Southeast European Times, 14/02/2006

EU eyes free trade zone in Balkans

The European Commission has proposed replacing the existing web of bilateral trade agreements in the Balkans with a regional free trade agreement — a move it says would boost economic prospects. However, the idea has met with opposition in Croatia.

By Kristina Cuk for Southeast European Times in Zagreb — 14/02/06

EU Enlargement Commissioner Olli Rehn and European Commission (EC) chairman Jose Manual Barosso will arrive in Zagreb Wednesday (15 February), the first stop in a three-day tour of the Western Balkans. High on their agenda will be the EC’s proposal for establishing a free trade zone that would include Albania, Bosnia and Herzegovina, Croatia, Macedonia and Serbia-Montenegro.

While some 31 bilateral trade agreements have been signed in the region, they have proved inadequate and should be replaced by a broader regional agreement, the EC believes. Regional trade remains below EC expectations, in part because the existing agreements have not been implemented fully.

"The main goal is to encourage strengthening of trade and investment by transforming of bilateral agreements for free trade in regional agreements and a unique zone," Rehn said.

However, the idea has not been welcomed in Croatia. Many view it with suspicion, regarding it as an attempt to recreate Yugoslavia. Prime Minister Ivo Sanader, who must somehow accommodate both the EC and domestic public opinion, has responded by putting forward an alternate proposal: instead of setting up a new trade zone, why not bring more SEE countries into the existing Central Europe Free Trade Agreement (CEFTA)?

Three countries — Bulgaria, Croatia and Romania — are currently part of CEFTA, though Bulgaria and Romania will leave after they enter the EU. In Sanader’s opinion, the agreement should be extended to include not only all the Western Balkan countries, but also Moldova.

Brussels has not ruled out Sanader’s proposal. "We are still considering whether [the new trade zone] should be based on CEFTA or something else. I think that CEFTA is a possibility which we are considering carefully," Rehn told Croatian television late last month.

At the same time, he sought to reassure Croatians that a free trade zone poses no threat to their sovereignty.

"Let me be clear and open, it is entire nonsense to assume that someone could try to create a new Yugoslavia," Rehn said. The point of the EC proposal is to "strengthen trade and investment in the Western Balkans by creating a regional free trade zone that would replace the existing network of bilateral arrangements," he added.

Croatia stands to benefit from such a zone, according to President Stipe Mesic. "The advice of the EC is making it possible for Croatian products to enter more strongly in the market of neighbouring countries, because we are technologically more developed," Mesic said.

"However, as soon as somebody mentions a multilateral treaty like this one, there is suspicion," he added.