Zdravko Ilic, CEFTA – Package of Measures for Trade Facilitation by the End of This Year

The fact that Serbia’s exports to the CEFTA countries are higher than the exports to a huge economy like Germany best shows the importance of the Free Trade Agreement in the Balkans, Zdravko Ilic, Senior Expert for Trade in Services at the CEFTA Secretariat, points out at the beginning of his interview for eKapija.

– It is always emphasized that the CEFTA is Serbia’s second most important partner after the EU, but I like to compare the CEFTA with individual exporting markets in the EU. If you look at it that way and take into consideration that Serbia exports around EUR 4 billion to Germany, which is the most important exporting market for Serbia, while exporting around EUR 5 billion to the entire CEFTA, which is a far smaller economy than Germany, it is only then obvious what an important market the CEFTA is for us – Ilic says.

For eKapija, he announces some important decisions within the Agreement, which will additionally facilitate the trade in the region, and which should take root by the end of this year. Among them are the mutual recognition of the status of the authorized economic operator, a more efficient mechanism for solving trade disputes and numerous facilities for companies and natural persons in the regional market.

eKapija: When will the authorized economic operator statuses (AEO statuses) be recognized at the level of the CEFTA members, so that companies could use their benefits to the full extent?

– The status of an authorized economic operator is a way of facilitating trade – of enabling simpler procedures and less control for entering other markets for companies, and in Serbia, 51 companies have that status so far.
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Concrete benefits from AEO status

When a company’s goods reach the border crossing, a risk analysis is done in order to determine whether control is necessary or not. Such controls require times and costs, because both the goods and the accompanying documentation are physically checked. With the AEO status, you already have some kind of a confirmation that you are a partner to trust and it is very likely that physical control will not be necessary. If it is, after all, companies with the AEO status have an advantage in those controls and they take less time, and the companies can even choose the location where the control is to be done.
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The AEO status is allocated by the Customs Administration in Serbia, and parallel with this, similar processes take place in other CEFTA members, so when that program is recognized by other parties to the CEFTA, the company will have the same status in other customs organs as well. In 2019, the CEFTA adopted the framework decision which says that all parties should go through the validation system in order to be recognized. At the moment, we have four members who have passed the validation, including Serbia, After the validation, it is necessary for the Joint Committee, the CEFTA body at the ministerial level, to confirm that validation, which is expected to take place by the end of this year.

eKapija: In what way does the CEFTA help small companies, which are sure to encounter bigger obstacles in exporting to the markets of the region than larger companies?

– In the future, that is one of the key things that the CEFTA will deal with, facilitating the export for smaller companies too. For small companies, it is quite expensive to find partners in foreign markets, do the testing, complete the documentation. The aim is for administrative requirements, primarily non-customs ones, to be eased for them. The facility we are striving for is to have the Serbian certificate, which you need to have in order to market certain goods, be recognized in other markets too. We have been working on that and we already have several different programs for recognizing those certificates in various fields.

eKapija: How are the negotiations about establishing a more efficient mechanism for solving trade disputes within the CEFTA agreement, which often cause problems with various export bans, going? What are the main obstacles for the members to reach an agreement there?

– The negotiations about the Additional Protocol 7 started in October 2020 and are still going on. Our goal is to agree detailed rules about how to solve trade disputes, with concrete procedures and deadlines, because it is very important, in order to secure effective implementation. It’s one thing when something is agreed on paper, and quite another when it is carried out in practice, in an efficient way. I can’t say more about this, because the negotiations are in progress, but the next round is in September. I can only say that there are not too many questions left opened and I expect it to be agreed this year.

eKapija: As a trade service expert, how do you see that segment of the exchange with the CEFTA? What are the biggest barriers in this sector, which comprises the majority of the economies of the parties to the Agreement?

– Services, if you look at the structure of the GDP, comprise more than 50% of the economy, except that, when it comes to them, unlike products, which you pack onto a truck and drive to another market, the question is whether you can export them and how. Aside from the very nature of the service, a bigger problem are various permits for providing services, that is, licenses for legal persons and qualifications for natural ones. Also, when a natural person is providing a service in the foreign market, a work permit is required. That is why the CEFTA has initiated several activities – one is recognizing the qualifications, which is to be done according to the EU model, and those negotiations between the members have already been completed and a decision has been drafted, and the other is working on licenses specifically for travel agencies, also according to the EU model, so that they can work on regional markets. That agreement is about 50% complete, and the third activity is the decision to remove the work permit requirement for people who temporarily do jobs in the market of the region and we are close to finishing that, nearly all the parties have agreed, so we expect it to be adopted by the end of the year.

eKapija: The development of a regional e-commerce market is another initiative that the CEFTA is working on actively. At the end of last year, the adoption of a set of agreements about it was agreed. What does it take for them to take root and why is it important to establish this market?

– The electronic market is very important for the economy, and small markets like the Serbian one do not leave those companies enough room for growth. If you take into consideration that Serbia has seven, and the CEFTA 20 million citizens, it is clear that there’s an opportunity for growth there. On the other hand, e-commerce is the future because that’s how you prepare for the market of the EU, and not just the EU. In other words, the regional market should be the starting point for our innovative companies for the European and global markets.

In order to solve various barriers in the regional electronic commerce market, we have already prepared four activities with that topic, and now we have a fifth one as well, all according to the EU single market model. The first problem are different regulations. For example, there is an online store and one system of rules in Serbia, another in Montenegro, and so on. That is why we have adopted the decision according to which the key rules are harmonized and become the same in all members. One of those rules is the responsibility of the platforms which don’t sell their own goods, in case of a fraud.

Secondly, when you buy online as a consumer, what are your rights in case you are not satisfied with the product? Those rights are now also harmonized, that has been agreed and will be implemented soon. The rules from the market which the company is coming from will apply to what is not harmonized, so that, if you have an online store, you will not have to have three lawyers which are supposed to analyze all the rules in seven different markets.

There are also problems that don’t have anything to do with the regulations, and one of them is the problem of geo-blocking. For example, you want to buy something in Bosnia, because you have discovered that it is cheaper and better, and the store says you can’t and forwards you to their partners in your country. With the new rules, we are saying “you can’t forbid people from buying where it pays off the most for them,”, but then again, we can’t force companies to deliver where they are not able to either. But, if you have a way of picking up the goods, they have to sell them to you.

Finally, I would like to mention the activities which pertain to the packages, that is, enabling a better and cheaper delivery. Since recently, we have also been working with partners on facilitating regional payments.

eKapija: Finally, the obligatory question – what happens after exiting the CEFTA, after the potential accession to the EU? From today’s perspective, how will this influence the economies of the member states?

– Since the very beginning, the CEFTA has been intended as a preparation for the EU. We often joke that our main goal is to end, because it means that all our members have joined the EU. The idea behind the CEFTA is to have several candidates heading toward the EU and to have them develop mutual relations through our mechanism. So, the CEFTA is there to strengthen those relations and to have them gain full strength in the EU. If we use all the facilities and benefits provided by the CEFTA, all of which are according to the EU model, to the maximum, the Serbian economy will be better prepared for the EU market. Companies are already using everything we have enabled, but we can provide more. The European Commission as well recently announced that it would come out with a plan for the growth of the Western Balkans, and one of the four segments of that plan would be to strengthen the regional market. It could mean, for example, recognizing the AEO status not just within the CEFTA, but also between the CEFTA parties and the EU, like Moldavia has, and we are seeking that possibility for other members too. In addition to that, from January next year, Serbia is taking over the presiding over the CEFTA, which will give it the role of the “navigator” within the Agreement.

B. P.

CEFTA

Free Trade Agreement in the Balkans

Zdravko Ilic

export of Serbia to CEFTA

AEO status

authorized economic operator status

CEFTA facilities for small companies

mechanism for solving trade disputes within CEFTA

CEFTA service trade

regional e commerce market