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In the recent past, the trend marking global trade has been through the formation of Trade Blocs and Free Trade Agreements (FTAs). These arrangements are meant to promote trade between countries occupying a given region and also raise their bargaining power with other countries and other trading blocs. They have been important engines for growth in global trade, although they have also beenaccused of balkanization of world trade into trading regimes which make it difficult for integration in the globalized world.
CEFTA is one of such agreement which was formed in 1992 by countries in Central Europe. The organization has undergone metamorphosis becoming an important stepping stone for Central European countries to be admitted into the EU.
What is CEFTA?
CEFTA, the Central EuropeanFree Trade Agreement, is a trade agreement signed by Central European and South-eastern countries. The organization brings together a number of countries which are yet to be admitted to the EU including Albania, Bosnia, Croatia, Macedonia, Moldova, Montenegro, Serbia, and Kosovo. There are other countries which have been members but have already exited the organization. These include Bulgaria, CzechRepublic, Poland, Slovakia, Romania, Hungary, and Slovenia (food-ks.org, 2006). These countries ended their CEFTA membership when they were admitted to the EU.
Originally, CEFTA was born out of a trade agreement between Poland, Ungary,
Czech Republic, and Slovak Republics in 1992. The trade agreement was enforced from July 1994 and since then more members have joined in while others left to jointhe EU.
The Central European Free Trade Area as it own name states, belongs to the free trade area trading bloc due to the fact that there is an agreement made between its members to trade freely among them, but also they are able to trade with outsiders in the way they consider the best for each one.
Ecuador as a South American country has not had any participation with this trading bloc eventhough this trade agreement has not established any negotiation as Ecuador belongs to other trade blocs.
Events and its importance
The initial aim in formation of CEFTA was to assist the member countries to mobilize their efforts in order to integrate Western European institutions. It was considered a vehicle that would drive the region to integrate with the rest of Europe in political,economic, security, and legal matters. The organization was meant to foster democracy and free-market economy in the region. More member joined the trade agreement including Slovenia in 1996, Romania in 1997, Bulgaria 1999, Croatia in early 2003, and Macedonia joined in 2006 (Handjiski, 2009). Most original members of CEFTA left the organization when they joined the EU in 2004. In 2006, it becameimportant to come up with an agreement for the remaining members. The new agreement deemed it fit to extend membership to bring into the fold other Balkan states. Most of these states had put in place free trade agreements under the framework of Stability Pact for South Eastern Europe. An agreement reached in 2006 at the Meeting of South East Europe Prime Ministers unanimously agreed to extend themembers to admit other members including Albania, Bosnia, Kosovo, Moldova, Serbia, and Montenegro (Handjiski, 2009).
CEFTA is important for a member to put in place liberate trade regime. Going bythe trend in the world, liberalization of trade regimes has been observed in many countries. For example, under CEFTA, Kosovo enjoys a general tariff rate of 10% for all imports and 0% rate for all exports(IPAK, 2007). This means that the country has already established a liberal trade regime. This can be considered as a chance for the country to establish liberal trade relations with her neighbors. At the time of signing of the agreement, it was presumed that there were two direct impacts of CEFTA to the Kosovo economy. In the long term, the growth of Kosovo economy depends on the export trade....
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