THE IMPACT OF TRADE LIBERALIZATION OF BOSNIA AND HERZEGOVINA’S EXPORT TO EUROPEAN UNION

Abstract

One of the basic and strategic goals of post-war Bosnia and Herzegovina is a full membership in the European Union. During 1992-1995, Bosnia and Herzegovina has passed through one of the most difficult periods in its’ history. The war has completely devastated the economical structure and the aftermaths were visible in the following years. As a new paradigm, the European Union appears. The European Union has helped the Western Balkans countries to overcome national tensions and offered them a new perspective; new regional and european integrations should be a new, historical chance for them. In the light of this, the focus of this paper is the impact of trade liberalization between the European Union and Bosnia and Herzegovina on the export from Bosnia and Herzegovina to European Union. The above mentioned impact has been observed in the period of eleven years. The total export amount of Bosnia and Herzegovina in 2015 was 4,6 billion euros, while the amount of the import was 8,1 billion euros, which makes nearly 60% in favor of import. Traditionally, Bosnia and Herzegovina’s most important foreign trade partner is the European Union where Bosnia and Herzegovina has a deficit in foreign trade. The portion of export to EU during 2015 was 71,79% while the portion of import was 60,85%. The coverage of import over export was 66,89%. In the period of 2005-2015, most of the products have been placed to markets in Croatia, Germany, Italy, and Serbia, which is not the EU member. The process of trade liberalization in 2015 has resulted in surplus of trade with certain EU countries; Austria, Luxembourg and Estonia while the decrease in trade has been recorded with Germany, Slovenia and Czech Republic. Regarding the export, Bosnia and Herzegovina mailny places products which have labour-intensive character. In the econometrics analysis, extented gravitational models of trade have been placed. Besides the abovementioned, the following econometrical techinques have been used: panel data models (PD), fixed effecs models (RE) and panel corrected standard errors (PCSE). In addition, Hausman test has been applied. According to the analysis that has been carried out, the following has been concluded; InGDPi, InGDPj and InDISTij variables are statistically important on the level of 5% in the period of gradual liberalization. The SSP1 an EK variables are not siginificant.In the other moder, in the period of complete liberalization InGDPi, InGDPj and SSP2 variables have a significant impact on a dependent variable on a level of 5%. InDISTij and EK variables have a significant impact on a level od 5% as well. The above mentioned result confirm the research hypothesis; trade liberalization has a significant impact on the export of Bosnia and Herzegovina to the EU. The basic limit of this research can be a relatively short observation period, caused by the fact that the data of merchandise trade between Bosnia and Herzegovina and EU countries until 2005 are not accessible.