Enhancing Regional Trade Integration in Southeast Europe

Overview

The Southeast Europe (SEE) region comprises a group of countries with a common objective, and prospect, to become members of the European Union (EU). To achieve the goal of EU membership, these countries have pursued closer integration with the EU as well as with each other. In December 2006, the SEE countries, and Moldova, signed the Central European Free Trade Agreement (CEFTA), a comprehensive free trade agreement that aims to fully liberalize trade in the region as well as ...
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Enhancing Regional Trade Integration in Southeast Europe

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Overview

The Southeast Europe (SEE) region comprises a group of countries with a common objective, and prospect, to become members of the European Union (EU). To achieve the goal of EU membership, these countries have pursued closer integration with the EU as well as with each other. In December 2006, the SEE countries, and Moldova, signed the Central European Free Trade Agreement (CEFTA), a comprehensive free trade agreement that aims to fully liberalize trade in the region as well as to achieve greater cooperation in a number of trade-related areas.

This book is part of the World Bank's efforts to understand the impact of CEFTA on regional trade flows, as well as to put forward other, complementary, ideas that could enhance further regional trade integration. The first study looks at intra-regional trade flows and the remaining non-tariff barriers to trade in the region. The second study assesses the costs and benefits of allow free movement of skilled labor within the region, and the last study looks at how adopting the EU's Common External Tariff could prevent trade diversion.

Intra-regional trade has increased rapidly in recent years, however, the content of trade flows do not signal significant trade integration, similar to what the countries of Central and Eastern Europe achieved in the past decade. Following the tariff liberalization, non-tariff barriers have become the main obstacles for trade. Enhanced regional trade integration should not be confined only to free movement of goods. Increased labor mobility could also have trade creation effects and help create a more integrated regional market. Finally, tariff structures in many countries of the region allow some scope for trade diversion in favor of EU and CEFTA countries at the expense of the rest of the world. Such trade diversion could be reduced by adopting EU's Common External Tariff structure.

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Product Details

  • ISBN-13: 9780821382592
  • Publisher: World Bank Publications
  • Publication date: 1/29/2010
  • Series: World Bank Working Papers, #185
  • Pages: 96
  • Product dimensions: 6.90 (w) x 10.00 (h) x 0.40 (d)

Table of Contents

Acknowledgments vii

Foreword viii

Acronyms and Abbreviations x

Executive Summary xii

Part I Evolution of Infra-regional Trade in Southeast Europe: The Role of CEFTA for Enhancing Regional Trade Integration 1

Abstract 2

1 Introduction 3

2 Trade Patterns in the SEE Region 5

Patterns and Structure of Trade Flows in SEE 7

Decomposition of Intra-regional Trade 11

Intra- versus Inter-industry Trade 15

Quality of Foreign Trade Statistics for the Region 18

3 The Role of Trade Regulations, Trade-related Business Environment, and Rules of Origin in Trade Expansion and Integration 22

Technical Regulations and Standards 22

Trade-Related Business Environment 29

Cost and Quality of Trade Logistics 35

Rules of Origin 38

4 How Are Firms Reacting to Regional Trade Integration? 41

The Case of Agrokor 41

The Case of ArcelorMittal 42

5 Conclusions and Recommendations 44

Annexes 46

Annex I.A Trade Structure by HS-2 Product Category in 2007 46

Annex I.B Trade Structure by HS-2 Product Category in 2008 48

Annex I.C Net Exports to CEFTA, the Top and Bottom Five HS 2-digit Products in 2008 50

Annex I.D Description of 2-digit HS Categories 51

Part II Labor Mobility in Southeast Europe 53

Abstract 54

6 Introduction 55

7 CEFTA: The Setting 56

Population and Labor Force 56

Economic Growth and Employment 58

Migration Patterns 61

The Diaspora 64

Migrants' Education Levels 64

Migrant Stocks in the CEFTA Countries 66

Irregular Migration 68

Remittances 69

8 Labor Mobility Provisions in Free Trade Agreements 71

Asia-Pacific Economic Cooperation (APEC) 71

ASEAN Free Trade Area (AFTA) 72

Caribbean Community (CARICOM) 72

East Africa Community (EAC) 74

Mercado Comun del Sur (Mercosur) 75

North American Free Trade Agreement (NAFTA) 76

European Union (EU) 76

Lessons from Labor Mobility Provisions of FTAs 79

9 The Benefits (and Costs) of Labor Mobility Provisions 83

Overall Production and Productivity 83

The Distribution of Benefits and Costs 84

The Transition to EU Requirements 86

10 Implementing Mobility in CEFTA 87

Migration Management: Alignment with the EU 87

Informal Economies and Work Permits 89

Credential Recognition, Social Security, Other Issues 90

11 Conclusions 92

Part III The Impact of Establishing a Virtual Customs Union between Southeast Europe and the European Union 95

Abstract 96

12 Introduction 97

13 Customs Union versus a Virtual Customs Union 101

14 Tariff Profile of Southeast Europe 106

The Level of Adjustment 107

15 Estimates of Trade Diversion and Trade Creation Due to Adoption of EU's CET 117

Breakdown of Trade Diversion and Creation among Trade Partners 121

16 Summary and Policy Recommendations 125

Appendix: Consumer Surplus by Product and Country 129

References 135

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