BUSINESS ENVIRONMENT ACTIVITY

Macedonia’s Recent Trade Agreements

Opportunities and Threatsfor Bottled Wine, Table Grapes,

Fresh Vegetables, Processed Vegetables

and

Wild Harvested Products

USAID Macedonia

Daniel Plunkett, AIRDLjupčo Tošev, FACE

April 17, 2008

Table of Contents

Executive Summary.....................................................................................................4Macedonia’s Recent Trade Agreements...............................................................7

Central European Free Trade Agreement (CEFTA).......................................7Macedonia-Turkey Free Trade Agreement....................................................12Macedonia-Ukraine FTA........................................................................................14Macedonia-EFTA Trade Agreement..................................................................14Macedonia’s Stabilization and Accession Agreement with the European Union.......................................................................................................15Macedonia’s EU Accession..................................................................................18

Bottled Wine..................................................................................................................20Opportunities............................................................................................................22Threats........................................................................................................................23Recommendations..................................................................................................24

Table Grapes.................................................................................................................25Opportunities............................................................................................................27Threats........................................................................................................................28Recommendations..................................................................................................28

Wild Harvested Products..........................................................................................29Opportunities............................................................................................................31Threats........................................................................................................................32Recommendations..................................................................................................32

Fresh Vegetables.........................................................................................................33Opportunities............................................................................................................35Threats........................................................................................................................37Recommendations..................................................................................................38

Processed Vegetables...............................................................................................39Opportunities............................................................................................................42Threats........................................................................................................................43Recommendations..................................................................................................44

Bibliography..................................................................................................................45List of Persons Interviewed.....................................................................................46Annex One: CEFTA Concessions Related to Macedonia...............................48Annex 2: Concessions under the Macedonia-Turkey Free Trade Agreement.....................................................................................................................63Annex 3: Concessions under the Macedonia-Ukraine Free Trade Agreement.....................................................................................................................66Annex 4: Concessions with Switzerland and Liechtenstein under the Macedonia-EFTA Free Trade Agreement............................................................68

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List of Acronyms

CEFTA Central European Free Trade Agreement EFTA European Free Trade AgreementHS Harmonized System (for tariff nomenclature)IPARD Instrument for Pre-Accession Assistance and Rural DevelopmentMFN Most Favored Nation tariff SAA Stabilization and Association Agreement TRQ Tariff-Rate QuotaUNMIK United Nations Interim Administration Mission in Kosovo

List of Tables

Table 1: Macedonia’s Exports for Products of Interest 2004-2007Table 2: Demographics of the EFTA-4Table 3: Tariff-rate Quotas for Imports of Macedonian Wine into the EUTable 4: Tariff-rate Quotas for Imports of EU Wine into MacedoniaTable 5: Market Access for Macedonian Bottled WineTable 6: Macedonia’s Exports of Table Grapes in 2007, By DestinationTable 7: Macedonian Exports of Ajvar and Lutenica

List of Figures

Figure 1: Timeline of Upcoming Dates Related to Macedonia’s Trade AgreementsFigure 2: Operation of a Tariff-Rate QuotaFigure 3: Macedonian Exports of Processed Vegetables

List of Boxes

Box 1: History of CEFTABox 2: EU Accession—Prospects and Strategy

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List of Annex Tables

Table A-1: Albania’s Quotas for Imports of Interest from MacedoniaTable A-2: Albania’s Tariffs for Imports of Interest from MacedoniaTable A-3: Bosnia’s Tariffs for Imports from MacedoniaTable A-4: Croatia’s Quotas for Imports from MacedoniaTable A-5: Croatia’s Tariffs for Imports from MacedoniaTable A-6: Moldova’s Quotas for Imports from MacedoniaTable A-7: Moldova’s Tariffs for Imports from MacedoniaTable A-8: Montenegro’s Tariffs for Imports from MacedoniaTable A-9: Serbia’s Tariffs for Imports from MacedoniaTable A-10: Kosovo’s Tariffs for Imports from MacedoniaTable A-11: Macedonia’s Tariffs on Imports from CEFTA CountriesTable A-12: Macedonia’s Quotas for Imports from AlbaniaTable A-13: Macedonia’s Quotas for Imports from CroatiaTable A-14: Macedonia’s Quotas for Imports from MoldovaTable A-15: Macedonia’s Quotas for Imports from TurkeyTable A-16: Turkey’s Quotas for Imports from MacedoniaTable A-17: Ukraine’s Quotas for Imports from UkraineTable A-18: Macedonia’s Quotas for Imports from UkraineTable A-19: Switzerland’s Concessions on Imports from Macedonia

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Executive Summary

Macedonia has signed five recent trade agreements that secure a place in Europe and provide significant opportunities for expanding exports in each of the five value chains supported by the USAID program AgBiz: bottled wine, table grapes, wild harvested products, fresh vegetables and processed vegetables. This report examines the details of the recent trade agreements, and eventual EU accession, analyzing the opportunities and threats related to each of the value chains and providing 36 recommendations for how to expand the value and volume of exports. The best opportunities arise from the Macedonia-Ukraine Free Trade Agreement, while the greatest threats lie ahead with EU accession, which promises to heighten competition in both Macedonia’s export markets and on Macedonia’s own domestic market.

The Central European Free Trade Agreement (CEFTA) was revised and re-launched in 2006, bringing together a network of 32 bilateral trade agreements governing trade in these sensitive agricultural products in Southeastern Europe. The CEFTA 2006 opened little new market access for Macedonian exporters of bottled wine, table grapes, wild harvested products, fresh vegetables and processed vegetables, but CEFTA 2006 did strengthen the institutional framework for trade amongst the 8 members sufficiently in order for the agreement to be properly implemented and trade has flourished.

Macedonia also signed trade agreements with the 4 EFTA countries, Turkey and Ukraine, opening excellent opportunities in each of the 5 value chains. Perhaps the best opportunity arising from the recent trade agreements is for exporting fresh vegetables and bottled wine to Ukraine, in particular.

Macedonia’s Stabilization and Association Agreement with the EU is now in its second phase, with most EU tariffs being phased out by the end of 2010. In many ways, this is the “honeymoon” period for Macedonia, in terms of having excellent market access to the EU but without having to open its own market much. A key challenge for Macedonia is to rally investment from the private sector to accompany the pre-accession money available from the EU (under IPARD) and to access the new funds available from the Macedonian government’s growing agricultural budget.

EU accession will not bring new market access for Macedonian exports, except that Macedonia’s table grapes and fresh vegetables will no longer be subject to the EU’s system of reference prices. But there will be plenty of new risks upon EU accession, all the more reason for Macedonian farmers, processors and traders to make every effort to benefit from the pre-accession IPARD funding. The biggest threat from the recent trade agreements will come from increased imports of EU wine and processed vegetables, once Macedonia joins the EU.

In order to expand their exports, companies in the 5 value chains supported by AgBiz must seek to exploit opportunities from the recent trade agreements, but they also need to

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improve their business practices and place new emphasis on short-term market penetration and long-term strategic planning. To aid them in penetrating new markets, the Annexes of this report contain the details of the concessions between Macedonia and its partners under CEFTA and the agreements with EFTA, Turkey and Ukraine.

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Figure 1: Timeline of Upcoming Dates Related to Macedonia’s Trade Agreements

2010

2011

2009

2008

-Under SAA, final tariffs on most EU food products come down (0%)

-Macedonian trade negotiators should be interacting with EU counterparts regarding third-party access upon EU accession (especially maintaining access to Serbia’s market for key Macedonian products)

-CEFTA negotiation on further tariff cuts (ask Croatia to eliminate quota for wine)

-Final CEFTA tariffs come down, except those governed by quotas.

-Croatia’s accession to the EU? (better access for Macedonian wine, new tariffs on imported glass containers)

-Macedonia’s accession to the EU (date?) expected to precede accession by Serbia. EU products now enter Macedonia freely.

-Final phase-in of deals with Ukraine, Turkey and the EFTA countries

-Under SAA, annual adjustments of EU wine quotas. Tariffs on other EU products still at 70% of Macedonia’s MFN rate

-Under SAA, tariffs on most EU food products still at a protective level (50% of MFN)

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Macedonia’s Recent Trade Agreements

The Republic of Macedonia has been active in signing and implementing trade agreements in recent years. Known as an exporter of farm and food products in Yugoslav times, Macedonia has maintained duty-free access on nearly all exports in the 5 AgBiz value chains to many of its traditional markets in former Yugoslav countries: Bosnia-Herzegovina, Montenegro, Serbia, and Kosovo (UNMIK—the United Nations Interim Administration Mission in Kosovo). For Croatia, Macedonia has privileged access under CEFTA, with quotas governing imports into Croatia on certain sensitive products. With the CEFTA, markets in Albania and Moldova are newly open to exports from Macedonia.

Macedonia has been following a progressive opening-up to the outside world since the trade conflicts experienced during the latter parts of the 1990s. Prior to WTO membership in 2002, Macedonia had “a long list of products under licensing from the Ministry of the Economy for protective purposes which is being terminated before WTO accession (World Bank 2003). The series of events leading up to the signing of CEFTA 2006—such as being the target of the Greek trade embargo or being affected by the U.N. trade embargo on Serbia—have shown that Macedonia’s farmers, processors and exporters can weather many storms, and Macedonia is well-positioned to establish itself amongst the other members of the EU.

Nevertheless, from the same source, Macedonia was praised for having made “the largest strides” toward establishing the network of agreements with the countries of Southeastern Europe. While a republic of the former Socialist Federated Republic of Yugoslavia, exporters from the present Macedonia had access to seaports. Suddenly landlocked, the country faces higher shipping costs as other handlers become involved.

Central European Free Trade Agreement (CEFTA)

Macedonia was one of the last countries to sign onto the original CEFTA treaty but one of the first to implement the second CEFTA treaty known as “new CEFTA” or “CEFTA 2006.” Both the old and the new CEFTA treaties were “made in Brussels” in that the European Commission was instrumental in bringing together the trade negotiators for the Central and Eastern European countries and reconstructing a formalized system of trade links amongst themselves. Box 1 shows the history of membership in the original CEFTA, which was superseded by CEFTA 2006.

The old CEFTA was not nearly as comprehensive a trade agreement as the new CEFTA, which in addition to trade concessions also includes a common approach to intellectual property rights, investment policy, safeguards, dispute settlement, and other aspects. The

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trade concessions under the old CEFTA were a matter for bilateral negotiation among the different member countries, resulting in a network of 32 bilateral agreements.

Before even becoming a member of the old CEFTA agreement, Macedonia signed bilateral trade agreements in 1997 with the Federal Republic of Yugoslavia and with Croatia, with Slovenia in 1999, Bulgaria in 2000, Albania and Bosnia-Herzegovina in 2002, with the Republic of Moldova in 2004, and finally signing deals with Serbia, Montenegro and Kosovo (UNMIK) in 2005 that came into force in 2006. The 2006 CEFTA Treaty details all of the bilateral treaties that are superseded by the CEFTA, including Macedonia’s deals with Albania, Bosnia-Herzegovina, Moldova, Serbia-Montenegro, and Kosovo.

The old CEFTA with the network of bilateral deals was clearly insufficient. “Establishment of a hodgepodge of bilateral free trade arrangements, especially in the context of extremely weak and sometimes corrupt customs services is not likely to enhance trade prospects or increase incomes and employment in the region. On the contrary it may lead to significant efficiency losses (World Bank 2003).” Macedonia’s government found the bilateral deals to be “disappointing—they failed to invigorate regional trade or eliminate mutual trade barriers… (they) lacked appropriate implementation infrastructure. Member countries often failed to fulfill their commitments, and there was no recourse for sanctioning behavior” (Ministry of Economy 2007a).

The new CEFTA 2006 changes little in terms of market access for Macedonian exports, but strongly reinforces the institutional framework for regional trade. The CEFTA 2006 provided for a Secretariat seated in Brussels and for procedures for selecting a mediator in case of disputes. There are also high-level sub-committees to deal with priority issues for implementation, such as agriculture, customs cooperation and non-tariff barriers. The

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Box 1: History of CEFTA

1992: Czech Republic, Hungary, Poland, Slovakia sign first CEFTA.

1996: Slovenia joins.

1997: Romania joins.

1999: Bulgaria joins.

2002: Croatia joins.

2004: Czech Republic, Hungary, Poland, Slovakia and Slovenia join EU, leave CEFTA.

January 2006: Macedonia joins old CEFTA.

Sept-Oct 2006: Albania, Bosnia, Macedonia, Moldova, Montenegro, Serbia and Kosovo all join new CEFTA.

2007: Bulgaria and Romania join EU, leave new CEFTA.

criteria for membership for the new CEFTA were watered-down slightly, in order to be more inclusive than under the more-restrictive criteria of the old CEFTA. The “New CEFTA” or “CEFTA 2006” came into force 26 July 2007 for the first five member countries (Albania, Macedonia, Moldova, Montenegro and UNMIK), with other countries such as Bosnia-Herzegovina, Croatia, and Serbia ratifying the agreement later on in 2007.

The free trade area amongst the CEFTA countries is to be in place by the end of December 2010, but tariffs on most products are to be eliminated by the end of 2008. Quantitative restrictions were eliminated under CEFTA, but countries were able to establish Tariff-Rate Quotas (TRQs), which allow in a given amount at a reduced tariff, with import quantities above the quota volume assessed a higher tariff (Figure 1). 1 The CEFTA also calls for the abolition of export duties and for a “standstill” on customs duties, such that applied duties may not be increased and no new equivalent charges may be assessed. The CEFTA also provides a forum for negotiating further tariff reductions, with negotiations on further liberalization to start no later than May 2009.

Figure 2

For many of Macedonia’s bilateral trade relationships, such as those with the other countries of the former Yugoslav Socialist Federated Republic, two-way trade was already unencumbered by tariffs or quotas. There are obvious advantages for Macedonia to pursue trade with its former mates in Yugoslavia, as these are close markets, with a

1 Macedonia’s recent trade agreements all use “tariff-rate quotas” (TRQs), also known as “tariff quotas” or simply “quotas,” to govern market access for several sensitive agricultural products. Under this schema, import volumes up to the level of the quota quantity can enter at a reduced tariff (often zero), while imports for quantities exceeding the quota quantity must pay a higher over-quota tariff. For those able to import at the in-quota tariff rate, it may be possible to realize an economic rent (or in other words, a good profit). The over-quota tariff will often make over-quota imports more expensive than domestic products.

Quota Import volume

Price

World price

World price +in-quota tariff

World price +over-quota tariff

In-quota tariff

Domestic pricein Macedonia Over-quota tariff

OPERATION OF A TARIFF-RATE QUOTA

RENT

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common language from the former Yugoslavia, that are relatively transparent for Macedonian exporters to penetrate. In the early part of this decade, agricultural products made up almost half of the bilateral trade recorded between Macedonia and Albania and Bosnia-Herzegovina (World Bank 2003).

Annex Tables A-1 through A-10 show the details of the concessions made on agricultural imports from Macedonia by its CEFTA partners. Three countries—Albania, Croatia and Moldova—established TRQs on imports from Macedonia for certain key products, including table grapes, ajvar and wine. Tables A-11 through A-15 show the TRQs established by Macedonia on imports from Albania, Croatia and Serbia. All have zero tariffs for in-quota quantities. For those products subject to TRQs, there are no provisions for eventual elimination of either the quota or the over-quota tariff—these thus represent permanent exceptions to the CEFTA free trade area.

Bosnia-Herzegovina, Croatia, Montenegro, Serbia and Kosovo all offer primarily duty-free access for Macedonian goods under CEFTA. As a small country and not a traditional trading partner, Moldova may be of less interest, although Moldova has established TRQs for many products of interest to Macedonia. Albania is a mixed story, as many key Macedonian products may enter duty-free, but some are subject to 15% tariffs.

Several tangible benefits arise from Macedonia belonging to CEFTA 2006. While the direct effects related to changes in tariffs are relatively minimal—given the prior bilateral trade deals, the indirect effects may already be having a positive impact on Macedonia’s exports. Indirect effects relate to the improved institutional framework, greater respect for the terms of the trade agreement by the participating countries, increased interaction between the countries, and the possibilities for greater investment and interest in a particular sector. According to the Ministry of Economy, Macedonian exports to Albania, Croatia, Moldova and Serbia have increased sharply during the first 4 months of “New CEFTA.”

One important effect outside of the 5 AgBiz value chains has been the end of export subsidies by Serbia on meat and dairy products. Prior to CEFTA 2006, Serbia was using export subsidies on 70% of exports to Macedonia, but now no more. One analyst observed a price increase for dairy products in the range of 20% (the UHT milk price from Serbia was 45 denars before, now 55 denars). Price increases were also noticed on meat products, including sausages. Price increases of course can be considered to benefit Macedonian dairy and meat producers.

Another positive aspect about the CEFTA 2006 is the opportunity for “diagonal cumulation” of products among CEFTA countries for the purposes of exporting to the EU. For example, Macedonian table grapes can be exported to Bosnia and then re-exported to the EU, since both are CEFTA countries. Diagonal cumulation reinforces the mutual production links oriented toward supplying EU markets. Diagonal cumulation is not practicable for products governed by TRQs.

Finally, the European Commission’s oversight of CEFTA 2006 ensures that the CEFTA countries will comply with the terms of the deal, which was not the case for the old

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CEFTA. Membership in CEFTA is seen as an “ante-chamber” to the EU and participation in CEFTA provides evidence to the EU that CEFTA countries can negotiate the terms and conditions for free trade, and implement and enforce the agreements.

There are some risks from the new CEFTA. The CEFTA treaty does not impose restrictions on agricultural policies, outside of those under the WTO. As Bosnia-Herzegovina, Montenegro and Serbia are not yet WTO members, agricultural subsidies provided by those countries could negatively impact Macedonian farmers. For example, if Serbia were to offer its farmers subsidies on inputs to vegetable production—while Macedonia did not, then the subsidies could lead to increased Serbian production and lower export market share for Macedonia into the key Serbian market.

Perhaps more importantly, Macedonia has set up zero tariffs for imports in every one of the 5 product areas of export interest. While Macedonia is usually an exporter in these areas, it is possible that imports coming from its CEFTA partners could pose challenges for domestic market sales. The potential for increased competition on the Macedonian market is particularly heightened in a sector that is not well-organized, such as table grapes.

With CEFTA being a free trade area but not a customs union, each country maintains its own external tariff policies for countries not belonging to CEFTA. This means that if Serbia changes an external tariff, products could enter there and be routed to Macedonia (in the past there was the case of tomato paste from China), but generally this is the result of fraudulent activity.

CEFTA does provide for each country to establish and operate a system of safeguards in case of “serious disruption” to domestic markets. Article 23 of CEFTA 2006 related to the use of WTO rules for safeguards should prevent arbitrary actions by non-WTO member countries (Serbia, Bosnia, Montenegro), but Article 23bis mentions protecting agricultural markets with safeguards (seen as a “black hole”). The Macedonian government has established a commission to handle safeguard questions and a set of procedures for applying safeguards, countervailing duties and anti-dumping actions. Government officials should closely monitor import volumes on an ongoing basis should seek to apply safeguards if import surges occur.2

Anytime there are TRQs in operation, there is the risk that the tariff-rate quota administration practices in partner countries could limit Macedonian exports. For example, Croatia is using 3 different types of allocation methods, for tobacco, wine and lamb (known as systems A, B, and C). Only domestic producers receive quota import rights under system A, while historical importers receive quota rights under B, and system C (all others) is either never utilized or unavailable. The danger is that while Macedonia’s seemingly transparent “first-come, first-served” practices for implementing

2 There are of course other ways to block or slow imports, for example by establishing temporary phytosanitary inspections or by the inspection of truck safety or equipment safety. The danger is that the trading partner will reciprocate.

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TRQs exposes the domestic market, Macedonian exporters (in particular for wine) may not be benefiting in return.

Table 1 shows the last four years of export figures for the product areas of interest within the 5 AgBiz value chains. While these data are not comprehensive regarding each category, the data show over $80 million worth of exports in the 5 value chains in 2007.

Table 1: Macedonia’s Exports for Product Areas of Interest2004 2005 2006 2007

Tons1,000 Dollars Tons

1,000 Dollars Tons

1,000 Dollars Tons

1,000 Dollars

tomatoes 30,879 9,166 36,595 14,946 42,166 18,071 47,832 23,130

cucumbers 15,953 4,138 18,062 5,492 19,783 5,391 18 237 7,077

fresh mushrooms 618 4,460 608 3,986 252 1,974 116 820

sweet peppers 19,191 5,564 20,753 5,884 9,244 3,412 17,970 6,365

frozen vegetables 3,283 3,236 3,722 3,509 5,438 5,245 8,387 9,591

dried mushrooms 141 2,638 130 3,162 180 5,173 67 1,624

table grapes 22,293 5,120 38,003 9,356 31,460 8,808 46,250 15,370

sliced mushrooms 0 0 594 972 674 1,167 602 1,449

ajvar 2,326 3,555 3,123 4,956 3,712 6,638 828 1,178

bottled wine 5,902 9,049 5,753 8,918 8,004 12,054 9,539 16,966

bulk wine 51,181 24,237 59,992 27,408 74,615 32,535 83,142 42,595

wine dregs 114 43 42 5,060 164 57 367 110

Source: Macedonia’s State Statistical Office.

Macedonia-Turkey Free Trade Agreement

While not neighboring countries, Macedonia and Turkey have long-standing trade links and the countries signed a deal on 7 September 1999 that came into effect on 1 November 2000. The Turkey-Macedonia free trade protocol, slated to be phased-in over 10 years, was amended in December 2003, so the ending date of implementation is unclear.

Turkey is a market of 71 million people with $9,400 per capita income, with a customs union arrangement with the European Union. Trade between Macedonia and Turkey is by road transport in sealed trucks via either Greece or Bulgaria.

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With a slightly earlier growing season for grapes and fresh vegetables, Turkey is an important supplier of off-season fruits and vegetables to Macedonia. With more-advanced technology on many Turkish farms, Turkey is a competitor with Macedonia in some export areas. Turkey is the second-leading producer of table grapes in the world (AgMrc 2006).

The agreement allows in most Turkish industrial products to Macedonia and allows many Macedonian agricultural and food products into Turkey. All industrial products from Macedonia can be exported duty-free to Turkey. The Turkey FTA has provisions for temporary protection for infant industries, with duties not to exceed 25%, not to exceed five years.

Under the agreement, Macedonia will not assess customs duty on key inputs into the value chains for bottled wine (bottles) and processed vegetables (jars) from Turkey. Without the agreement, bottles and jars would be assessed Macedonia’s MFN tariff of 50%. This opportunity could allow Macedonian bottlers and processors to diversify their source of supply away from the leading Croatian company (Vetropak).

As shown in Annex 2, Turkey granted concessions on imports of fresh vegetables, beans, fresh fruits, rice, ajvar, soups, with zero-tariff on imports within quotas. For other products (frozen and dried vegetables, canned vegetables, mushrooms, and wine, Turkey only offered to reduced its MFN rate by 50%. The opportunities for Macedonian exports within the AgBiz value chains include red peppers in powder form, canned vegetables and sauces. Turkey’s concession on wine from Macedonia is for a 50% reduction of the MFN duty, which is 102%, resulting in a rather-high 51% duty, albeit for unlimited quantities. It bears pointing out some “gaps” in the Annex showing Turkey’s concessions under the deal, a point that Macedonia’s trade negotiators should seek to clarify.3

Also in Annex 2 are the concessions granted by Macedonia for importation of agricultural products originating from Turkey. It designates the products, as well as the quantity of quotas. For almost all of the products listed (chicken meat, lentil, dried grapes, olives, canned fish, cotton, etc.), the within-quota tariff equals 0%, except for imports of Turkish beer at 50% duty for within-quota quantities. The concessions granted by Macedonia do not include any products figuring amongst the 5 value chains.

Cultural and historical links between the two countries could be exploited to promote trade (the countries share some similar foods). At least one Macedonian company (Medium Export) is eager to penetrate the Turkish market, seeking to export fresh vegetables for industrial purposes and for fresh consumption.

It is noteworthy that Macedonia made no concessions on imports of fresh peppers from Turkey (Annex Table A-16). Turkey’s earlier harvest for peppers could offer Macedonian processors a chance to import peppers before the start of Macedonia’s domestic pepper harvest and ensure an extra month or two of processing activity. Macedonia could

3 Some of the quota quantities and in-quota tariff rates for items are blank. Is this an oversight? Some of them are also jumbled and out of numerical order.

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simply open up a TRQ for fresh peppers from Turkey, for example during the month of June before Macedonia’s main pepper harvest. But it might be savvy to seek to negotiate something in return for improving Turkey’s access to Macedonia’s market. In return for establishing the TRQ for imports of fresh peppers into Macedonia, Macedonia could negotiate a TRQ at 0% duty for say 1,000 tons of wine.

Macedonia-Ukraine FTA

Perhaps the most promising of the trade agreements signed in recent years, in terms of expanding Macedonia’s exports, is the FTA with Ukraine that opens a market of 46 million people with $6,900 per capita income to a wide range of agricultural products from Macedonia. Ukraine has a different growing season than Macedonia and many complementary products.

Under the deal, Ukraine has opened quotas for Macedonian products in 4 out of the 5 value chains supported by AgBiz (not table grapes). Annex 3 contains the concessions granted by Ukraine for importation of agricultural products originating from Macedonia. Ukraine opened up zero-duty quotas for chilled or frozen goat meat, peppers, dried fruit and vegetables, red powder pepper, products made of sugar not containing cocoa, chocolate, biscuits and waffles, canned fruit and vegetables, jams, fruit juices, sauces, wine, hard liquors, vinegar, tobacco.

Annex 3 also contains the concessions granted by Macedonia for imports from Ukraine, for chilled and frozen beef, frozen pork, milk and cream, barley, wheat, oilseeds, sugar made of sugar beet, products made of sugar, chocolate, biscuits and waffles, jams and fruit jellies, mineral water, vinegar (Ministry of Agriculture 2005).

The FTA with Ukraine was said by one person to not yet be operational, since the negotiators from the two countries had not met to finalize the TRQs and the tariffs to be applied on the bilateral trade. However, the Ministry of Economy reports the FTA with Ukraine to be in force since 15 July 2003 (Ministry of Economy 2007a).

Macedonia trade data show 38 tons of fresh tomatoes to Ukraine, worth $18,000.There is also evidence that some wine is already being exported there under the rather-large TRQ opened by Ukraine (40 million liters of Macedonian wine—whether bottled or in bulk—may enter duty-free). One analyst also brought up the possibility of barter trade between Macedonia and Ukraine, with Macedonian wine going north and Ukrainian wheat heading south.

Macedonia-EFTA Trade Agreement

Macedonian exporters can find several interesting opportunities arising from the agreement between Macedonia and the 4 countries of the European Free Trade

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Agreement (EFTA). As with the CEFTA, each EFTA state has made a bilateral arrangement with Macedonia for concessions on trade in agricultural products.

The four EFTA countries—Iceland, Liechtenstein, Norway and Switzerland, comprise a market of 12.5 million people with $45,534 per capita income (Table 2). The EFTA countries have far different growing seasons than Macedonia and many Macedonian products cannot be grown in EFTA countries. Switzerland is the largest market and has a customs union with Liechtenstein since 1923.

The Macedonia-EFTA agreement, signed in 2000 and to be put in place over 10 years, does not arrive anywhere near free trade in agricultural products. Macedonia only opened a handful of quotas for imports from Switzerland—none in the 5 value chains. The base tariff is that applying on 1 January 2000. Given the highly subsidized nature of the EFTA countries’ agriculture, there are provisions for consultation before countervailing duty actions may be taken.

Table 2: Demographics of the EFTA-4  Population Per-capita income Iceland 301,931 $39,400 Liechtenstein 34,247 $25,000 Norway 4.6 million $55,600 Switzerland 7.6 million $39,800 EFTA-4 12.54 million $45,534Source: CIA World Fact Book; authors’ calculations.

Under the Switzerland-Macedonia agreement, Macedonian exports of bottled wine benefit from a reduced tariff rate equal to the Swiss MFN rate minus 17.5 Swiss francs per 100 kg. Switzerland’s top MFN rate for bottled wine is 50 francs/100 kg, meaning the duty on Macedonian wine would be 32.5 francs/100 kg, which is more than quadruple that of Croatia. Croatia has a reduced tariff rate for wine into Switzerland (7.5 Swiss francs per 100 kg)—and the provision that the wine from Croatia must be wholly obtained would seem to exclude Macedonian wine being sent to Croatia for re-export to Switzerland.

Macedonia’s Stabilization and Accession Agreement with the European Union

The European Union now has 27 member countries, a market of almost 500 million people with $28,213 per capita income. There are many linkages with the European Union. More than half (53%) of Macedonia’s trade is with the EU, but in return Macedonia only represents 0.1% of EU trade (Macedonian Business 2007). Most foreign direct investment in the region comes from the EU, with only 0.5% of total FDI coming from the other countries in the southeastern Europe region (OECD 2007). Macedonia’s FDI as a % of GDP was 5.6% in 2006 (World Bank 2007).

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The EU has member countries with similar growing seasons as Macedonia, but also countries with complementary seasons or which cannot grow certain products. It is safe to say that the EU market already features every product available in Macedonia, except Makedonski ajvar.

Macedonia signed the Stabilization and Association Agreement with the European Union in 2001, to be phased in over 10 years, with the final tariff reductions scheduled for the beginning of 2011. As noted for countries throughout the region,

The EU does not initiate negotiations for an SAA unless the EU judges that the political conditions are met and the country would have the institutional capacity (with EU assistance) to implement its commitments under the agreement. These commitments extend beyond trade and cover matters pertaining to investment, competition, the environment, standards, etc. The aim in all these is to bring the institutions, legislation and regulations of the countries to be in line with those in the EU so as to facilitate their future integration into the EU structures. Countries with SAAs, on the other hand, are labeled 'potential candidates' for EU accession.

--World Bank 2003.

The market access provisions of the SAA are asymmetrical in favor of Macedonia. This favorable trade regime vis-à-vis the EU will only last until EU accession. Macedonian agricultural products can enter the EU market duty-free except for tariff-rate quotas on wine, baby beef and fish (sardines). Macedonia opened quotas for imports from the EU for 29 tariff lines, but wine is the only product figuring in the 5 value chains focused on in this report.

A separate wine protocol was signed in 2002, and has been renegotiated since. Table 3 shows the starting point from 2006 for Macedonian exports of wine to the EU, with the interesting mechanism for increasing the import quota for bottled wine each year while decreasing the quota for bulk wine. The SAA is re-negotiated each time the EU adds a new member state, so the accession of Bulgaria and Romania prompted a slight increase in the wine TRQ.

Table 3: Tariff-rate Quotas for Imports of Macedonian Wine into the EU  2006 TRQ

(hectoliters)Yearly

adjustmentsTariff rate

within quotaTariff rate for volumes

above quota

Sparkling wine HS 220410 and Wine in bottles HS220421

37,000 +6,000 0% Up to €32/hl

Bulk wine HS220429 354,500 -6,000 0% Up to €32/hl

While there are zero customs duties on other agricultural product imports from Macedonia into the EU, for fresh fruits and vegetables, the EU continues to practice a system of reference prices that utilize a variable import levy to maintain a minimum import price for fruits and vegetables coming into the EU. This system, which limits trade, will remain in place until Macedonia joins the EU.

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For most EU agricultural product exports to Macedonia, there will be a phase-out of tariffs by 2011, with a “cliff” in the final year (the tariff reduction for Macedonia is backloaded). Macedonia opened up a couple of different types of TRQs for EU imports. Macedonia has opened TRQs with zero-duty for in-quota imports for a range of EU products: beef and poultry offal, ham, milk, cream, butter, certain cheeses, oranges, mandarins, grapefruits and lemons, sausages and pâté, unrefined soybean oil, olives, juices and certain animal feeds. For a second category of TRQs (milk, certain cheeses, sausages and pâté, juices and certain animal feeds), the in-quota tariff rate is not zero, but rather 70% or 100% of MFN. Macedonia also opened a TRQ for wine imports from the EU (Table 4). There is no provision for the eventual elimination of tariffs on Macedonia’s imports of agricultural products from the EU for products with TRQs.

Table 4: Tariff-rate Quotas for Imports of EU Wine into Macedonia  2006 TRQ

(hectoliters)Yearly

adjustmentsTariff rate

within quotaTariff rate for volumes

above quota

Sparkling wine HS 220410 And Wine in bottles HS220421

3,000 +300 0% 50%

These quantities were adjusted in the revision to the SAA.

As for tariff concessions, Macedonia opened immediate duty-free access in 18 agricultural tariff lines, but again none involve products from the 5 value chains. As for the list of products for which Macedonian tariffs will be progressively eliminated by 2011, there are several tariff lines for fresh and processed vegetables, including fresh mushrooms, fresh tomatoes, sweet corn, olives, as well as dried mushrooms, other dried vegetables, and jams and jellies.

Tomato ketchup (HS210320) is one product where it can be expected that there will be a shock to the Macedonian market, with the tariff dismantling backloaded, such that in 2008, the Macedonian tariff is still 70% of the MFN rate. In January 2011, the Macedonian tariff on tomato ketchup will drop dramatically from the 2010 rate of 30% (50% of the MFN rate of 60%) to 0%. The Macedonian authorities should place tomato ketchup on a watchlist to ensure that retailers pass along this tariff reduction to end-consumers, rather than simply pocketing the difference themselves. The same applies for sweet corn, a product of interest to the EU, and peanut butter.

Pre-accession is the “honeymoon” period for Macedonia, in terms of having excellent market access to the EU but without having to open its own market much. It is essential that Macedonia take advantage of the transition funds provided by the European Commission under the program known as the Instrument for Pre-Accession Assistance for Rural Development (IPARD). The IPARD funds require considerable expertise in filling out paperwork and often require considerable co-financing by the farmer. In theory, the EU funds are aimed at rural development aims rather than specifically at boosting agricultural production. The IPARD subsidies can boost the productivity of a qualifying farmer, but only about 30 percent of the EU’s pre-accession funding has been successfully distributed among the countries of Central and Eastern Europe eager to join the EU.

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Alongside the IPARD funds, Macedonia itself is in the process of greatly increasing its own agricultural sector subsidies: from €5 million in 2006 to €20 million in 2007, with planned increases to €45 million in 2008, €70 million in 2009 and €100 million. A key challenge for Macedonia is to rally investment from the private sector to accompany the money from IPARD and the Macedonian government—and to fully access those available funds.

Macedonia risks not being able to benefit from IPARD funds during the pre-accession period unless farmers become skilled at filling in the paperwork (role for FACE in training how to do it).

Macedonia’s EU Accession

With the Stabilization and Association Agreement coming into force in 2002, Macedonia was recognized as a potential candidate country by the EU. On 22 March 2004, Macedonia formally applied for EU membership, and in December 2005, the European Council granted Macedonia formal candidate status. But it might be several more years from now before accession is achieved.

In a 2004 report by Macedonia’s Ministry of Agriculture, it is asserted that “Macedonian agriculture commences reforms for approximation to EU from an unfavourable starting position…Macedonia has developed a National strategy for European integration (following on from) Macedonia accession to the WTO (2003)…Agriculture has the vital role of a buffer of social problems in the period of large scale economic and societal changes…The emphasis of the agrarian policy reforms should be put on the transfer from a market-pricing to a structural policy and on the introduction of various forms of support for increasing of the profitability and competitiveness of the agriculture economies. With the Stabilization and Association Agreement (article 68), the Republic of Macedonia has taken on the obligations for approximation of its legislation to the acquis communautaire of the EU (Ministry of Agriculture 2004).”

The “acquis communautaire” represents 80,000 pages of EU legislation that Macedonia will have to translate and transpose into national law. It is estimated that 60% of the work is related to agricultural markets. This is a substantial task for any country, but particularly for Macedonia given the small size of its bureaucracy.

Macedonia would appear to be second in line (behind Croatia) to join the EU and achieving NATO membership would undoubtedly be helpful for Macedonia to achieve EU membership. It cannot be stressed enough how important it is for Macedonia to

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successfully implement its new campaign of agricultural-sector support and to take advantage of the availability of IPARD funds during the pre-accession period.

As mentioned in the prior section, market access for Macedonian exports to the EU will not change substantially upon EU accession. The TRQs for Macedonian exports of wine, baby beef and fish would no longer be in effect, as all Macedonian products could enter other EU markets duty-free and quota-free. In addition, the EU system of reference prices for imported fresh fruits and vegetables from outside the EU, which serves in effect as a tariff on imports, would no longer be applicable.

On the other hand, upon EU accession, all EU products will be able to enter Macedonia’s market duty-free. As Macedonia’s present tariffs on EU imports are often 50%, the “big bang” of EU accession may have some strong effects—and some unforeseen effects.

Amongst the 5 AgBiz value chains, EU accession can be expected to have the strongest impact on Macedonian producers of wine and processed vegetables (Box 2). In both sectors, Macedonian consumers will benefit from lower prices for EU products and a wider variety of available products than at present. But competition could be fierce from EU imports for supermarket sales in Macedonia of bottled wine and processed vegetables, as EU companies have sophisticated branding and market penetration strategies never before seen on Macedonia’s market.

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Box 2: EU Accession—Prospects and Strategy

Bottled wine Rapid loss of market share in Macedonia (up to one third?).

Need to co-opt the competitors.

Table grapes Little change except for potentially higher Serbian duties.Will FDI drive out the local guys?

Wild products Little change. Possible loss of supermarket sales (small).

Fresh vegetables Potential loss of some supermarket sales in Macedonia.

Macedonian eating habits for fresh vegetables may change.

Processed vegetables Little change for exporters.Penetration of Macedonian market by bigger and stronger EU brands.

The timing of EU accession for Macedonia vis-à-vis important trading partners such as Croatia and Serbia could change the market access conditions for Macedonian exporters. If Croatia joins the EU before Macedonia, as some predict, then Macedonia’s access to Croatia’s market will in fact improve. Croatia’s import quota for wine from Macedonia would be folded into the EU import quota for wine from Macedonia and Croatia would have to abandon its restrictive tariff rate quota administration practices (at least in theory). In return, Macedonia would erect its MFN tariff wall against imports from Croatia—although it is possible that the European Commission, in re-negotiating its SAA with Macedonia due to Croatian accession to the EU, would seek to preserve some of Croatia’s traditional market access into Macedonia.

If Macedonia joins the EU before Serbia, then Macedonia may find that its largest, traditional market is lost by the wayside, as Serbia would erect new tariff barriers against imports from Macedonia. As mentioned in the hypothesis above regarding Croatia, it may be possible to preserve some of Macedonia’s traditional access into Serbia’s market as part of the negotiations surrounding Macedonia’s EU accession. As for imports from Serbia, Serbia already enjoys unfettered access into Macedonia’s market, so Serbian market access would not necessarily change, if Macedonia joins the EU before Serbia.

Another potential effect from EU accession could be a rise land prices in Macedonia, as agricultural subsidies are capitalized into land values. It is difficult to gauge at this point whether it might be a mild or a stronger effect, as the large number of smallholder properties could make land aggregation difficult to realize.

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EU accession will likely also have an effect on Macedonia’s labor market, including its agricultural labor force. Outmigration, as occurred in new EU members such as Poland or Bulgaria, would tend to increase the cost of labor in Macedonia, but this effect would be mitigated by Macedonia’s present high unemployment rate (close to 40%), as well as Macedonia’s particular structure of agricultural production.

Bottled Wine

For a country with a tradition thousands of years long of tending grapevines, there seems to be a rather casual approach to the growing of grapes in Macedonia. About 28,000 hectares are under total grape production in Macedonia, with about 3,600 hectares irrigated. About 70% of the total grape area is under wine varieties while 30% of the area is dedicated to varieties used for fresh table grape consumption.

Total grape output is about 220,000 tons, with grape yield of just under 8 tons per hectare. More than two-thirds of the grapes grown in Macedonia go for wine production, with farmers’ own production of wine or grape brandy (rakija) still an important element in the sector. Average annual production of wine is considered to be just under a million hectoliters.

Grape production in Macedonia is an extensive agriculture activity, especially in the central southern parts of the country. The most famous production region is the Tikves area (Kavadarci, Negotino, Demir Kapija). Macedonia’s Institute for Agriculture has 54 registered grape varieties. Among the white wine varieties, the most common are Smederevka, Zhilavka, Rheine Riesling, and Belan. The red varieties most used are Vranec,4 Cabernet Sauvignon, Merlot, and Burgundy.

There are a handful of big wineries in Macedonia and many small wineries. Amongst the biggest wineries, the export of bulk wine in tanker trucks is the traditional business model. The bulk wine is sold to Germany, where it is bottled, often under supermarket private brand labels. Under the former Yugoslavia, bulk wine was exported to Slovenia and Serbia and bottled there. Croatia and Czech Republic are other typical outlets for Macedonian wine.

In an earlier section of this report, Table 1 shows that Macedonia’s exports of bottled wine grew from $9 million in 2004 to nearly $17 million in 2007. Exports of bulk wine also grew steadily, from $24.2 million in 2004 to $42.6 million in 2007.

In the past few years, some new wineries have emerged in the largest grape- producing areas of the country. These emerging wineries are built and equipped following the standards of up-to-date technologies and methods of modern wine production. Generally, the new technology in these wine production facilities, as well as the upgrading of the old wineries with new equipment, have contributed to improvement in the quality of wine

4 Vranec is a grape native to Macedonia that was brought to the U.S. and became today’s Red Zinfandel.

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produced during the last few years, confirmed by the increased demand for Macedonian wine by foreign buyers.

Macedonia has adopted a law for wine, approximated to the wine law of the EU, and therefore to the legislative requirements of the WTO concerning wine. This is an important step towards organization in the sector. However appropriate implementation of the law is still needed.

The wineries in Macedonia are believed to have some reserve capacity available for expansion of wine production. About 1,200 people are employed by the wineries. A group of 6 wineries have formed a wine cluster, the Macedonian fine wine Export Group, although their ability to cooperate on export marketing has so far not been proven.

The sales and distribution on the domestic Macedonian market is generally handled by each winery’s sales department dealing directly with the retailers. There are very few wholesalers of wine and alcoholic beverages leaving each winery to deal with both “on-premise” and “off-premise” domestic retail accounts.

Although estimates vary, Macedonia’s domestic wine consumption is considered to be relatively low by EU standards. One study attributed Macedonia’s consumers with “a low degree of demand sophistication” (Harvard Business School 2006).

Imports of bottled wine into Macedonia amounted to only $176,000 in 2007 while bulk wine imports amounted to only $122,000. Slovenia, Greece and Germany are traditional suppliers, while a few bottles of wine from Spain, France and Australia can be observed in the largest supermarket retailers in Skopje, at prices to consumers more than double the most-expensive Macedonian wines on the shelves. This price gap is undoubtedly due in part to the 50% customs duty and to the relatively small size of the duty-free quota for the import of EU wine into Macedonia. In smaller supermarkets, there are no foreign wines present.

Opportunities

Macedonia’s recent trade agreements have opened up a number of interesting opportunities for exporting bottled wine. As always, there is a difference between the opening up of “market access” and actual “market entry” or export sales.

The CEFTA 2006 ensures zero-duty access to Bosnia, Kosovo, Montenegro and Serbia. Croatia opened a quota for bottled wine from Macedonia, but problems with quota administration there appear to be hampering exports. CEFTA also ensures that Macedonian bottlers of wine can have duty-free access to an important input—glass bottles (HS701090), imported from a company in Croatia.

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Table 5: Market Access for Macedonian Bottled Wine ExportsQuota volume Duty within quota Over-quota

dutyCroatia (CEFTA) 4,000 tons 0% 21%Ukraine 40 million liters 0% 0%Turkey Unlimited1 51% 51%SAA (EU) 37 million liters2 0% Up to 32

Euros per hlSwitzerland (EFTA) Unlimited1 32.5 Swiss

francs/100kg 32.5 Swiss francs/100kg

Norway (EFTA) Unlimited1 0% 0%With EU accession Unlimited 0% 0%1 In effect, an unlimited quota volume means no quantitative restriction is in effect.2 Base volume for bottled wine and sparkling wine in 2006. Frequent adjustments.

Under the Macedonia-Turkey FTA, Turkey made a concession on imports of bottled wine from Macedonia, but it is unlikely that much will be exported unless the access is improved. For unlimited quantities of bottled wine, Turkey agreed to cut its MFN rate in half, but since the MFN rate is 102%, Macedonian wine still faces a hefty 51% customs tariff.

Ukraine, on the other hand, opened rather-large quotas for Macedonian wine (40 million liters, whether bulk or bottled) and for rakija (HS220890—100,000 liters). Imports within the quota can enter Ukraine at zero duty, which could be a real opportunity indeed.

Under the agreement with EFTA, Switzerland made a tariff concession on wine imports from Macedonia, but the duty is still 4 times higher than the concession granted by Switzerland to Croatia. Norway offers duty-free and quota-free access for Macedonian wine, but Norway’s state control over alcohol sales are believed to pose a formidable non-tariff barrier.

As shown in Table 3 in a prior section, Macedonia’s SAA with the EU opened quotas for bottled wine and bulk wine from Macedonia, with a mechanism for the bulk wine quota to decrease over time and the bottled wine quota to increase. Wine exported within the quota can enter the EU market duty-free. The wine quotas are re-examined each year and have been increased successively as new countries join the EU. Wine exports to Sweden, similar to Norway, are hampered by the existence of state monopoly on alcohol.

With EU accession, Macedonian wine will no longer face quotas for entry into the EU market. Furthermore, if Croatia joins the EU prior to Macedonia, then upon Macedonia’s EU accession, Macedonian wine will have free access to the Croatian market.

Threats

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Macedonia’s wine industry faces a number of tangible threats in the next few years. Some of these threats can be attributed to the rather casual nature of the local industry referred to before, but others will be due to Macedonia’s sudden exposure to a highly competitive and rapidly evolving global industry.

As a main source of supply to other downstream elements of the wine industry in the ex-Yugoslavia, Macedonia achieved a reputation for supplying good-quality wine in bulk. The transformation from a bulk wine exporter to a bottled wine exporter has been called “the major strategic challenge for the cluster” as often the grapes are delivered to the wineries in Macedonia the day after they have been picked (Harvard Business School 2006). This renders it very difficult to ensure standard taste and quality in every bottle of fine wine.

The danger exists that Macedonia will become known for poor-quality wine instead of good-quality wine. Wineries are afraid to cooperate because of this, but it is more than anything an additional reason for them to cooperate.

Another danger is that Macedonian wineries will not capitalize on the present period prior to accession to upgrade the rootstock and handling practices of their suppliers and to agree on effective quality standards and a common logo and slogan for the whole industry to use.

For now, Macedonia’s wine industry is nicely protected from much outside competition by a 50% customs tariff. Upon EU accession, the wide range of EU wines will suddenly become available to be imported into Macedonia duty-free and quota-free. While there is no panicking necessary, it is inevitable that some wine and probably even a great deal of EU wine will come onto the Macedonian market, perhaps accounting for even one-third of total consumption. EU wines can compete both on price and quality, as well offering a wide range of tastes for the end-consumer to try.

With EU accession, Bulgaria, which is considered to be strong in bottled wine, would have unlimited access to Macedonia’s market. French exporters seem able to sell their wines at only a few Euros per bottle, well below the price of quality Macedonian wines in Macedonia. On the bright side, the real threats internationally in bottled wine come from Chile, Australia, and Argentina, and upon EU accession Macedonia would cease to apply its own tariff on these imports, but would now apply the EU common external tariff, which could be as much or higher.

If Croatia joins the EU before Macedonia, then Macedonia’s duty rate on glass bottles will increase from 0% to 5%, as occurred with the import of corks and foil caps from Bulgaria upon EU membership.5 If Macedonia joins the EU before Serbia, then it is possible that Macedonia’s bulk wine sales to Serbia would then face Serbia’s MFN tariff.

5 Macedonia’s importers of glass bottles and glass jars have experienced difficulty in recuperating duty drawback and VAT when those bottles and jars are subsequently re-exported with bottled wine or processed vegetables.

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Recommendations

A number of recommendations emerge from analysis of the bottled wine sector in order for Macedonia to take advantage of the recent trade agreements.

1) Macedonian wineries should attempt to benefit from the inevitable imports of EU wine by importing EU wine themselves and selling it to the Macedonian retailers (before someone else does).

2) Some wineries have observed that most of their new sales come when foreign buyers visit the vineyards in Macedonia. Therefore, AgBiz could invite foreign buyers from target markets (UK, US) to come visit.

3) “Someone” (Macedonia’s government or a wine exporter association) should monitor the fill rates of the wine quotas and send regular updates so exporters can target unfilled quota volumes.6

4) Macedonia’s trade negotiators have made an unsuccessful démarche towards Croatia, asking the authorities there to improve their quota administration practices in order to let in Macedonian wine. The wine industry should prepare information to help the government to try again.

5) Macedonia’s wineries “must also build sustainable models for contract supply of grapes including the management of supplier’s vineyards for grape quality (World Bank 2006).

6) An EFTA wine initiative. Macedonia’s wine exporters should make a sales trip to Norway to investigate how to sell there despite the system of state control. The wine industry should request Macedonia’s trade negotiators to convince Switzerland to offer Macedonian wine similar access conditions as that for Croatian wine.

7) Bosnian wine can enter Turkey duty-free, but diagonal cumulation would not apply. The Macedonian wine industry should request Macedonia’s trade negotiators to convince Turkey to offer Macedonian wine similar access conditions as that for Bosnian wine.

8) Continue to build the link between Macedonian wine and the tourism and food industries.

6 Government and exporters should maintain a common database on the practices of each of its trading partners in terms of TRQ management, in other words, the manner in which the quota import rights are allocated. The WTO has recognized 8 different types of TRQ management, many of which are sufficiently restrictive that the TRQ is unusable or worthless. Exporters can contribute information to this common database based on their personal experiences and Government should make regular démarches towards the countries concerned in an effort to convince them to change their TRQ management practices in order to permit exports from Macedonia to enter more easily.

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9) Macedonia’s wine cluster should seek to agree on a national mark and a slogan for Macedonian wine marketing abroad. Some examples of slogans might be:

--“Wine from the Land of Alexander” --“Thousands of Years’ Experience Making Wine” --“Try Vranec and You Will Know Original Zin”--“Traminec—Better than the White Wine You Usually Drink.”

Table Grapes

Macedonia’s table grapes sector is a fascinating mix of potential growth and potential catastrophe. As noted in the section on bottled wine, about 28,000 hectares are devoted to grapes overall. In many regions of Macedonia, there are still empty fields that have great potential to be used for grape production, perhaps as much as an additional 7,000 hectares.

Roughly 20,000 farmers are actively involved in grape production (including for wine). One estimate is that 15,000 seasonal workers participate in the harvesting of the grapes each year (Harvard Business School 2006). The grape producers generally belong to the Federation of Farmers of Macedonia as well as local, regional associations. Given the widespread practice of home-brewing of wine, grape harvesters have not yet adopted differentiated practices for the harvesting of table grapes as opposed to wine grapes.

Most of the table grapes grown in Macedonia are not produced, harvested, handled, packed and shipped according to the Global GAP standards necessary for sale to large-scale supermarkets in the EU.7 There are reports of some pioneer moves by the farm association AS Vitis in this regard in Negotino in the heart of the Tikves region.

Prices for fresh-market table grapes are typically higher than those for grapes used for processing into wine, canned products, grape juice or dried grapes (raisins), due to differences in handling and packing requirements. Much of the high production costs are attributable to a significant dependence on manual labor (AgMRC 2006).

Inputs into grape production are provided in part by Macedonia’s Institute of Agriculture, while all others are imported. The Ministry of Agriculture’s seeds certification Board regulates the import of new vinestock. New varieties must undergo testing before they are included on the list of seeds that can be imported. Distribution of other agriculture inputs is also organized through small local shops. Imported fertilizers and pesticides are preferred, since domestic ones have variable quality.

The IPARD funds provided during the pre-accession period by the EU can be used for the refurbishing of agricultural structures, in the name of rural development. For example, for table grapes, it is believed that IPARD funds can be used to replace vines or to provide drip irrigation. Accessing the IPARD funds requires rather stringent attention to detail in terms of the need for sound business plans and in filling out the paperwork.

7 Global GAP standards were known as EUREPGAP until the beginning of 2008.

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The table grapes sector is the value chain most sorely needing a healthy share of IPARD funds to be disbursed in its direction.

There is a particularly daunting aspect about IPARD, as one university professor explained to us. For producers to apply for IPARD funds, each producer must meet national standards. In order to complete the process of using IPARD funds, and receive the full amount of the co-financed grant, each producer receiving IPARD support must end up meeting the EU standards.

Referring to Table 1 in an earlier section, Macedonia’s table grape exports grew from $5.1 million in 2004 to $15.4 million in 2007. The biggest market for table grapes is Serbia (Table 6). Macedonia’s table grapes are shipped to the Belgrade green market in bulk in 10-kg wooden crates. It is said that the taste of the Macedonian table grape is appreciated in Serbia. The season in Macedonia is end of June until September, although some grapes are available in November too. Macedonian table grapes tend to be on the market earlier than those grown in Serbia.

Table 6: Macedonia’s Exports of Table Grapes in 2007, By DestinationDestination Volume (tons) Value ($)Serbia-Montenegro1 8,496 $2,220,471Croatia 561 $17,714Albania 156 $85,314Bosnia-Herzegovina 316 $83,472Russia 53 $24,778Romania 113 $22,247Sweden 31 $10,297Slovenia 1.4 $920Source: Macedonia’s State Statistical Office. Not all destinations shown.1 Macedonia’s data set has not yet separated out Serbia from Montenegro.

A major weakness of the sector is that 80% to 90% of Macedonia’s table grapes have seeds in them. Only a couple of Macedonian companies have seedless table grapes to export, which has fast become the international standard over the past 15 years.

Another difficulty, observed in some of the other AgBiz value chains as well, is the lack of professionalization of the sector. Traders exporting table grapes are often not paying farmers on time and might take up to a year to pay them. Farmers harvesting table grapes may have an unwritten “contract” with the trader to provide them with a set quantity at a set price, but sometimes do not honor the agreement. Given the price fluctuations normally observed during harvest time, it is sometimes possible for foreign buyers from Serbia to come and pay cash for the table grapes to take back to Serbia. This can result in a lack of available supply for Macedonian traders.

Opportunities

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The CEFTA 2006 offers duty-free access for Macedonian table grape exports to Bosnia-Herzegovia, Croatia, Kosovo, Montenegro and Serbia. These are Macedonia’s traditional export markets from the former Yugoslavia. One trader reported that he was required to pay Serbia’s seasonal levy (prelevman) on shipments from the 2007 harvest, although this should not be required under the CEFTA. Also under CEFTA, Albania lowered its MFN tariff on table grapes from Macedonia to 10%.

Access to Serbia’s market under CEFTA has opened up another somewhat unusual opportunity. Because Serbia has an FTA with Russia, table grapes exported from Serbia can enter Russia duty-free. There have been numerous reports that Macedonian table grapes (and peaches) have been exported to Serbia, and then re-exported duty-free to Russia. Macedonian exports to Russia normally face a 20% duty. The diagonal cumulation possible under CEFTA for exports to the EU most likely does not apply under the Serbia-Russia, so if Macedonian table grapes are entering Russia duty-free via Serbia, they are either posing as Serbian-nationality table grapes, or the Russian authorities are turning a blind eye.

No new opportunities arise from the FTAs signed by Macedonia with either Turkey or Ukraine. Table grapes were the only one of the 5 AgBiz value chains for which a quota was not opened by Ukraine.

Under the Macedonia-EFTA agreement, Norway offers duty-free access for table grapes from Macedonia. Iceland also offers duty-free access. Both of those non-EU markets likely require Global GAP certification for sales in supermarket chains.

Under Macedonia’s SAA with the EU, Macedonian table grapes can enter the EU market duty-free and quota-free. While Macedonian table grapes not meeting the Global GAP standards may still enter the EU market, they may not be sold in large-scale chain supermarkets. The non-Global GAP grapes from Macedonia can be sold in many of the EU countries’ open-air markets or in small-scale, mom-and-pop grocery stores choosing not to apply the Global GAP standards.

Upon EU accession, access for Macedonian table grapes to the EU market would not necessarily change. In return, however, table grapes in consumer-ready packs would be able to enter Macedonia’s domestic market freely.

Threats

The threats to Macedonia’s table grape industry arising from the recent trade agreements are not insurmountable, but they are formidable. Many of the threats are exacerbated by the laidback attitude of Macedonia’s vine-growing culture. But these problems will get worse the longer they are unattended to.

Poor compliance with contracts by both farmers and traders is a major impediment to expanding exports and results in foreign buyers coming to Macedonia to buy their grapes. Greater professionalization of the sector, given the large number of smallholders, will not

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be easy. A widening gulf is likely to emerge between those companies that are serious about undertaking what is necessary in order to hold onto existing export markets and to penetrate new markets and those that remain at the present level.

If Macedonian producers do not invest in new vines and seedless varieties, there is a risk that foreign investors will come and beat them to it. Without the ability to export seedless varieties, there is a real risk of losing key export markets (Serbia, Croatia). Macedonian traders could also lose those markets if they do not improve selection and handling. On the other hand, there is probably little threat of losing green market sales in Macedonia.

Upon EU accession, with removal of the 50% MFN duty, there is a real threat of the loss of supermarket sales of table grapes within Macedonia (although this is small for now). Macedonian traders should seek to develop the necessary packaging and handling techniques for supermarkets sales in the home market as an experiment in increasing the quality and value-added for Macedonian table grapes for export.

Another threat will arise if Macedonia joins the EU before Serbia. In that case, Serbia will erect new barriers to imports from Macedonia (further reinforcing the potential loss of a key market).

Recommendations

10) Improve quality control in post-harvest and shipping. Traders should end the practice of hiding poor-quality grapes under good-quality grapes in shipments.

11) Adopt a code of good business practice for the sector and have the traders and farmers sign on. Success in this area will depend on the existence of financial incentives for both sides to abide by the contracts they sign, such as quality premiums, pre-harvest finance, or special access to investment funding from the Government of Macedonia. Penalties in case of non-compliance can be envisioned as well.

12) Provide technical assistance to help companies and farmers to access IPARD funds. While this recommendation could be acted upon in a number of different manners, the registration of farmers and documenting of their assets and practices (such as under a grapes cadastre) could provide information on the types of grape farms, type of varieties used, physical infrastructure, and primary needs. A widespread effort is needed to introduce Global GAP standards and to ensure traceability.

13) Traders should obtain a certificate of origin in order to avoid seasonal levy (prelevman) for exporting to Serbia.

14) Invite one or more table grape associations from elsewhere (for example, the California Table Grape Association) to visit Macedonia as a way to initiate business links and stimulate needed investment in the sector.

15) Study costs and benefits of adopting retail packaging (plastic bags for supermarkets).

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16) In the run-up to EU accession, insist that the European Commission negotiate duty-free access for Macedonian table grapes into Serbia.

Wild Harvested Products

The collection of mushrooms, berries and medicinal herbs growing in the wild in Macedonia’s mountains has been traditionally practiced for hundreds or even thousands of years. Macedonia’s main exports in this sector include frozen, cut or dried wild mushrooms, dried juniper berries, frozen wild blueberries, and herbs for medicinal purposes and for teas. Trade data is particularly difficult to find for this sector as products that are “wild” and products that are harvested are often grouped together.

Macedonia, along with Bulgaria, was a major exporter of wild mushrooms in the former Yugoslav times, but it is believed that the industry has shrunken since then. One of Macedonia’s competitors is a registered business in Bulgaria with a large capacity for collecting and exporting, including roasted wild mushroom products.

Macedonia exported about $4 million in mushrooms in 2007, including fresh, frozen, preserved and dried mushrooms, but the share for wild mushrooms is not clear. Porcini mushrooms are the most common wild mushroom variety exported.

For mushrooms, there are two harvest periods of 15 days each. The first-level consolidator is the village shop who will sell to the second-level consolidator who goes around from village to village. Mushroom collecting is a cash business, except for the field collectors, who may barter for other items or services. Most of the wild mushrooms go to Italy for use by chefs and caterers. Some wild mushrooms also are exported to Serbia and Bosnia, potentially for re-export to the EU.

For juniper berries, Macedonia’s harvest is in September and October and the collectors of aggregators undertake drying of the berries, which permits them to be sold throughout the winter. Most juniper berry buyers are Italian or German, who do their own sifting and use the lowest grade for distilling. In Macedonia, about 80% of the harvest is of good quality and goes for spices. Only about 20% of the harvest is the lowest quality suitable for distilling. Nearly all Macedonian exports of juniper berries go to Germany, sometimes in combined shipments with juniper berries from Serbia and Albania.

As for herbs and spices, Macedonia exports a range of products. It is believed that the export value of tinctures, essential oils and finished herbal teas amounts to approximately $10 million. It is not clear what share of this is represented by wild harvested products. As for teas, three or four types produced in Macedonia have been organically certified.8

8 Organic certification is believed to be easier with wild products than for cultivated products. There is no requirement for a transition period. The certifying body defines the collection area (a mountain or half a mountain, for example), then looks into the history of dumpsites, soil analysis, and records of the

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In terms of raw medicinal herbs, Macedonia exports between 250 and 500 tons of oak moss (Lichen Quercus) to the fragrance industry for the manufacture of oak moss absolute through solvent extraction. Chamomile exports are about 50 tons per year and exports of marshmallow root (Althaeae radix) are around 25 tons per year.

The largest pharmaceutical company in Macedonia, Alkaloid, has a special department called Herba working on natural products: herbal teas and essential oils (for their own purposes, as well as for creams, gels and drops). The herbal teas are either standard (for the Macedonian market) or organic (for export). Alkaloid has an organic production certificate from SKAL, the Netherlands and is ISO 9001 approved. As part of the ex-Yugoslavia, Macedonia was of great interest to pharmaceutical companies outside of Macedonia (Lek, Ljubljana, Pliva, Zagreb, Droga, Portoroz and ICN Galenika, Belgrade), that had permanent buy-out points in some villages. Today, besides Alkaloid, there are two other processors of medical herbs: Kastel, Delcevo in the eastern part of Macedonia; and Konimex (KORO) in the western part of Macedonia.

The main products are: chamomile (Matricaria camomilla); mint (Mentha piperita); rosehips (Rosa canina); linden (Tilia sp.); hibiscus(Hibisci flos); nettle (Urtica dioica); St. John's wort (Hypericum perforatum); thyme (Thymus serpylllum); parsley (Ptroselinum crispum);  elder (Sambucus nigra); sage (Salvia officinalis); hawthorn (Crataegus oxyacantha); juniper berry (Junuperus communis); oak moss (Lichen quercus); horsetail (Aesculus hyppocastanum);  yarrow (Achilea millefolium); oregano (Origanum vulgare). The products are sold in bulk (mainly for export) and as tea (both to the domestic and regional market). Other products are essential oils (produced by Konimex) from combinations of herbs and juniper berries, as well as spices and vinegars in combination with different herbs.

The vast majority of herbal teas are sold on the local market and face strong competition from Slovenian and EU-made products. The essential oils and some of the vinegars have already reached some of the EU markets, but still in insignificant quantities.

There are around 50,000 families that engage in collecting herbs and other non-timber forest products (juniper berries, mushrooms, wild berries), and roughly 200.000 people who gain additional income from this activity. The collectors come from the hilly areas considered as undeveloped municipalities by the Government of Macedonia.

The collectors are mainly unemployed individuals, or whole families from the hilly areas in Macedonia. They are seasonal workers. The collected herbs are sold at the buy-out points in the villages, operated by the processors.

The collectors and processors are united in the Association of Non-Timber Forest Products, but have reportedly only had one meeting so far. The Association has limited

management group. Organic wild products need separate storage from cultivated products, and the collectors must be trained in organic techniques.

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know-how in technical expertise and almost no human resources to oversee and manage the sector. The Swiss development assistance SIPPO is also working on wild products.

Opportunities

Trade barriers are usually not so important in exporting wild harvested products. More critical is having the connections to buyers and capturing as much of the end-user price as possible. This reinforces the notion that the sector’s problems are internal, rather than external.

The CEFTA 2006 ensures duty-free access for all of Macedonia’s wild harvested products into Bosnia, Kosovo, Montenegro and Serbia. With CEFTA’s diagonal cumulation, Macedonian wild harvested products can be exported first to another CEFTA country, then to the EU market.

Under CEFTA, Moldova offered no better access for Macedonian mushroom products (including wild mushrooms) than its 15% MFN rate. Albania reduced its MFN rate to 10% for mushrooms coming from Macedonia.

Under the FTA with Turkey, a zero-duty quota was opened for dried vegetables from Macedonia, including dried wild mushrooms. Ukraine also opened a quota for imports from Macedonia of dried vegetables, including wild mushrooms, as well as herbs for tea.

Under the Macedonia-EFTA deal, Switzerland offered tariff concessions on several fruits but not on fresh wild blueberries (HS0810400024), frozen wild blueberries (HS0811902024) or dried wild blueberries (0813402010). For frozen wild blueberries, the primary Macedonian export product, the Swiss MFN is up to 4 Swiss francs/100kg.

Even without a trade agreement, juniper berries (HS090950) typically enjoy duty-free access into most countries, such as the US and the EU, but not Switzerland (the MFN is 2.5 Swiss francs per 100kg). On the other hand, Norway offers duty-free access for imports from Macedonia of dried wild mushrooms and wild blueberries.

Threats

There are few risks from the recent trade agreements for those involved in this sector. One “risk” is that the sector may not be able to grow very much, in terms of volumes for export or in terms of value-added. In order to do so, those in the sector will need to be clever and daring.

Another risk is that Macedonian collectors are not utilizing their market power to the fullest extent for wild mushrooms, demand for which can be assumed to be largely price-inelastic. This means that even if the price of wild mushrooms for offer by Macedonian collectors (or exporters) were to rise, demand would remain stable.

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With a short collection season, there is plenty of time for marketing activities. Collection is seasonal, but demand is year-round, therefore there is no hurry to sell. This logic assumes that Macedonia’s collectors and aggregators are using proper post-harvest handling techniques. Mushrooms need to be cooled as soon as possible after the harvest, so the lack of coolers tends to shorten the shelf-life of fresh wild mushrooms and lower the quality of dried products.

Juniper berries are the main ingredient in ginever (the Dutch national drink) and in gin. Macedonians are missing out by not targeting these logical outlets for their raw material.

Eventually, the supermarket chains in Macedonia will develop product lines in fancy foods, including herbs and spices and wild mushrooms. Unless the Macedonian industry is pro-active in penetrating their own market, with attractive consumer packaging, those retail-level wild harvested products will come from EU countries or elsewhere, which would be a shame.

Recommendations

17) Macedonian collectors of wild harvested products of all types should seek to maximize their market power by developing a central point for sales, with a single sales agent who could command the best prices. The sector should seek to establish some price competition among buyers, for example through the centralizing of sales information, in an effort to raise the value of the products. External marketing strategies should seek to “cut out the middleman” and develop direct links with end-users. The combination of the characteristics “wild” and “organic” has the potential to be a devastatingly attractive marketing tool, so efforts at improving market organization and export strategy could pay off.

18) For wild mushrooms, one of the internal bottlenecks for the sector, cooling facilities, could potentially be addressed through either the IPARD funds or Macedonia’s agricultural budget. As mentioned in the paragraph above, a single sales agent in Macedonia could help organize the structure of sales. Using the Internet, the marketing agent could find the association of EU gourmet chefs, or the contact information for individual chefs, and launch direct marketing to them.

19) The wild mushroom sector would benefit from having a sales agent based in Italy, closer to the point of demand. The sector should solicit an analysis of the costs and benefits of custom packaging for wild mushrooms, primarily for the Italian market, but also for the US market.

20) Another potential export market for wild mushrooms is Albania. Albania is another exporter of wild mushrooms to Italy, with an Italian company sourcing its product there. Macedonia could negotiate a tariff reduction (at present 10% for Macedonian exports under CEFTA) and seek to bring Macedonian wild mushrooms into Albania for sale to the Italian company to benefit from CEFTA’s diagonal cumulation.

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21) Several opportunities were opened under the recent trade agreements for exports of truffles, an extremely high-value product that would open up the French market to Macedonian exporters. AgBiz could explore how to bring the necessary trained pigs (or dogs) from Serbia and help develop the market linkages.

22) For juniper berries, cutting out the middleman would mean taking the sifted and sorted dried berries to Germany and selling them there, rather than having buyers come to Macedonia and play off one local collector or aggregator against another. Distillers of gin (Tanqueray, Gordon’s) or ginever (Bols) would be natural outlets for direct sales of juniper berries from Macedonia, although the sector would need to be pro-active in adapting their methods meeting the specific buyer requirements.

23) In addition to frozen wild blueberries, it may be possible to develop dried blueberries, blueberry powder (as a flavoring for foods) or blueberry brandy.

24) Another idea is to ask Macedonia’s trade negotiators to seek improved market access for wild harvested products into Switzerland. This may require studying the seasonality and supply patterns of Switzerland’s own wild harvested sector.

Fresh Vegetables

The major vegetable production regions in Macedonia are located in the south of the country (Strumica, Gevgelija), characterized by a modified Mediterranean climate, and also in Kumanovo and Skopje, where a moderate continental climate is present. The most significant products are tomatoes, peppers, cabbage, melons and watermelons as well as cucumbers and root plants such as potatoes. These are traditional crops for Macedonia, along with other garden vegetables such as potatoes, beans, onions, garlic, leek, green peas, string beans, cauliflower, lettuce, eggplant and others. Recently, agricultural producers have introduced new types of non-traditional vegetables, like broccoli, Brussels sprouts, Chinese cabbage, asparagus and others.

Vegetable and fruit production in Macedonia, in particular in the individual farmers sector, is characterized by very small production plots, often not exceeding a hectare of land per farmer. There are about 52,000 hectares devoted to vegetables, only a small percentage of which is irrigated. The average farm size in Macedonia is 2.5 ha. Typically, a farmer will grow a combination of fruits, vegetables, cereals, and livestock, including fodder production.

Regarding the inputs in vegetable production, the seed material cultivated in open-field operations and in greenhouses is usually imported from Holland, Israel, Serbia and Montenegro, Bulgaria and Greece. Only a limited amount of the required vegetable seed material is produced locally. The fertilizer applied is mainly of Macedonian origin, while the plant protection materials are imported.

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Furrow irrigation is used on open field activities, while sprinkler and drip irrigation is more often found in protected vegetable production, i.e. under plastic tunnels or glasshouse production. For most of crops, producers normally cultivate seedlings which are afterwards planted on the field. In recent years, Macedonian farmers have successfully adapted to the need to maintain the standards and procedures under Global GAP (formerly known as EUREPGAP) required for large-scale supermarket sales in EU markets.

The most profitable vegetables for the farmers are those that can be picked early and brought to the market when there is the biggest demand for them. The most important vegetable crops in Macedonia, in terms of production area, quantity, value and marketing prospects are tomatoes, peppers and potatoes.

Vegetables are marketed at the wholesale or retail markets. At the wholesale markets, large amounts of imported or produced by domestic growers are accepted, temporarily stored and prepared for further sale. Organized wholesale markets do not have sorting, classification and packing facilities at their disposal, necessary to fulfill the particular marketing requirements. The adoption of marketing strategies through the introduction of new regulations in line with the EU standards is necessary for the strengthening of these facilities. A large portion of produce is retailed to the so-called Green Markets, and thus distributed to the end consumers. Recently, the wholesale markets assumed an increasingly important role in the distribution of the produce.

Macedonia’s fresh vegetable industry suffers from factors like inadequate government support, inadequate packing, lack of storage and cooling facilities, lack of sorting and grading expertise. The fragmented nature of these domestic markets, in combination with a large number of small producers, are key factors contributing to the current situation where Macedonia is losing its competitiveness.

For some crops, the last decade has shown an increase in the volume of output, but not an increase in net income. This is due to inadequate selection of varieties and lack of appropriate post-harvest activities. Value-added in the post-harvest activities simply vanishes as a result of lack of patience or knowledge of farmers.

Table 1 in a prior section shows steadily rising exports by Macedonia of fresh tomatoes, fresh cucumbers and fresh peppers from 2004 through 2007. Over the same period, exports of fresh mushrooms have been falling. These four fresh vegetables accounted for over $38 million in exports in 2007.

The export of fresh vegetables is mainly organized by domestic and foreign wholesalers or traders. Trade in vegetables focuses on the 5 main products grown in Macedonia: tomatoes, peppers, cabbage, watermelons and cucumbers. Depending on the region, onions, potatoes, carrots and beetroot are also traded. Most of the wholesalers trade in the whole range of available produce. Produce is mainly sold to fresh vegetable markets. The most attractive products are early-season vegetables due to the attractive prices that can be achieved both in the export and the domestic markets.

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The advantage that the country has in trade competition is that the Macedonian season starts at least one month earlier than in most neighboring countries. The main markets for fresh produce are Serbia and Montenegro, Croatia, Slovenia, and Bosnia. Other markets of some relevance are the Czech Republic, Slovakia, Poland, Russia, the Baltic countries, Sweden and Greece.

About 70 % of Macedonian vegetables exports are going to the markets in the Balkanregion, in particular to Serbia and Montenegro. “Macedonian supply has not yet adapted to the changing requirements in formerly important trading partners like Croatia and Slovenia, where fresh vegetable products imported from Italy, Spain and Turkey are preferred by traders because of better packaging, sorting, grading and freshness (World Bank 2006).” In addition to selling to the green markets in the former CEFTA countries, Macedonia also exports fresh vegetables, especially tomatoes, to Slovenia for sale in that country’s Mercator supermarkets and to Serbia for the Delta supermarket chain. Kosovo has long been a good market for fruits and vegetables from Macedonia, but direct sales on the green market rather than for sale through supermarkets.

Export to the EU involves attaining high quality requirements for grading, packaging and transporting the fresh produce. Nevertheless, the need for large quantities of standardized early-season vegetables and fruits in EU markets represents a good opportunity for Macedonia to increase the export of fresh vegetables in the future.

Opportunities

The recent trade agreements open up considerable opportunities for Macedonian exporters of fresh vegetables. Under the new CEFTA, Macedonian exporters have duty-free access to Bosnia, Kosovo, Montenegro and Serbia. Several persons interviewed noted that consumers in these former Yugoslav regions have a highly favorable opinion of the flavor of the Macedonian tomato (domati).

The Croatian market is more-protected, as Croatia established TRQs for imports from Macedonia of tomatoes (4,000 tons), cucumbers (1,200 tons) and peppers (3,500 tons). As seen in Annex Table A-4, the quota volumes are rather substantial, with zero-duty for imports within the quota. For import volumes above the quota, Macedonian exports are assessed only 45% of Croatia’s MFN rate under CEFTA, which results in the over-quota tariff for tomatoes being relatively low (6.75%).

Albania established quotas for imports from Macedonia of tomatoes and cucumbers, but these are relatively small (150 tons and 100 tons respectively, as seen in Annex Table A-1). Albania’s import market for fresh peppers is apparently wide-open, with a zero duty for imports from Macedonia.

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As for Moldova, CEFTA 2006 resulted in quotas being opened for imports from Macedonia of cabbages (200 tons), tomatoes (100 tons) and cucumbers (100 tons). Annex Table A-6 shows that the over-quota tariff for these categories is no better than Moldova’s MFN tariff of 15%, suggesting that Moldova is interested in protecting these markets and only allowing in no more than a few truckloads of each product.

Under the Macedonia-Turkey FTA, Turkey opened quotas for imports from Macedonia of fresh tomatoes, onions, cucumbers, mushrooms and both fresh and semi-prepared peppers. It is worthwhile studying the relative complementarity of the Macedonian and Turkish markets for these fresh produce items, in order to find the right market niche.

Ukraine opened only one TRQ for fresh vegetable imports from Macedonia (Annex Table A-17), but it is a duty-free quota for 5,000 tons of fresh peppers, which presents a gaping opportunity boosting exports. Ukraine also opened small quotas for dried peppers and dried mushrooms.

The Macedonia-EFTA agreement provides for unlimited zero-duty imports from Macedonia into Switzerland of a range of fresh vegetables, including tomatoes, cucumbers, onions, and winter mushrooms (Annex Table A-19). For Chinese cabbages, leeks, gherkins and summer mushrooms, Switzerland made concessions generally involving a reduction in their MFN rate, which do not seem overly generous. Another EFTA member, Norway, opened quotas for tomatoes, peppers, and mushrooms.

Under the SAA with the EU, all Macedonian fresh vegetables can enter any EU member country “duty-free.” But this market access is not as attractive as at first blush, since the EU’s system of reference prices and a variable levy still act as tariff-like barriers. Of course, upon EU accession, Macedonian vegetables would no longer be subject to the reference price system.

Threats

The fresh vegetable sector is not overly menaced by threats from the signing of the recent trade agreements. Duty-free access is ensured into Macedonia’s market for imports from Bosnia-Herzegovina, Kosovo, Montenegro and Serbia, but these CEFTA countries are usually importing from Macedonia rather than exporting to Macedonia. Tomatoes and cucumbers may enter Macedonia duty-free from all CEFTA partners except Albania and Moldova.

Also under CEFTA, small TRQs for imports from Albania were opened for potatoes, tomatoes, carrots and cucumbers. The effect of the concession will be limited in time, as above-quota quantities will face Macedonia’s MFN tariffs from Albania including the seasonal levy called the prelevman.

Perhaps the most important concession made by Macedonia is to permit duty-free imports from Moldova for 100 tons of seeds for planting (HS1209). This could include seeds for

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such products of importance to Macedonia as tomatoes, peppers and cucumbers. With little domestic seed production in Macedonia, this opening to Moldovan seeds may be seen as an opportunity to improve competitiveness, rather than a threat.

One analysis warns that Macedonia “is losing market share in a range o f historical markets (e.g. Croatia and Slovenia) due to its slow adoption of modem production systems (EUREPGAP), quality standards and grading and packaging technology. Macedonia should not be complacent about its tenure in a key market like Serbia, where the influence of domestic and international supermarkets is spreading rapidly (World Bank 2003).”

One tangible risk to Macedonia’s market access would certainly arise if Macedonia joins the EU before Serbia. While Serbia would continue to enjoy duty-free access into the EU market—including Macedonia, Serbia would have the right to erect new barriers to imports from Macedonia. A 30-percent tariff by Serbia on Macedonian fresh vegetables, including being subject to Serbia’s seasonal prelevman, would undoubtedly jeopardize one of Macedonia’s principal export markets.

The agreement with Turkey does not provide new access into Macedonia’s market, which could be seen as a threat averted by Macedonia’s trade negotiators. On the other hand, seasonal imports from Turkey could provide raw material for Macedonia’s vegetable processors.

With EU accession, a wide range of fresh vegetables will be able to enter Macedonia’s market duty-free. Products from other EU countries would undoubtedly penetrate Macedonia’s domestic market, but probably only in supermarket sales. As has happened elsewhere, with EU accession, Macedonian consumers will have year-round access to certain vegetables now only available seasonally. It is possible to anticipate a change in Macedonian eating habits regarding the purchase and preparation of fresh vegetables. If so, what will be the effect on Macedonian producers?

Recommendations

25) Macedonia’s Ministry of Economy should open up a tariff-rate quota for the import of fresh peppers from Turkey during the period of the harvest season in Turkey (the month of June). This would allow Macedonian pepper processors to have additional through-put during the months of July and August at a time when their factories are otherwise not operating. As this could be a unilateral measure, it would not be necessary to negotiate this quota within the framework of the Macedonia-Turkey FTA. However, it might be desirable to amend the FTA with Turkey and make this a permanent TRQ for pepper imports. Turkey’s concession on wine from Macedonia is for a 50% reduction of the MFN duty, which is 102%. In return for establishing the TRQ for imports of fresh peppers into Macedonia, Macedonia should negotiate a TRQ at 0% duty for say 2,000 tons of wine.

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26) A similar opportunity for rationalizing the trade regime—and increasing throughput by Macedonia’s vegetable processors—could be attractive for other fresh vegetables such as tomatoes, cucumbers, onions, etc. If the imports enter Macedonia at a time of year when there is little local product to be found on the market, then it can be said that the imports will have little effect on Macedonian producers. What is needed is a marketing study of the seasonality of imports versus exports for the fresh and processed vegetable sectors.

27) As mentioned in the recommendations for table grapes, the non-respect for contracts by farmers and delays in payments to farmers by exporters is an untenable situation. The sector would benefit from designing a Code of Good Business Practices for the industry, if it were linked to a financial incentive of some kind. The financial incentive could relate to eligibility for quality premiums, or training in how to benefit from the EU’s offered IPARD funds.

28) Develop a marketing campaign to profit from the good image of the Macedonian tomato in CEFTA markets.

29) In order to capitalize on the opportunities presented by the recent trade agreements, there are myriad possibilities for market promotion activities. Some of these might include: undertaking a trade mission to Turkey or inviting Turkish buyers to Macedonia;9 studying how to sell peppers to Ukraine—who are the main buyers?; inviting Swiss traders to Macedonia to capitalize on zero-duty access in Switzerland for certain products.

30) The lack of professional organization of the fresh vegetable sector is in part responsible for the perceived loss in competitiveness in recent years. Earlier in this decade, a tomato and pepper sub-sector development committee was in existence. The group, including traders and exporters made a trip to Canada. Reviving this group, and establishing a fresh vegetable exporters association, would provide a focal point for training activities and the dissemination of information on trade opportunities and for training on how to access funds from IPARD. Croatia’s Agrokor has started to invest in Macedonia in fresh vegetable and processed vegetable production in the south near the Greek border. The sector’s professional organizations could serve as an entrée for welcoming further foreign investment in the sector, in order to bring in more-modern techniques and marketing skills.

Processed Vegetables

Macedonia’s processed vegetable industry is very export-oriented, with the main products being ajvar and frozen peppers. Even in the former Yugoslavia, Macedonia was organized to supply other parts of the country. About 90% of the processing done in

9 Perhaps by using the connection presented by the presence of RamStore, a Turkish supermarket chain, in Skopje.

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Macedonia involves vegetables, rather than fruit. Roughly 30 vegetable processing companies are presently engaged in the freezing, drying or canning (into glass jars) of vegetables (World Bank 2006).

Macedonian vegetable processors offer a range of products:

Frozen vegetables are semi-processed products which are then further used as inputs in the food industry. The most commonly applied technology is tunnel or chamber freezing. Macedonian production of frozen vegetables has decreased since 1998, while production has increased strongly in other neighboring countries and in the EU. The handling of exports is mostly conducted by brokers.

Dried fruits and vegetables produced in Macedonia include peppers, onions, leek, spinach, carrots, parsley and semi-dried tomatoes. The production of dried products is relatively low, mainly due to high energy costs, as many companies depend on crude oil heating and drying systems. Dried vegetables are mostly exported, whereas only small quantities of dried peppers and onions are sold on the domestic market.

Tomato concentrate, tomato paste, tomato ketchup and tomato juice are also traditional Macedonian exports. The equipment in most of the processing facilities is old, having been installed in the mid-1970s and 1980’s, but is still in good condition. Some processors recently installed aseptic production lines.

Prepared, preserved or provisionally preserved vegetables represent the best-known of the traditional industries in the sector. The Macedonian canning industry makes pepper products (ajvar—a type of pepper purée, lutenica—a mixture of pepper and tomatoes, and djuvec—a mixture of different vegetables and sliced and roasted peppers), a range of marinated vegetables (pickled gherkins, chili pepper, cabbage, red beet, mixed pickled vegetables, tomato products), and vegetables that have been pasteurized or preserved in some other fashion (peeled tomatoes).

Red pepper is the most important raw material for the vegetable processing industry, with about half of all the raw material processed. MAP data show 28,600 tons of peppers processed in 2007, compared with 2,100 tons of chili peppers and 1,200 tons of white peppers (MAP 2008). Nearly all of the companies active in processing vegetables in Macedonia have been formed since the mid-1990s.

Fresh vegetables are bought from private farmers and from agricultural enterprises. The processors often pre-finance the production of the private farmers, providing seeds of fruit seedlings, fertilizers and technical assistance. During the last few years, major problems occurred in assuring a sufficient supply of raw material. Processors are unable to conclude long-term delivery agreements with the farmers. In most situations, written contracts do not exist, and sometimes farmers sell their products in the market in spite of previous agreements with the processor. Major quantities of raw material are provided through intermediaries (trading companies), which buy the produce from farmers and

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deliver it to the industry. Due to the financial difficulties of processors, barter arrangements prevail.

In order to assure supply of raw product, certain processors have started their own production of fresh vegetables. Imports of raw products for processing are very limited, partly due to high import duties on fruits and vegetables in Macedonia.

Currently, Macedonian processors of fruit and vegetables are not facing serious problems concerning the compliance with quality requirements for exports to regional markets. However, other markets such as the EU continue to increase their requirements for quality standards, food safety and protection of consumers. Macedonian processing industry is making efforts to improve the quality standards by introducing new technology and standards such as HACCP and ISO, but progress is slow.

Macedonia is a net exporter of processed and preserved vegetables, with ajvar representing the largest share of the industry. About 50 traders (each exporting about 2,000 tons per year) are active in Macedonian processed vegetable exports (World Bank 2006). Much of Macedonia’s exports are anonymous for the end-users, going for production under private labels for retail chains. The EU is the most-important market, with Serbia the second most important market after the EU as a whole.

Macedonia’s Association of Processors notes the relatively low value of processed vegetable exports, which fall below the psychological threshold of 1 Euro per kilogram (MAP 2008). As a result, MAP considers these exports to be “commodities” rather than “value-added products” (although this is a matter of semantics).

According to MAP, Macedonia’s frozen pepper industry utilized 4,500 tons of raw material to produce 1,700 tons (the net weight from washing, cutting, and removing the seeds). The industry offers diced peppers in 10 mm or 20 mm sizes, going mostly to EU markets such as Germany, Bulgaria, Holland and Slovenia. Some of the frozen peppers are exported in 20-25 kg cold stores and then repacked in the importing country.

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As shown in Figure 3, Macedonian exports of frozen vegetables have grown quickly from 2004 through 2007. Exports of ajvar, based on data from MAP were growing from 2004 through 2006, but remained level in 2007.

With several different combinations of pepper products being produced and exported, it is perhaps inevitable that the Macedonian trade data for pepper mixtures may be somewhat difficult to interpret. In order to properly penetrate new and existing markets, exporters of ajvar need to specify which HS tariff code they are exporting their product under, preferably at the 10-digit level.

Table 7: Macedonian Exports of Ajvar and Lutenica (HS2005), in Million Euros2004 2005 2006 2007

HS2005 4.30 5.93 7.88 7.82Source: Macedonian Association of Processors (MAP 2008). Includes some product categories not covered in Figure 2.

As for Macedonia’s imports, about 85% fall under the category of “other preserved vegetables,” mainly potatoes (fried, cut, salted or roasted, including potato chip) and

0

2.5

5

7.5

10

2004 2005 2006 2007

Sliced mushrooms Frozen vegetables Ajvar

Million dollars

Source: Macedonia’s State Statistical Office; MAP for ajvar exports .

Figure 3: Macedonia’s Exports of Processed Vegetables

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preserved olives, which combined amount to three-quarters of all processed vegetable imports. Pickles are another common import product for Macedonia.

Opportunities

For processed vegetables, there are many trading opportunities opened by CEFTA and the other recent agreements. The input supply problems the industry faces, especially procuring sufficient volumes of raw vegetables, represent perhaps a greater barrier to expanding exports in a significant way than does market access.

The CEFTA 2006 provides for zero-duty access for Macedonian exports to Bosnia, Kosovo, Montenegro and Serbia for all products. The concessions made by Albania under CEFTA for imports from Macedonia include zero duties for dried peppers and marinated peppers (but not ajvar). As for Croatia, quotas were opened for pickles (400 tons), preserved tomatoes (1,500 tons), and ajvar (1,500 tons) to Croatia, with imports up to the level of the quota able to enter Croatia duty-free. For ajvar, the over-quota tariff is relatively low, at 8.1%.

CEFTA also opens up the possibility for Macedonia’s processors to benefit from “diagonal cumulation.” This means that Macedonian processors can purchase raw material from other CEFTA countries and the resultant product counts as “CEFTA origin” and can be exported duty-free to the EU.

Another opportunity under CEFTA relates to an important input into Macedonia’s canning industry. Macedonian processors can import glass jars from Croatia duty-free and are doing so.

The Macedonia-Ukraine FTA resulted in quotas being opened for exports to Ukraine of dried vegetables (HS0712—500 tons), and dried peppers (500 tons).

As for Turkey, that FTA opened quotas for imports from Macedonia of dried onions vegetable mixtures, crushed pepper, processed mushrooms and peppers, pickled products, and ajvar. Annex Table A-15 shows the details of the agreement with Turkey, keeping in mind that some of the gaps in the table make the precise quota quantities for specific products somewhat unclear.

The Macedonia-EFTA offers a couple of very-specific opportunities, but unfortunately not to the largest market (Switzerland-Liechtenstein). Norway has established zero-duty access for unlimited imports of dried & prepared mushrooms and dried pepper. Iceland, which is certainly a limited market, opened zero-duty access for imports from Macedonia of prepared mushrooms and ajvar.

Macedonia’s Ministry of Agriculture is finalizing registration of Makedonski ajvar as a geographical indication, meaning that only ajvar produced in Macedonia within the guidelines of a certain range of ingredients will be able to use that term. As there are several producers and exporters of ajvar—and all could benefit from an enhanced image

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of the product, the registration of the Makedonski ajvar mark presents the opportunity for an industry-wide marketing campaign.

Threats

There are always threats to any business and this holds true for Macedonia’s vegetable processors as well. The recent trade agreements will only heighten the pressures faced by these companies and each one needs a strategic vision given the many changes underway. A recent report by the World Bank (2006) predicted that “increasing trade liberalization is promising to transform Macedonia’s agricultural sector. Unless producers and agro-processors become more competitive, they will have trouble competing in both external and internal markets.”

The troubled raw material supply relations between Macedonia’s vegetable processors and farmers certainly hamper competitiveness. From our interviews, it became clear that the variable business practices on the part of both sides disrupt the processors’ business plans and sales calculations.

Beyond the issue of contract enforcement, Macedonian processors lack raw material most of the year, especially peppers for processing. There is a lack of adequate warehousing to handle a greater proportion of Macedonia’s domestic vegetable crop. There is also a lack of import opportunities in order to provide a “second season” of processing activity, which limits the growth of companies and the growth of exports.

As for the terms of the trade agreements themselves, the CEFTA 2006 opens duty-free access for processed vegetable imports from Bosnia, Kosovo, Montenegro and Serbia. New investments in those countries could present new competitors both for Macedonia’s exports and on Macedonia’s home market. Macedonia opened TRQs for imports from Moldova of pickled and prepared vegetables (including potatoes).

Under Macedonia’s SAA with the EU, there will potentially be a sharp adjustment in the import price for tomato ketchup, as the Macedonia’s tariff concession is backloaded. The tariff will fall from 30% ad valorem in 2010 to 0% in 2011. The EU also seems intent on exporting sweet corn to Macedonia, whether in cans or frozen. Most of the other recent agreements do not involve specific concessions by Macedonia on processed vegetables.

If Croatia joins the EU before Macedonia, the glass jars imported into Macedonia will face an increase in duty (although Macedonia would not be obligated to raise the duty). If Macedonia joins the EU before Serbia, Serbia would likely erect new barriers to imports from Macedonia.

Another tangible threat is that Macedonia may see changes in the lifestyle and foodways of its domestic consumers, such that they are buying processed vegetables at supermarkets rather than buying fresh vegetables and processing them at home. While this may expand overall sales, the relatively limited product line of Macedonia’s

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processors (outside of different pepper mixtures) could lead to a trend towards importing ready-made foods.

With EU accession, it can be anticipated that supermarket sales will be affected, as EU processed vegetables will enter Macedonia duty-free and offer a broader selection of products.

Recommendations

31) As mentioned under the section on fresh vegetables, a top priority should be for Macedonia’s vegetable processing industry to lobby the government to open a seasonal TRQ to buy peppers duty-free from Turkey. This could be a way to provide additional throughput for pepper processors during a period of the year before Macedonia’s domestic pepper harvest. It is said that in Turkey, there is ample production of peppers during the month of June, when Macedonia’s processing facilities are idle.

32) To improve the cooperation amongst Macedonia’s processors, it should be possible to establish a purchasing cooperative to gain economies of scale in buying inputs such as glass jars and caps. In addition to cost savings, this step would improve the functioning of the industry association.

33) One analyst noted that Macedonian products are being sold in larger-size jars (over 700 grams) than those sold in the EU market. It is recommended to study the costs and benefits of moving to smaller-size jars (320 grams), as this could be a way to brace for increasing supermarketization of Macedonia’s consumer purchasing behavior.

34) As a unique product, ajvar presents some opportunity for creativity, which could help bring the industry closer together. Those eligible to do so should change their labels to say Makedonski ajvar and cooperate on a marketing campaign in key markets to announce the launch of this protected geographic mark. Using e-mail, it would be interesting to undertake a “viral marketing campaign” among Balkan-origin populations around the world, with such slogans as “If you miss home, buy ajvar.”

35) Macedonia’s processors suffer problems both in maintaining consistent relations with the farmers supplying raw materials and in grappling with the legal code in order to bring on their own labor force, which is only needed for a couple of months’ period. A Code of Good Business Practices could be developed to promote respect by farmers for direct contracts and timely payment by processors. A provision related to the hiring of workers for seasonal processing could be inserted into Macedonia’s labor and tax codes.

36) In order to capitalize on the opportunities for exporting to Turkey, Macedonian exporters should solicit a market analysis of the potential export outlets for products of interest covered under the Macedonia-Turkey FTA. Another avenue would be to identify interested Turkish importers and to organize a mission by Turkish buyers to Macedonia. Similar recommendations hold for exploiting the opportunities under the Macedonia-Ukraine FTA.

45

Bibliography

Agricultural Marketing Research Center (AgMRC 2006). “Commodity Profile: Table Grapes.” University of California. February.

Business Monitor International. “FDI: Down But Not Out – Macedonia.” www.fdi.net.

Gruevski, Nicola. “Welcome Address to the CEFTA 2006 Summit.” Prime minister of Macedonia.

Harvard Business School (2006). “The Macedonian Wine Cluster.” Cambridge, Mass. 5 May.

Macedonian Association of Processors (MAP 2008). “Survey on the Performance of the Fruit and Vegetable Processing Industry 2007.” February.

Macedonian Business (2007). “Exports are an issue of survival.” No. 66. Vol. VII. April.

Ministry of Economy (2007a). “2007 Conference on Promoting Macedonian Exports: Proceedings.” April 16.

Ministry of Economy (2007b). “Report on Foreign Trade of Macedonia 2007.”

Ministry of Economy (2006). “Developing Trade Exchange Within CEFTA-- razvojot na trgovskata razmena po stapuvaweto vo sila na CEFTA 2006.” Prepared by Department for Multilateral Affairs. 31 March.

Ministry of Agriculture (2005). “Trade Liberalization and WTO, FTAs and SAA Implications on Macedonian Agribusiness Sector.” November.

Ministry of Agriculture, Forestry and Water Economy of the Republic of Macedonia (2004). “Strategy for Approximation of the Macedonian Agro-Food Sector to the Common Agriculture Policy (CAP) of the EU.” November.

Organization for Economic Cooperation and Development (OECD 2007). “The Economic Situation in South East Europe and the Role of Trade and Investment.” PowerPoint file by director for OECD Investment Compact for SEE, Anthony O’Sullivan. 19 April.

Southeast European Times (2006). “Macedonia gains membership in CEFTA.” 28 February.

46

Turkish Weekly (2005). “CEFTA to admit Macedonia, opens door to other Southeast European countries.” 30 November.

World Bank (2007). “Trade, Regional Integration and Growth in the Western Balkans.” PowerPoint file.

World Bank (2006). “FYR Macedonia and EU Accession: Achieving FYR Macedonia’s Agricultural Potential.” November.

World Bank (2003). “Trade Policies and Institutions in the Countries of South Eastern Europe in the EU Stabilization and Accession Process.” 28 March.

WTO (2008). “Working Document 13: Tariff Quotas.” WTO website. Material from post-Uruguay Round analyses.

World Trade Organization (2002). “Accession of the Former Yugoslav Republic of Macedonia.” WT/L/494. 18 October.

List of Persons Interviewed

1. Ministry of Economy of Republic of Macedoniaa. Mr. Krume Efremov – State Advisor for Euro-integration and international

policyb. Mrs. Anastasija Jovanovska – Head of Unit for cooperation with WTOc. Mrs. Zorica Smileva – Head of Unit of Multilateral Trade Cooperationd. Mrs. Lidija Paskalova – Advisor in the Unit of Multilateral Trade

Cooperation

2. Ministry of Agriculture, Forestry and Water Economy of Republic of Macedoniaa. Mrs. Tatjana Veta – Head of Trade Policy Unit

3. Customs Administration of Republic of Macedoniaa. Mr. Zlatko Veterovski - Head of Training Unit Customs Administration

Republic of Macedonia and Advisor to the Director Generalb. Mrs. Lidija Lekoska – Advisor for Customs Tariffs

4. Faculty for Agriculture Science and Food – Skopjea. Mrs. Aleksandara Martinovska, PhD – Department for Agro-economics

5. German Technical Cooperation – GTZa. Mr. Boban Ilic - Project Coordinator-Modernization of the Agricultural

sector in Macedonia

47

6. MAP – Macedonian Association of Processorsa. Mr. Saso Risteski - Executive Secretary

7. USAID’s Business Environment Activity (BEA)a. Mr. Aleksandar Sahov - Chief of Partyb. Mr. Dimitar Dimitrovski - Senior Legal Advisor

8. AgBiz Programea. Mr. Jeton Starova - DCOP/Production Agriculture and Policy Manager

AgBiz coordinator for wild harvested products.b. Mr. Martin West - Post-farm Gate Development & Finance Manager

AgBiz coordinator for processed vegetables.c. Mr. Goran Damovski - Marketing and SME Development Manager

AgBiz coordinator for bottled wine.d. Mr. Lovre Ristevski - Finance and Marketing Specialist

AgBiz coordinator for table grapes.e. Mr. Vladimir Kokarev - Production Agriculture Development Specialist

AgBiz coordinator for fresh vegetables.

9. Medium – Export – Skopje, export-import of agrarian products, lamb meat, vegetables (pepper, tomato, etc.)

a. Mr. Zvonko Janevski – Director

10. Alijansa - Kavadarci, Fresh Table Grapes producera. Mr. Emanuel Tasev (Bapcho) – Director and co-owner

11. Permindex – Agricultural Complex (including VARDAR Gradsko)a. Tomislav Bukleski – Marketing and Sales

12. Vinery BOVIN – Negotinoa. Mr. Aleksandar Bogevski – Managerb. Mr. Jani Bogevski – Sales Manager

13. Vinery SKOVIN – Skopjea. Mrs. Marija Miteva – Head of Commercial Department

48

Annex One: CEFTA Concessions Related to Macedonia

Table A-1: Albania’s Quotas for Imports from MacedoniaTariff Code Product Name Quota

(tons)Preferential duty within quota

Maximum import duty for quantities exceeding the quota

0406 10fresh cheese (not cured) 50 0% 10% MFN

0406 90 29 00 goat milk cheese 50 0% 10% MFN0702 tomatoes 150 0% 10% MFN0707 cucumbers 100 0% 10% MFN0808 10 apples 3,000 0% 10% MFN1601 sausages 150 0% 10% MFN1602 other prepared or

preserved meats100

0%10% MFN or 15% MFN

1704 sweets made with sugar (not cocoa)

2000% 10% MFN

49

Table A-2: Albania’s Tariffs for Imports of Interest from Macedonia070951 mushrooms 10% MFN070952 other types of mushrooms 10% MFN070959 truffles and other wild roots 10% MFN070960 peppers 0%

071080mushrooms or tomatoes steamed or frozen 10% MFN

071140cucumbers provisionally preserved (not ready for consumption) 10% MFN

071151

mushrooms provisionally preserved (not ready for consumption) 10% MFN

071159

mushrooms provisionally preserved (not ready for consumption) 10% MFN

071231dried mushrooms (including powder) 10% MFN

071239 more types of dried mushrooms 10% MFN080610 fresh grapes 10% MFN0904 dried peppers  0%200190 marinated peppers 15% MFN20019020 other types of marinated peppers 0%20019050 other types of marinated peppers 0%20019070 other types of marinated peppers 0%20019096 other types of marinated peppers 0%200310 preserved mushrooms 15% MFN

200320other types of preserved mushrooms 15% MFN

200590 ajvar 15% MFN

200390other types of preserved mushrooms 15% MFN

220410 sparkling wine 0%220421 wine in bottles 0%220429 bulk wine 0%220430 wine must 0%2307 wine lees (solids) 0%

50

Table A-3: Bosnia’s Tariffs for Imports of Interest from Macedonia0702 tomatoes 0%0707 cucumbers 0%070951 mushrooms 0%070952 other types of mushrooms 0%070959 truffles and other wild roots 0%070960 peppers 0%

071080mushrooms or tomatoes steamed or frozen 0%

071140cucumbers provisionally preserved (not ready for consumption) 0%

071151mushrooms provisionally preserved (not ready for consumption) 0%

071159mushrooms provisionally preserved (not ready for consumption) 0%

071231 dried mushrooms (agaricus) 0%071232 wood ears (auricularia) 0%071233 jelly fungi (tremella) 0%071239 other mushrooms 0%080610 table grapes 0%0904 dried peppers 0%200190 marinated peppers 0%200210 preserved tomatoes 0%

200290more preserved tomatoes, including paste 0%

200310 preserved mushrooms (agaricus) 0%200320 preserved truffles 0%200390 other preserved mushrooms 0%200590 ajvar 0%220410 sparkling wine 0%220421 wine in bottles 0%220429 bulk wine 0%220430 other grape must 0%2307 wine lees (solids) 0%

Bosnia did not establish any tariff-rate quotas for imports from Macedonia.

51

Table A-4: Croatia’s Quotas for Imports from Macedonia

Tariff codeProduct name

Quota (tons)

Preferential duty within quota

Import duty for quantities exceeding the quota

020321020322020329 Pork

300 04.5%+€20.4/100kg (45% of MFN

020410Lambs meat

800 04.2%+€32.5/100kg (45% of MFN)

0406cheese

100 0 Rates vary by type (45% of MFN)

070200 tomatoes 4,000 0 6.75% (45% of MFN)070700 cucumbers 1,200 0 15.75% (45% of MFN)070960 peppers 3,500 0 9% (45% of MFN)

080711watermelons

7,500 04.5%+€5.45/100kg (45% of MFN)

080810apples

1,000 06.75%+€7.92/100kg (45% of MFN)

110100 wheat flour 200 0 2.25% (45% of MFN)

151219refined sunflower oil

200 02.25%+€9/100kg (45% of MFN)

160100sausages

150 04.5%+€70.52/100kg (45% of MFN)

1602liver pate

150 04.5%+€79.92/100kg (45% of MFN)

110100 wheat flour 200 0 2.25% (45% of MFN)

151219refined sunflower oil

200 02.25%+€9/100kg (45% of MFN)

160100sausages

150 04.5%+€70.52/100kg (45% of MFN)

1602liver pate

150 04.5%+€79.92/100kg (45% of MFN)

200110pickles

400 04.5%+€9.9/100kg (45% of MFN)

2002preserved tomatoes

1,500 04.5%+€7.47/100kg (45% of MFN)

200590102005903020059050200590602005907010200590802005908010

Other preserved vegetables (including ajvar)

1,200 0 8.1% (45% of MFN)

2204 wine in bottles 4,000 0 21% (45% of MFN)220429 bulk wine 2,750 0 30.2% (45% of MFN)

52

240110 tobacco 2,500 0 9% (45% of MFN)240220 cigarettes 180 0 22.2% (45% of MFN)Authors’ calculations of over-quota tariff rate.

53

Table A-5: Croatia’s Tariffs for Imports of Interest from Macedonia070951 mushrooms 0%070952 other types of mushrooms 0%070959 truffles and other wild roots 0%

070960 pepperssee quota explanation

071080mushrooms or tomatoes steamed or frozen 0%

071140cucumbers provisionally preserved (not ready for consumption) 0%

071151mushrooms provisionally preserved (not ready for consumption) 0%

071159mushrooms provisionally preserved (not ready for consumption) 0%

071231 dried mushrooms (agaricus) 0%071232 wood ears (auricularia) 0%071233 jelly fungi (tremella) 0%071239 other mushrooms 0%080610 table grapes 0%0904 dried peppers 0%070951 mushrooms 0%070952 other types of mushrooms 0%070959 truffles and other wild roots 0%

070960 pepperssee quota explanation

071080mushrooms or tomatoes steamed or frozen 0%

071140cucumbers provisionally preserved (not ready for consumption) 0%

071151mushrooms provisionally preserved (not ready for consumption) 0%

071159mushrooms provisionally preserved (not ready for consumption) 0%

071231 dried mushrooms (agaricus) 0%071232 wood ears (auricularia) 0%071233 jelly fungi (tremella) 0%071239 other mushrooms 0%080610 table grapes 0%0904 dried peppers 0%

Table A-6: Moldova’s Quotas for Imports from Macedonia

54

Tariff code

Product name

Quota (tons)

Preferential duty within quota

Import duty for quantities exceeding the quota

070490 cabbages and broccoli 200 0% 15% MFN070700 cucumbers 100 0% 15% MFN070960 peppers 100 0% 15% MFN0904 dried peppers 10 0% 10% MFN1006 rice 200 0% 5% MFN1601 sausages 50 0% 15% MFN1602 liver pate 50 0% 15% MFN1704 sugar sweets without cocoa 50 0% 15% MFN1806 chocolate 50 0% 15% MFN1905 biscuits and cookies 50 0% 15% MFN

20019020preserved vegetables in vinegar

100 0% 20 MFN

20019050preserved vegetables in vinegar

100 0% 20 MFN

20019070preserved vegetables in vinegar

100 0% 20 MFN

200590801ajvar 100 0% 20 MFN200590809ajvar 50 0% 20 MFN2009 fruit juices 50 0% 10 MFN or 15 MFN2101 instant coffee 10 0% 15 MFN2103 soy sauce, tomato ketchup 150 0% 10 MFN or 15 MFN2104 soups 150 0% 10 MFN2201 bottled water 300 0% 15 MFN

2202bottled water with flavorings or sweeteners

200 0% 15 MFN

2203beer

3,000 hl

0% €0,25/liter MFN

2402 cigarettes 100 0% €3/1000 pieces MFN

55

Table A-7: Moldova’s Tariffs for Imports of Interest from Macedonia0702 tomatoes 20% MFN070951 mushrooms 15% MFN070952 other types of mushrooms 15% MFN070959 truffles and other wild roots 15% MFN070960 peppers see quota information071080 mushrooms or tomatoes steamed or frozen 15% MFN

071140cucumbers provisionally preserved (not ready for consumption) 15% MFN

071151mushrooms provisionally preserved (not ready for consumption) 15% MFN

071159mushrooms provisionally preserved (not ready for consumption) 15% MFN

071231 dried mushrooms (agaricus) 15% MFN071232 wood ears (auricularia) 15% MFN071233 jelly fungi (tremella) 15% MFN071239 other mushrooms 15% MFN080610 table grapes 20% MFN0904 dried peppers see quota information200190 marinated peppers see quota information200210 preserved tomatoes 20% MFN200290 more preserved tomatoes, including paste 20% MFN200310 preserved mushrooms (agaricus) 20% MFN200320 preserved truffles 20% MFN200390 other preserved mushrooms 20% MFN200590 ajvar 20% MFN220410 sparkling wine €0,5/liter MFN220421 wine in bottles €0,5/liter MFN220429 bulk wine €0,5/liter MFN220430 other grape must €0,5/liter MFN2307 wine lees (solids) 10% MFN

56

Table A-8: Montenegro’s Tariffs for Imports of Interest from Macedonia0702 tomatoes 0%0707 cucumbers 0%070951 mushrooms 0%070952 other types of mushrooms 0%070959 truffles and other wild roots 0%070960 peppers 0%071080 mushrooms or tomatoes steamed or frozen 0%

071140cucumbers provisionally preserved (not ready for consumption) 0%

071151mushrooms provisionally preserved (not ready for consumption) 0%

071159mushrooms provisionally preserved (not ready for consumption) 0%

071231 dried mushrooms (agaricus) 0%071232 wood ears (auricularia) 0%071233 jelly fungi (tremella) 0%071239 other mushrooms 0%080610 table grapes 0%0904 dried peppers 0%200190 marinated peppers 0%200210 preserved tomatoes 0%200290 more preserved tomatoes, including paste 0%200310 preserved mushrooms (agaricus) 0%200320 preserved truffles 0%200390 other preserved mushrooms 0%200590 ajvar 0%220410 sparkling wine 0%220421 wine in bottles 0%220429 bulk wine 0%220430 other grape must 0%2307 wine lees (solids) 0%

Montenegro did not establish any tariff-rate quotas for imports from Macedonia.

57

Table A-9: Serbia’s Tariffs for Imports of Interest from Macedonia0702 tomatoes 0%0707 cucumbers 0%070951 mushrooms 0%070952 other types of mushrooms 0%070959 truffles and other wild roots 0%070960 peppers 0%071080 mushrooms or tomatoes steamed or frozen 0%

071140cucumbers provisionally preserved (not ready for consumption) 0%

071151mushrooms provisionally preserved (not ready for consumption) 0%

071159mushrooms provisionally preserved (not ready for consumption) 0%

071231 dried mushrooms (agaricus) 0%071232 wood ears (auricularia) 0%071233 jelly fungi (tremella) 0%071239 other mushrooms 0%080610 table grapes 0%0904 dried peppers 0%200190 marinated peppers 0%200210 preserved tomatoes 0%200290 more preserved tomatoes, including paste 0%200310 preserved mushrooms (agaricus) 0%200320 preserved truffles 0%200390 other preserved mushrooms 0%200590 ajvar 0%220410 sparkling wine 0%220421 wine in bottles 0%220429 bulk wine 0%220430 other grape must 0%2307 wine lees (solids) 0%Serbia did not establish any tariff-rate quotas for imports from Macedonia.

58

Table A-10: Kosovo’s Tariffs for Imports of Interest from Macedonia0702 tomatoes 0%0707 cucumbers 0%070951 mushrooms 0%070952 other types of mushrooms 0%070959 truffles and other wild roots 0%070960 peppers 0%071080 mushrooms or tomatoes steamed or frozen 0%

071140cucumbers provisionally preserved (not ready for consumption) 0%

071151mushrooms provisionally preserved (not ready for consumption) 0%

071159mushrooms provisionally preserved (not ready for consumption) 0%

071231 dried mushrooms (agaricus) 0%071232 wood ears (auricularia) 0%071233 jelly fungi (tremella) 0%071239 other mushrooms 0%080610 table grapes 0%0904 dried peppers 0%200190 marinated peppers 0%200210 preserved tomatoes 0%200290 more preserved tomatoes, including paste 0%200310 preserved mushrooms (agaricus) 0%200320 preserved truffles 0%200390 other preserved mushrooms 0%200590 ajvar 0%220410 sparkling wine 0%220421 wine in bottles 0%220429 bulk wine 0%220430 other grape must 0%2307 wine lees (solids) 0%Kosovo did not establish any tariff-rate quotas for imports from Macedonia.

59

Table A-11: Macedonia’s Quotas for Imports from Albania

Tariff codeProduct name

Quota (tons)Preferential duty within quota

Import duty for quantities exceeding the quota

0406 10 cheese 50 0% 25%+€0,62/kg MFN0406 90 29 cheese 50 0% 30%+€0,62/kg MFN0701 potatoes 300 0% 45% MFN (for 070190)0702 00 tomatoes 150 0% 25%+€0,12/kg MFN0706 carrots 200 0% 40% MFN0707 00 cucumbers 100 0% 25%+€0,12/kg MFN0807 ex 0807 11 00 00

melons, excluding watermelons

2,500 0% 45% MFN

1601 00 sausages 150 0% 10%+€0,43/kg MFN1602 liver pate 100 0% 10% or 15% MFN2208 20 12 00 ethyl alcohol 200 hl 0% 0% MFN

Table A-12: Macedonia’s Quotas for Imports from Croatia

Tariff code Product name

Quota (tons)

Preferential duty within quota

Import duty for quantities exceeding the quota

0203 21pork 300 0%

€0.19/kg (45% of MFN)0203 22 €0.16/kg (45% of MFN)0203 29 €0.18/kg (45% of MFN)0401 20 milk 600 0% 11.25%+€0.0225/kg (45% of MFN)

0406 30blue cheese (cow's milk)

150 0% 4.5%+€0.28/kg (45% of MFN)

0406 90 other cheeses 150 0% €0.28/kg (45% of MFN)1001 wheat 20,000 0% 6.75%+€0.045/kg (45% of MFN)1101 wheat flour 200 0% €0,675/kg (45% of MFN)

1512 19refined sunflower oil

200 0% 6.75%+€0.045/l (45% of MFN)

1601 sausages 400 0% 4,5%+€0,19/kg (45% of MFN)1602 liver pate 1,100 0% 4,5% or 6.75% (45% of MFN)

2103 90 90 90

sauces, including tomato ketchup

300 0% 13,5% (45% of MFN)

2104 10 soups 540 0% 2,25%+€0,59/kg (45% of MFN)2204 29 bulk wine 400 hl 0% 22,5% (45% of MFN)2401 10 tobacco 2,500 0% 9% (45% of MFN)2402 20 cigarettes 100 0% 27% (45% of MFN)

60

Table A-13: Macedonia’s Quotas for Imports from Moldova

Tariff code

Product name

Quota (tons)

Preferential duty within quota

Import duty for quantities exceeding the quota

0202beef

100 0%13%+0.05 eur/kg max.15% MFN

0405 butter 100 0% 15% MFN

0713dried peas

100 0%10% MFN or 15% MFN

0802nuts

100 0%5% MFN, 10% MFN or 15% MFN

1001wheat

1,000 0%15%+0.1 eur/kg max. 75% MFN

1003 barley 1,000 0% 8% MFN or 10% MFN

1209seeds for planting, including peppers and tomatoes

100 0% 2% MFN or 15% MFN

1507 soybean oil 100 0% 0% MFN1601 sausages 50 0% 10%+€0,43/kg MFN1602 liver pate 50 0% 10% or 15% MFN1703 sweets 300 0% 2% MFN

1704sweets

50 0%14%+0.35 eur/kg max.30% MFN

1806chocolate

50 0%Rates vary up to 30%+0.17 eur/kg, max.36% MFN

1905cookies and biscuits

50 0%30% MFN

2001pickled vegetables, incl. peppers

100 0%50% MFN

2005 10prepared vegetables, incl. potatoes

100 0%5% MFN

2005 20 40% MFN2007 jams and jellies 100 0% 5%, 20% or 30% MFN2008 prepared nuts 100 0% 20% or 30% MFN

2009fruit juices

50 0% Rates vary, max 46% MFN

2402 cigarettes 50 0% 60% MFN

Table A-14: Macedonia’s Tariffs on Imports from CEFTA Countriesfor Products of Interest

61

0702 tomatoes 0% Moldova has MFN; Albania has a quota* 0707 cucumbers 0% Moldova has MFN; Albania has a quota**070951 mushrooms 0% Moldova has MFN 25%; Albania has a quota070952 other types of mushrooms 0% Moldova has MFN 25%; Albania has a quota070959 truffles and other wild roots 0% Moldova has MFN 25%; Albania has a quota

070960 peppers 0%Albania and Moldova have MFN 45%+0.12 eur/kg max.65%

071080mushrooms or tomatoes steamed or frozen 0% Moldova and Albania have only MFN 45%

071140

cucumbers provisionally preserved (not ready for consumption) 0% Moldova and Albania have only MFN 45%

071151

mushrooms provisionally preserved (not ready for consumption) 0% Moldova and Albania have only MFN 35%

071159

mushrooms provisionally preserved (not ready for consumption) 0% Moldova and Albania have only MFN 35%

071231 dried mushrooms (agaricus) 0 Moldova and Albania have only MFN 20%

071232 wood ears (auricularia) 0 Moldova and Albania have only MFN 20%

071233 jelly fungi (tremella) 0 Moldova and Albania have only MFN 20%

071239 other mushrooms 0 Moldova and Albania have only MFN 20%

080610 table grapes 0 Moldova and Albania have only MFN 50%

0904 dried peppers 0Moldova and Albania have only MFN 45% for 090420 (capsicum); 0% for piper

200190 marinated peppers 0Only Moldova has a quota; Albania has zero for 20019050 and above.

200210 preserved tomatoes 0 Moldova and Albania have only MFN 50%

200290more preserved tomatoes, including paste 0 Moldova and Albania have only MFN 50%

200310preserved mushrooms (agaricus) 0% Moldova and Albania have only MFN 40%

200320 preserved truffles 0% Moldova and Albania have only MFN 40%

200390 other preserved mushrooms 0% Moldova and Albania have only MFN 40%

200590 ajvar 0% Moldova and Albania have only MFN 50%

220410 sparkling wine 0% Moldova and Albania have only MFN 45%

62

220421 wine in bottles 0% Moldova and Albania have only MFN 50%

220429 bulk wine 0%Croatia has a quota; Moldova and Albania have only MFN 50%

220430 other grape must 0% Moldova and Albania have only MFN 50%

2307 wine lees (solids) 0% Only Moldova has MFN 5%* MFN features seasonal duties of: 45%+€0.12/kg, max 65% from March 15-Dec 31; with 25%+€0.12/kg Jan 1-March 14.** MFN features seasonal duties of: 45%+€0.12/kg, max 65% from Feb 15-Oct 31; with 25%+€0.12/kg Nov 1-Feb 14.

63

Annex 2: Concessions under the Macedonia-Turkey Free Trade Agreement

Table A-15: Turkey’s Quotas for Imports from Macedonia

HS codeProduct name Tariff quota Rate of duty

within quota070200 Tomatoes fresh or chilled    070310 Onions and shallots    070490 Other 1500t 0%070700 Fresh cucumbers, gherkins    

070960 Fruits of Genus Capsicum or Pimenta

   

070951 Mushrooms 100t 0%07108051 Sweet peppers 100t 50% reduction

in MFN07109000 Mixtures of vegetables    07122000 Dried onions    071290 Other dried vegetables, mixtures of

dried vegetables300t 50% reduction

in MFN07133390 Other 500t 0%08071100 Watermelons 1000t 50% reduction

in MFN07071900 Other    0808(excl.08081020;080810900011;--12)

Fresh apples, pears and quince(excl. Golden, starkrimson, starking)

350t 0%

090420 Fruits of Gemus Capsicum or Pimenta, dried, crushed or ground

100t 0%

100630 Semi-milled or wholly milled rice, whether or not polished or glazed

8000t 0%

121190 (excl. 12119075:950013; 950017;950018

Other 100t 50% reduction in MFN

20019050200310

MushroomsMushrooms

100t 50% reduction in MFN

20019096 Other    20059010 Fruits of Genus Capsicum other

than sweet peppers or Pimentos100t 50% reduction

in MFN20059070 Vegetable mixtures    200590800019 Other (Ajvar) 200t 0%20011000 Cucumbers and gherkins 200t 50% reduction

64

in MFN20019070 Sweet peppers    2103 Sauces and preparations therefore;

mixed condiments and mixed seasoning; mustard flour and meal and prepared mustard

unlimited 0%

20011000 Cucumbers and gherkins 200t 50% reduction in MFN

20019070 Sweet peppers    2103 Sauces and preparations therefore;

mixed condiments and mixed seasoning; mustard flour and meal and prepared mustard

unlimited 0%

210410 Soups and broths and preparations therfor

unlimited 0%

220290(excl. 22029091;95;99)

Other 0%

2204 Wine of fresh grapes, grape must other than that of heading No 2009

unlimited 50% reduction in MFN

2208 Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80%vol;spirits, liqueurs and other spiritious beverages

unlimited 0%

65

Table A-16: Macedonia’s Quotas for Imports from TurkeyHS code Product name Tariff quota Rate of duty

within quota0207 Poultry meat 3,000t 0%0713 40 Lentils 500t 0%0802 22 00 00 Hazelnuts (shelled) 250t 0%0805 10,20,30,40,90

Oranges, mandarins, lemon, grape fruit, other citrus fruit

8000t 0%

0806 20 Dried grapes 250t 0%1509 10 90 Olive oil 100t 0%1604 14 Canned tuna fish 350t 0%1604 20 70     0%2005 70 Preserved olives 700t 0%2008 Fruits, nuts and other edible parts of plants,

otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit

200t 0%

2203 Beer 300t 50% reduction from MFN

290543 Mannitol unlimited 0%

2905 44 D-Glucitol (Sorbitol) unlimited 0%

3505 Dextrins and other modified starches, blues based on starches

unlimited 0%

3809 Finishing agents, dye carriers to accelerate the dyeing of fixing of dyestuffs and other products and preparations

unlimited 0%

5201 00 Cotton, not carded or combed unlimited 0%5301 Flax, raw or processed but not spun; flax tow

and waste (incl. yarn waste and gartnetted stock)

unlimited 0%

5302 True hemp (Cannabis sativa), raw or processed but not spun; tow and waste of true hemp (incl. yarn waste and gartnetted stock)

unlimited 0%

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Annex 3: Concessions under the Macedonia-Ukraine Free Trade Agreement

Table A-17: Ukraine’s Quotas for Imports from Macedonia

HS code Product name Tariff quotaRate of duty within quota

0204 Meat of sheep or goats 500 tons 0%070960 Peppers 5,000 tons 0%0712 Dried vegetables (including

mushrooms)500 tons 0%

0813 Meat of sheep or goats 200 tons 0%0904 Dried pepper 500 tons 0%121190 Herbs for tea 500 tons 0%1704 Sugar sweets (no cocoa) 500 tons 0%1806 Chocolate 500 tons 0%1904 Breakfast cereals 500 tons 0%190530 Cookies and waffles 100 tons 0%2001 Pickled vegetables 6,000 tons 0%2002 Preserved tomatoes 4,000 tons 0%2005 Vegetable mixtures (ajvar) 3,000 tons 0%2007 Jams and jellies 100 tons 0%2008 Prepared or preserved nuts 500 tons 0%2009 Fruit juices (including grape must) 3,000,000 liters 0%2103 Sauces, including ketchup 3,000 liters 0%2204 Wine (bulk or bottled) 40,000,000 liters 0%220820 Undenatured ethyl alcohol 100,000 liters 0%220890 Grape brandy (rakija) 100,000 liters 0%2209 Vinegar 100,000 liters 0%240110 Tobacco 10,000 liters(!) 0%

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Table A-18: Macedonia’s Quotas for Imports from Ukraine

HS codeProduct name Tariff quota Rate of

duty within quota

0201; 0202 Fresh and frozen beef 1,000 tons 0%020321;-22;-29

Frozen pork 300 tons 0%

0402 Condensed milk 400 tons 0%100350 Barley 5,000 tons 0%100590 Maize 20,000 tons 0%1512 Sunflowerseed oil 10,000,000 liters 0%170112 Beet sugar 15,000 tons 0%1704 Sugar sweets (no cocoa)100 tons 0%1806 Chocolate 100 tons 0%190530 Cookies 50 tons 0%2007 Jams and jellies 100 tons 0%2201 Water 100,000 tons 0%2209 Vinegar 100,000 liters 0%

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Annex 4: Concessions with Switzerland and Liechtenstein under the Macedonia-EFTA Free Trade Agreement

Table A-19: Switzerland’s Concessions on Imports from Macedoniafor Products of InterestHS code Product name Tariff quota Rate of duty within

quota0702 Tomatoes Unlimited 0%0703 Onions Unlimited 0%Except 070390 Leeks Quota no.15 MFN rate minus 5 Swiss

francs/100kg0704 Cabbages Unlimited 0%Except 07049060:90 Chinese cabbages Quota no.15 5 Swiss francs/100 kg0707 Cucumbers Quota no.15 5 Swiss francs/100 kgExcept 070705 Gherkins Unlimited MFN rate minus 5 Swiss

francs/100kg070951:076011 Mushrooms Unlimited 0%Except 07096012 Mushrooms (April 1-October 31) Unlimited 5 Swiss francs/100 kg

071220 Dried onions Unlimited 0%09042010:90 Dried pepper Unlimited 0%20021010 Prepared or preserved tomatoes

(>5kg)Unlimited MFN rate minus 6.5 Swiss

francs/100kg20021020 Prepared or preserved tomatoes

(<5kg)Unlimited MFN rate minus 11.5

Swiss francs/100kg20029010 Tomato pulp and puree (>5kg) Unlimited MFN rate minus 6.5 Swiss

francs/100kg20029021 Tomato pulp and puree Unlimited 0%20029029 Other tomato pulp and puree Unlimited MFN rate minus 11.5

Swiss francs/100kg200310 Prepared or preserved mushrooms Unlimited 0%20049018 Prepared or preserved vegetables

with onions, peas, beans (>5kg)Unlimited MFN rate minus 10 Swiss

francs/100kg20049039 Ajvar with onions, peas and beans

(>5kg)Unlimited MFN rate minus 10 Swiss

francs/100kg20049049 Prepared or preserved vegetables

with onions, peas, beans (<5kg)Unlimited MFN rate minus 14 Swiss

francs/100kg20049069 Ajvar-like products with onions,

peas and beans (<5kg)Unlimited MFN rate minus 14 Swiss

francs/100kgConcessions apply for exports to Liechtenstein as well. Quota no. 15 refers to annual Swiss import law.

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