Multilateral free trade agreements for Western Balkans

Peace and stabilization in the region can come about only through cooperation amongst member countries, which should be initiated as an organic initiative from below and should not be forced by the authorities from above, if it is to have any chance of succeeding.Among the different possible forms of cooperation, economic cooperation has the most important role and trade is its best representative. The goal of this section is to analyse the existing trade flows of the Western Balkan countries and discuss the potential effect of a new multilateral free trade arrangement (SEFTA—South East European Free Trade Agreement) in light of the broader economic cooperation among these countries and their integration into the EU and the world economy. This agreement was signed on 17 December 2006, but by autumn 2007 it was still not operational. Uvalic identified two controversial questions regarding trade among the Western Balkan countries: first, how important is regional trade within South East Europe (SEE), and second, is there a potential for its growth? Wittich posed the question as to whether the increase in trade with the EU at the expense of intra-trade in the SEE region indicates a trade diversion in the European context, as the trade liberalization with the EU prior to the regional trade liberalization diverted some trade flows previously directed to the SEE partners. For the Western Balkan countries liberalization sequencing is the other way round and thus less supportive for the intra-regional trade. The EU bilateral Stabilization and Association Agreements (SAAs) with some Western Balkan countries were signed and applied before the asymmetric uniform regime on Autonomous Trade Preferences (ATP) was applied for all Western Balkan countries late in 2000, while bilateral free trade agreements (FTAs) between these countries were signed and applied later, in the 2002–2004 period. Due to such sequencing, the trade diversion from the region to the EU took place first and intra-regional bilateral FTAs were signed later among the ‘spokes’, which can