CEFTA trade bloc keeps Balkans just outside EU membership

The Central European Free Trade Agreement (CEFTA) is sometimes dismissed as the EU's waiting room, or even as a set of training wheels that Brussels provides to aspiring members to learn the art of free trade before they join the bloc's massive free market.

And for most of its history, CEFTA has functioned as a stepping stone towards the EU. The free trade deal, whose rules are based on EU legislation, was first signed by representatives of Czech Republic, Poland, Slovakia and Hungary in 1992. With Brussels' backing, it was gradually expanded to include Slovenia, Bulgaria,  Romania and Croatia. All of these states later dropped out of CEFTA to become full-fledged EU members.

The last major expansion of CEFTA was in 2006, when Serbia, Montenegro, Bosnia-Herzegovina, Albania, North Macedonia, Moldova and Kosovo joined. Those seven countries, with a combined population of under 20 million, now comprise the trade bloc's entire membership. 

EU as CEFTA's referee

Brussels remains engaged with CEFTA as a partner, mediator and a stabilizing force. The EU's efforts have proven crucial for smoothing out repeated conflicts between Serbia and Kosovo, which the former regards as a breakaway province. The EU has recently pushed Kosovo into lifting its blockade on Serbian goods, and pressured Belgrade into allowing the Kosovo government to represent itself at CEFTA meetings, rather than communicating through the UN mission in the capital of Kosovo, Pristina.

The EU wields strong influence through its massive trade with CEFTA countries, as well as aid and investment. Another factor is that the smaller bloc has yet to negotiate its own dispute settlement mechanism and is, therefore, reliant on the EU as a referee.

"CEFTA being a treaty-based institution makes the resolution of such issues quite difficult as they are at a political level, much more than technical or trade level," Ardian Hackaj from the Tirana-based Cooperation and Development Institute told DW.

Hackaj is also the coordinator of Tirana Conference on Berlin Process, which aims to bring the remaining Balkan nations into the EU. On Monday, the prime ministers of six out of seven CEFTA countries traveled to Berlinto meet German Chancellor Olaf Scholz and European Commission chief Ursula von der Leyen to discuss an action plan to improve CEFTA.

Getting into the EU or going nowhere?

Officially, the EU is still keeping the door open for the remaining Western Balkan states and Moldova to enter the club once its conditions are met. On Monday, Chancellor Scholz insisted that the European Union "will only be complete when the Western Balkans is part of it."

Von der Leyen said that the drive to expand the EU had gained new momentum in recent years.

"Russia's war of aggression in Ukraine has brought clarity — you have to choose to be on the right side of history and on the side of international law," she said.

Behind the group photos and evocative press statements, however, there is a sense that the EU expansion plans are in fact going nowhere.

The last country to join the EU was former CEFTA member Croatia in 2013. And while the EU is eager to protect its hegemony in the Balkans and curb the influence of China, Russia and Turkey, European leaders have no desire to import territorial conflicts, poverty and corruption plaguing the remaining CEFTA members. One exception could prove to be Montenegro, a coastal nation with a total population of 600,000 people — equivalent to that of a mid-sized European city.

For their part, countries such as Serbia and Albania have grown comfortable with being big fish in the small CEFTA pond, rather than being left to sink or swim in the EU's free market of 450 million. Also, governments in the Balkan region are unwilling to alienate China, which has brought fresh money, or openly defy their traditional allies for Brussels' sake, especially as the EU struggles to respond to global upheavals and boost its sputtering economy.

Chinese money fuels Serbia's surplus

Serbia has been the biggest winner of the CEFTA framework. Despite Kosovo halting imports from Serbia,  Belgrade reported a trade surplus with CEFTA of $2.71 billion (€2.48 billion) in 2023. It is worth noting, however, that much of the exports were due to successful Chinese-owned companies based in Serbia.

Albania also reported a CEFTA trade surplus of around $242 million last year. In contrast, Kosovo reported a €583 million deficit.

While the economic outlook might appear grim in Pristina, Belgrade's concession on Kosovo being represented by its own politicians at CEFTA meetings is a major political coup for Kosovo.

"This is a logical step in the affirmation of Kosovar statehood. It is also very important because it demonstrates that seemingly impossible changes in the region can be done provided there is clear political will and commitment" from the EU and its Balkan partners, Hackaj told DW.

Belgrade, which currently holds the CEFTA's rotating chair, is still holding on to one point: in official communication, Kosovo's name will be followed by an asterisk, to indicate that using the name in this forum has no bearing on Serbia's stance on Kosovo's independence.

This detail could be seen as a warning to Brussels — business has the power to pave over, but not to erase old rivalries and resentment in the Balkans. For that, the EU will need a vision that goes beyond money and surpasses the old and new Balkan alliances offered by its geopolitical rivals.

Edited by: Anne Thomas