Analysis of the Effects of the Stabilization and Association Agreement over External Trade of the Republic of Macedonia

The European Union has launched the Process for Stabilization and Association for establishing external relations with the countries of the so-called Western Balkans group: Macedonia, Croatia, Albania, Serbia, Montenegro and Bosnia and Hercegovina. The Republic of Macedonia has signed the Stabilization and Association Agreement (SAA) with the European Union in 2001. Besides the legal framework, the Stabilisation and Association Agreement has determined the asymmetrical liberalization of trade between EU and the Republic of Macedonia in favour of the Republic of Macedonia.The asymmetrical liberalization of trade meant that the Republic of Macedonia had longer transitional period for liberalization of the so called sensitive sectors, like: textiles, agricultural products and steel industry. The purpose of this paper is through analysis of the external trade of the Republic of Macedonia to show some effects that came out from the asymmetrical preferences in trade. Although the analysis shows that the Republic of Macedonia has experienced considerable growth of the external trade, more notable is the diversion of trade flows towards the European Union mostly as a result of the asymmetrical treatment. And until now, the analysis indicates that the asymmetrical liberalization of trade towards EU hasn't helped in strengthening the competition of Macedonian export products and in strengthening the Macedonian position on international markets.This paper was presented at the 17th International Conference of the International Trade and Finance Association, Miami, Florida, May 2007.