Analysis: How will Kosovo’s newly Imposed Tariffs influence CEFTA Agreement?

Kosovo Government passed a decision on introducing 100 percent customs duties for products imported from Bosnia and Herzegovina and Serbia. The tariffs were adopted at the proposal of Trade Minister Endrit Shala with an aim to strengthen the domestic production, statehood and economy of Kosovo, the decision stated.

Bosnia and Herzegovina, Kosovo (or more accurately, the United Nations Interim Administration Mission in Kosovo (UNMIK) on behalf of Kosovo), and Serbia are all members of CEFTA, as well as Albania, Montenegro, and Moldova. CEFTA is meant to ensure free trade between these countries. The unilateral imposition of tariffs goes against the obligations of CEFTA members. The EU supports CEFTA, seeing it as important to encouraging trade and cooperation between countries and preparing them for full EU membership. Eight current EU member states are former members of CEFTA. Kosovo has previously imposed tariffs and other barriers on CEFTA members and has threatened to leave the association. Even holding the Presidency of CEFTA did not stop Kosovo from imposing the latest tariffs. However, each time Kosovo has backed down largely due to strong opposition from the EU.

Serbia is the biggest exporter among the CEFTA countries, and so is its greatest supporter. It has been keen to push for further economic integration through a common market. Kosovo and Albania have strongly opposed this move, fearing Serbian economic domination. Kosovo’s government is particularly fearful of this for historical reasons, seeing Serbian investment as a backdoor for greater political influence in what the Government of Serbia still officially views as a Serbia’s southern province.

The tariffs have already caused problems to the EU-mediated dialogue process between Serbia and Kosovo. The tariffs could also cause problems domestically, with Kosovo’s Serbs threatening protests. Kosovo’s previous tariff regimes have not lasted long, suggesting these latest tariffs are also likely to be short-lived.

Nevertheless, by taking the step of imposing tariffs multiple times, Kosovo’s governments have continually sought to highlight the non-tariff barriers that result from other CEFTA members’ failure to recognize Kosovo as an independent state. There is no adequate method for addressing this issue within CEFTA. The EU-mediated dialogue between Kosovo and Serbia should resolve the dispute through a legally binding agreement that regulates their relations. Until such an agreement is reached, Bosnia and Herzegovina’s and Serbia’s inclusion in a trade agreement with a country that they do not recognize is an inescapable contradiction that will continue to cause disagreement and discord in South East Europe. Kosovo’s imposition of tariffs adds to and potentially prolongs its ongoing political dispute with Serbia.

Without recognition from Serbia and Bosnia and Herzegovina, it is doubtful that Kosovo will enjoy the full benefits of CEFTA membership soon. The grievance, combined with the political usefulness of tariff to Kosovo’s politicians means that it is probable that Kosovo will continue to periodically impose tariffs and other barriers to trade with Serbia and Bosnia and Herzegovina. It is unlikely, however, they will be sustained for long periods, mainly because they are strongly opposed by the EU.

Exports from BiH to Kosovo amount to 120 million KM (70 million U.S. dollars) annually. Most exported products are milk, oil and paper, amounting to 4.0 percent of exports to CEFTA countries. After Kosovo decision, 10,000 working places in BiH are endangered, experts say.


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