, and the harmonization of regulations with EU and WTO regulations so as to increase competitiveness. The results will also depend on whether the CEFTA countries have managed to create a favorable environment for business operations and investing, with clear, stable and predictable rules, so as to attract as many investments as possible to the production sectors that generate exports of products with a higher degree of value added, as well as on the level of redirecting from trade to cooperation, i.e. to joint production in the region, using the possibility of the diagonal cumulating of the origin, for the placement of “CEFTA products” on the market of the EU and of other countries.

The chairman of the Administrative Board of the Serbian Society of Agrarian Economists,

Danilo Tomić, speaking recently about the (un)used opportunities of Serbian agriculture on the CEFTA market, said, among other things, that the producers here must increase the competitiveness of their products and organize better. It is necessary to adapt Serbia’s agrarian production to the climatic changes and the requests of the market. For decades now, according to him, there has been talk about exports of finished products, while raw material is still mostly exported. It is high time for this trend to change.


The share of the CEFTA member countries in Serbia’s total exports is around 30 percent. In Serbia’s total imports, the share of these countries is around eight percent. Since the start of the implementation of bilateral free trade agreements and CEFTA in 2006, Serbia has been registering a surplus in trade with the CEFTA member countries, which was around 1.5 billion dollars in 2011.

The current exports to the CEFTA countries account for 20 percent of Croatia’s total exports. Last year, Croatia exported products in the value of 1.66 billion euros, two times more than was imported from CEFTA to Croatia.

Business & finance 97

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