TIRANA, Apr. 9- In retaliation of Serbia’s efforts in blocking the recognition of Kosovo’s independence and its membership in key international organizations, the Albanian ethnic country decided to impose a 100 percent tax tariff for goods imported from Serbia and Bosnia-Herzegovina on November 2018.
Within four weeks, namely from Nov. 21 to Dec. 19, 2018, Serbian and Bosnian exports were reduced to a mere 174 trucks mainly transporting raw material worth around €290,000, compared to some 2,800 trucks worth €35 million. Whereas from the moment the tax was imposed about five months ago today, Kosovo Customs claim that Serbia has lost around 175 million euros due to the tariff.
Workers from Kosovo Customs have said that during the first trimester of 2018 Serbia profited 100 million euros from products exported to Kosovo, whereas this year Kosovo hasn’t imported even 1 million worth of these products. On the other side of the coin however, Kosovo Customs officials have said that their country’s exports have been on the rise.
“If in the same period last year [first quarter] we had 96 million kilograms of exported products, we now have 108 million kilos of Kosovar products exported to different countries of the world, including Serbia,” officials said.
Serbian goods imported to Kosovo would reach the value of 400 million euros annually, or an average of 30-40 million euros each month, whereas the country would export to Serbia only 40 million euros worth of goods. Kosovo initially decided to impose only a 10 percent tax on Serbian imported goods on Nov. 6, 2018. However, on Nov. 21 it raised its bar to a 100 percent tariff. Data from the Kosovo Statistics Agency show that once the tax was implemented Serbian imports during November 2018 were halved to 15 million euros. The next month the imports amounted to 5 million euros, thus experiencing a drop by 88 percent comparing to December 2017.
This tax has seen some positive effects within Kosovo in terms of its economic growth and development as from local manufacturers, economy experts, and even citizens. However, Serbian products can still be found all over Kosovo. Deputy Prime Minister of Serbia and the Minister of Trade, Tourism and Telecommunications, Rasim Ljajic, said that his country’s products are entering Kosovo through alternative ways.
Berat Rukiqi who serves as President of the Kosovo Chamber of Commerce, has responded to Ljajic through a Facebook post where he claimed that such a thing has been warned by his institution since December 2018. He added that when policies and tariffs like these are imposed, then the practice of “trade circumvention” are played out. Trade circumvention are fraud tactics against World Trade Organization commitments that include avoiding quotas and other restrictions by altering the country of origin of a product; measures taken by exporters to evade anti-dumping or countervailing duties.
Apart from economic difficulties that Serbia has been facing from the taxes, this policy has also affected the Kosovo-Serbia dialogue. The Serbian side is conditioning the continuation of the dialogue with the lifting or suspension of the tax, while Kosovo Prime Minister Ramush Haradinaj continues to insist that the tax will be removed only when Serbia and Bosnia-Herzegovina recognize Kosovo’s independence.
The most recent peril arising from Serbia would be the refusal to sign the roaming agreement with Kosovo. However, that agreement includes the entire region and it has a pressure by the European Union, as it is one of the reforms to be met in terms of European integration. Yet, as for Kosovo the suspension of the tax has been requested by the European Union and the United States of America in order to continue Kosovo-Serbia dialogue.
How Albania profits
Albania is optimistic to profit over the Kosovo-Serbia trade war in terms of exports. Albania experienced a sharp increase in taxes towards Kosovo right after the tax was implemented. Apart from exports, Albania also experienced an increase in imported Kosovar goods. Kosovo’s imports from Albania rose by 50 percent over November-December 2018, which made Albania a top exporter to Kosovo among regional EU aspirant and CEFTA countries. CEFTA stands for Central European Free Trade Arrangement and includes Albania, Bosnia-Herzegovina, Bulgaria, Moldova, Montenegro, Northern Macedonia, Serbia.
Albania exported to Kosovo a 17 million worth of goods during December 2018. These goods amounted to 5.7 percent of the overall imports Kosovo conducted. Albania did experience a slight drop of exports during December comparing to November (20 million), however overall 2018, Albanian exports towards Kosovo increased by 29.5 percent comparing to the previous year.
In the first two months of 2019 Albania did experience an increase in exports towards Kosovo by 18.7 percent comparing to the same period the previous year, however the boost isn’t as sharp as anticipated. Import of raw materials that was traditionally imported from Serbia and Bosnia will remain a problem for Kosovo until new competitive suppliers are found.
Albania will find it almost impossible to replace Serbian grains and flour as well as raw material for Kosovo producers. Local experts said that Albania can be quite competitive in replacing former Serbian steel and oil products however, which Albania heavily produces through Turkish and Chinese investors. Yet, tariff and non-tariff barriers still in place and poor production capacities by the Albanian economy compared to other regional competitors, will likely find the Albanian economy with moderate benefits from Kosovo’s tariff.
Regardless of the increased trade with Kosovo, Albania however, has been facing an overall fall of export and other trade difficulties due to a slump in international oil prices, a prolonged drought paralyzing domestic hydro-dependent electricity generation and Europe’s single currency continuing to trade at a 10-year low against the Albanian lek. More than that Albania has generally poor diversified exports, which through these negative effects it has been hinted that 2019 will be a tough year regarding this economic sector.
Thus, Albania will have to upgrade its inner production and industries in realizing trading deals with more countries, as trade with Kosovo won’t make up for the already growing trade deficit. Moreover, Kosovo has increased imports from other regional countries, and mostly from Turkey and EU countries of Bulgaria and Croatia.
