Serbia to sign Balkan trade deal, keep negotiating

Serbia to sign Balkan trade deal, keep negotiating
Fri Dec 8, 2006 6:58am ET

BELGRADE, Dec 8 (Reuters) - Serbia will sign a key free trade agreement with its Western Balkan neighbours this month despite unresolved issues affecting its tobacco industry, Serbia's chief negotiator said on Friday.
The Central Europe Free Trade Agreement (CEFTA), a training ground for states vying to join the European Union, would bring together Croatia, Bosnia, Serbia, Montenegro, Albania, Macedonia, Moldova and Kosovo in a market of 29 million people. "The government made the decision to sign CEFTA," Vlatko Sekulovic told Reuters. "Prime Minister Vojislav Kostunica will sign it on Dec. 19 in Bucharest".
"That doesn't mean we have solved our problems, but we have time to solve them until the ratification (by next summer)," Sekulovic added.
Serbia is concerned that the deal would damage its tobacco sector, which has attracted over $1 billion in investment from companies such as Altria Group Inc. (MO.N: Quote, Profile , Research), which owns tobacco maker Philip Morris, and British American Tobacco (BATS.L:

Belgrade applies a relatively low tax on cigarette imports but protects its producers with high excise duties. It wants Croatia to scale back its own high customs tax which protects its Rovinj cigarette plant. Zagreb so far rejects the demand.
"There are pending issues, but we believe CEFTA should not be held up," Sekulovic said. "As the biggest market in this region, we want to have a leading role."
All future CEFTA members initialled the deal last month apart from Serbia and Bosnia.
Bosnian says its agriculture sector would be crippled by unfair competition within the bloc.
Sarajevo is considering opting out unless Serbia and Croatia, its top trading partners, allow it to keep customs duties on some products such as meat and dairy for two years -- a request so far denied.
The 370-page CEFTA blueprint, which would replace 31 bilateral pacts, is designed to expand economic activity and attract investors who might otherwise avoid small markets known for bureaucracy, weak infrastructure and low product quality.