Predrag Bjeli Professor of International Trade Faculty of Economics University of Belgrade

COMPETITIVENESS, TRADE REGIMES AND SPECIALISATION IN THE SOUTHEAST EUROPE

Resime of the Speech held at RCC Conference

Overcoming the Economic Crisis and Developing Competitive Economies Sarajevo, 25.02.2010.

Western Balkans in 2020

Countries in transition are at a specific phase of its economic development and the change in economic system will lead to restructuring of the economy. In order to create a new economic structure fully based on international trade specialization principles one economy has to now which trade regime will be prevalent in the future. There are now three prevailing international trade regimes dominant for West Balkan Economies: CEFTA 2006 Trade regime; Common EU External Trade Regime; World Trade Organization Trade Regime.

Trade regime inforce between CEFTA 2006 is a free trade yone so it does not have any bearing on trade relations of West Balkan countries with nonmember economies of CEFTA 2006. Economies in WB are creating CEFTA 2006 trade regime but this framework will be temporary so companies from WB must realized that the framework of their business activities will be trade regime set by a Common EU Trade policy. Common EU External Trade Regime will be the dominant trade regime for business of West Balkan enterprises and they have to specialise according to this regime. This regime gives rules on trade relations to third countries, non-members of the EU. This regime is a future for West Balkan economies but it must be taken into account even now if companies from West Balkan want to find an appropriate niche at EU single market. International Trade regime created by WTO regulates trade relations with countries non-members of CEFTA, and in the future non-member of the EU. It is extremlz important that countries from the region Montenegro, 1

Serbia and Bosnia and Herzegovina - bear this fact in mind in accession negotiation that will result in full WTO memebership. Even if CEFTA 2006 is subregional and transitory integration it is the dominant regional trade initiative in our region. CEFTA 2006 has a good precondition to rise welfare in the region since all CEFTA 2006 economies have a large share of intraregional trade (except Moldova). Table 1: West Balkans Economies Share in CEFTA 2006 Intraregional Goods Trade (percentage) Customs Territory Albania Bosnia and Herzegovina Croatia Macedonia (FYR) Moldova Montenegro Serbia Kosovo (UNMIK) EXPORT 2007 2008 0.70 1.03 17.59 15.07 32.44 11.74 0.10 2.96 33.68 0.79 39.66 11.26 0.1 2.12 29.12 1.54 IMPORT 2007 2008 3.42 2.26 36.25 43.93 16.65 7.87 0.09 15.98 19.42 0.32 9.83 4.99 0.08 10.53 11.84 16.49

Source: Calculations based on EUROSTAT data and national statistical offices

Concerning CEFTA 2006 intraregional exports we can observe that most developed CEFTA 2006 members, Croatia and Serbia, have largest share of intraregional export, which combined are above 60% in 2007 and above 70% in 2008. Bosnia and Herzegovina and Macedonia have significant shares in CEFTA 2006 intraregional export flows while all other CEFTA 2006 members have small shares in intraregional exports. But concerning shares in CEFTA 2006 import flows member economy that is dominant is Bosnia and Herzegovina with approximately 44% share in total CEFTA 2006 imports in 2008. Kosovo (UNMIK), Serbia and Montenegro have also significant shares in CEFTA 2006 import flows.