With the support of the European Commission

1

FREE TRADE AGREEMENTSREPUBLIC OF CROATIA

Goran MarijanovićEkonomski fakultet ,Osijek

With the support of the European Commission

With the support of the European Commission 2

• Economic profile of the Republic of Croatia • AREA• 87,661 square kilometers

56,594 square kilometers of land31,067 square kilometers of territorial seaCoast: 1,778 kmIslands: 1,185 (66 inhabited)Capital city: Zagreb (779,000 inhabitants)

With the support of the European Commission 3

POPULATION

48,00%MEN

52,00%WOMEN

4.437,460TOTAL

.0002001

With the support of the European Commission 4

ECONOMIC INDICATORS

18,2***Unemployment rate %

2,1Inflation rate%

3,7Industrial production, %

4,4Population, millions (census)

7.730**GDP, per capita. USD

34,3* GDP, billion USD2004

With the support of the European Commission 5

ECONOMIC INDICATORS

6,0355Exchange rate HRK/USD991,6***Average monthly gross salary, USD-2,2**Government budget balance (% of GDP)

-366,7Balance of payments account, millionsUSD

16.583,2Import, millions USD8.022,5Export, millions USD2004

With the support of the European Commission 6

ECONOMIC INDICATORS

1.085.159***No. of employees in corporate bodies39Number of banks61.643Number of companies

8.759Foreign exchange reserves of HNB, millions USD, end of period

4,5Discount rate of Croatian National Bank(HNB), %, end of peroid

7,4952Exchange rate HRK/EUR2004

With the support of the European Commission 7

ECONOMICS INDICATORS

*estimate of Central Bureau of Statistics (DZS)**estimate of Ministry of Finance (MF)***provisional data

Sources: HNB, DZS, MF, FINA (Central FinanceAgency)

With the support of the European Commission 8

TRADE IN GOODS 2004.

11,8 944.905 OTHERS

1,2 97.620 CEFTA countries

64,5 5,177.755 EU countries

88,2 7,077.547 EUROPEAN COUNTRIES

100,08,022.452EXPORT TOTAL

%000 USD

With the support of the European Commission 9

TRADE IN GOODS 2004.

Source: Central Bureau of Statistics (DZS)Data processing: Croatian Chamber of Economy

15,9 2,635.641 OTHERS

1,5 240.714 CEFTA countries

69,5 11,526.212 EU countries

84,1 13,947.511 EUROPEAN COUNTRIES

100,016,583.152IMPORT TOTAL

% 000 USD

With the support of the European Commission 10

MAJOR TRADE PARTNERS 2004.

100,08,022.452Total exports of Croatia69,05,535.491Total presented export3,7 294.065 Serbia and Montenegro7,5 601.010 Slovenia9,4 756.570 Austria11,2 895.134 Germany14,4 1,154,065 Bosnia and Herzegowina22,8 1,831.237 Italy%000 USDEXPORT

With the support of the European Commission 11

MAJOR TRADE PARTNERS 2004.

100,016,583.152Total imports58,29,651.394Total presented import4,4 731.752 France6,8 731.752 Austria7,1 1,179.496 Slovenia7,3 1,205.258 Russia15,5 2,567.629 Germany17,1 2,842.145 Italy%000 USDIMPORT

With the support of the European Commission 12

LEGAL FRAMEWORK FOR FOREIGN TRADE

• Completely harmonized with the WTO’s regulations

• Trade Law have contributed to trade liberalization• Import and export of goods are free

With the support of the European Commission 13

LEGAL FRAMEWORK FOR FOREIGN TRADE

• Exceptions are:- quotas or protective tariffs, in accordance withWTO regulations

- antidumping duty- to prevent harmful damping- EUR 1- certificate of origin- certificates of sanitary, veterinary,

phytopathological correctness (for food, animals, medicines etc.)

With the support of the European Commission 14

FREE TRADE AGREEMENTS

Agreements of free trade between two or more countries are signed with the aim of:

- removing customs and non-customs trade barriers- to boost the trade beetween the contract parties- to increase direct investment- to achieve better transparency in trade policies

With the support of the European Commission 15

PROGRAM OF CROATIAN GOVERNMENT 2000.-2004.

Points:- enter new markets with Croatian products- export is the driving force behind economicgrowth- create the conditions within two years in whichmore than 80% of total foreign trade will be carriedout under free trade principles

With the support of the European Commission 16

PROGRAM OF CROATIAN GOVERNMENT 2000.-2004.

As a result of Program preferential tradearrangements have been made on the basis offree trade agreement with:- EU- CEFTA- EFTA- other European countries

With the support of the European Commission 17

SIGNED FREE TRADE AGREEMENTS

-1. 1. 2002. 1. 1. 2002. 1. 4. 2002. 1. 8. 2002.

EFTASwitzerland LiechtensteinNorwayIsland

Changes related to EU enlargement are definedby Protocol 7. of SAA

1. 1. 2002. (for the new 10 EU member statesfrom 1. 5. 2004.)

European Union(25 countries)

-1. 1. 2001Bosnia and Herzegowina

-9. 6. 1997. Macedonia

NoteStarting DateCountry

With the support of the European Commission 18

SIGNED FREE TRADE AGREEMENTS

-1. 10. 2004.Moldova

-1. 3. 2003.CEFTABulgariaRomania

-1. 6. 2003 Albania

-1. 7. 2004.Serbia and Montenegro

-1. 7. 2003.Turkey

NoteStarting DateCountry

With the support of the European Commission 19

SIGNED FREE TRADE AGREEMENTS

Number of countries with which Croatia has signed and is applying free trade agreements: 37

With the support of the European Commission 20

Free trade agreements withcountries of West Balkans

Albania• STATUS: Signed on 27 September 2002 in Zagreb

IN FORCE: since 1 April 2003

MAIN CHARACTERISTICS:• MILDLY ASSYMETRICAL • CERTIFICATE OF ORIGIN

Form EUR 1 – issued by customs offices according to regulationson the origin of goods defined in the Protocol of the Agreement.

With the support of the European Commission 21

Free trade agreements withcountries of West Balkans

Albania• industrial products (HS 25 – 97)*• For products from Annex II of the Agreement, phasing out of customs

duties over several years for the EXPORT of all products of Croatian origininto Albania:

abolishedto 20%to 35%to 50%to 65%to 80%Reduction of MFN duties

1.1.2008.2007.2006.2005.2004.2003.Year

With the support of the European Commission 22

Free trade agreements withcountries of West Balkans

• Albania• For products from Annex III of the Agreement, phasing out of customs

duties over several years for the IMPORT of all products of Albanian origininto Croatia:

abolishedto 15%to 30%to 40%to 55%to 70%Reduction ofMFN duties

1.1.2008.2007.2006.2005.2004.2003.Year

With the support of the European Commission 23

Free trade agreements withcountries of West Balkans

Albania• Agricultural and food products (HS 1 – 24)• For products from ANNEX A of the Protocol 1. of the Agreement

0% of customs duties for EXPORT of products of Croatian origininto Albania.

• For products from ANNEX B of the Protocol 1. of the Agreement0% of customs duties for IMPORT of products of Albanian origininto Croatia.

With the support of the European Commission 24

Free trade agreements withcountries of West Balkans

TRADE IN GOODS CROATIA – ALBANIA - 000 USD

158,15273,96156,39Indeks 2002./2004.

28,04872627.322200428,15867227.4862003

17,73526517.4702002

TOTALIMPORTEXPORTYear

Source: Central Bureau of Statistics,ZagrebData processing: Croatian Chamber of Economy, SMO

With the support of the European Commission 25

Free trade agreements withcountries of West Balkans

Bosnia and Herzegowina• STATUS: Signed on 19 December 2000 in Zagreb

Ratified: since 1 January 2001 – temporarily implementedPublished: Official Gazzette – International agreements (Narodne novine No. 9/01)

• In force: 1 February 2005 (NN-MU No. 2/2005)

MAIN CHARACTERISTICS:• ASSYMETRICAL • CERTIFICATE OF ORIGIN

Form EUR 1 – issued by customs offices according to regulations on the origin of goodsdefined in the Protocol of the Agreement.

• LIBERALIZATION0% of customs duties on IMPORT of all products of Bosnia-Herzegowina origin intoCroatia Reduction of customs duties over several years for EXPORT of all goods of Croatianorigin into Bosnia and Herzegowina

With the support of the European Commission 26

Free trade agreements withcountries of West Balkans

Trade in goods between Croatia and Bosnia and Herzegowina - mil. USD

133,7150,8129,3index

1.502,8348,71.154,12004

1.123,6231,2892,42003

TotalImport from B.-H.Export into B.-H.

With the support of the European Commission 27

Free trade agreements withcountries of West Balkans

• CEFTA countries: Croatia, Bulgaria, Romania• STATUS: Signed on 6 December 2002 in Zagreb

IN FORCE: since 1 March 2003 (temporary implementation)Official Gazzette – International Agreements No. 4/03

• MAIN CHARACTERISTICS:• SYMETRICAL • CERTIFICATE OF ORIGIN

Form EUR 1 – issued by customs offices according to regulations on theorigin of goods defined in the Protocol of the Agreement

• No import tax refund – drawback (Article 15 of Protocol 7a.)• Partial pan-European compound duty and intra-CEFTA compound duty

(Article 4 of Protocol 7a.) • LIBERALIZATION • industrial products (HS 25 – 97)• 0% customs duty for all industrial products in both directions

With the support of the European Commission 28

Free trade agreements withcountries of West Balkans

Trade in goods Croatia - Bulgaria - 000 USD

78,77350.55228.2212004.

65,69042.24723.4432003.

27,14415.38111.7632002.

TOTALIMPORTEXPORTYear

With the support of the European Commission 29

Free trade agreements withcountries of West Balkans

Macedonia• STATUS: Signed on 9 May 1997 in Skopje

IN FORCE: since 9 June 1997, - amendments on 1 July 2002.Official Gazzette – International Agreements No. 16/97

MAIN CHARACTERISTICS:• SYMETRICAL • CERTIFICATE OF ORIGIN

Form EUR 1 – issued by customs offices according to regulations on theorigin of goods defined in the Protocol of the Agreement

• No import tax refund – drawback (Article 15 of Protocol 2.) • LIBERALIZATION • Industrial products (HS 25 – 97)• 0% customs duty for all industrial products in both directions

With the support of the European Commission 30

Free trade agreements withcountries of West Balkans

Trade between Croatia and Macedonia

131,6 156,7 105,2 index190,8 116,7 74,1 2004.

145,0 74,5 70,5 2003.

TotalIMPORTEXPORTmil USD

With the support of the European Commission 31

Free trade agreements withcountries of West Balkans

Serbia and Montenegro• STATUS: Free Trade Agreement between Croatia and Yugoslavia signed on 23

December 2002.Agreement between Croatia and Serbia and Montenegro on amendments of

the above FTA signed on 14 January 2004.Published: Official Gazzette-International Agreements No. 4/2004Came into force: 1 July 2004 (NN-MU 5/2004)

•• MAIN CHARACTERISTICS• SYMETRICAL • CERTIFICATE OF ORIGIN

Form EUR 1 – issued by customs offices according to regulations on the origin ofgoods defined in the Protocol of the Agreement

• LIBERALIZATION •• Industrial products (HS 25 – 97)• Gradual reduction of customs duties over several years for industrial products in both

directions (except for import of products listed in Annex I and Annex II of Protocol 1. ofthe Agreement within quantity restrictions (QUOTAS)

With the support of the European Commission 32

Free trade agreements withcountries of West Balkans

Trade between Croatia and Serbia and Montenegro - mil. USD

162,5183,4154,1index

434,8140,7294,12004.

267,476,7190,72003.

TotalImportExport

With the support of the European Commission 33

Free trade agreements withcountries of West Balkans

Overview of trade in goods between Croatia and countries ofwestern Balkans (2004) mil. USD

16.583,15657,38140,7116,750,55348,70,726Import

8.022,451.577,84294,1074,1028,221.154,1027,32Export

Total Croatia

TotalSerbia&MMacedoniaBulgariaBosnia&HAlbania

With the support of the European Commission 34

CONCLUSION

Problems of Croatian economy:- high external debt- balance of payments deficit

With the support of the European Commission 35

CONCLUSION

- Bilateral Free Trade Agreements with the countriesin the region have increased trade, but thepossibilities are far from exhausted

- Croatian trade with other countries in the region isfor the most part insufficient or disproportional

- These countries account for 19,7% of exports, but only 3,96% of Croatian imports

With the support of the European Commission 36

CONCLUSION

Trade in goods with old EU members has remainedat the level of about 60% for the past ten years, which is lower than in 1990.

With the support of the European Commission 37

CONCLUSION

Solution to these problems lie in:• increase of production• increase of export• promoting trade integrations and competitiveness by:

- continuation and acceleration of reforms- strengthening the rule of law- decreasing the role of state in economic operations