Following the changes that were made in 2000, the then existing Federal Republic of Yugoslavia and Serbia, which were still under sanctions, tried to make up at least partly for the lag behind other countries in the neighbourhood. The first measures geared to liberalisation and opening up were applied once all sanctions were lifted towards the end of 2000. From its formation in January 2001, the new Serbian Government worked on a common programme with the Federal Government.

The foreign trade and foreign exchange management systems were thoroughly liberalised by the middle of 2001, customs duty rates were substantially reduced and unified and many restrictions were lifted completely. The total average nominal customs duty load was reduced from 14.43% to 9,37% or by 5.06%. The rates varied from 1% to 30% and in the case of 50.16% of the total number of products, they varied from 1% to 5% and in the case of 73.17% of products, from 1% to 10%. The maximum customs duty rate of 30% was applicable to only 7.67% of the total number of products.[1]

The customs duty rates were reduced once again and in mid-2003, they averaged 7.4%, following the adoption of the Law on the Harmonisation of Economic Relations with Montenegro. Incidentally, Montenegro has been applying its own foreign trade system since the late nineties. Since the customs duty rates were not harmonised and the authorisations and procedures were not defined, rise was given to problems not only in bilateral trade, but also in trade with other countries.

That was paralleled by the negotiation and signature of free-trade agreements with the countries of South Eastern Europe on the basis of the Memorandum of Understanding of June 2001 concerning the liberalisation of trade, which was signed by these countries under the auspices of the Stability Pact.[2] All of the free-trade agreements signed by Serbia & Montenegro will come into force on 1 August, even though many problems and dilemmas concerning their application have not been dealt with yet. Negotiations have also been started up about making the European Union market more accessible to textile products.

The liberalisation and opening of the country was followed by a dramatic increase in the foreign trade deficit, which was upwards of US$ 5 billion in 2003. In the first half of 2004, the trade deficit increased by about 60% in relation to the same period of 2003. The opponents of the sudden liberalisation and existing foreign exchange management policy are of the opinion that that was the main cause of the deficit and problems in Serbia's economy. The Serbian Government is once again tempted to resort to restrictive measures for the purpose of protecting the domestic market against "excessive" imports.

 

ILE KOVAĆEVIĆ, SURVEY S&M Editor-in-Chief

Reviewed by: Dr MIHAILO CRNOBRNJA, Special Advisor to the Republic of Serbia Government Office for Association with the EU; Dr DEJAN JOVOVIĆ, Assistant Minister of International Economic Relations, Serbia & Montenegro Council of Ministers

 

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[1] For more about this, see: Changes in the Foreign Trade and Customs System, 1999-2001, Lj. Antonović and M. Simić, Yugoslav Survey, No. 2/2001, pp. 73-86.

[2] For more about that, see: FR of Yugoslavia Free-trade Agreements and Volume of Trade with Countries of the South Eastern Europe Region, Dr Dejan Jovović and Stanka Radan, Yugoslav Survey, No. 3-2002, pp. 85-92.