Is the free trade agreement with China beneficial for Serbia?

Economists in Serbia rated the announced free trade agreement between Serbia and China as “very good, dangerous, confusing, good in theory”, while some of them are worried, others are optimistic, but all agree that more information is needed about what the possible agreement will contain and how it will be implemented in practice.

Ivan Nikolic, a senior researcher at the Institute of Economics, assesses the free trade agreement with China positively with a dose of scepticism about how it will work and be implemented because, as he says, a similar trade regime already exists with the Russian Federation and the Eurasian Union:

“China has a huge market and currently none of our companies can conquer it and sell their goods there on their own. Or rather, they can to some extent, but it’s difficult and only in certain areas and with limited values. If we are talking about large companies selling their goods nationwide in China, there is no such thing. That is why the agreement is interesting for investors who would come to Serbia to produce in large quantities and in series and thus put cheap stuff on the Chinese market.” According to him, the agreement is a very good thing.

On the other hand, Dr. Milan R. Kovačević, a regular member of the Scientific Society of Economists of Serbia, warns that the agreement, if linear, will be very harmful for the country and favourable for China because Serbian import from China is significantly higher than export: “If the agreement is linear, China will sell even more goods to us. It would be good for us for the agreement not to be reciprocal, but to assess what goods can we export to China in larger quantities, and hence balance out import and export.“

However, even assuming that we will be able to achieve significant trade volume in both directions and increase exports, the question arises as to what will happen when Serbia joins the EU, the expert notes, “If we join the EU, we have to adhere to the EU’s attitude towards China, and then the agreement will be annulled. We would lose a lot and it would be a blow to our economy, so I do not see why it would be useful for us,” Dr Kovačević says.

He reminds that Serbia is already doing a lot of business with China, especially in terms of investments, financing and loans. “We are unprepared and one day we will have to pay our loans (taken from China). Our exports to China are weak, the debt is piling up, so I am very concerned when someone has an idea and doesn’t follow it through to the end. We must not forget that we work with China in a very unusual way, without any competition, they charge us dearly for construction projects they are implementing here and our debt is constantly growing,” he concludes.

(eKapija, 08.02.2022)



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