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East: Regional Economic Agreement Loses Momentum As EU Expansion Gets Closer

  • Eugen Tomiuc

Prime ministers of the seven member states of the Central European Free Trade Agreement (CEFTA) today began a two-day meeting in Bratislava to assess the group's economic and political cooperation. But analysts say that CEFTA, now in its 10th year, has so far had only limited success in boosting regional economic cooperation and trade.

Prague, 13 September 2002 (RFE/RL) -- Heads of government from the seven-member Central European Free Trade Agreement, or CEFTA, are gathering today in the Slovak capital Bratislava for two days of talks on the group's progress, as well as on their countries' individual bids to enter the European Union.

Slovak Prime Minister Mikulas Dzurinda, the host of the meeting, is due to be joined by Bulgarian Prime Minister Simeon Saxecoburggotski, Polish Prime Minister Leszek Miller, Hungarian Prime Minister Peter Medgyessy, Romanian Prime Minister Adrian Nastase, and Slovenian Prime Minister Janez Drnovsek.

The Czech Republic is represented by Industry and Trade Minister Jiri Rusnok, while Croatia, which is interested in becoming a member, has sent a delegation led by Deputy Prime Minister Slavko Linic. The European Union is represented by Trade Commissioner Pascal Lamy.

Zenon Mikle, deputy director of the Slovak government's press office, told RFE/RL about the agenda for the ninth meeting of CEFTA prime ministers. "The main objectives of this prime ministers' meeting will be the analysis of the development of economic and trade relations, the current functioning of CEFTA, the process of Croatia's accession to CEFTA, the progress reached in the fields of agreements regarding the mutual recognition of certificates and test results, as well as the mutual exchange of information and experiences of the multilateral negotiations within the World Trade Organization. The prime ministers will exchange their views on the progress in accession negotiations with the European Union, as well as on CEFTA's future after the entry of some of its members into the EU," Mikle said.

CEFTA was founded in the Polish city of Krakow on 21 December 1992 as an instrument to strengthen economic cooperation among the members of the Visegrad Group, which had been established the previous year by the leaders of Poland, Hungary, and what was then Czechoslovakia.

CEFTA, which initially comprised the Czech Republic, Slovakia, Poland, and Hungary, was later joined by another three countries: Slovenia in 1995, Romania in 1997, and Bulgaria in 1999.

CEFTA's initial aim, to establish a free-trade area among the four founding states by 2001, was later expanded to the newly admitted countries.

Analysts, however, say that CEFTA has had only a limited impact on developing regional trade and economic cooperation.

British journalist Robert Wright, a Budapest-based correspondent for London's "Financial Times," said that from the beginning, CEFTA was doomed to be an organization of secondary importance, since trade volume in industrial goods among members has always been small. "It's hard to say what CEFTA has achieved. Obviously, they've signed a number of free-trade agreements with each other, as I know trade in industrial products between these countries is entirely liberalized. That's some kind of achievement, but in a sense, [CEFTA members] face a fundamental problem: They were never going to achieve very much, because these countries' natural trade patterns are not to trade very heavily between each other, particularly in industrial goods. The natural pattern for trade in Central Europe is for these countries to trade heavily with countries like Germany and Italy. For all these countries, the dominant trading partner is still Germany [or the EU overall]," Wright said.

Indeed, the EU trade volume of one of the more developed countries in the region, Hungary, exceeded $20 billion in the first half of this year. By contrast, Hungary's trade with the other six CEFTA countries over the same period was less than $3 billion.

Even in the case of less developed CEFTA member Bulgaria, EU trade volume last year totaled some $100 million, while trade with its CEFTA partners was worth a mere $13 million.

Analysts say that the main flaw in the agreement remains the exclusion of agricultural products from trade liberalization. Concessions in trade with agricultural products are negotiated on a bilateral basis between member states, and they remain negligible.

Wright believes it is exactly the trade in agricultural products that could give CEFTA a reason for existence. "The products in which these countries could really be trading heavily with each other is probably agricultural produce. And as far as I know, CEFTA has not done a great deal in terms of liberalizing agricultural trade and there are also regular trade disputes between CEFTA members over agricultural trade. That's the one area where perhaps people could have achieved something useful, could have done something for the agriculture. But agriculture is always a fairly sensitive issue, and there hasn't really been the political determination to liberalize agricultural trade between these countries," Wright said.

When founded, CEFTA was also meant to become a tool to prepare the member countries for future EU membership. In this respect, a country could become a CEFTA member only if it had already signed an association agreement with the EU.

Subsequently, all CEFTA members became full-fledged EU candidates, but wide gaps in their economic development still persist.

Slovenia, the Czech Republic, Poland, Hungary, and Slovakia are among the front-runners and are set to join the 15-member bloc in 2004.

Less developed Romania and Bulgaria are lagging behind, and their accession date still remains unclear.

Wright said that because EU membership remains the top priority for most of the CEFTA members, the political elites in these countries have become less and less interested in pursuing the further development of their regional group. "It never really seems a terribly convincing organization. [When] one goes along to a press conference at the close of a CEFTA meeting, one doesn't get the feeling that there's been the kind of hard bargaining that one would see at, for instance, a European Union summit, where really important things are happening," Wright said.

One of the stated goals of the Bratislava summit is to find a new framework in which CEFTA could continue its existence after 2004, when most of its members will likely join the EU.

However, analysts believe that as the EU enlargement date draws near, interest in further expanding regional economic cooperation under the auspices of CEFTA will dwindle.

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