CEFTA and the path to EU accession: challenges and new directions

The complexity of regional economic cooperation in the Western Balkans, the unblocking of CEFTA, the impact of non-tariff barriers, the recognition of university degrees and the role of stakeholders in promoting sustainable trade practices – we discussed all of this with Sokol Zeneli, Director of Programmes at Re-ACT Lab

Can you give us a general understanding of the state of regional economic cooperation in the Western Balkans?

After the Yugoslav wars, regional cooperation became a prerequisite for the EU integration of the Western Balkans. The ideas behind was that, just like in the EU history after the Second World War, economic cooperation could stimulate growth, reduce tensions and contribute to overcoming historical grievances in the region. Even if the Western Balkan countries were initially hesitant about regional cooperation, the idea of gaining EU membership acted as a strong incentive.

Regional cooperation has since considerably evolved: in 2006, the WB joined the Central European Free Trade Agreement (CEFTA) to allow free flow of goods, services and people. Today they are engaged in building a Common Regional Market (CRM) similar to the EU single market and preparing for full EU integration.

Individually, these countries may not attract big investors, so the idea is to present the region as a unified market rather than individual countries. However, while the future access to the EU single market is expected to provide further opportunities to the region, it can also create challenges for small businesses that may struggle with the new market requirements and the WB need to prepare to face them.

Now the WB are currently preparing to advance with the recognition of degrees and qualifications, to make it easier for professionals to move within the region and find jobs across different countries. This process is based on EU procedures, but it is still an open question as to whether these qualifications will be recognised within the EU itself.

CEFTA has progressed slowly. Why and what results have been achieved so far?

CEFTA was first developed for Central European countries and then was extended to the Western Balkans, but this extension did not take into consideration the unique situation of the region. CEFTA has done a lot of commendable work that deserves recognition, yet it hasn’t produced as many results as hoped. The primary obstacles have been political will and historical animosity, as exemplified by Kosovo's case. Initially, Kosovo joined CEFTA under UNMIK, but after it declared independence in 2008, it wanted to be represented in the organisation with the asterisk according to the 2013 agreement with Serbia (as it was the case with Transport Community and Energy Community). According to Kosovo's Constitution, no international body can represent Kosovo in international agreements, so Kosovo began blocking decisions to ensure its full membership. However, CEFTA is an international treaty so any changes require unanimity among members for the ratification. Needless to say, this made any decisions extremely difficult. Now the agreement was found by changing the rules of procedures of CEFTA and not the treaty, otherwise there was the risk of seeing it blocked by the Serbian parliament.

The other issue is a more technical one, which deals with non-tariff barriers such as different standards and regulations that countries impose on each other. These inconsistencies have hindered trade within the region. Although political issues have always taken the spotlight, there is a new and emerging interest in eliminating these non-tariff barriers.

And when was a solution found regarding Kosovo’s representation and the ongoing trade barriers with Serbia?

The matter was solved at the Berlin Process last November, after some hard diplomatic work on Germany's part along with the Western Balkan governments and the EU. This is one of the achievements of the ten-year anniversary of the Berlin Process, a small but important result.

Then there is the problem of bilateral trade between Kosovo and Serbia. Kosovo has completely blocked Serbian trade products at times, in 2024 for security concerns after Banksa, because arms were smuggled through traded goods. Germany and France have since promised to give Kosovo some scanners that will scan the products as they cross the border in hopes of avoiding such problems. Currently, trade is unblocked, and we are optimistic about moving forward.

What about the recognition of university degree qualifications between countries?

If I had studied in Albania and wanted to return to Kosovo, I would still have to go through the procedure of diploma recognition, meaning I would have to prove my qualifications all over again, which is a lot of bureaucratic hassle. It is a non-tariff barrier that prevents the free movement of people, one of the foundations of the CRM and CEFTA. Now the new recognition agreement is trying to ensure that all the qualifications are on the same level as the rest of the EU, so that if you graduate in one country, you won't have problems going to another one to work. This has not been achieved yet, but the joint technical committees are trying to make that possible. We're still waiting for the CRM mobility agreements to be put into effect, though it’s uncertain how quickly this will progress. We have the agreement and technical committees, but we have not started the implementation.

You previously mentioned that the integration approach in the Balkans has been applied too straightforwardly drawing from the Franco-German model and EU integration. Could you elaborate on that?

It also connects to the reconciliation process. Germany took the blame after WWII, something that facilitated the development of economic cooperation with France. But in the Western Balkans each country blamed each other and cooperation was imposed by the UE as a condition for membership. The many unresolved issues remained, such as for instance the non-recognition and border disputes. For instance, the Kosovo-Montenegro border demarcation was a big problem until it was ratified in the Parliaments. These issues were still open when the EU integration talks began some time around 2000-2004.

You wrote a paper on how to unblock CEFTA. What is the main point of your argument?

I wrote my paper before the recent unblocking of CEFTA at the Berlin Process. While on Kosovo's representation in CEFTA I recommended a treaty change, German diplomacy discovered a faster and equally effective solution: changing the rules of procedures within CEFTA.

There are two crucial features of the EU Free Trade Agreements (FTAs) that have been present since 2011 that are important for WB6 as well: first on the Trade and Sustainability Chapters, which include Domestic Advisory Groups. Given global issues such as climate change, these sustainability chapters are critical for incorporating environmental, labour and social safeguards directly into trade agreements, ensuring that trade supports environmental protection rather than undermining it. As in the WB the money available for the green transition is not enough and we need to find a new way to achieve these results: establishing such TSD chapters is one way.

A second important tool are the 'non-regression clauses' in the Trade and Sustainability chapters, which are particularly crucial. These ensure that, once a country agrees to norms such as labour rights or climate obligations, progress cannot be reversed for trade reasons. For example, if certain levels of carbon emissions objectives are set for 2024, governments can only set higher goals in the future, not reduce them. Regressing would imply violating the obligations under the free trade agreement, therefore making countries legally responsible for such violations, which is critical for a steady green transition in the Western Balkans.

What measures are there to guarantee compliance on these agreements?

Enforcement is indeed a key issue. I have suggested addressing this through the establishment of a dispute settlement body within CEFTA which considers a case, analyses the situation and following the WTO law decides how to resolve it. Within the TSD Chapters, it would depend on CEFTA to choose how to regulate the dispute settlement of obligations stemming from these chapters, either via dialogue and negotiations or even with sanctions including blocking trade. For regions like the Western Balkans, where not complying with CEFTA regulations has become standard practice, this external enforcement can drive adherence to international standards.

What is the role of social partners in general policy-making in this sphere? How can their engagement be increased?

If the WB are preparing to align with the EU standards, even when working within CEFTA, we need to harmonise with all EU practices from the start. This includes adopting the Trade and Sustainability chapters and establishing the Domestic Advisory Groups (DAG) that are key mechanisms for civil society engagement. They serve as a platform for monitoring the implementation of the free trade agreements and providing input. The DAGs include trade unions, business associations, environmental groups, human rights organisations, consumer organisations, NGOs, academia and think tanks. Each country establishes its domestic advisory groups that keep their own governments in check.

By making the DAG consultations mandatory rather than optional, we will already adhere to the EU best practice of providing a legal avenue for civil society to shape and influence trade policies. A recent example of such consultations is the case of the ad hoc consultations with the Regional Cooperation Council on the design and development of the new action plan of CRM. However, this was a decision stemming from goodwill rather than a legal obligation. Embedded DAGs mean the structured feedback is constant. It would effectively put us on the path to EU integration, as well as prepare civil society organizations (CSOs) to actively contribute to EU FTAs and DAGS once WB6 become EU members, therefore also part of the EU FTAs.

While NGOs, think tanks and academia have been empowered in the region, trade unions are still weak: what can be done to remedy this situation?

That is true and it is a problem. If the countries actually want to go forward, they may have capacity-building programmes that include trade unions and other stakeholders. In many cases, CSOs are not involved in the formulation of trade policies because they lack access to information. CSOs and trade unions need to have the necessary capacity to respond and acquire power and rights.

How do you see the current changes? Civil society has been very active in pursuing reforms in many areas, including gradual integration.

CSOs, especially when it comes to enlargement as a policy and politics around it in the region, have been doing an amazing job. And yes, gradual integration is one of the proposals. I am positive about the outlook. There were consultations with the transport community on the infrastructure projects that the EU is financing in the region, which is also good because we've seen that CSOs can actually monitor and analyse even these big projects that are implemented in the region. But again, it is true that the CSOs, think tanks and trade unions don't have the capacity to deal with all of these things.

Aligning these efforts with the EU might bring change and the EU should insist to have the contribution of the stakeholders. But without the political will from the WB countries, this is unlikely. The CEFTA secretariat has no authority to push ahead with such changes; it is left to the willingness of countries to act.