Non-Tariff Barriers in the Central Europe FTA

The Project at A Glance

The Central European Free Trade Agreement (CEFTA) involves countries with similar economic profiles, all classified as upper-middle income by the World Bank. Signed in December 2006 and effective from May 2007, the CEFTA includes Albania, Bosnia and Herzegovina, Moldova, Montenegro, North Macedonia, Serbia, and UNMIK/Kosovo. While total exports among the CEFTA members grew by 40% from 2011 to 2020, intra-regional trade increased by 45%, reaching EUR 9 billion in 2020. However, the share of intra-regional exports in total trade decreased from 7.3% to 5.7% during this period, despite the CEFTA’s aim to enhance cooperation among member economies in preparation for EU membership.

Against this backdrop, International Economics (IEC) provided technical assistance to the CEFTA Secretariat in the monitoring and evaluation of the reforms of Additional Protocol 5 (AP 5) to the CEFTA Agreement on Trade Facilitation for improved transparency and accountability. The project was funded by the German Federal Ministry for Economic Development (GIZ).

What We Found

IEC prepared a report on non-tariff barriers (NTBs) in the region and the progress made in the 1-year timeframe, in accordance with the international standards of reporting on NTBs, such as those by UNCTAD and the EU. The ultimate objective of the project is to increase the contribution of public and private stakeholders to the implementation of regional agreements on trade facilitation, in particular to the implementation of AP 5 to the CEFTA Agreement.

It is estimated that around 74% of all NTMs imposed by developed economies are SPS and TBT measures, whilst it represents nearly half of NTMs imposed by developing nations. Non-compliance with such requirements can lead to expensive consequences, with the goods being refused entry into the destination market. For the purpose of this project, our team assessed three main types of NTBs:

Sanitary and Phytosanitary Measures: It was found that the three most frequent NTMs faced in the area of SPS are conformity assessments; labelling, marking and packaging requirements; and prohibitions and restrictions of imports for SPS reasons.
Technical Barriers to Trade: Labelling, marking and packaging requirements represented the most commonly reported NTM. On the import side, it was found that this NTM was mainly applied by Albania, Serbia and the EU, whilst North Macedonia, Albania and Kosovo faced such NTMs the most.
Price Control Measures: Traders highlighted that “additional taxes and charges” was one of the more occurring NTMs in this area. It is mainly applied by Albania and Serbia and predominantly impacts Albania and Bosnia and Herzegovina.

Our Strategy and Impact

The impact of non-tariff measures on international trade is a concern. While many NTMs are applied for legitimate reasons, some can equally constitute a barrier to trade, hindering trade flows with additional costs and delays. In order to mitigate the negative impacts of NTMs, IEC made the following recommendations:

Recognise conformity assessment procedures for agricultural and food products across the CEFTA.
Re-strengthen conformity assessment bodies for greater efficiency.
Reduce waiting times by expanding business hours.
Develop a private sector-led trade obstacle alert mechanism.
Facilitate the release and clearance of goods.
Adopt a risk-management system for inspecting cargo.
Establish One-Stop–Shops across CEFTA to ensure all formalities can be undertaken in one place.

Our Core Solutions

Understanding the sustainability provisions in FTAs is important for businesses as they seek to import or export from certain markets. At IEC, we provide our clients with a detailed analysis of the key impacts of new trade agreements on their operations and competitiveness through an assessment of tariff, and non-tariff tariff barriers, provisions on rules of origin, customs efficiency, the effectiveness of transport networks, and sustainability provisions, among others. We can help assess the opportunities in different markets, determine the feasibility and viability of projects, and benchmark the wider ecosystem to support business growth.