Fruit and vegetables have become the unlikely weapons as bad neighbours sharing borders feel the discord of strained relations…
By Darren Parkin
SINCE a fragile peace was declared across the Balkans after years of bitter and bloody fighting, the independent nations born from the shreds of the former Yugoslavia worked hard to find common grounds for a prolonged harmony. One such mutual interest was agriculture.
The wheat and grapes of Croatia are highly prized throughout the region, as are Bosnian milk and cheese. So too is Macedonia’s rice, as are the 200,000 tonnes of apples harvested in Serbia each year, or Montenegro’s highly prized cattle.
Harmony had prevailed for almost a quarter of century as cross-border trade in the agricultural industry thrived. Until recently.
A few weeks ago, Croatia suddenly decided to hike up import fees on a selection of farmed imports. The move came with little warning, or indeed explanation.
Predictably, Croatia’s neighbours didn’t wait for an explanation. Instead Serbia instantly put up its duties, and the other Balkan states threatened to do the same. Montenegro’s livestock industry began to look unsteady, Serbia’s fruit businesses almost ground to a halt, and Croatian vineyards have been left wondering what to do with hundreds of barrels of wine that were on order from their bloc neighbours.
Trade, based on peace and harmony – created from a post-war business vision – is now quickly turning into what can only be described as a trade war. But over what? What has driven Croatia to suddenly more than double its levy on imports that appeared to be perfectly fine just the way they were?
Officials in Zagreb are pointing the finger at Brussels.
As an EU member, Croatia must adhere to the union’s guidelines in order to maintain its membership. These guidelines extend to ‘phytosanitary measures’ – the controls put in place to ensure robust checks on agricultural imports are free from pests or viruses. In order to comply, Croatia says it has been forced to raise the fee of a standard inspection from 90 kuna to 2,000 kuna.
The EU candidate states of Macedonia, Montenegro and Serbia, however, are crying foul, with ministers from each of Croatia’s neighbouring nations claiming the sudden price hike has violated agreements which gave equal access to markets across the region.
Rasim Ljajic, Serbia’s Trade Minister, was the first to wade in after meeting with other nations’ ministers in Sarajevo.
“These measures are absolutely protectionist in an economic sense,” he blasted.
“They are populist in a political sense and cannot be justified – they are not in the spirit of good neighbourly relations.”
The Sarajevo gathering urged Croatia to drop its crippling new charges, and called upon the European Commission to step in to investigate what it described as a ‘serious violation of the principles of free trade’.
Serbia has since ramped up its own border controls by increasing the level of its own phytosanitary measures on organic produce being imported from Croatia. Although viewed as ‘petty retaliation’ in Zagreb, Serbia’s intention to vet Croatian produce strictly now means all goods – including meat and dairy – can be held at border checkpoints for up to 30 days.
Despite the tit-for-tat response, Ljajic insists “our goal is not to wage any kind of economic war, but to protect our economic interests and the free flow of goods”.
As members of the World Trade Organisation, Macedonia and Montenegro have stated they will be filing complaints with the WTO and seeking compensation from the Croatians. Both Macedonia and Montenegro are huge producers of fruit, and Croatia’s sudden raising of import fees has hit the nations keenly in the peak of the harvesting season.
The effects aren’t just being felt in the Balkans either. As a key entry point for EU imports from the region, Croatia is making it increasingly difficult for other parts of the bloc to export to EU nations.
Croatia’s attempted explanation that the import duties were aimed at all non-EU members, rather than specifically at its neighbours, fell largely on deaf ears. But a verbal reproach did come from Mirko Sarovic, Foreign Trade Minister for Bosnia, who said his country was looking into an ‘adequate response’. Without elaborating, he simply said: “Croatia does not import raspberries from Trinidad and Tobago, but from Serbia and Bosnia!”
Observers are suggesting Croatia may be abusing its position as the greater business force for the region. All the countries in the bloc – with the exception of Serbia – sell less produce into Croatia than they buy out. Serbia, meanwhile, has an export surplus with its neighbour, importing goods totalling €80m against the export of €116m.
“From the outside looking in, it’s a bit of an odd, unhealthy, and unnecessary situation,” trade analyst Daniel Myatt told Business Vision.
“But the close-up view would suggest Croatia is merely trying to comply with EU regulations, which aren’t favourable to the other countries in the region who are all candidate nations.
“It’s a shame, really, that given the improvements in investment, business and trade for the Balkans in what has been a successful peacetime, a little bit of common sense hasn’t been deployed to avert what is becoming a trade war.”
Despite igniting the issue, Croatia has been remarkably quiet in responding to the four neighbours demanding answers, although Croatia’s Minister of Agriculture – Tomislav Tolusic – has invited his counterparts from the region to meet him in Zagreb to discuss the issues.
“We hope to resolve the issue just as soon as we see what the problem is,” was all he would add to a previous statement that explained Croatia was imposing the rule on 168 non-EU nations in order to maintain the quality of imports.
Led by Serbia, the four countries opposing Croatia’s move will look to demand Tolusic revokes Croatia’s decision to raise its importation fees. Serbian officials have highlighted that, until recently, every truck entering Croatia with produce was subjected to a €12 inspection, for which they received a certificate of sanitation. That certificate now costs each truck driver 270 euros.
If Tolusic doesn’t withdraw the fees, it is anticipated that Serbia will encourage further blockades of Croatian goods heading into neighbouring states – a move that would see the decision to impose extra phytosanitary charges potentially backfire on Zagreb.
