REGIONAL COOPERATION AND ECONOMIC INTEGRATION

PART II:
INTRODUCTION
CEFTA-2006 is one of the greatest achievements of the regional co-operation in SEE
promoted by the Stability Pact and a long process took place before its actual coming into
force. Trade experts working under the Stability Pact had suggested that the SEE countries
adopt a single regional trade agreement back in 2001 but this was not politically feasible at
the time. Hence the decision to go for a network of bilateral free trade agreements (FTAs).
Since 2001 the countries of the region negotiated and ratified a network of 32 bilateral
FTAs, under the guidance of the Stability Pact. These FTAs already helped improve the
political and economic relations between the countries and it led many to conclude that a
single agreement would yield even more benefits. Therefore the SP’s Trade Working Group
Recommended in 2005 that it explore the feasibility of developing a single agreement ,
possible based on the Central Europe Free Trade Agreement- CEFTA. The original CEFTA
required that members must have a contractual relationship with the EU and be WTO
members- and this was not case for SEE countries at the time. The countries could be
eligible for new CEFTA if they agreed to apply WTO rules and procedures in advance
of membership and if they were in advanced stages of negotiations with the EU and the
WTO.
The significance of “old” CEFTA ,which has been successful in its aim of restoring trade
links severed in the early 1990s and promoting European integration, declined after May
2004 ,when five of its members- Hungary, Poland, the Czech Republic, Slovakia and
Slovenia – joined to EU. However, the looming expansion of CEFTA into South- eastern
Europe has breathed new life into the agreement.. Five Sought-east European countries –
Bosnia and Herzegovina, Albania, Serbia, Montenegro and Moldova from former Soviet
Union, plus Kosovo, agreed to join an expanded CEFTA on December 19 th 2006. They
formed an eight –member regional trading bloc alongside CEFTA’s existing members,
Croatia and Macedonia, ( Bulgaria and Romania also signed the agreement in Bucharest,
but left CEFTA almost immediately when they joined the EU on January 1st 2007 ).
The CEFTA 2006 includes issues such as trade in services, government procurement, state
aid and intellectual property rights. The “old” CEFTA countries experienced substantial
increases in trade with each other on implementation of the agreement and one could expect
the same for SEE as well as an increase in investment, because a single market plays a key
role in attracting investment, thereby promoting economic growth, job creation and in
reducing unemployment. There will also be a unified system for resolving trade disputes.
The enlarged CEFTA should help move south- eastern Europe nearer to the creation of
single market, but CEFTA expansion will not in itself liberalize goods trade beyond the
tariff reductions in the bilateral FTAs (these are annexed to the new CEFTA agreement).
The new CEFTA had been intended to come into force on May 1 st 2007, but delays in the
ratification process mean that this target was missed. By the end of t May , six of the eight
parties had ratified CEFTA and since November 22ed 2007 trade relationships between
SEE countries are regulated by CEFTA -2006 Agreement.
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