Proposal for a Council Regulation amending Regulation (EC) No 2007/2000 introducing exceptional trade measures for countries and territories participating in or linked to the European Union's Stabilisation and Association process
Date: 2005-09-12
Institutions: European Commission
Subjects: European Community, Kosovo, Montenegro, Serbia, Western Balkans, association agreement, economic stabilisation

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.9.2005 
COM(2005) 417 final 

Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 2007/2000 introducing exceptional trade measures 
for countries and territories participating in or linked to the European Union's 
Stabilisation and Association process 

(presented by the Commission) 

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EXPLANATORY MEMORANDUM 

Context 

By  Regulation  (EC)  No  2007/20001,  the  European  Communities  have  granted 
exceptional  unlimited  duty-free  access  to  the  EU  market  for  nearly  all  products 
originating  in  the  countries  and  territories  benefiting  from  the  Stabilisation  and 
Association process.  

The key aim of these measures is to revitalise the Western Balkan economies through 
a  privileged  access  to  the  EU  market.  In  turn,  economic  development  is  to  foster 
political stability in the entire region. 

In  accordance  with  the  EU  Stabilisation  and  Association  process,  the  granting  of 
these  exceptional  trade  preferences  is  subject  to  certain  conditions,  namely  the 
respect  by  the  beneficiary  countries  and  territories  of  fundamental  principles  of 
democracy  and  human  rights,  the  readiness  of  the  countries  concerned  to  develop 
economic  relations  between  themselves  and  to  engage  in  economic  reforms  and 
regional integration through trade. Entitlement to the exceptional trade preferences is 
conditional on the beneficiaries’ involvement in effective administrative co-operation 
with the Community in order to prevent any risk of fraud. Finally, these exceptional 
trade preferences could only be maintained if the beneficiaries’ respected a standstill 
in customs duties and measures having equivalent effect to import trade originating 
in the EU. 

These trade preferences were granted for a period ending on 31 December 2005, with 
a view to allow for a review of the conditions established and the experience gained 
in granting the arrangement in question. 

Justification for this proposal 

The present proposal aims at continuing the current system of trade preferences for 
an  additional  period  of  5  years,  i.e. until  31  December  2010.  The  main  reasons  for 
this proposal are the following. 

The  trade  preferences  have  contributed  to  an  increase  in  the  Western  Balkans’ 
exports  to  the  EU,  thus  meeting  their  objective  so  far.  Indeed,  between  2000  and 
2004, imports from these countries into the EU have increased by approximately 8% 
on an annual basis.  

At its meeting in Lisbon on 23 and 24 March 2000, the European Council concluded 
that  Stabilisation  and  Association  Agreements  with  the  Western  Balkan  countries 
should be preceded by asymmetrical trade liberalisation. Since then, Stabilisation and 
Association Agreements have been concluded with the former Yugoslav Republic of 
Macedonia  and  with  Croatia,  but  not  with  the  other  Western  Balkan  countries. 
Therefore,  the  above  mentioned  conclusions  of  the  European  Council  call  for  a 
continuation of the current system of autonomous trade preferences. 

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OJ  L  240,  23.9.2000,  p.  1  Regulation  as  last  amended  by  Council  regulation  (EC)  No  374/2005 
(OJ L 59, 5.3.2005, p. 1). 

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Despite  some  objective  progress,  the  economic  transition  and  reform  process  is,  in 
general,  far  from  being  completed  in  the  Western  Balkans.  The  termination  of  the 
current  trade  preferences  would  withdraw  from  the  beneficiaries  an  objective 
economic advantage in their trade with the EU. In view of the importance of the EU 
as  the  Western  Balkans´  dominant  export  destination,  this  may  have  very  negative 
consequences  on  the  overall  economic  performances  of  these  countries,  with 
consequent negative repercussions on their domestic reform and transition processes. 

The continuation of these trade preferences would not cause any meaningful adverse 
effects on the EU domestic market. Indeed, the Western Balkans as a whole continue 
to represent a very small fraction (0.7%) of the EU’s total import trade.  

III. 

Explanation of the provisions of this proposal 

10. 

The  present  proposal  extends  the  duration  of  the  current  autonomous  trade 
preferences, to 31st December 2010. It also modifies the text of Council Regulation 
(EC)  No  2007/2000  to  reflect  the  new  situation  concerning  import  conditions  for 
textiles  from  Montenegro  and  Kosovo2,  further  to  the  signature  of  a  bilateral 
agreement  in  trade  in  textiles  between  the  EC  and  the  Republic  of  Serbia  on  31 
March  2005.  Finally,  the  proposal  takes  into  account  the  change  of  name  of  the 
Federal Republic of Yugoslavia into Serbia and Montenegro, as well as the fact that 
the  Republic  of  Montenegro,  the  Republic  of  Serbia  and  Kosovo  each  constitute  a 
separate custom territory. 

IV. 

Budgetary implications 

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The Regulation does not incur costs charged to the EC budget. Its application would 
also  not  entail  any  losses  of  customs  revenue  compared  to  the  current  situation. 
However,  the  application  of  this  regulation  would  entail  losses  of  customs  revenue 
compared  to  a  non-preferential  trade  treatment  of  the  countries  and  territories  with 
which Stabilisation and Association Agreement are not in force. This loss of customs 
revenue would amount to approximately € 105 million in annual terms. 

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As defined in the United Nations Security Council Resolution 1244 (1999) 

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Proposal for a 

COUNCIL REGULATION 

amending Regulation (EC) No 2007/2000 introducing exceptional trade measures 
for countries and territories participating in or linked to the European Union's 
Stabilisation and Association process 

THE COUNCIL OF THE EUROPEAN UNION, 

Having regard to the Treaty establishing the European Community, and in particular Article 
133 thereof, 

Having regard to the proposal from the Commission3, 

Whereas: 

(1) 

(2) 

(3) 

(4) 

(5) 

Council Regulation (EC) No 2007/20004 introducing exceptional trade preferences to 
imports  from  the  countries  and  territories  participating  in  or  linked  to  the  European 
Union’s Stabilisation and Association process, expires on 31 December 2005.  

Since Stabilisation and Association Agreements have not yet been concluded with all 
the  Western  Balkan  countries,  it  is  appropriate  to  prolong  the  period  of  validity  of 
Council Regulation (EC) No 2007/2000. 

Continued  market  opening  is  expected  to  contribute  to  the  process  of  political  and 
economic  stabilisation  in  the  region  while  not  creating  negative  effects  for  the 
Community. Accordingly, these preferences should apply for a further period, from 1st 
January 2006 to 31 December 2010. 

A  Constitutional  Charter  was  adopted  in  the  Federal  Republic  of  Yugoslavia  on  4 
February 2003, changing the name of that country to Serbia and Montenegro. 

The  trade  measures  provided  for  in  Council  Regulation  (EC)  No  2007/2000  should 
also  take  into  account  that  the  Republic  of  Montenegro,  the  Republic  of  Serbia  and 
Kosovo, as defined in the United Nations Security Council Resolution 1244 (1999) 5, 
each constitute a separate customs territory. 

(6) 

The Community has concluded with the Republic of Serbia an Agreement on trade in 
textile products6 , 

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OJ C , , p. . 
OJ  L  240,  23.9.2000,  p.  1.  Regulation  as  last  amended  by  Council  Regulation  374/2005 
(OJ L 59, 5.3.2005, p. 1). 
http://www.un.org/Docs/scres/1999/sc99.htm 
OJ L 90 , 8.4.2005, p. 36. 

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HAS ADOPTED THIS REGULATION: 

Regulation (EC) No 2007/2000 is amended as follows: 

Article 1  

1. 

2. 

3. 

4. 

5. 

In Article 1, paragraphs 1 and 3, the words “and Serbia and Montenegro, including 
Kosovo”  shall  be  replaced  by  the  words  “and  in  the  customs  territories  of 
Montenegro, Serbia or Kosovo”. 

In  Article  3,  paragraphs  1  and  2,  the  words  “the  Federal  Republic  of  Yugoslavia” 
shall be replaced by the words “the customs territories of Montenegro or Kosovo’; 

Article 4 is modified as follows: 

(a) 

(b) 

In  paragraph  2,  point  d),  the  words  “in  the  Federal  Republic  of  Yugoslavia 
including Kosovo” shall be replaced by the words “in the customs territories of 
Montenegro, Serbia or Kosovo”.  

In  paragraph  4,  introductory  phrase  and  point  c),  the  words  “and  Serbia  and 
Montenegro,  including  Kosovo”  shall  be  replaced  by  the  words  “and  in  the 
customs territories of Montenegro, Serbia or Kosovo”. 

In Article 17, “31 December 2005” shall be replaced by “31 December 2010”. 

In  Annex  I,  in  the  column  “Beneficiaries”,  all  references  to  the  words  “Federal 
Republic of Yugoslavia including Kosovo” shall be replaced by “customs territories 
of Montenegro, Serbia or Kosovo”. 

Article 2 

This  Regulation  shall  enter  into  force  on  the  first  day  following  that  of  its  publication  in 
the Official Journal of the European Union. 

This Regulation shall be binding in its entirety and directly applicable in all Member States. 

Done at Brussels,  

For the Council 
The President 

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