Kosovo’s reciprocating to an export ban by Serbia may lead to incorrigible economic losses for the latter. Even if access to the Kosovar market resumes, Serbian products may no longer be able to regain prominence, having been replaced by domestic alternatives and imports from other countries.
Prishtina, Kosovo — In an attempt to oppose Kosovo’s independence, Belgrade made a bold decision back in 2008: it ran counter its commitment under a free-trade agreement and banned all Kosovar products. The move, however, had no major economic impact on Serbia, since its new neighbor had few goods to export.
Belgrade imposed the embargo anticipating that its exports to Kosovo would not be restrained. But as the Serbian side pulled out of EU-sponsored talks, aimed at normalizing trade among other issues, the Kosovar government backfired with reciprocal measures–though only with a three-year delay.
Kosovo is estimated to have given Serbia €4 billion in cash since 1999. But while Serbia has a lost an important trading partner, the Kosovar market is facing no shortages as domestic products and imports from other countries are filling in.
Manufacturing of Kosovo goods has increased by 40%, business leaders say, while customs agency reports a hike in imports from Albania, Macedonia, Turkey and other neighboring states. Regional businessmen have also poured into Kosovo to explore opportunities in the market.
The political situation in the country remains tense as Serbia sponsors illegal structures in order to undermine Kosovar sovereignty. But there is hope that talks may resume and the two countries will seek to resolve the trade dispute by dialogue.
Nonetheless, it may be too late for Serbia to regain its foot on the Kosovar market by then, even if full and free access is granted anew. Serbian goods have always enjoyed wide consumption in Kosovo, but once replaced by domestic and regional alternatives, it may be very difficult for them to re-achieve an upper-hand in the Kosovar market.
Combinations of unsound economics and destructive nationalism are not unknown to Serbia, whose government policies have hurt the welfare of the country throughout modern history. Between 1880 and 1910, as Serbian writers recall, national debt skyrocketed by 2197%, leading to the government’s involvement in costly wars of aggression as the only means to bailing the country out the financial crisis.
The monarchical regime of the interwar period was no improvement. The Karageorgevich dynasty suppressed the political as well as economic freedoms of the non-Serbs, while letting the country slip into financial dependence on the two Axis powers of Europe–Nazi Germany and Mussolini’s Italy.
In the 1990s, Milosevic’s corrupt clique made tremendous personal gains through an unprecedented hyperinflation, while massive defense expenditures to support four armed conflicts and the NATO bombing in 1999 left a major scar on Serbia’s economy. Yet Belgrade could have avoided all that, just as it could opt out of its hostile policy towards Kosovo that is now incurring renewed economic losses.
Conversely, the reciprocal trade ban will relieve Kosovo of economic dependence on a state that refuses to recognize its political independence. Simultaneously, Prishtina is determined to put an end to Belgrade-sponsored illegal organizations that have hindered the rule of law in northern Kosovo.
Thus, Belgrade’s move to lay an embargo on its southern neighbor has no support from an economic perspective, but political gains might be evident. Serbia’s policy on Kosovo will meet its fatal failure, what may hopefully lead to a new ground for the two countries to build steady and friendly relations, including free trade.
(Initially published online in German-based magazine GT Worldwide, Aug. 3, 2011)