Serbia and EAEU look set to sign FTA - what will it mean for trade?

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Serbia is keen to boost its trade ties with the nations of the EAEU, with an FTA looking set to be inked by the end of the month. Here, we'll take a closer look at the agreement and its implications.

The world may have a new free trade agreement (FTA) by the end of this week, as Serbia and the Russian-led Eurasian Economic Union (EAEU) look set to sign a deal on October 25th 2019.

Russian prime minister Dmitry Medvedev said during a visit to Belgrade last week that Moscow fully supports Serbia and is keen to get a deal done to ensure better relations with the EAEU.

He also said Russia respects Serbia's territorial integrity and sovereignty in Kosovo, despite this remaining a sticking point for diplomatic relations elsewhere.

It therefore looks as though Serbian prime minister Ana Brnabic will go ahead with signing the FTA, which Mr Medvedev said aims to function on equal grounds and realise the pragmatic interests of its members.

Serbia and the EAEU

The EAEU's members are currently Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. Serbia began negotiations on free trade with the bloc back in 2016 in order to benefit from an FTA that would give it access to a market of 180 million consumers.

It had been hoped that the FTA would be signed during a visit to Serbia by Russian president Vladimir Putin back in January, but talks had failed to harmonise the issue of all tariff lines.

Two major sticking points had proven to be Vinjak brandy quotas for Armenia and cheese quotas for Belarus.

Finally though, in March 2019, the final text of the agreement was decided upon by Serbian minister of trade Rasim Ljajic and his EAEU counterpart Veronika Nikishina.

Terms and conditions

As part of the FTA, Serbian producers will be able to export unlimited quantities of fruit brandy and cheese made from sheep and goats' milk. Quotas have also been agreed for exporting cigarettes, which had previously not been duty-free.

It is hoped these and other elements will considerably reduce the costs of import and export, thereby making Serbian producers more competitive.

However, duty-free exports for automobiles were not included in the agreement due to prior caveats requiring a certain proportion of vehicles to be made domestically.

Friction with the EU?

Interestingly, although a new FTA with the EAEU nations may benefit Serbia, it could lead to friction with the European Union.

This is because Serbia is currently an EU candidate country and, although it is technically free to negotiate agreements of its own, EU member states do not look kindly upon it in practice.

The European Commission has already said it is closely following the talks and EU spokesperson Maja Kocijancic told and EURACTIV Serbia it expects Belgrade to align with EU foreign policy.

Furthermore, Serbia will be committed to withdrawing from all bilateral FTAs should its accession to the EU be completed in the future.

However, data obtained by the Balkan Investigative Reporting Network suggests EU companies will in fact benefit most from Serbia's new ties with Russia.

Responding to the subject of the EU, Mr Medvedev has said he does not think countries should be forced to make a choice between the east and the west, but should be free to act in their own interests.

Going forward

Russian Federation Council speaker Valentina Matviyenko has said she expects the deal to be a "serious step forward" in developing future relations between Serbia and the EAEU.

The agreement opens up new opportunities for Serbian trade and its economy and will allow it to buy and sell with new partners, including Armenia and Kyrgyzstan.

Serbian deputy prime minister Rasim Ljajic has also told Sputnik the nation is planning to boost exports to the EAEU by 50 per cent after the deal is done, commenting: "I am sure that our producers will use this chance provided by the state."

It will certainly be interesting to see how Serbia goes about building stronger trade ties should the FTA indeed be concluded by the end of the month.