Required Report - public distribution

**Date:** 3/17/2004

**GAIN Report Number:** BK4005

BK4005

**Bosnia-Hercegovina**

**Trade Policy Monitoring**

**Bosnia Suspends FTA Implementation**

**2004**

**Approved by:**

![](media/image1.wmf)Sarah Hanson

U.S. Embassy

**Prepared by:**

Sanela Stanojcic

**Report Highlights:**

The Bosnia and Herzegovina (BiH) Council of Ministers unilaterally
suspended implementation of the Croatia and Serbia and Montenegro FTAs
for several agricultural products until April 1, 2004. It is not known
whether the suspension will be lifted or prolonged. Based on these FTAs,
the Government is now focusing on bilateral veterinary protocols that
will include lists of foreign facilities approved for export between the
countries. Increased support to agricultural producers was also expected
but hasn't occurred due to limited budgets.

Includes PSD Changes: No

Includes Trade Matrix: No

Unscheduled Report

Vienna \[AU1\]

\[BK\]

As of January 1, 2004, import duties for products originated from
Croatia and Serbia and Montenegro (SAM) should have been eliminated in
accordance with free trade agreements (FTAs) signed between Bosnia and
Herzegovina (BiH) and these countries. Before it happened, BiH Council
of Ministers (CoM) unilaterally temporarily suspended provisions of FTAs
for several agricultural products (HS chapters 01, 02, 04, 15, 16, and
20) until April 1, 2004.

It is yet unknown whether this suspension will be lifted or prolonged
further. During the interim, the Government promised to explore ways of
making BiH agricultural producers more competitive on the market and to
resolve problems that local companies face while exporting to Croatia
and SAM.

BiH food products were often rejected at the Croatian and Serbian
borders for different reasons, mainly related to sanitary and
phytosanitary (SPS) requirements. In addition, there were many problems
with inconsistent application of the agreement in SAM and exclusion of
Kosovo. Based on these FTAs, the Government is now focusing on bilateral
veterinary protocols that will include lists of foreign facilities
approved for export between the countries. The protocol with SAM is
done, and one for Croatia is still being negotiated. This is a single
tangible measure that the Government and the Ministry of Foreign Trade
have taken during the suspension. Increased support to agricultural
producers was also forecasted, but it hasn't occurred because entity
budgets are limited.

Background:

BiH agricultural producers and processors requested the suspension of
FTAs. Farmers blocked one border crossing to Croatia in December 2003
and destroyed their products symbolizing their incapability to
sell/export their products and to compete with neighbors. They also
threatened to block other border crossings to prevent foreign food
products to enter the country, and announced a massive blockage of
borders on January 1, 2004.

These FTAs entail a progressive reduction of tariffs for Croatian and
SAM products while BiH products from the beginning entered Croatia and
S&M free of charge. For Croatian and S&M food products tariffs first
dropped to 60% of total import duties in 2002, then to 40% of total
import duties in 2003, and should have dropped to 0% in the beginning of
2004.

BIH food producers requested the Government to cancel or re-negotiate
the FTAs and to keep import duties for agricultural products. BiH
agricultural producers believe they can not compete with these
countries. Public opinion is that unilateral partial suspension of FTAs
is not supportive to BiH\'s candidacy for WTO membership. Also, the BiH
Assistant to the Minister for foreign trade and the head of WTO
accession team decided to take an early retirement because of the
criticism regarding the overall trade policy. A new head is not yet
appointed.

BiH also applies FTAs with Slovenia and Macedonia. Slovenians pay 30% of
total duties (but only until they join the EU in May) and Macedonians
pay 40% of total import duties this year.