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EU Trade Policy and Western Balkan Countries: A Way to Regional Trade Growth

Andrej Kumar

Western Balkan Countries (WBCs) are gradually moving towards implementing or signing of the Stabilization Association Agreements (SAAs) with the EU. Croatia (OJ, 330/01), Albania (OJ, 239/06) and Macedonia (OJ, 124/01) have such agreements already in force. Monte Negro signed the SAA on October 15, 2007 while Serbia and Band H have initialed such agreements with the EU recently. The purpose of SAAs is to include the Western Balkan countries into the association process with the EU. An important activity part within the context of SAAs' implementation is successful development of the regional Free Trade Agreements (FTA) among the Western Balkan countries. FTAs will help to increase trade among WBCs developing to important effects.The first effect is created by known economic impacts of FTAs between the partner countries; trade creation, trade diversion and in long ran improved economic growth based on FTA's induced increased trade growth. The second effect of SAAs with is support to creation of FTAs between WBCs could be attributed to development of "integration experiences" which will be developed among participating countries. "Integration experiences" are a necessary background to the WBCs in their accessing process towards the EU Membership. Without such experiences this counties will have more difficulties to fulfill the Copenhagen membership criteria. Especially in the areas of "working market economy" and ability to actually accept and implement on working terms the "spirit" of EU integration formal and informal environment. EU trade policy already (gradually) opens the EU market to the prodcuts from the WBCs. On the other side EU trade Policy at the moment is still not able to introduce a tool which could strongly support the FTAs achievements among the WBCs. The tool is so called pan European "cumulative rule of product origin" (CRPO).The paper will focus on analyzing the process and effects of implementing the FTAs between the WBCs. The process is known as a process of establishing The New CEFTA. On the other side paper will analyze the advantages of (eventual) introducing of the Pan European CRPO for the WBCs. Because there are chances that such tool will be formally accepted during Slovene Presidency to the EU (spring 2008), the paper will focus predominantly on analyzing the tool's economic advantages and expected impacts of such tool on trade growth between the WBCs countries and on their trade with the EU members, especially with Slovenia.

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