engleski

Theory of trade and integration applied for trade perspectives in the area of western Balkans

Free trade is generally seen as a driver to faster economic growth and to increased national income. Regulated trade is global reality in spite of WTO activities and in spite of numerous economic integration agreements like EU, CEFTA, EFTA, NAFTA or many others. Different studies show that even today's regulated trade still has evidently strong positive increasing impacts on nations’ incomes. For example Frankel and Romer study (1999) suggests. “ The results provide no evidence that ordinary least-squares estimates overstate the effects of trade. Further, they suggest that trade has a quantitatively large and robust, though only moderately statistically significant, positive effect on income” . (JEL F43, O40) Mentioned study show strong impact of regional trade on enhanced national economic and income growth. “ The relation between the geographic component of trade and income suggests that a rise of one percentage point in the ratio of trade to GDP increases income per person by at least one- half percent” . Reasons for strong regional positive trade effects are: “ Trade appears to raise income by spurring the accumulation of physical and human capital and by increasing output for given levels of capital” . The key driver to trade growth is opening of economies, along with the improvements of human capital. Opening of economies is two way activities: - WTO multilateral negotiation track and - Regional/economic integration track. Both tracks are used in case of countries in the WB region. Countries that succeed to increase trade in goods and services normally attract relatively much more FDI than countries that fail to become adequately open and integrated into the global economy. Among other important elements of successful attracting of FDIs is the absorption capacity of the national economy and/or the size of the other national markets which are relative freely accessed from the country where actual increased amounts of FDIs are binge located? CEFTA countries (the WB region) and Turkey were suggested by the EU to open their economies to stimulate mutual trade growth by creating CU and FTA. Working of FTAs or CUs should increase the size of free accessible national markets for all foreign investors who envisage the potential advantages of their investing in the region. The concept for the region with regard to its future economic success is rather clear: "increase the level of trade openness of regional markets (successful operation of CEFTA), achieve benefits of an accelerated economic growth together with general regional welfare increase. Such developments will help to improved regional political and national stability together with good chances for accelerated EU accession process." The paper will after considering theoretical bases for positive trade growth impact on economic growth and political stability develop some practical suggestions for new regulative environment supporting trade and FDIs growth in the area of the WB countries.

regional trade ; economic growth ; WTO ; CEFTA ; WB region

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