11 Jun 2006

Serbia: new deadline for Stabilization and Association Agreement.

The Serbian process for SAA (Stabilization and Association Agreement), to joint European Union, was recently stopped due to Serbia failure to extradite General Ratko Mladic to the Hague war crimes tribunal.
The proposed SAA would have granted Serbia free trade without any barriers regarding customs or quantity after a six-year transition period and with due respect for general trade regulations.
EU has already taken unilateral action to help Serbia in other areas. These measures concern financial cooperation, support in the CARDS programme (which provides assistance to South-Eastern European countries intending to take part in the SAA process), loans from the European Investment Bank, macro-financial support for the Serbian budget and Serbia's inclusion in so-called "internal community programmes", such as scientific and technical cooperation, study programmes and other related issues.
In any case the SAA would have affected Serbia's economic prospects over the longer term: lower the cost of imports, boost trade with the EU, attract foreign investors and generally make the Serbian economy and market more competitive.
However many sectors of Serbia's economy remain very vulnerable, or "sensitive", to foreign competition. These sectors include the chemical industry, leather and footwear manufacturers, furniture makers, transport, the metal and electrical industries and others.
In the meantime, Serbia has drawn up an ambitious platform for the SAA talks with the EU, based on the government's recently adopted "strategy for integration with the EU", aimed at creating the conditions for joining the Community by 2012.
But now what are the consequences of the EU decision to interrupt talks for the integration of Serbia in the Community?
The short-term delay of the SAA talks and an extended deadline for their completion would not cause major negative consequences to Serbia's trade.
But it would affect the overall economic situation in the "neighbourhood", and especially foreign investors.
Over a longer term, the failure of the SAA talks would jeopardise the government's plans to entice substantially bigger foreign investments in 2006 and in the following years, as envisaged by the recently adopted strategy.
A major derailment of the SAA talks would weigh heavily on the pace and composition of Serbia's economic reforms, which essentially depend on the country's continuing integration into Europe.

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