"FTA-s/CEFTA and some revealed effects, on the Albanian Economy and

Agribusiness"

Selim Belortaja ACIT (Albanian Centre for International Trade)

Skopje, January 25, 2008

My Presentation

• Our region: accelerated process of tariff liberalisation. Albania: deeper liberalization in Agbiz tariffs.

• Growth of trade volume but ..with important imbalances.Ag.and ag.processing products suffering more

• Gains from trade liberalization (hub and spoke, retail prices)

• CEFTA – 2006: cares on insufficiencies of bilateral FTA-s

• Competitiveness: a comprehensive approach for optimizing impacts and maximizing benefits from t.liberalization

SEE countries: a multi-path commitment to trade liberalization efforts

• Autonomous measures

• Regional efforts/agreements– Bilateral– CEFTA 2006

• EU integration

• Multilateral context (WTO)

Brussels 2001: the MoU on Trade Facilitation and Liberalization,

The regional approach gains a new momentum

Albania’s simple bound av.tariff dynamics, 2002-2009

0

2

4

6

8

10

12

2002 2003 2004 2005 2006 2007 2008 2009

av

era

ge

ta

riff

in %

Tariffs, % ALB B&H1 BUL CRO FYROM MONT1 MOLD ROM EU

Simp. average final bound Total Agric Non-Agric

7.09.46.6

25.642.423.0

6.412.05.5

7.213.46.3

6.913.46.0

39.998.430.9

5.415.43.9

Simp. aver MFN applied Total Agric Non-Agric

5.77.95.4

7.213.86.2

10.419.99.0

4.911.04.0

8.313.77.4

4.910.84.0

5.211.54.2

(2005)15.922.914.8

5.415.13.9

Animal prod2 8.6 45.7 24.0 20.9 14.1 19.7 17.8 23.1 25.4

Dairy prod2 9.9 21.3 39.0 26.3 20.8 29.0 17.1 39.0 23.8

Fruit, veget, plants2 10.3 8.5 24.0 11.9 20.8 13.5 13.2 20.2 11.8

Coffee, tea2 11.7 7.8 23.9 8.8 14.7 10.0 8.1 18.0 6.5

Cereals and preperations2 7.9 13.6 26.4 12.3 17.8 7.9 10.7 22.2 25.6

Oilseeds, fats & oils 2.1 2.6 10.1 4.3 2.8 2.6 5.9 12.3 5.9

Sugar and confectionery 5.6 8.5 26.9 19.3 8.2 4.8 18.6 33.8 32.9

Beverages and tobacco 11.1 31.5 30.7 14.9 31.6 24.2 17.7 53.9 20.2

Cotton 2.0 0.0 0.0 0.0 0.0 0.0 0.0 1.8 0.0

Other agri prod 6.1 1.2 6.4 2.6 1.9 1.7 6.4 20.3 5.3

1Non- WTO member 2Average MFN applied

Tariff liberalization: Albania and its neighbors, relatively low import tariffs

Albanian regional trade, supported by the bilateral FTA-s

Albanian Trade Flows with the region

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2000 2001 2002 2003 2004 2005 2006

Imp

ort

/ex

po

rt w

ith

th

e r

eg

ion

(0

00

US

$)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

as

% t

o t

ota

l im

po

rt/e

xp

ort

Imports from the region Exports to the region Imports as % of total imports Exports as % of total exports

An impressive growth of regional trade volume – but still weak import coverage

2002

total

2006

total

2002

regional

2006

regional

Total trade

2006/2002

Regional tr.

2006/2002

Albanian Exports

330,2 790,6 12,7 64,0 2,4 times 5,0 times

Imports 1490,0 3049,7 113,3 316,6 2,04 2,8

Trade Volume

1820,0 3840,3 126 380,6 2,11 3,0

ALBANIA’s TRADE 2002 2003 2006 Fact Tendency

Regional import coverage

(By regional exports)

11,2 11,7 20,2 weaker Strong improvement

Total import coverage

(By total exports)

22.2 24,1 26 better Slight improvement

Distribution of Albanian exports to the region (2006)

Croatia4%

Bosnia & Herzegovina

7%Bulgaria

5%

Kosova (UNMIK)

46%

Moldova0%

Macedonia20%

Romania1%

Serbia & Montenegro

17%

Origin of Albanian regional imports (2006)

Serbia & Montenegro

11%

Bosnia & Herzegovina

3% Bullgaria31%

Croatia11%

Kosova (UNMIK)

6%

Moldova2%

Macedonia19%

Romania17%

-

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

2000 2001 2002 2003 2004 2005 2006 2007

tho

usa

nd

s U

SD

Albanias total exports to the region

Albanian export of agbiz. Products to the region

-

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

18,000.00

20,000.00

2000 2001 2002 2003 2004 2005 2006 2007

Th

ou

san

d U

SD

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

2001 2002 2003 2004 2005 2006 2007

Annual increase rates of Albania’s total export to the region (%)

Annual increase rate of Albanian Agbiz. Export to the region (%)

9.6% 8.6%

63.9%

168.7%

-3.7%10.7%5.0%

-50.0%

0.0%

50.0%

100.0%

150.0%

200.0%

2001 2002 2003 2004 2005 2006 2007

The rate of the export of Agbiz. commodities to total export to the region (in %)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2000 2001 2002 2003 2004 2005 2006 2007

Albania’s total imports from the region

-

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

400,000.00

450,000.00

500,000.00

2000 2001 2002 2003 2004 2005 2006 2007

tho

us

an

d U

SD

Alb. Imports of Agbiz. products from the region

-

20,000.00

40,000.00

60,000.00

80,000.00

100,000.00

120,000.00

140,000.00

2000 2001 2002 2003 2004 2005 2006 2007

Thou

sand

U

SD

Increasing rate of total imports to the region 2001-2007 (%)

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

2001 2002 2003 2004 2005 2006 2007

Increase rates of agbiz. Imports from the region

-20.0%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

120.0%

2001 2002 2003 2004 2005 2006 2007

The rate of the imports of Agbiz. commodities to total imports from the region (%)

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2000 2001 2002 2003 2004 2005 2006 2007

Is there any “visible” shift to a stronger regional trade? (2003 to…)

The intra-regional and EU oriented trade - 2003(The size of spheres shows the trade openness index for each country)

Albania

Bulgaria

Kosova

Moldova

Serbia & Montenegro

Bosnia & Herzegovina

Croatia

Macedonia

Romania

-10%

0%

10%

20%

30%

40%

50%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Trade with EU (% of total trade)

Tra

de

wit

h t

he

re

gio

ni(

% e

of

tota

l tr

ad

e)

Albania

Bosnia&Herzegovina

Croatia

Rep of Moldova Serbia

Montenegro

Kosovo

Macedonia

Bulgaria

Rom ania

-10%

0%

10%

20%

30%

40%

50%

60%

70%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Trade to EU 25 as % of total Trade flows

Trad

e to

the

regi

on(%

of t

otal

trad

e)

…2006)

2000 2001 2002 2003 2004 2005 2006

(Goods Export +Import)/GDP

36.0 39.9 40.4 39.1 36.9 39.6 41.8

(Ex+Im+Pr.Tr) /GDP 47.6 53.1 53.2 52.8 49.8 51.2 54.8

Goods exp./GDP 6.9 7.4 7.3 7.8 7.96 8.0 8.6

Export growth rates (%)

-7.2 19.3 8.4 35.4 34.9 9 20

(Goods +services export +import)/GDP

59.8 63.7 66.5 65.8 62.0 64.7 66.2

(Ex+Im+S+Priv. Transf.) /GDP

71.4 76.9 79.3 79.5 74.9 76.3 79.2

(Ex+Im+S+Private Transfers + FDI)/GDP

75.3 82.0 82.3 82.6 79.4 80.5 83.7

Albania’s Openness indexes, as % to GDP

Failures of bilateral FTA-s

– Mendelson: “A complicated system(‘sphagetti bowel’)…”

– World Bank (2000): “…a series of uncoordinated bilateral FTA-s, with different coverage, preferential depth and rules of origin, are very hard to be implemented…”

– Not in full conformity with the principals and standards of the MoU 2001, including the trade coverage standards (90% of the tariff lines and 90% of import value)

– A critical issue: the rules of origin, considering just the “individual origin” from a single country

– As a result the implementation of the FTA’s “… could not lead to the expected dynamic benefits regarding the economy of scale, transfer of technology, etc.” (Grupe and Kuŝić, 2005)

On the other hand: The context of Thessaloniki agenda:

• called for deeper trade relations, including the development of closer regional trade integration.

• recalled the central role of trade policy in SAP

This calls for broad and complex facilitating and liberalization measures, far beyond the mere tariff liberalization

From FTA-s to CEFTA 2006 – a “natural” and smooth process

• -consolidation of the 31 bilateral FTA-s, deeper liberalization, abolition of quotas

• -creation of a single Regional Free Trade area

• -”modernised CEFTA”: completion with “new” dimensions, like trade in services, measures regarding investments, public procurement, competition and state aid, i.property, antidumping, safeguards, non-tariff-barriers, etc.

• -from the view of EU: complementary to the Stabilization and Association process

Trade liberalization and trade growth – a complex casual link

A complexity of factors behind the end results:

– Restoration of peace in the region– On-going reform process in each country regarding the business climate– Infrastructure development– More free movement of people – FDI / economic growth– European Integration process

and:– FTA-s and CEFTA

The regional trade - still a potential to be explored:– EU markets remain the most important for many SEE countries.– Imports from the other countries are also expanding fast

Competitiveness- a key issueGCI and Albania, 2007-08

Ranking Comparison Report of WEF, 2007-2008

Global Competitiveness Index Albania 2007: 109/131 (score: 3.48)

Albania 2006: e 98/122 (score: 3.56)

• Rank 131 in “inovation” 122• “ 124 in “Infrastructure” 119• “ 117 in “goods market efficiency” 107• “ 114 in “Institutions” 111• “ 74 in “technological readiness” 88

Main concern: lowest position as compare to the region

Business Competitiveness Index:• Albania 2007: rank 122 out of 127 countries• Albania 2006: 119th out of 121

0

65

130

GCI 2007-08 (out of 131)

Institutions

Infrastructure

Macroeconomic stability

Health and primary education

Higher education and training

Market efficiencyLabor market efficiency

Financial market sophistication

Technological readiness

Market Size

Business sophistication

Innovation

Albania

Croatia

Bulgaria

Macedonia

Bosnia & Herzegovina

GCI and its 12 pillars 2007-08Who takes care on each issue?

Concluding Remarks• The regional trade liberalization build on an complex and multi-path

process.• Albania’s trade with the region growing faster and showing more

interest. Winners and losers• Albania’s Agbiz regional trade, facing more difficulties to compete. • The increased trade volume so far, mainly results from tariff

liberalization. • Problems with the distribution of gains from tr. liberalization (externally

and internally)• CEFTA-2006 brings a new momentum, especially in overcoming some

non-tariff shortcomings.• Competitiveness: an approach and philosophy which deserves more

attention by governments, donors and interest groups• Neither tariff liberalizat. nor regional trade volume, are ‘final goals’ per

se. They are processes leading to sustainable development• EU integration shall prevail, as it addresses with priority the remained

issues

THANKS FOR THE ATTENTION

Contacts:

sbelortaja@acit-al.org

www.acit.al.org