Economic (re)integration versus protectionism

An agreement on economic co-operation between Serbia and Republika Srpska stands in stark contrast to protectionist measures passed by the parliament of Bosnia and Herzegovina.

By Ian Bancroft

Following the signing of an agreement on economic co-operation between Serbia and Republika Srpska on Monday 15th June by Serbia’s minister of economy and regional development, Mlađan Dinkić, and Republika Srpska’s minister for economic relations and regional cooperation, Jasna Brkić, Serbia’s prime minister, Mirko Cvetković, quickly reiterated that the Western Balkans can only mitigate the effects of the global financial crisis by expanding regional markets, not by imposing trade barriers. Republika Srpska’s prime minister, Milorad Dodik, meanwhile, who hopes to develop economic co-operation in a plethora of other areas, emphasised that ‘the rest of Bosnia is welcome to join this co-operation’; re-enforcing the Serbian government’s insistence that it had offered the Federation of Bosnia and Herzegovina the same terms of cooperation as it did to Republika Srpska.

Less than a week later, however, the parliament of Bosnia and Herzegovina, against the advice of the government and in the wake of country-wide protests from farmer’s associations, adopted a law designed primarily to protect domestic agricultural production by imposing higher customs duties on almost a thousand items; ignoring warnings from the EU that it would violate the CEFTA (Central European Free Trade Association) agreement, which strengthens intra-regional trade and prepares the countries of the Western Balkans for entry into the EU’s single market.

In response, the EU expressed that it ‘regrets the adoption of the law’ and asserted that the move ‘contradicts [Bosnia and Herzegovina’s] commitments under the Stabilisation and Association Agreement (SAA)’. Croatia, the leading exporter to Bosnia and Herzegovina, immediately sent a protest note to the embassy of Bosnia and Herzegovina in Zagreb; whilst Bosnian Croat deputies in the House of Peoples threatened to block the law through the Constitutional Court should the country’s High Representative, Valentin Inzko, refuse to abolish it. Dinkic, meanwhile, who said that Serbia would make its complaints to the CEFTA secretariat and the EU, maintained that whilst ‘locking down into internal boundaries in the situation of a crisis may help somebody in the short term,….in the long term, I believe that Bosnia and Herzegovina will harm itself’.

The decision of the parliament of Bosnia and Herzegovina will only further antagonise regional economic co-operation, still struggling to contend with the complications created by Kosovo’s unilateral declaration of independence. Though UNMIK continues to attempt to facilitate the involvement of the Kosovo government in international and regional forums, the challenges posed by the introduction of new customs stamps by the Kosovo Customs Director-General has caused difficulties for the implementation of CEFTA and its mechanisms for promoting economic co-operation through the region, with Serbia continuing to assert that such stamps contravene UN Security Council Resolution 1244 and are not status neutral.

With cross-border co-operation a key prerequisite for the region’s integration into the EU, the agreement between Serbia and Republika Srpska constitutes a positive and important development that should be replicated elsewhere throughout the Western Balkans in order to expand access to regional markets. Though the global economic crisis has placed the economy of Bosnia and Herzegovina under considerable strain, resort to protectionist measures will only result in ‘harmful and unnecessary trade disputes’ with neighbouring and other CEFTA partners, thereby further undermining efforts to strengthen regional economic integration and re-integration.