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EU Report about Serbia

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Evolution of Macroeconomic Indicators in Serbia

The economy of Serbia has been on the rise since the year 2000. The stabilization of the economic indicators like GDP and revenues, generated by business organizations, has been connected to the relationships that Serbia has been building with the European Union. The EU is a collaborative union that enables free trade among its 27 members. The members of this union make and manage decisions together in terms of individual’s and general members’ business and economic stabilization. Given that, the EU is mostly business oriented. Political powers have been influencing the undertakings of the union and, therefore, regulating members and potential candidates. Serbia has been economically instable for a long time. However, considering the fact it has never been a member of the EU, Serbia had to give in to some regulations and treaties to secure aid and donations from the EU (Staab, 2011). In this case, the political aspects that surround the EU have been affecting Serbia’s economic status.

Since the year 2000, the relations between Serbia and EU have grown rather rapidly to a point that the EU is considered the largest Serbia’s trade partner. The factorial means, within which Serbian government estimates its economic growth, cannot be established. However, a review on the political prospects, that have enabled Serbia to create relations with the EU, include the fight against terrorism within the region – a reason that drove Serbia to be considered a candidate for the EU membership – and requesting for aid from some member states of the EU. The interaction between the EU members and Serbia has transformed the operational model from the political to the economic one. However, the number of investments in Serbia, made by the EU member states, owes to the former political relations and interactions. The government of Serbia regulated the amount of imports and exports to and from the EU, but it operated in a similar model as the one applied by the EU members (Wadhva & Vekaric%u0301, 2005).

Economic Support

Serbia is not only affiliated to EU members alone. Other members from all other the world, especially the USA and some Asian nations, are some of the trade partners that have steered the Serbian economy’s growth. During a study, carried out in 2010, Serbia was engaged in business and trade relations with the EU that estimated about 56% of Serbia’s revenue generation. The other trade partners or associates like China, the USA, Russia, and Turkey among others filled the remaining less that 40% of revenue generation. The reason for highlighting that these other countries contributed less than 40% of Serbia’s revenue generation is because Serbia conducts internal trading activities that generate revenues as well.

Since the year 2000, Serbia has developed a trading bond with the EU that accounts for more than 50% revenues with the EU members investing over 2 billion Euros in Serbia. The investments not only catapult Serbia’s economic statues, they have also raised Serbia’s GDP to a point that it can be considered for the EU membership. In terms of trade deficits and surplus, China and the USA are known to be the most unfair trade partners to have ever existed. However, in the case of Serbia and the EU, over 50% of Serbia’s exports are traded on the EU markets while, on the other hand, the European Union invests directly and indirectly into Serbia’s development.

Comparison between Trade Partners

The fact that an organization may fail to do business with another one because the latter has less potential or is less wealthy, is a business strategy that aims to develop scale economies. This helps the organizations to avoid the incurrence of slow growth liabilities (Staab, 2011). Serbia and its business model with the EU experiences the same phenomenon. Russia is the largest country lying above the Equator in the world; however, its geographical position has not proved Russia to be an economic giant or to be more stable than many other economies. Thus, the Russian surface area is almost twice bigger than the one covered by the 27 EU members. In regard to this, Serbia’s trade with the EU is ten times bigger than that with Russia. This fact shows that Russia is a weaker trading partner for Serbia. This could be triggered by its involvement in wars and unstable currency. The level of influence that Russia can give to any optimistic nations is the weapons trade and scarce resources concealing.

Currently, Serbia has acquired a 4.5% GDP increase by the end of 2011. This figure is compared to $90.1 billion according to 2010. Compared to other economies, like the Chinese one, Serbia is still behind the grind as China’s GDP stood at 8% growth for the first quarter of 2012. However, China may be Serbia’s trade partner as well, but it does not acquire a large export share. The cases of China and Russia define that Serbia is more influenced by the European Union’s economies than that of China and Russia. This factor can be attributed to the governance styles that the trade partners apply.

Governance

Trade is a source of financial stability through the revenues generation, accrued from exportation of resources, labor and technology. On the other hand, economies grow through the application of modern technology and government regulations. Since the World War II (WWII), China has had a communist government that governs with an iron fist, so that it can control trade, technology, and even the flow of information. The Chinese government controls and runs businesses, even those registered under the private sector. In this case, the government regulates imports and exports, and any trade partner is likely to suffer trade deficit. Secondly, Russia is a warlord under the Soviet regimes and through history. It is known to engage in twisted operations.  The governments of Russia and China can be equated to be alike in terms of imposing trading restrictions on trade partners. However, the EU member states govern the trade’s economic and political aspects through diplomacy and equity. This equity has caused Serbia to be more associated with the EU than any other nation belonging to a different union.  Therefore, the macroeconomic indicators that can prove Serbia to be developing in terms of economic stability can be defined through the type of its trade partners’ government regimes (Ginsberg, 2010).

Trade Imbalance

The context of this report is Serbia’s relations with the European Union or the presence of the EU’s influence in Serbia. However, the reason why the EU plays a major role in Serbia’s economic development is due to the factors influencing trade between Serbia and other nations. China and Russia are good and distinct examples that can be used to explain this phenomenon. Despite the fact that Serbia is more involved in business and trade with the EU than with Russia, Russia manages to be ranked second among Serbia’s trade partners. However, the factors that have drawn Serbia’s economic stability behind involve trade deficits that have been registered with Russia in terms of energy. China, on the other hand, is a notorious international trade player with the ability to maneuver through regulation systems to create business havoc. Currently, Serbia suffers a trade deficit of more than 98% with China in terms of imported goods. Following 2010 statists, Serbia’s exports to China ranged between 3 and 4%. With a trade deficit of over 98%, it means Serbia is just a potential customer for China with nothing to offer.

With the examples of China and Russia, the EU’s presence in Serbia has been triggered by the unfair trading grounds with other nations. Considering that economies cannot change abruptly, like the installation or a new information system in an organization, the more time wasted with less beneficial trade partners, the higher the chances of developing economic difficulties. In regards to the slow but steady growth of Serbia’s economic stability, the engagement in trade with nations like China and Russia is responsible for the lower rate of GDP growth. In this case, it means that the EU has been in business with Serbia as an option of last resort. The steady growth of 4.5% in GDP can be attributed to the trade partnership Serbia has engaged in with the EU.

The presence of the European Union and the role it plays in the Serbia’s economic indicators is to link up the gap, created by trade deficits with other nations. Supposing Serbia could have attained financial and economic stability through a higher GDP growth, the trade deficit’s presence has forced it to lag behind in terms of development. The EU’s duty in the restoration of Serbia’s economy has been through financial aids, direct investments, and through the creation of equitable trading grounds. These aspects have not only assisted Serbia in maintaining its GDP growth, but also in the handling of trade imbalance issues with other business partners. The EU can be mistaken to have been offering Serbia financial help, but in reality, under business ethics, it was motivating Serbia to become a stronger trader with the European markets as well as the world arena. This fact has ensured that the economic shortcomings of financial and stock market crises do not affect the average GDP growth of Serbia (Staab, 2011).

History Concerning Serbia’s Accession to the EU

Serbia is a country with rich history and has conducted accession to the European Union. Accession to the EU means the process of the country being integrated into the EU as a full-fledged member state of the union. Serbia applied for the EU’s membership in the year 2009 on December 22nd. This was three years ago and, after application to the EU, the European Commission in 2011 recommended for it to be an official candidate. Earlier in its history, the EU had frozen its trade agreements with Serbia but on December 7th 2009 it eliminated those limitations. This is because Serbia as a country was determined and had set some assertions to the EU until 2014.  This was a plan known as Papandreou plan - Agenda 2014.

After their formal application, the vice president of the European commission, Jacques Barrot, predicted Serbia’s EU accession within 5 to 7 years, and this was an initiative that he backed ever so well. Again looking at the history of accession, Serbia later initiated a Stabilization and Association Agreement (SAA). This was with the European Union in 2007. This was a step immediately following the official signing that was expected to take place in 2008. This became a milestone in Serbia’s accession negotiations.  

Following the advice of chief war crimes prosecutor Carla Del Ponte, the plan was later executed. The prosecutor advised the EU that Serbia was complying very well with the tribunal. Several people, including Ratco Mladic and Goran Hadzic, were arrested in the recessions for crimes against humanity and some until today still remain on trial. In the past 2 years, Serbia has been striving to receive full candidate status and, finally, managed to do it. It is worth noting that Serbia received a full candidate status in the EU on 1 March 2012.

EU Formations and Models

To determine how the European Union policies have affected Serbia, it is necessary to comprehend the EU formation and how various members are differentiated from one another. The formation is as follows:

EU15 Specialization Model

The European Union is the largest organization in the world in terms of promoting free trade and open market. The trend, in which an organization or a firm can trade freely within the readily available markets, plays both as an opportunity and a shortcoming. Following the risk taking aspect and the minimization of such risks, organizations, whose hosting nations are members of the EU, make decisions that favor their existence in spite of the stiff competition they face from their allies. Some decisions, made by these organizations, reflect on the organization’s size and the type of a favored sectorial doing business model. In spite of the organization’s size, the host nations, being member of the EU, define the boundaries within which certain practices and undertakings can or cannot be utilized. An economy that supports a business model, which favors small firms, usually tends to eliminate the dominance that large organizations may impose in different environment.

The European Union is made up of two groups - the EU15 and the recently formed EU21, which includes emerging new economies. Considering that the former group consists of much more experienced economy movers than the latter one, it is noteworthy to recognize the effect such status has on the organizations that belong to this group. EU15 member states and their respective organizations deal with the issue of competition through making decisions that reflect on the firm’s survival as well as the economy in general. As a result, the diversity between large and small companies is defined through the decisions they make. Small firms are more drawn to reflecting on microeconomics, where they make decisions that influence mostly their role on the market and focusing on how well to maintain a sustainable growth. On the other hand, the larger organizations are much more interested in making decision that reflect on macroeconomics, in which they focus on national GDP, market distribution, and the economy in general. For this reason, it is understood that being members of the European Union, in general, organizations tend to make specialized decisions to keep up with competition and rivalry (Hayoz, 2005).

Distribution of Size across the Member States

As discussed above, the size of an organization is not determined by the amount of resources or market share that a nation may possess. It is defined by how effectively the application of business strategies fits. The European Union, being a group of nations that engage in trade across an extensive market, conducts decision making by means of operational oriented activities, rather than profit oriented ones. When the operations of the organization are well suited to reflect and draw a certain margin of the economy, the profits and sustenance for growth take care of themselves. On the other hand, the size of the organization is affected by both endogenous and exogenous issues that originate within and without the organization. An organization, which host nation is a member of the EU, is likely to make decisions influenced by the exogenous aspect of competition, fair market share and the likelihood of surviving economic and financial crises.

The petroleum sector is among the sectors that are most affected by external, as well as internal forces. Some of external forces that influence the decisions made by organizations in this sector include government regulations, price controls, and heavy operational costs. For this reason, being the EU members, such organizations within this sector merge to cut down on operational cost while, at the same time, making the organizations multinational in nature, therefore reducing government involvement in the organizations’ internal affairs. Organizational mergers are effects that result from the idea of an organization belonging to a member state of the Eropean Union. For this reason, the scope of the organizations dealing with petroleum depends on the availability of the product in the member states. This is performed in order to expand the margin of opportunity as well as save on operational cost in order to maximize profits.

Endogenous and Exogenous Theories

The organization’s growth rate depends on the aspect of making decisions that correlate with a certain rationale of attracting scale economies. The decisions made to attract the firm’s growth are supposed to be reflective of the organization’s objectives as well as the challenges that the organization faces. As a result, internal and external challenges and opportunities are considered as the variables to go by. To support this, there exist two forms of growth: endogenous growth and exogenous growth. The role of each is to attract opportunities and filter those that are applicable while an opportunity cost is incurred for others that may not be manageable.

Considering the EU nations and the organizations that are operating inside them, the market share and the heavy presence of competitors on a leveled ground is an exogenous element of growth, if seized properly. It is through market research that organizations would predict and have specific knowledge concerning the market and, therefore, lead to the implementation of favorable operational models. However, the market is too open for the EU members so that an equilibrium status should be established for those of other unions not to overshadow the operations of one organization. Contextually, equilibrium means balancing the level of input with the level of output in relation to pressure and challenges posed by other firms (consider China’s business model with Serbia). To acquire that equilibrium, under the circumstances emerging as result of being the EU member state organization, strategies of venturing into new businesses or indulging in diverse business operations should be implemented, which would result in sustainable growth (resolving trade imbalances). Specifically, the influence that the EU membership has on Serbia’s organizations is pushing them to deviate from the usual and obvious businesses, dominated by older and much experienced organizations and government regimes (Audtresch, 1998).

Serbia’s Case

Serbia was affected by European policies through various ways.

There were setbacks in the political field and most of Serbia’s trade was affected. The main effect of the European policies was that trade agreements were frozen between Serbia and the EU.

There were strict visa requirements for Serbian citizens, especially when going to Schengen countries. Therefore, Serbian citizens were affected by European policies, whereby they found it difficult to obtain visas for travelling to specific countries. Some Serbia’s citizens were arrested when fighting for recessions and crimes against humanity, and this affected the whole country.

Serbia was also affected by European policies, since by these policies it brewed tension with the United States and many EU countries, due to independence of its former province, Kosovo.

There have always been high unemployment rates and poor living standards in Serbia, and the positive impact of European policies is that it has helped reduce the level of unemployment and helped increase living standards, since all countries strive to enter the EU for economic stability. Therefore, joining the EU has improved Serbia’s economy, since it was facing a global economic crisis.

Legal immigration has been elevated in Serbia through European policies. There has also been attraction of the most qualified migrants from other countries, and this has been easier conducted through the EU. This has helped in developing the country, since the trade links and traveling means have been improved through legal immigration. The European Union had a major stance on illegal immigrants, and countries in the EU member states had common standards on expulsion of all irregular immigrants. Therefore, legal immigration as a European policy helped Serbia a lot.

European policies have also affected Serbia by enabling it to catch up with the rest of the region in terms of European Integration. This is because these policies have made Serbia have a stronger government that was earlier dominated by democratic forces. The Serbian police force has strengthened and the rate of crimes has decreased.

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