Regional Cooperation and European Integration in the Western Balkans Milica Uvalic University of Perugia European Movement - Serbia Belgrade, May 30-31, 2008

2 Introduction Main channels for the reintegration of the Western Balkan countries, after 2000 Regional (intra-SEE) integration, through initiatives on regional cooperation ( ‘ regionalism ’ ) Integration with the EU (bilateralism) In WB region: integration with EU welcomed, but regionalism viewed with suspicion

3 Introduction Evolution of these processes - regionalism and bilateralism - by focusing primarily on the 1 st 1. Regional cooperation (rationale, different perceptions … ) 2. Some achievements of RC In the economic area  trade liberalization 3. Prospects? Open questions

4 1. Regional cooperation Regional cooperation in SEE on the EU agenda for over 10 years (since 1996) In SEE, RC rejected on various grounds Delays entry into the EU Fear of revival of former Yugoslav space SEE not a region due to low level of trade, similar economic structures … Externally imposed concept, not in line with national interests ( “ external engineering ” ) Still today contested, viewed as ‘ ineffective ’, perceived differently, controversial …

5 Why regional cooperation? Political: good relations with neighbours as key instrument for promoting peace and stability in SEE Economic: more intense economic links/trade liberalization  positive for growth, FDI (larger market, economies of scale … ) EU integration: RC as precondition for faster entry into the EU (following exp. EU, CEFTA) Interdependence: regional dimension of problems (infrastructure, refugees, security)

6 If so, why different perceptions? Assessment of regional cooperation depends on 1. Definition of the SEE region Western Balkans WB + Bulgaria, Romania, Moldova (SEE) SEE + Greece and Turkey 2. Historical context (1989, 2008) In 1989, SEE not a region – low integration among 4 SEE Cs (Alb, Bulg, Rom, SFRY) - 2 subregions 2008: ‘ Emerging ’ region  integration among WB 3. Area of cooperation: in some areas more effective than in others

7 2. Achievements of RC After 2000, many positive developments (despite remaining problems) Numerous RC initiatives within the Stability Pact, important steps forward Trade  Regional Free Trade Area (2001) Energy  Energy Community Treaty (July 2006), integrated energy market (electricity, natural gas) Transport  Core Regional Transport Network (2004) … many others Change of perceptions of RC

8 Achievements of RC … Positive evolution of the concept of RC From a vague political objective  concrete initiatives and results From externally imposed aim  more ‘ regional ownership ’ - long way from Zagreb to Sarajevo (Regional Coop. Council in 2008) RC and EU integration no longer viewed as ‘ mutually conflicting ’, but complementary (1 st step towards EU), RC initiatives as ‘ building blocks ’ towards EU

9 Achievements of RC … In the economic sphere, SEE integration through trade liberalization (Stability Pact MoU on Trade liberalization and facilit. June 2001)  network of bilateral FTAs (WB + Bulg, Rom, Moldova), regional free trade area Important step forward in late 2006  bilateral FTAs transformed into ‘ CEFTA 2006 ’ Multilateral agreement (harmonized provisions) Modernized to include services, IPR, public procurement, investment promotion System for resolution of disputes …

10 Achievements of RC … Results of regional trade liberalization? Initially lots of scepticism, various reasons After 1991 (break-up of SFRY)  trade barriers, drastic reduction in volume of trade, stagnation of trade throughout the 1990s … Recovery difficult EU policies of trade opening (autonomous trade preferences in 2000, SAAs)  EU market main target of SEE countries, no scope for intra-regional integration

11 WB exports in the 1990s

12 Achievements of RC … Trade patterns of SEE Cs after 2001? Increase in trade both with the EU and with the SEE region Trade with the EU: EU main trading partner of all SEE Cs, except Moldova But EU as trading partner much more important for Albania, Bulgaria, Romania, than for Cs of former Yugoslavia

13 Achievements of RC … Regional (intra-SEE) trade? Alb, Bulg, Rom: intra-SEE trade shares (exp, imp): lower than 5%, never over 10% of total For the ex-Yu Cs, on the contrary, relative shares much higher, especially for FYRoM, B&H, Serbia, Montenegro (30-40% of total trade), also Kosovo – trades much more with Serbia and Macedonia than with Albania Even more important: trends in the volume of regional trade  significant increase Example of Serbia

14 Serbia: threefold increase in regional exports & imports

15 Achievements of RC … Impact of trade liberalisation initiative? Positive for some Cs, primarily ex-Yu [but could also be the effect of limited competitiveness on EU markets] Little impact for others (Albania, Bulg, Rom, Moldova) Reasons for such a different impact?

16 Achievements of RC … History: For ex-Yu Cs key role of past political & economic linkages EU trade policies: very different for individual SEE Cs Earlier access to EU markets of Bulg, Rom, even Albania, than for other SEE Cs Trade of Alb, Bulg, Rom determined primarily by EU measures in the 1990s, much less by the 2001 regional trade liberalisation initiative  Importance of timing (& coordination) of different EU trade measures

17 3. Prospects Regional cooperation Crucial moment for ‘ regional ownership ’, with the phased transfer to RCC (2008)  How to maintain momentum? Further fragmentation of the region when Croatia joins the EU (as in 2007 Bulg, Rom) After Kosovo proclamation of independence, RC constrained by present political tensions in the region Return to ‘ political normality ’ very urgent!

18 Prospects … Key to stability in the region: Serbia Serbia ’ s present strategy is costly and non- affordable (to the detriment of all) Serbia risks even greater loss if it holds on to Kosovo, it should accept reality & look into the future How to find an exit strategy? Not exclusively in the hands of Serbia, an agreement among ‘ imposers ’ is needed ( ‘ international management of sovereignty ’ )

19 Prospects … European integration Despite EU intentions to accelerate SAP (March 2008), in WB return of pessimism  Room for rethinking EU policies Too strict conditionality could be counterproductive (e.g. Mladic – not only political will, but government capacity to deliver)  more flexibility Incentives can be efficient (SAA  Serbian elections), could be even stronger

20 Prospects … Additional EU incentives? Specify approximate time frame of next EU enlargement(s) - e.g. within the financial perspective? Promote all WB Cs into EU candidates? If EU commitment is there, would be an important incentive ( ‘ absorption capacity ’ less problematic today, after Lisbon)