The foreign trade policies of the FR of Yugoslavia and Serbia have always had a high dose of protectionism manifest in the form of big import barriers, involving various instruments, such as high tariff rates, permits, quotas, contingents, obligatory reporting of every foreign trade transaction and the like. However, such measures of protectionism were not always effective fully, partly because of corruption in the customs authorities, government administration and various inspective services, and partly because of the existence of dual exchange rates, where foreign currencies were officially underestimated.
The chief characteristics of the foreign trade policy of the FR of Yugoslavia and Serbia in the nineties of last century were as follows:
- Existence of the system of import permits, contingents and quotas, as well as export permits. The permits directly restricted the quantities of goods that may be imported, while the system of import quotas was such that when a general import quota is exceeded (or an individual quota, which was 10% of the general quota), the tariff rate was 2.5 times higher than the prescribed one;
- Big difference between the official and market exchange rates. Customs duty or tariff bases were calculated at the official exchange rate, where the national currency was overestimated and the foreign currencies underestimated. Imported products were being sold at market price (with the exception of those whose maximum price was set by the government), so that the customs duty actually levied was much lower than that calculated against the nominal tariff rate;
- Relatively high and highly diversified nominal tariff rates.
- In the latter half of the nineties of last century, the nominal tariff rate varied from 14% to 20%, while because of the dual exchange rates and overestimated dinar exchange rate in relation to the official rate applied, the average actual tariff rate was in most cases under 5%.
- Obligatory registration of all businesses engaged in foreign trade and very stiff requirements for engaging in foreign trade;
- Obligatory reporting of every foreign trade transaction to the National Bank of Yugoslavia and then to the competent federal ministry;
- Obligatory sale of 5% to 10% of the foreign exchange earned to the National Bank of Yugoslavia at the official exchange rate (much below the market value of foreign currencies), which meant a big loss to enterprises and encouragement to cut exports.
The foreign trade system was deregulated to a considerable extent in the course of 2000 and 2001.
The obligatory registration for engagement in foreign trade, obligatory reporting of foreign trade transactions and dual exchange rates were abolished towards the end of 2000 and in June 2001, permits (other than those applicable to twenty or so steel products), quotas and the high and varied tariff rates were practically abolished. The new laws dealing with foreign trade are geared to the following:
- Deregulation of foreign trade for the purpose of stepping up competition on domestic market, which would produce a favourable effect on prices;
- Abolition of import quotas and permits (with the exception of the products that have to be kept on that regime because of international conventions) for the purpose of speeding-up and simplifying the foreign trade transactions and reducing the non-tariff import barriers;
- Keeping the tariff rates as the sole form of protection of domestic production. The customs tariff having only six rates (1%, 5%, 10%, 15%, 20% and 30%), instead of 36 in the past, should simplify and cut the customs clearance procedure considerably and thus also cut the import costs. Customs duty is to be calculated on the basis of a single exchange rate.
The lengthy transition from high protectionism to moderate one has already been carried out. The foreign trade system reforms have made importing easier by eliminating many barriers to importing. However, some big import barriers are still existent. It is not easy to eliminate some of them within a short period of time and some of them will persist for a long time.
* This article has been taken over from the section entitled Free-trade Zone Agreements of the book Antimonopoly Policy in the FR of Yugoslavia (by Boris Begovi} et al.) published by the Liberal Democrat Centre, Belgrade, with the author's consent, after some editing and updating of the data presented. Charts 1 and 3 were prepared by our editors. We are grateful to the Centre for giving us the right of publication.
 Import restrictions can be a big indirect barrier to importing, especially if there is no alternative way of earning foreign exchange.
 See: Yugoslav Survey, 2001, No. 2, pp. 77-90.
 The chief laws and regulations dealing with foreign trade are as follows: Foreign Trade Law (Službeni list SRJ, No. 46/92, ... and 23/02), Customs Law (Službeni list SRJ, Nos. 45/92, ... and 36/02), Customs Tariff Law (Službeni list SRJ, Nos. 23/01 and 40/01 - corrected) and Decision on the Classification of Goods According to Import and Export Forms (Službeni list SRJ, Nos. 25/01, ... and 42/02).
BORIS BEGOVIĆ, Centre for Liberal Democrat Studies, Belgrade
Translated by: Milutin Dovijanić