Kosovo Free-Trade Deal With EU Lapses

Kosovo’s attempts to export goods to Europe and attract foreign investment have suffered another blow since the preferential trade agreement between the EU and Kosovo expired on January 1.

In an effort to support the economic integration of the Western Balkans into the European Union and foster political stability, the EU established trade agreements with Albania, Bosnia, Croatia, Macedonia, Montenegro, Serbia and Kosovo in 2000.  

The measures allowed duty-free and unlimited access to the EU market for nearly all products, with the exception of wine and certain foodstuffs. The preferential trade measures were renewed in 2005 for five years but expired on December 31, 2010.

On February 22, 2010, the European Commission adopted a proposal to extend the measures for Kosovo until 2015 but the extended agreement did not receive the necessary approval from other EU institutions because five out of the EU's 27 members do not recognise Kosovo's independence.

A spokeswoman for the European Commission Liaison Office, ECLO, in Kosovo, said problems had emerged within the European Council, composed of representatives of the member states.

A Ministry of Trade and Industry confirmed to Balkan Insight that “Kosovo had completed all administrative procedures” for the extension. According to the source, the delay is due to internal differences among EU member states on the status of Kosovo. 

The ECLO in Kosovo acknowledged that “discussions in the Council among the member states were not conclusive and the regime expired. 

“However, the legislative procedure, on the basis of the Commission’s proposal, is still ongoing and all sides are attempting to find a mutually acceptable way to extend the measures," the spokeswoman added. 

Although the European Commission expects the agreement to be renewed in the coming weeks, exports to the EU are currently not subject to the preferential trade agreement.

According to the European Commission, the impact on Kosovo will be low as importers will have to pay the duties, not Kosovo producers. Also, "since Kosovo exports are very low, this is not a very big economic problem," she added.

The ECLO confirmed that a new agreement will act retroactively, ensuring that importers will recoup the duties they have paid if and once the renewed regulation enters into force. 

Kosovo’s trade agreements with the EU have been a major plank in campaigns to attract foreign investment into the country.

Exports have slumped since it declared independence in 2008 because Serbia has blockaded products marked "Republic of Kosovo".

As a result, exporters have been force to use more expensive routes to the European Union rather than pass through Serbia, pushing up the price of products.