Economics

What Is CEFTA?

CEFTA refers to the Central European Free Trade Agreement. It is a trade agreement between non-EU countries.

What Is CEFTA?

CEFTA stands for Central European Free Trade Agreement. It is a trade agreement between non-EU states, mostly found in southern Europe. As of July 1, 2013, members of CEFTA were Kosovo, Serbia, Montenegro, Moldova, Macedonia, Herzegovina, Bosnia, and Albania and once a member country joins the EU, their CEFTA membership ends.

Background

The original CEFTA agreement was signed on December 21, 1992, in Krakow, Poland. The Visegrad Group countries of Poland, Czech, Hungary, and Slovakia signed the original treaty. This trade union entered into force in July 1994. The main aim of the agreement was to mobilize the participating countries efforts to better integrate into Western European institutions. The members also hoped to participate in European political, economic, legal, and security systems. Eventually, the members hoped to consolidate democracy and free market economics. On September 11, 1995, new agreements amended the treaty, and on July 4, 2003, more amendments were included. In 1996, Slovenia joined CEFTA. In 1997, Bulgaria joined, followed by Croatia in 2003 and Macedonia in 2006.

The 2006 Agreement

By 2006, most if not all of the original parties that founded the Union had joined the EU, thus terminating their membership with CEFTA. As such, the existing members agreed to extend CEFTA to cover the Balkan states. The Balkan countries had already entered into trade agreements with the Stability Pact for South Eastern Europe, a bilateral agreement that endorses free trade among its members. On April 6, 2006, CEFTA declared its expansion to Albania, Serbia, Montenegro, Bosnia, Herzegovina, Moldova, and United Nations Mission In Kosovo (UNMIK) representing Kosovo. On November 9, 2006, in Brussels, the agreement came into force. It was signed in Bucharest on December 19, 2006.

CEFTA Enforced

On July 26, 2007, Macedonia, Albania, Moldova, Kosovo, and Montenegro enacted the agreement. Croatia agreed on August 22, Serbia on October 24, and Herzegovina and Bosnia enforced it on November 22, 2007. The aim of this agreement was to establish a free trade zone among its members by December 31, 2010. However, when Kosovo gained independence on February 17, 2008, and then changed its customs stamps from UNMIK to Kosovo, Serbia and Bosnia retaliated with trade blockades claiming they did not recognize the Republic of Kosovo. Pristina retaliated back by imposing its own trade embargoes on any imports from Serbia. These disagreements led to border clashes in July 2011.

CEFTA And EU Relationship

The CEFTA membercCriteria implies that each member state trades with the CEFTA States, Europe Union members, and the rest of the world. The agreement has financial and commercial ties with the EU. These relationships were important for two main reasons. Before 2007, the Balkan states had decided that developing economic links with other European countries was the easiest path to follow to join the political talks and sessions for EU membership. Secondly, the Balkan states had already witnessed the economic weakness of the region. A reliable trade partner, in the form of the EU, was the only way to strengthen their ties. On the other hand, the EU saw that economic links as gold mine. First, EU would become a haven for newly born states including the Balkan thus terminating instability and security that was occuring in Southeastern EU members. Secondly, the EU would expand its existing market to the less developed states, thus boosting the economic and political arena of the EU in the long run.

Benefits Of CEFTA

So far CEFTA has proved beneficial to its members. The 10-year old commercial links have facilitated better understandings and collaborations among the Balkan territories which were involved in war in the 1990s. This trade union has brought stability to the region, thereby eliminating future conflicts thus giving the governments of the members a better shot at becoming EU members one day. The Balkans are now focusing their efforts on financial and economic competitions with EU. They have lost interests on political and military strategies that characterized the region. Moreover, the more these territories are interconnected by the trans-boundary trade unions and agreements, the less likely they are to clash. Besides, there has been increased swap of productive methods, information, economic strategies, and ideas. The free circulation of certain goods and services have soared the financial state of CEFTA members.

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