A poster of Kosovo PM Ramush Haradinaj in front of the Grand Hotel, days after Kosovo imposed 100 % tax customs to Serbia and Bosnia and Herzegovina. | Photo: Kallxo.com.

The history of the Kosovo-Serbia trade war

Blocking the import of goods from Serbia has made sense in the past. But without an economic vision, trade policies are determined ad hoc and Kosovo producers are left unprepared.

In November 2007, just a few months before Kosovo was declared an independent country, the Serbian government ordered all ministers to draw up concrete plans on how to oppose this act coming from Prishtina. One of the planned measures was a trade blockade, which would have resulted in closed borders for the flow of goods between Kosovo and Serbia.

By blocking border checkpoints in Merdare, Dheu i Bardhe, Northern Mitrovica, Serbia was threatening to cause a humanitarian crisis. In 2006, 31 per cent of Kosovo’s imported goods entered through these three customs checkpoints, with 16 per cent of these imports originating from Serbia.

In December 2007, a few days after Serbia threatened Kosovo with this trade embargo, the Institute for Advanced Studies, GAP, analyzed the economic effects that such a blockade may have for Kosovo. The findings showed that, in case of a blockade, Serbian products could have been substituted with goods from other countries for a short time. The only problem that could have arisen in the short term would have been wheat supply, as Kosovo imported 11,200 tons of wheat and flour from Serbia that year. Wheat and its derivatives constituted 19 per cent of the overall import from Serbia, with a monetary value of 34 million euros.

On the other hand, goods imported from other European countries that went through Serbian territory could find another route to reach Kosovo, but this would increase the prices.

After Kosovo was declared independent, Serbia took every measure possible to impede Kosovo, but it never shut down the borders. A trade blockade would negatively affect Serbia’s economy much more than Kosovo’s. Exports from Serbia to Kosovo have increased year by year, reaching a value of 449 million euros in 2017. Serbian goods now constitute 14.8 per cent of all Kosovo imports.

Instead of stopping Serbia’s exports to Kosovo, it blocked Kosovo’s exports to Serbia in December 2008. Along with Bosnia and Herzegovina, Serbia forbade the usage of its territory for the export of Kosovo goods to the EU market. Serbia justified its blockade based on the change in customs stamps from UNMIK Customs to Kosovo Customs. This, according to Serbia, was considered a violation of the CEFTA agreement.

This blockade lasted until summer 2011, when Kosovo took reciprocal measures, stopping Serbian goods from entering Kosovo. After a 58-day blockade, Serbia was forced to accept  stamps by Kosovo customs, and Kosovo also withdrew its blockade for Serbian goods. During this 58-day embargo, the Kosovo market reacted by increasing imports from Bulgaria and Macedonia. Furthermore, local producers reported that they had one of their best sales periods during that time. For example, paper producers reported that during those two months their sales tripled.

During all these years, Serbia caused all sorts of trouble for Kosovo exporters. Kosovo continuously complained to CEFTA for various non-tariff barriers that Serbia enforced for Kosovo exporters, restricting imports through mechanisms other than increasing tariffs, which would halt trucks at the borders for days on end. CEFTA did not facilitate Kosovo’s exports to Serbia.

Take the example of building material manufacturer BRICKOS from Kamenica. It would be much more profitable for BRICKOS to sell clay tiles in Bujanovac and Presevo – municipalities in Serbia – rather than in Prishtina, due to the higher price owing to the distance. But, due to customs snags, these manufacturers cannot export to Serbia.  

Kosovar fruit juice manufacturers have constantly complained that their goods are blocked for up to two weeks at the Serbian border, with the justification of filling out phytosanitary certificates.

If the timeline of trade relations between Kosovo and Serbia this far teaches us any lesson whatsoever, it is that a blockade for Serbian goods works. The blockade that Kosovo imposed on Serbian products in 2011 caused Serbia to accept Kosovo customs stamps and allow Kosovo exports. So, the government decision to impose a 100 per cent tariff for Serbian products exported to Kosovo is a decision that should have been made many years ago.

The only problem with the government’s decision is that it was made on an ad hoc basis, without any announcement for local producers. Even though such a measure generally helps local producers, there are still about 300 producers that import raw materials from Serbia.

According to sources by the Kosovo Ministry of Trade and Infrastructure, local producers submitted a request to exempt foreign businesses that operate in Serbia from the tariff, as they import raw materials from them. Milk producers (for packaging material), fruit juice producers (for wrappings and cans) fireplace manufacturers,  depend on raw materials imported from Serbia.

In the long term, local producers need to find alternatives for supplying raw materials from other countries. The Kosovo economy can only benefit from this tariff if it stimulates an increase in local production. Otherwise, if all of the imports from Serbia are substituted with imports from other countries, there is a risk that the price of products will increase, thus Kosovar consumers will end up paying more.

Considering this, the 100 per cent tariff on Serbian products needs to be accompanied by other measures that help local production and keep prices low. This requires a strategic identification of production sectors, subventions for local production, and professional training of the workforce.

The opinions expressed in the opinion section are those of the authors only and do not necessarily reflect the views of BIRN.

27 November 2018 - 10:54

Agron Demi

27/11/2018 - 10:54

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Prishtina Insight is a digital and print magazine published by BIRN Kosovo, an independent, non-governmental organisation. To find out more about the organization please visit the official website. Copyright © 2016 BIRN Kosovo.