17 from the last column of Table 3, FR Yugoslavia import statistics tended to give<sup>muchlower</sup> values of imports than respective exporters. For instance, the value of Albania's<sup>exportsto</sup> FR Yugoslavia was four times larger than the value of FR Yugoslavia imports from<sup>Albania;the</sup> values of Croatia and FYR Macedonia exports to FR Yugoslavia were more than twice<sup>larger</sup> than the values of imports from Croatia and FYR Macedonia as reported in FR<sup>Yugoslavia trade</sup> statistics.

_Table 3: Ratio of exports reported by exporter (rows) to these exports as reported by unporter_<sup>_in 2000 (in_</sup> _percent)_

|From/to|Albania|Bosniaand<br>Herzegovina'|Croatia|FYR<br>Macedonia|FR<br>Yugoslavia|
|---|---|---|---|---|---|
|Albania|x|0%|0%|167%|400%|
|Bosniaand|0%|x|93%|172%|117%|
|Herzegovina||||||
|Croatia|92%|118%|X|104%|249%|
|FYRMacedonia|60%|136%|87%|x|256%|
|FRYugoslavia|30%|132%|61%|111%|x|

_Sources:_ Albania: IMF; Bosnia and Herzegovina: National Statistics and IMF; Croatia: National<sup>Statistics;</sup> FYR Macedonia: National Statistics; FR Yugoslavia: National Statistics.

Since no border charges are levied on exports from SEE-5, there is little reason for exporters to circumvent border controls. For importers, however, there is incentive<sup>to'convince'</sup> customs officials not to register imports especially strong in the presence of high levels of<sup>tariffs,</sup> sales tax and excise tax rates.<sup>22</sup> By this measure, it would be tempting to conclude<sup>that Albania</sup> and Croatia emerge as countries with relatively low levels of the incidence of<sup>corruptionin</sup> customs administration, whereas customs administrations in other SEE-5 countries<sup>donotpass</sup> this test. This may be the case. But the fact that FR Yugoslavia controls economic<sup>border onlyof</sup> Serbia may lead to discrepancies, as statistics may report exports destined to<sup>Montenegroor</sup> Kosovo as exports to FR Yugoslavia whereas these are beyond the reach of FR Yugoslavia customs.

Another source of distortion with potentially significant impact on the pattern of trade is that for the better part of the 1990s, that is, until the EU extended the new set of<sup>ATPsto</sup> FR Yugoslavia on November 1, 2000, FR Yugoslavia's trade with highly developed economies was subject to severe restrictions and economic sanctions. In consequence, FR Yugoslavia diverted its trade to the region.<sup>23</sup> Its trade in 2000, the latest year for<sup>which tradestatisticsare</sup> available, with other SEE-S countries was much higher than it would have been<sup>thecasehad</sup> FR Yugoslavia had access to EU markets.

Leaving aside the low quality of trade statistics in most SEE-5 countries, the problem is also that some portion of it goes unreported. Different and high excise tax rates and tariffs certainly provide powerful incentives to smuggling. But this is not the<sup>onlyreasonsuggesting</sup> that reported trade flows are lower than the actual ones. Other reasons may stem from the 22 Mirror statistics do not allow capturing the scope of smuggling activities, as neither customs services of an originating country nor those in the country of destination report them. Hence,<sup>thedifferencebetween</sup> the corresponding values of trade flows cannot be explained by smuggling.

23 As Christie (2001, p. 14) notes, foreign trade of FR Yugoslavia "... displays a very irregular pattern, with massive redirecting of trade to specific 'friendly partners'."