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Barriers to cross-border trade in intermediate goods within regional value chains in the CEFTA region

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  • Krasniqi, Besnik
  • Ahmetbasić, Jasmina
  • Bartlett, Will

Abstract

This paper investigates the barriers to the development of regional supply chains to support the growth of regional trade in the CEFTA region. The paper first identifies the way in which regional FTAs such as CEFTA may bring about structural change and tendencies to either convergence or divergence among partner economies. Tendencies to agglomeration of benefits in countries with strong manufacturing sectors are identified. In the case of CEFTA we show that Serbia (and to some extent North Macedonia and Bosnia and Herzegovina) has used its policy of subsidising FDI in the manufacturing sector by establishing a network of special economic zones (SEZs) to gain an advantage on the regional market through boosting its capacity for the production of manufactured goods for export. We argue that the tendency towards economic divergence within CEFTA that this creates could potentially be offset by developing regional value chains to supply inputs to multinational companies based in SEZs. However, there are many barriers to the development of such cross-border regional value chains. The paper presents some qualitative research findings that reveal the range of barriers to the development of regional value chains involving SMEs. It concludes with some reflections of how policy could be focused to best reduce the barriers to regional value chains, with the aim of harnessing the opportunities offered by CEFTA to reverse the process of divergence among partner economies.

Suggested Citation

  • Krasniqi, Besnik & Ahmetbasić, Jasmina & Bartlett, Will, 2019. "Barriers to cross-border trade in intermediate goods within regional value chains in the CEFTA region," LSE Research Online Documents on Economics 117484, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:117484
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    File URL: http://eprints.lse.ac.uk/117484/
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    References listed on IDEAS

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    JEL classification:

    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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