RESTRICTED  WORLD  TRADE  
ORGANIZATION  WT/TPR/S/227 
17 February 2010  
 
(10-0838) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
CROATIA 
 
  
 
This report, prepared for the first Tr ade Policy Review of Croatia, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Croatia on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to  
Ms. Mena Hassan (tel:  022 739 6522 ) or Mr. Ricardo Barba (tel:  022 739 
5088). 
 
Document WT/TPR/G/228 contains the policy statement submitted by Croatia. 
 
 
 
Note: This report is subject to restricted circ ulation and press embargo until the end of the first 
session of the meeting of the Trade Policy Review Body on Croatia. Croatia WT/TPR/S/227 
 Page iii 
 
 
CONTENTS 
 
 
 Page 
SUMMARY OBSERVATIONS vii 
 
 (1) T HE ECONOMIC ENVIRONMENT  vii 
 (2) I NSTITUTIONAL FRAMEWORK  vii 
 (3) T RADE POLICY INSTRUMENT  viii 
 (4) S ECTORAL POLICIES   ix 
I. ECONOMIC ENVIRONMENT 1 
 (1) M AJOR FEATURES OF THE ECONOMY  1 
 (2) R ECENT ECONOMIC DEVELOPMENTS  2 
 (3) T RADE PERFORMANCE AND INVESTMENT  4 
 (i) Trade in goods and services 4  (ii) Foreign direct investment 9 
 (4) O
UTLOOK  10 
II. TRADE AND INVESTMENT POLICY FRAMEWORK 12 
 (1) G ENERAL FRAMEWORK  12 
 (2) P ARTICIPATION IN THE WORLD TRADE ORGANIZATION  16 
 (3) P REFERENTIAL TRADE AGREEMENTS AND ARRANGEMENTS  18 
  (i) Stabilization and Association Agreement (SAA) 19 
  (ii) Central European Fr ee Trade Area (CEFTA 2006) 20 
  (iii) Free-trade agreement with the Eu ropean Free Trade Association (EFTA) 21 
  (iv) Free-trade agreement with Turkey 21 
  (v) Other preferential trade arrangements 22 
 (4) I NVESTMENT REGIME  22 
 (5) A ID FOR TRADE  23 
III. TRADE POLICIES AND PRACTICES BY MEASURE 25 
 (1) M EASURES DIRECTLY AFFECTING IMPORTS  25 
 (i) Registration and documentation 25 
 (ii) Customs procedures and valuation 26  (iii) Rules of origin 28 
 (iv) Tariffs, other duties, and taxes 28 
 (v) Import licensing, controls, and prohibitions 40  (vi) Contingency trade measures 41 
 (vii) Standards and other technical requirements 42 
 (viii) Public procurement 50 
  (ix) Local-content requirements 53 
 (x) Other measures 53 
 (2) M
EASURES DIRECTLY AFFECTING EXPORTS  53 
 (i) Registration and documentation 53 
 (ii) Export taxes 53 
 (iii) Export prohibitions, controls, and licensing 53 WT/TPR/S/227 Trade Policy Review 
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 Page 
 
 (iv) Export subsidies, finance, assistance, and promotion 54 
 (v) Free zones 57 
  (vi) Other measures 58 
 (3) M EASURES AFFECTING PRODUCTION AND TRADE  58 
 (i) Incentives 58 
 (ii) State trading, state-owned enterprises, and privatization 60 
 (iii) Competition policy, state aid, and price controls 62 
 (iv) Protection of intellectual property rights 67 
IV. TRADE POLICIES BY SECTOR 74 
 (1) A GRICULTURE AND RELATED ACTIVITIES  74 
 (i) Main features 74 
  (ii) Policy developments 76 
 (2) M ANUFACTURING  81 
 (3) S ERVICES  83 
 (i) Overview 83 
 (ii) Financial Services 83 
 (iii) Telecommunications and postal services 87  (iv) Transport 90 
 (v) Tourism 94 
 (vi) Professional services 95 
REFERENCES    97 
APPENDIX TABLES   99 
 
  Croatia WT/TPR/S/227 
 Page v 
 
 
CHARTS  
 Page 
I. ECONOMIC ENVIRONMENT 
 I.1 Structure of merchandise trade, 2003-08 7 
I.2 Direction of merchandises trade, 2003-08 8 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Breakdown of applied MFN tariff rates, 2009 30 III.2 MFN tariff distribution by ISIC sector, 2009 33 
III.3 Tariff escalation by ISIC 2-digit industry, 2009 34 
  
IV. TRADE POLICIES BY SECTOR 
 IV.1 Tariff protection in the manufacturing sector, 2009 82 
 
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Selected economic indicators, 2004-09 3 
I.2 Balance of Payments, 2004-08 5 I.3 Foreign direct investment, 2004-08 9 
I.4 FDI inflows by origin and economic activity, 2004-08 10 
 II. TRADE AND INVESTMENT POLICY FRAMEWORK 
 
II.1 Main trade-related laws, 2009 14 II.2 Selected notifications to the WTO, 2009 17 
II.3 Trade under preferen tial agreements, 2008 19 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Structure of the Croatia's MFN tariff by sectors, 2009 29 III.2 Structure of MFN tariffs in Croatia, 2009 31 
III.3 Summary analysis of Croatia's MFN tariff, 2009 31 
III.4 MFN and preferential simple average tariffs, 2009 35 
III.5 Excise duties, 2009 36 
III.6 Legislation regarding products subject to quality control, 2009 48 III.7 Products subject to sanitary measures, 2009 49 
III.8 Public procurement contracts by type of procedure, 2008 52 
III.9 Key features of the export promotion programmes, 2009 54 III.10 Key features of the export insurance programmes, 2009 55 
III.11 Croation Privatization Fund CPF, 30 June 2009 62 
III.12 Registered and resolved administrative cases by the Competition Agency, 2004-08  64 III.13 State aid in Croatia, 2004-08 66 
III.14 Membership in international agreements, conventions, and treaties, 2009 68 
III.15 Infringement of intellectual property, 2004-08 72  
IV. TRADE POLICIES BY SECTOR 
 IV.1 Agriculture production, 2006-08 average 75 
IV.2 Meat production, 2006-08 75 WT/TPR/S/227 Trade Policy Review 
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 Page 
 
IV.3 Sea fish catch, 2004-08 76 
IV.4 Selected telecommunication indicators, 2004-08 87 IV.5 Selected tourism indicators, 2004-08 94 
 
  
APENDIX - TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Structure of exports, 2003-08 101 AI.2 Structure of imports, 2003-08 102 
AI.3 Destination of exports, 2003-08 103 
AI.4 Origin of imports, 2003-08 104  
II. TRADE AND INVESTMENT POLICY FRAMEWORK 
 
AII.1 Economic activities subject to special requirements, 2009 105 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
AIII.1 Applied MFN tariffs average by HS2, 2009 108 AIII.2 Products subject to import licencing, 2009 111 
AIII.3 Products subject to export licencing, 2009 115 
 IV. TRADE POLICIES BY SECTOR 
 
AIV.1 Applied MFN tariffs, by ISIC Rev.2 category, 2009  119  
 Croatia WT/TPR/S/227 
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SUMMARY OBSERVATIONS 
 
1. After its independence in 1991, the 
Republic of Croatia began the repair of large-
scale war damage and swiftly embarked on an 
ambitious reform programme aimed at restoring macroeconomic stability and establishing a fully functioning market economy.  Croatia has largely met these 
objectives creating a modern, stable, outward-
oriented economy, well integrated worldwide.  Liberalization of trade and investment, driven by commitments in the WTO and preparations for accession to the European Union (EU), has been a major feature in this process.  
(1) T
HE ECONOMIC ENVIRONMENT  
2. Croatia's economic reform programme 
resulted in a positive economic performance during 2004-08, with relatively high GDP growth rate (4.2% per year on average), 
moderate inflation (3.5% per year on average), 
and declining public deficit (it fell from 3.2% of GDP in 2004 to 0.9% in 2008).  Croatia's strong economic performance also brought substantial improvements in its social indicators: the unemployment rate declined to 
8.4% in 2008 (from 13.8% in 2004) and per 
capita income (about €10,700 in nominal terms) is around two-thirds of the EU's GDP average.  Nonetheless, for 2009, real GDP growth rate is estimated at -5.2% largely as a 
result of the global economic downturn, while 
the fiscal deficit is predicted at 2.9% of GDP.  Moreover, Croatia still faces key problems, notably external vulnerability due to its high external current account deficit (6.1% of GDP 
estimated for 2009) and large stock of external 
debt (93.3% of GDP in 2009), while important disparities in regional development remain. 
3. The Kuna (HRK), the national 
currency, is fully convertible.  The foreign exchange system of a tightly managed float 
with a very limited degree of exchange rate 
flexibility followed by the Croatian National Bank has served the economy well.  Indeed, it has lent stability and credibility to the investment environment, provided a credible 
anchor for price stability, and has also helped mitigate potential exchange rate-induced credit 
risk in a highly euroized economy.  
4. Croatia's economy is highly dependent 
on international trade.  The ratio of trade in 
goods and services (exports and imports) to 
GDP averaged 92.6% during 2004-08, although it is estimated to  have fallen to 77.3% 
in 2009.  Early in the 1990s, Croatia faced with the loss of Yugoslav markets and the 
breakdown of transport and communications 
to south-east Europe, reoriented trade towards an enlarging EU, which now accounts for about two-thirds of Croatia's trade.  Pre-transition trade links have not disappeared though, with Bosnia-Herzegovina and other 
countries in the region remaining amongst 
Croatia's most important trading partners.  Manufactures, led by machinery and transport equipment, represent about 70% of total merchandise exports and im ports.  Croatia is a 
net exporter of services, with a surplus 
averaging €5,803 million per year over 2004-08. 
5. Croatia's annual inflows of foreign 
direct investment (FDI) jumped from an average of US$447 million during 1990-00 to 
US$3,222 million in 2004-08, largely due to 
the positive developments in the economy and some privatizations.  To improve the business environment still inhibited by several factors, notably difficulties in obtaining necessary 
licences, corruption and an inefficient public 
administration, the authorities have, inter alia , 
established the Trade and Investment Promotion Agency (APIU) and enacted the Investment Promotion Act. 
(2) I
NSTITUTIONAL FRAMEWORK  
6. Formulation, administration, and 
coordination of Croatia's trade policy are the responsibility of the Ministry of the Economy, Labour and Entrepreneurship (MELE).  Depending on the nature of the issue, MELE 
consults with relevant ministries and other 
institutions that also take part directly or indirectly in foreign trade policy formulation and/or implementation.  The views of the private sector, including NGOs, are WT/TPR/S/227 Trade Policy Review 
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customarily taken into consideration 
throughout the process (although this is not legally required). 
7. Croatia's efforts to integrate into the 
world economy are reflected in the 
dismantling of the restrictive trade regime inherited from the former Socialist Federal Republic of Yugoslavia, and in its accession, participation in, or adherence to various 
multilateral, regional, and bilateral trade 
initiatives.  Croatia became the 140th member of the WTO on 30 November 2000.  It grants at least MFN treatment to all its WTO trading partners.  To date, Croatia has been involved in one case under the WTO dispute settlement 
mechanism. 
8. Croatia is strongly committed to the 
multilateral trading system.  It has been participating actively in the current round of trade negotiations, including as coordinator of 
the group of Recently-Acceded Members 
(RAMs).  Croatia made extensive commitments upon its WTO accession (binding 100% of its tariff lines; and making extensive specific commitments under the GATS).  Croatia is a signatory of the 
Information Technology Agreement (ITA) and 
the Agreement on Trade in Civil Aircraft, while is an observer to the Plurilateral Agreement on Government Procurement.  In areas such as agriculture, Croatia has faced 
some difficulties in providing notifications in a 
timely manner. 
9. The orientation of Croatia's economic 
and trade policies is, however, like that of other central and eastern European countries, 
largely driven by the goal of accession to the 
EU.  In this regard, Croatia has continued to reform its policies in trade and related areas with the objective of bringing domestic legislation into line with the EU's acquis 
communautaire , and has been aligning its 
preferential regime with that of the EU.  
Croatia has preferential trading agreements with 39 partners: the EU-27 under the Stabilization and Association Agreement (SAA); the other seven parties of the Central 
European Free Trade Agreement (CEFTA 2006); the four European Free Trade 
Association (EFTA) states;  and a bilateral free-trade agreement with Turkey.  Trade under these preferential agreements 
represented 76.9% of Croatia's total exports 
and imports in 2008, 82.2% of which was with the EU-27, 14.2% with CEFTA 2006, 2% with EFTA, and 1.6% with Turkey. 
10. The foreign inv estment regime of 
Croatia is fairly liberal, with most business 
activities open to domestic and foreign natural and legal persons alike.  In addition, the Constitution provides several guarantees for foreign investors.  Some activities, however, must be carried out only under specific 
requirements, such as special certificate of 
approval or licences.  These activities include:  banking, insurance, air and road transport, most energy activities, and telecom services. With respect to acquiring property rights 
(excluding real estate in excepted areas), 
foreign investors have the same rights, obligations and legal status as domestic investors, provided the condition of reciprocity is met. Nonetheless, since 1 February 2009, the provisions on reciprocity exclude EU 
citizens or legal persons. 
11. Some SOEs operate under de jure  
monopoly or hold exclusive rights, including Croatian State Forests, Croatian Railways and Croatian Post, while recently privatized 
companies still operate as de facto  
monopolies.  Indeed, despite that the electricity market was liberalized in July 2008, in practice the electricity company HEP remains the only supplier.  The gas market 
also has a single supplier in the oil and gas 
company INA. 
(3) T
RADE POLICY INSTRUMENTS  
12. Goods imported into Croatia may be 
subject to three types of duties: customs duties, excise duties, and VAT.  The tariff comprises  
ad valorem  rates – 93.9% of total lines (up 
from 87.9% in 2000) – and non- ad valorem  
rates (specific, mixed, and compound), i.e. 6.1% of the total.  The simple average MFN tariff declined from 12.1% in 2000 to 7.1% in Croatia WT/TPR/S/227 
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2009.  Tariff quotas (on "sensitive" 
agricultural products) are applied to 0.7% of total tariff lines.  Upon its accession to the EU, Croatia will have to adopt the EU's common 
external tariff and its bound rates.  
13. During its accession to the WTO, 
Croatia bound all its tariff lines at a final simple average rate of 8.5%, ranging from zero (e.g. on products under the ITA) to 60% 
(e.g. on coffee, tea, and sugar).  On 
agricultural products (WTO definition), Croatia bound its tariff lines at a final simple average rate of 17.4% (compared with a simple average applied MFN rate of 16.3%).  For non-agricultural goods, the final simple 
average bound tariff rate is 5.7%, while the 
simple average applied MFN rate is 4.2%. 
14. The average preferential tariff (on all 
products) under Croatia's preferential trade agreements ranges from zero (under the 
agreements with Bosnia and Herzegovina and 
UNMIK/Kosovo all tariffs are duty-free) to 4.2% (under the agreement with Turkey).  Croatia's trade in non-agricultural goods with its largest trading partners is virtually duty free;  for example, the average tariff on non-
agricultural imports (WTO definition) from 
the EU is 0.1%, i.e. 4.1 percentage points lower than the corresponding MFN tariffs.  For agricultural imports, such difference amounts to 3.2 percentage points.  
15. With the elimination of the stamp tax 
at the end of 2008, all fees charged by customs have been abolished.  Croatia maintains licensing requirements to regulate four categories of products: those affecting public 
security, order, health, environment, and 
cultural heritage;  rough diamonds;  agricultural products that are subject to tariff quotas;  and cereals.  It has neither imposed nor initiated any anti-dumping or countervailing measure, wh ile one provisional 
safeguard measure has been introduced so far 
(on imports of semi-hard cheese and cheese substitutes).  Croatia h as reviewed and updated 
almost all its trade-related legislation, including on customs, SPS, TBT, competition, 
government procurement, and intellectual property rights, with the objective of bringing 
it into line with the acquis , a process that is 
still ongoing.  
16. Croatia has been implementing a 
major privatization programme of state-owned 
enterprises (SOEs) since early 1990s, as part of its transition into a market-oriented economy.  As a result, the private sector share in output and employment is estimated to have 
risen to slightly above or close to 70%, 
respectively.  Nonetheless, by 30 June 2009, there were still 835 SOEs (down from 2,825 in May 1999), with the State keeping a majority holding in 85 of them.  Moreover, some important SOEs, notably the shipyards and 
Croatian Railways, still run losses with 
consequent budgetary transfers.  As a result, these SOEs and others are in the process of being restructured as a precondition for their privatization. 
17. During the last few years, Croatia's 
trade regime has also focused largely on export promotion, including free zones.  The government provides export support through a number of programmes in the form of loans, insurance, guarantees, letters of credit, and 
business advice.  In 2008, Croatia's export 
financing and guarantee programmes provided financial support for around 6% of Croatia's total exports.  In addition, Croatia has various other incentives programmes comprising, inter 
alia, duty and tax concessions, and state aid.  
Croatia also promotes investment (domestic and foreign) at the local level. 
(4) S
ECTORAL POLICIES  
18. Croatia has a relatively diversified 
economy, with services being the most 
important sector in terms of contribution to GDP (over 60%) and employment (over half of Croatia's labour force), while tourism is a major net foreign exchange earner.  Manufacturing accounts for around one-fifth 
of GDP and almost 70% of the total value of 
merchandise exports.  Agriculture, hunting, forestry and fishing contribute around 7% to GDP, 10% to employment and 13% to merchandise exports.  The mining, quarrying WT/TPR/S/227 Trade Policy Review 
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and energy sector account for around 1% of 
GDP and 17% of merchandise exports. 
19. Under the GATS, Croatia scheduled 
extensive specific commitments, although 
generally do not reflect the applied regime, 
which is more liberal.  Croatia maintains MFN exemptions under Article II of the GATS in some areas of road transport and audiovisual services.  During the last few years, Croatia 
has taken measures to tackle some of the 
structural problems in some services subsectors:  the financial services' supervisory framework has been strengthened and liberalization of telecommunications has progressed, although Croatian Telecom still 
dominates the subsector. Croatia's main 
transport strategy is determined by the primary objective of integration into the European transport system.  Major modernization of the transport and tourism networks is under way.  
In general, the process of modernization in 
services industries would benefit from increased foreign presence, in terms of increased transfers of capital, technology and know-how, and hence from enhanced market-access commitments in the WTO. 
20. The biggest problem facing agriculture 
in Croatia is structural, i.e. farms are too small and each one is scattered over several different plots.  Government assistance is provided through a combination of border measures 
(tariffs and tariff quotas) and domestic support 
(mainly through direct payments to farmers and state aid since guaranteed prices and input subsidies have been eliminated).  The largest share of total domestic support during 2001-05 
was for blue box measures (direct payments under production-limiting programmes).  In 
addition, structural policies include separate support and investment programmes in favour of rural development and less-favoured 
agricultural areas.  The simple average MFN 
tariff on agriculture, hunting, forestry, and fishing is 10.8% using ISIC (Revision 2) definition, i.e. four percentage points higher than manufacturing (6.8%).  There is also a 
wide variation between tariffs and in Croatia 
rates range from zero (e.g. on products of animal origin) up to 279.8% (an AVE) on cider apple, in bulk from 16 September to 15 December. 
21. Croatia has a relatively diversified 
manufacturing sector, led by food products, 
beverages and tobacco; pulp, paper and paper products; chemicals; and shipbuilding.  The sector is a major beneficiary of government support, including through investment 
incentives (e.g. duty and tax concessions) to 
promote, inter alia, free zones, and SMEs.  In addition, during 2004-08 most sector-specific state aid was allocated to manufacturing, particularly shipbuilding.  State aid to the iron and steel industry was granted until 2007;  the 
two remaining state-owned mills were 
privatized in 2008.  MFN customs tariffs on manufactured goods (major division 3 of ISIC, Revision 2) average 6.8%, with rates ranging from zero to 81.5% on the manufacture of 
sugar products.  The positive tariff escalation 
in some industries, i.e. food and beverages, and textiles and apparel, means relatively high effective rates of protection, which somewhat impede Croatia's export competitiveness of 
those manufactured products.