72544 v1 World Trade Indicators 2009/10 Bosnia and Herzegovina Trade Brief Trade Policy application of tariffs so as to mitigate any long-term damage.3 Bosnia and Herzegovina has adopted significant trade reforms since the end of the civil war in 1995. Today, based on its 6.8 percent simple average MFN applied External Environment tariff, Bosnia and Herzegovina’s trade regime is similar The simple average rest of the world tariff (including to that of other Europe and Central Asia (ECA) preferences) faced by the country’s exports is 10.4 countries, but more open than that of an average percent. When its trade flows are taken into upper-middle-income country (9 percent). Similar to consideration, it is apparent that Bosnia and the majority of other countries in its comparator Herzegovina’s exports have good access to groups, Bosnia and Herzegovina is more protective of international markets, especially in comparison to its its agricultural goods (MFN of 12.4 percent) than of comparators. The country’s weighted average rest of its non-agricultural goods (MFN of 6 percent). Based the world tariff (including preferences) is 0.5 percent, on the MFN applied tariff, it ranks 70th out of 181 much lower than the regional and income group countries (where 1st is least restrictive). Bosnia and averages of 2.1 and 3.1 percent, respectively. Similar to Herzegovina’s maximum MFN applied tariff, the majority of other countries in the region, Bosnia excluding alcohol and tobacco, was 204.3 percent in and Herzegovina’s agricultural products face a less 2008 and has been decreased to 181.8 percent in 2009, favorable trading environment (4.9 percent tariff) than but is still higher than in 2007 when it was 167.7 its non-agricultural products (0.2 percent tariff). In percent. nominal terms, its convertible marka appreciated by The Bosnian Parliament adopted, in June 2009, a law 6.6 percent against the U.S. dollar in 2008, making that re-imposes MFN duties on agricultural products exports more expensive in foreign currency terms.4 from Serbia and Croatia,1 which are Bosnia and Bosnia and Herzegovina and the EU have Herzegovina’s second and third most important implemented a free trade zone through the entry into trading partners, respectively, after the European force of the Transitional Agreement, which was signed Union (EU)2 and with which Bosnia and Herzegovina on June 16, 2008, together with the Stabilization and has been in a free trade agreement since 2007 through Association Agreement (SAA). While the latter needs the Central European Free Trade Agreement to be ratified by the EU member states, the (CEFTA). The new law requires that the duties be Transitional Agreement contains provisions from the implemented in line with Bosnia and Herzegovina’s SAA that could be implemented immediately.5 The laws and its obligations under the CEFTA and GATT. gradual opening of Bosina and Herzegovina’s market However, on July 3, 2009, the Constitutional Court of is especially important as the EU is the country’s main Bosnia and Herzegovina decided to review the trading partner, accounting for more than half of the constitutionality of the law and suspended the country’s exports and almost half of imports in 2007.6 Additionally, trade integration was advanced further through the introduction of diagonal accumulation of origin of goods for countries in the EU’s Stabilization Unless otherwise indicated, all data are as of August 2009 and Association Process, Turkey and EU member and are drawn from the World Trade Indicators 2009/10 states.7 Database. The database, Country Trade Briefs and Trade-at-a-Glance Tables, are available at Behind the Border Constraints http://www.worldbank.org/wti. In terms of the conduciveness of its institutional If using information from this brief, please provide the environment to business, Bosnia and Herzegovina following source citation: World Bank. 2010. “Bosnia ranked 132nd out of 183 countries in the 2010 Ease of and Herzegovina Trade Brief.� World Trade Indicators Doing Business index. Additionally, its Logistics 2009/10: Country Trade Briefs. Washington, DC: World Performance Index score, which reflects the extent of Bank. Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Bosnia and Herzegovina Trade Brief trade facilitation in the country, is below the ECA and Notes upper-middle-income group averages, suggesting that it has a less conducive climate for trade. It scores 2.46 1. European Union Commission. March 17, 2009. on a scale of 1 to 5, with 5 being the highest score, 2. Global Trade Alert 2009. while the regional and income group averages are 2.59 3. World Trade Organization 2009. and 2.85, respectively. Bosnia and Herzegovina ranked 4. Global Trade Alert 2009. 88th out of 150 in the world and 14th in the ECA 5. International Monetary Fund (IMF) 2009. region (with Turkey leading the regional group). The 6. Croatian state news agency HINA 2008. logistics indicators in which it performed the best were 7. Economist Intelligence Unit (EIU) 2008. domestic logistics costs and timeliness of shipments in 8. World Bank 2009. reaching their destination, while its weakest 9. Centralna Banka Bosne i Hercegovine (CBBH) 2009a. performance was in the ability to track and trace shipments. 10. Centralna Banka Bosne i Hercegovine (CBBH) 2009b. 11. International Monetary Fund (IMF) 2008, p. 9. Trade Outcomes Bosnia and Herzegovina’s trade growth, in real terms References (constant 2000 US dollars), improved slightly from an average rate of 7.2 percent over the 2005–07 period to Centralna Banka Bosne i Hercegovine (CBBH) 2009a. 8.7 percent in 2008. Though export growth declined to BH External Sector: Exports of goods by tariff chapters. 8.2 percent in 2008 compared to 14.1 percent over the CBBH. August 5. . 3.9 percent over the 2005–07 period. Centralna Banka Bosne i Hercegovine (CBBH) 2009b. BH External Sector: Imports of goods by tariff chapters. In recent years, the country’s exports have grown CBBH. August 5. . the country’s main exports.8 However, the Croatian state news agency (HINA). 2008. “EU’s Free concentration of exports on resource-intensive Trade Agreement with Bosnia Goes into Force.� products means that they are affected by swings in July 1. BBC Worldwide Monitoring. commodity prices (the main export commodities Economist Intelligence Unit (EIU). 2008. Country include aluminum, iron and steel products, and Profile: Bosnia and Herzegovina. EIU. electricity). The recent fall in these prices influenced European Union Commission. March 17, 2009. Procedured the slowdown in export growth in nominal U.S. dollar Relating to the Implementation of the Common Commercial terms (from 26.1 percent in 2007 to 20.2 percent in 2008). Exports further declined in the first half of Policy. Official Journal of the European Union, 2009, falling by 33.6 percent in nominal U.S. dollars in 2009/C 62/07. comparison to the same period in 2008.9 Imports also Global Trade Alert. 2009. “Bosnia: Law on the contracted by 34.9 percent in nominal U.S. dollars in Protection of Domestic Production.� Global Trade the same period,10 after the nominal growth rate of Alert.org. July 15. . prices (heavy petroleum accounts for 10 percent of International Monetary Fund (IMF). October 2008. IMF Bosnia and Herzegovina’s imports), the 2008 growth Country Report No. 08/327. IMF, Washington, DC. rate was several times higher than in 2006, when ____. August 2009. International Financial Statistics nominal import growth had fallen to 3.3 percent on (Country Tables). IMF, Washington, DC. the back of a VAT-related slowdown.11 Bosnia and World Bank. 2009. “Country Brief 2009: Bosnia and Herzegovina is dependent on remittances, which, as a Herzegovina.� World Bank, Washington, DC. July share of GDP, dropped to 14.8 percent in 2008 from 10. . 17.8 percent the year before. FDI inflows into the World Trade Organization. April 2009. Trade Profile— country in 2008 were a 5.4 percent of GDP, a drop Bosnia and Herzegovina. Geneva. from 13.9 percent of GDP the year before.