VZCZCXRO2416
RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #1100/01 2971329
ZNR UUUUU ZZH
R 231329Z OCT 08
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0559
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCPDOC/DEPARTMENT OF COMMERCE WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE

UNCLAS SECTION 01 OF 02 BELGRADE 001100 
 
SIPDIS 
USDOC FOR 4232/ITA/MAC/EUR/OEERIS/SSAVICH 
 
E.O. 12958: N/A 
TAGS: ECON EINV ETRD EFIN SR
SUBJECT: SERBIA AND THE CENTRAL EUROPEAN FREE TRADE AGREEMENT - 
MODERATE SUCCESS 
 
SUMMARY 
------- 
 
¶1.  One year after Serbia ratified the Central European Free Trade 
Agreement (CEFTA) Serbian trade with its regional partners is 
expanding, but Serbian integration into a regional market is still 
far from a reality.  CEFTA's founders envisaged the elimination of 
all trade barriers and the formation of a common framework that 
would give investors access to a market of 30 million people.  The 
CEFTA countries combined are Serbia's second largest regional trade 
partner after the EU.  In 2007, Serbia recorded a $1.33 billion 
trade surplus with CEFTA.  Although trade has been lucrative for 
Serbia, Serbian exporters continue to encounter tariff and 
non-tariff barriers.  Implementation of CEFTA remains a testing 
ground for Serbia and its aspirations for EU and WTO accession.  END 
SUMMARY. 
 
CENTRAL EUROPEAN FREE TRADE AGREEMENT 
------------------------------------- 
 
¶2.  Serbia signed the updated Central European Free Trade Agreement 
(CEFTA) in December of 2006, replacing 32 bilateral free trade 
agreements.  CEFTA signatories currently include Albania, Bosnia and 
Herzegovina, Croatia, Macedonia, Moldova, Montenegro, Serbia and 
UNMIK/Kosovo.  Serbia ratified CEFTA on October 24, 2007.  With a 
market of 30 million people CEFTA aims by 2011 to eliminate 
non-tariff barriers, liberalize the services industry, grant equal 
treatment to domestic and regional investors, open the public 
procurement market, protect IPR rights, improve dispute resolution 
mechanisms, and apply WTO-compliant rules. 
 
SERBIA-CEFTA TRADE UP 46%, $1.33 BILLION TRADE SURPLUS 
--------------------------------------------- --------- 
 
¶3.  Collectively, CEFTA countries are Serbia's second largest 
regional foreign trade partner behind the EU.  Serbian trade with 
CEFTA countries, including Kosovo, increased by 46% from $2.9 
billion in 2006 to $4.4 billion in 2007.  Similar trends continued 
in the first half of 2008 with exports up 47% and imports up 41%. 
Trade with CEFTA countries in 2007 accounted for 16% of Serbia's 
total trade.  CEFTA countries accounted for 32% of Serbia's exports 
and 8% of Serbia's imports.  In the last four years, exports to 
CEFTA countries grew from 29% to 32% of Serbia's total exports and 
imports from 5.6% to 8.2%.  Industrial products account for 72% of 
total Serbian trade with CEFTA, while agricultural products account 
for 24%.  Serbia recorded a $1.33 billion trade surplus with CEFTA 
countries in 2007, with $2.85 billion in exports and $1.52 billion 
of imports.  In the first half of 2008, the surplus reached $919 
million, with exports at $1.85 billion and imports at $927 million. 
 
 
CEFTA FACES NON-TARIFF BARRIERS 
------------------------------- 
 
¶4.  In a meeting with us on September 19, Dejan Jovovic and Zorica 
Radovanovic from the Serbian Chamber of Commerce said Serbian 
businesses encountered many non-tariff barriers (NTB) in trading 
with CEFTA countries.  Frequently reported barriers included customs 
procedures, non-recognition of certificates of quality, additional 
verification of documentation, and regulations not in accordance 
with international standards.  Overall, the Chamber of Commerce said 
CEFTA was good for Serbia, but that foreign investors were more 
attracted to Serbia because of its free trade agreement with Russia 
than with CEFTA countries. 
 
¶5.  In a meeting on September 16, Assistant Minister of Economy 
Bojana Todorovic gave us anecdotal examples of NTBs.  Todorovic said 
that Montenegro had imposed a ban on egg imports from Serbia after a 
poultry health scare.  Todorovic stressed that CEFTA was an 
opportunity to build stronger relations between countries which had 
recently been in conflict. 
 
¶6.  On October 2, Mirjana Karadzic, export manager for the dairy 
firm Imlek told us that CEFTA did not bring Imlek any benefits that 
were not already outlined in previous bilateral agreements.  Many 
CEFTA countries protected their agriculture sector with high 
tariffs.  Eliminating high agricultural tariffs was last on the list 
of CEFTA implementation so Imlek was focusing on securing an EU 
export license. 
 
COMMENT 
------- 
 
¶7.  After one year, Serbia has benefited modestly from CEFTA.  This 
positive trend could increase as more tariff and non-tariff barriers 
are lifted under the agreement.  With the looming global economic 
downturn, Serbia's trade relations with its CEFTA neighbors may 
offer some cushion from the loss of trade growth with more developed 
markets.  At the minimum, CEFTA is a good training ground where 
 
BELGRADE 00001100  002 OF 002 
 
 
Serbia can work on legislation and trade practices in preparation 
for WTO and EU accession.  End Comment. 
 
MUNTER