In 2006 the Western Balkan economies and the Republic of Moldova set a new course to secure sustainable long-term growth and improved standards of living by establishing the Central European Free Trade Agreement (CEFTA 2006). Emerging from a network of more than 30 bilateral free trade agreements, it created a unified trade market of nearly 30 million consumers, and helped prepare the signatories for EU accession.
In 2009, the OECD Investment Compact for South East Europe started providing implementation support to signatories of the Central European Free Trade Agreement (CEFTA 2006). This support is currently structured around the following projects:
- Monitoring the elimination of non tariff barriers in CEFTA 2006
- Industry concentration and supply chains
- Trade in services
Monitoring the elimination of Non-Tariff Barriers in CEFTA 2006
The aim of this project, launched in 2010, is to assist the signatories of the Central Free Trade Agreement (CEFTA) to derive full benefits of CEFTA implementation through progressive elimination of Non-Tariff Barriers (NTBs).
NTBs comprise all measures other than tariffs that restrict or otherwise distort trade flows. From an economic view non-tariff barriers can be much more harmful than tariffs and thus their reduction or removal is important for the facilitation of international trade. CEFTA 2006 is recognising this, and in addition to implementing traditional trade-related liberalizations such as tariff reductions, it obliges the Parties to undertake commitments related to the elimination of NTBs.
The OECD developed, in consultation with the CEFTA Secretariat and trade experts, a Multilateral Monitoring Framework (MMF) composed of sets of indicators for each of the key NTBs area, with the aim of establishing an instrument for the coordination of actions for the elimination of NTBs at multilateral level, complementing the actions already taken by the parties at a bilateral level.
The methodology of the MMF is based on the OECD Investment Reform Index (IRI), but greatly expanded as regards to NTBs. It includes all areas of NTBs covered by the CEFTA agreement, namely: (i) Technical barriers to trade (TBTs); (ii) Sanitary and phytosanitary (SPS) measures; and (iii) Administrative barriers to trade.
The first NTBs monitoring cycle was conducted in all CEFTA Parties during the months of September and October 2011. Assessment results were presented at the 3rd Budapest Roundtable on NTBs reduction held on 3-4 November 2011 and at the CEFTA Week held in Paris on 22-23 November 2011.
The final CEFTA NTBs report, outlining the state of reform in the process of reducing NTBs between CEFTA Parties and policy recommendations on steps to be taken for their elimination, will be published by OECD in April 2012.
Industry concentration and supply chains
PSD conducts analytical work to provide inputs to the CEFTA Parties for the elaboration and introduction of policy measures that maximise the potential benefits of trade and investment liberalisations and the gains from increasing regional and European economic integration in terms of growth and job creation. Current analytical work focuses on industry concentration and supply chains in CEFTA 2006.
The focus on industry concentration provides an analysis of turnover and employment of 22 manufacturing industries for 102 sub-national CEFTA regions. The analysis of supply chains uses trade data on intermediate and final goods to assesses extra-CEFTA and intra-CEFTA supply chain patterns and to identify the position of CEFTA Parties in international supply chains. The two studies will be published in June 2012. The data underlying the analysis of industry concentration – which have been gathered by PSD in collaboration with national statistical offices – will be made publicly available.
Trade in services
As foreseen by the CEFTA 2006 Agreement, Parties are preparing to start negotiations on services trade liberalisation. The OECD supports the CEFTA Parties in this process by providing information on regulatory barriers to services trade for priority sectors. In the first phase of the project, the four professional services sectors legal, accounting, architectural and engineering services are covered. In later phases, other sectors that might be covered include construction services, telecommunication services, distribution services or transport services.
In particular, PSD applies the Services Trade Restrictivenss Index developed by the OECD’s Trade and Agriculture Directorate to CEFTA Parties www.oecd.org/trade/stri. The STRI has two distinct instruments: a services trade regulatory database and a services trade restrictiveness index. The STRI database is an inventory of trade policy measures and domestic regulation relevant for services trade negotiations and behind the border reforms. The index provides a measurement tool for trade in services barriers, capturing the essence of restrictiveness at a glance, in order to help policy-makers identify areas of strengths and weaknesses.
Roundtable on non-tariff barriers in CEFTA 2006, Budapest, 4 November 2011
Eliminating non-tariff barriers at core of CEFTA 2006 Aid for Trade roundtable, Budapest, 8 October 2009
Reaping the benefits of trade and investment integration in South East Europe