Companies Feel Consequences of EU Trade Policy

Ljubljana, 16 April

Almost one year into EU membership, Slovenian companies are feeling the positive and negative effects of the single European market and the fact that trade is governed by EU regulations. While they have unlimited access to a market with 450 million consumers, they also feel the negative consequences of the termination of free trade agreements with CEFTA and countries of the former Yugoslavia.

The elimination of preferential trade deals, in particular with Croatia, Macedonia and Bosnia-Herzegovina, has hit several exporters quite hard, in particular the food industry.
Customs duties increased over night, which severely curbed the companies' competitive edge over rivals from the EU. On the other hand, imports have become cheaper as the EU has preferential trade deals with most of them.
Customs duties increased most for Bosnia-Herzegovina and least for Croatia. The trade conditions have actually improved for Serbia-Montenegro, the only country in the former Yugoslavia that had not had a free trade deal with Slovenia.
Trade with Croatia, Slovenia's most important export market in the region, was badly hit after 1 May but the situation improved on 1 January 2005 when the EU factored in the ten newcomers to its quotas.
The second market where Slovenia lost free access following EU accession is Macedonia. Here, too, Slovenia managed to transfer almost all the quotas to the EU-Macedonia stabilisation and association agreement.
The bilateral free-trade deal provided concessions only for products subject to quotas, but all others were eligible for general tariffs imposed by Macedonia.
By joining the stabilisation agreement, Slovenia got to partake in additional benefits for certain groups of products. However, these are mostly products that do not play a significant role in Slovenia's exports to Macedonia.
Trade with Bosnia-Herzegovina is subject to full tariffs, which compares unfavourably with the fact that the customs rate was reduced to 30 percent of the basic rate under the free-trade deal.
Moreover, since Bosnia-Herzegovina has several free-trade agreements, Slovenian products face cheaper competition from Croatia, Serbia-Montenegro, Turkey, Macedonia and other lower-cost countries.
Imports from Bosnia are subject to no tariffs, which boosted Bosnia's exports and left Slovenia's exports to the country stagnating.
Serbia-Montenegro is a special case, as it is the only country from the former Yugoslavia with which Slovenia had no trade accord. Imports, which had been subject to full tariffs, are now tariff-free while exports are still liable for the came tariff rates as before.
Imports have thus increased by 30 percent, while exports have been increasing, albeit at a slower rate.
Overall, EU entry brought no major benefits for exporters to the Western Balkans, while importers are having a boon.
It is true that the Union has preferential trade deals with several major markets such as the US, Canada, Japan and China, but these countries account for only a fraction of Slovenia's non-EU trade.

Companies Feel Consequences of EU Trade Policy

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