Non-Tariff Barriers in the Central Europe FTA

The Project at A Glance

The Parties to the Central European Free Trade Agreement (CEFTA) have a relatively uniform economic profile. They are all classified as upper-middle income, according to the World Bank, with a Gross Domestic Product (GDP) per capita ranging from EUR 3,908 (in Kosovo) to EUR 7,007 (in Montenegro). The CEFTA was signed on 19th December 2006 and came into effect on the 1st of May 2007. The current signatories include Albania; Bosnia and Herzegovina; Moldova, Republic of; Montenegro; North Macedonia; Serbia; and UNMIK/Kosovo.
Trade in goods has been steadily increasing since the beginning of the decade, driven largely by the strong recovery of exports from the financial crisis. In the period from 2011 to 2020, total exports increased by approximately 40%, standing at EUR 34 billion in 2020. However, the increase in trade has not been reflected at the intra-regional level. Intra-regional trade accounted for EUR 9 billion in 2020, in comparison to EUR 6.2 billion in 2010, a 45 percent increase. However, the share of intra-regional exports in total trade decreased from 7.3 percent in 2010 to 5.7 percent in 2020. This is despite the fact that CEFTA aims to promote increasing cooperation among its economies, in preparation for EU membership.
Against this backdrop, International Economics Consulting (IEC) provided technical assistance to the CEFTA Secretariat in the monitoring and evaluation of the reforms of Additional Protocol 5 (AP 5) to the CEFTA Agreement on Trade Facilitation for improved transparency and accountability. IEC prepared a report on non-tariff barriers (NTBs) in the region and the progress made in the 1-year timeframe, in accordance with the international standards of reporting on NTBs, such as those by UNCTAD and the EU. The ultimate objective of the project is to increase the contribution of public and private stakeholders to the implementation of regional agreements on trade facilitation, in particular to the implementation of AP 5 to the CEFTA Agreement.

What We Found

It is estimated that around 74% of all NTMs imposed by developed economies are SPS and TBT measures, whilst it represents nearly half of NTMs imposed by developing nations. Non-compliance with such requirements can lead to expensive consequences, with the goods being refused entry into the destination market. For the purpose of this project, we assessed three main types of NTBs:

Sanitary and Phytosanitary Measures: It was found that the three most frequent NTMs faced in the area of SPS are conformity assessments; labelling, marking and packaging requirements; and prohibitions and restrictions of imports for SPS reasons.
Technical Barriers to Trade: Labelling, marking and packaging requirements represented the most commonly reported NTM. On the import side, it was found that this NTM was mainly applied by Albania, Serbia and the EU, whilst North Macedonia, Albania and Kosovo faced such NTMs the most.
Price Control Measures: Traders highlighted that “additional taxes and charges” was one of the more occurring NTMs in this area. It is mainly applied by Albania and Serbia and predominantly impacts Albania and Bosnia and Herzegovina.

Our Strategy and Impact

The impact of non-tariff measures on international trade is a concern. While many NTMs are applied for legitimate reasons, some can equally constitute a barrier to trade, hindering trade flows with additional costs and delays. In order to mitigate the negative impacts of NTMs, IEC made the following recommendations:

Recognise conformity assessment procedures for agricultural and food products across the CEFTA.
Re-strengthen conformity assessment bodies for greater efficiency.
Reduce waiting times by expanding business hours.
Develop a private sector-led trade obstacle alert mechanism.
Facilitate the release and clearance of goods.
Adopt a risk-management system for inspecting cargo
Establish One-Stop–Shops across CEFTA to ensure all formalities can be undertaken in one place

Our Core Solutions

Understanding the sustainability provisions in FTAs is important for businesses as they seek to import or export from certain markets. At IEC, we provide our clients with a detailed analysis of the key impacts of new trade agreements on their operations and competitiveness through an assessment of tariff, and non-tariff tariff barriers, provisions on rules of origin, customs efficiency, the effectiveness of transport networks, and sustainability provisions, among others. We can help assess the opportunities in different markets, determine the feasibility and viability of projects, and benchmark the wider ecosystem to support business growth.