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Pavel Radomirski
Bulgarian export within the multilateral trade system
Born on 17 January 1977 in Sofia. In 1996 he finished the Spanish Language School 'Miguel De Cervantes' in Sofia. In 2000 he graduated from the Faculty of Law at the International State Institute of International Relations (MGIMO) in Moscow, specialty - 'International Commercial Law', Diploma work - 'Shareholders Law in Mexico and International Investments'. He works in the spheres of law and economics. Chief Secretary of the Bulgarian-Greek Juristic Club and Executive Director of the Centre for Strategies and Analysis 'AEQVVS'. Coordinator of the Program 'Economics'. Proficiency in English, Spanish and Russian languages.
Yesterday, in this same conference hall, a rather large discussion concerning the economic growth and the methods of its optimization and realization was organized. There was a serious impression that traditionally affirmed measures were emphasized, related in most cases to taxation policy, fisc, budget - all things being widely discussed in the last 10 years by applying various mechanisms but yet restricted enough as a possibility for action because of a number of conditions being enforced. In this aspect, as here different spheres and elements have been also discussed, which definitely contribute to the economic growth, I will focus on the Bulgarian export, the export as a whole, within the multilateral trade system, the possibilities of which are traditionally underestimated.
In the last 10 years the export as a factor of particular importance to the growth was neglected. This is related to the essential import liberalization exceeding in many cases the admitted level, known with countries of the first and the second EU accession wave, at the same time this process not being in conformity with a number of standards, characteristic of the industrial advanced countries with strong competitive economic subjects. The radical restructuring of the export orientation of the country to the European market was connected with a decrease in other potential market possibilities, typical of the multilateral trade system, as well as with the advantages ensuring the membership of the Bulgarian state in the World Trade Organization. Upon a detailed development of a trade strategy, including an analysis of the institutional regulations, it will become obvious that especially mechanisms as protective duties as well as antidumping duties, are measures with the strongest increasing popularity worldwide as far as the protection of the national productions is concerned. They are separately regulated by the World Trade Organization, drawn as a major economic instrument in the strategy post-Doha, a key one for the World Trade Organization as well as in the legislative base of the European Union. Here, I refer to Art. 113 of the European Community Agreement.
A main reason for the introduction of such measures is the cause of a serious damage to the national production by the increased import. In this case the protective measures are combined with a serious pressure on the payment balance available at the moment at a deficit of over 3 billion according to the commodity balance which is already a certain problem; the GATT chapters, referring to Chapters XII and XVII, provide a direct possibility (together with the protective duties) to be an extra motivation for their introduction. If towards the end of 2002 the increase in the deficit in the payment balance was often characterized as a sustainable negative one, then the last year balance had already provided serious grounds to be specified namely as such.
The issue concerns the introduction of protective tax for certain sectors which I will bring to the fore front as priorities - they are not part of the afore mentioned triangle 'tourism, services and agriculture'. The issue concerns sectors of key importance included in the formation of the gross domestic product.
First place - this is the textile, irrespective of the fact that the greater part of it is toll production, so to say, this is the sector with the largest number of employed in the production. For the last 5 years it marked 100 % growth and is subject to an ever increasing dumping import, which is often called an incorrect one. It is a fact that the stimulation of a sector of such strong economic and social importance at first sight seems completely logical, but an absolutely equal treatment of the industrial segments of various contribution is characteristic for Bulgaria in respect of the GDP formation, as well as of their social significance. The use of such protective mechanisms against the unregulated import from China and Turkey is a measure complying with the world practices. I would like to underline that it is explicitly the European Union that is one of the major drivers for their putting into practice as well as for one of the global commercial subjects against which investigations have been initiated namely against the illegal use of such measures.
In this case we are speaking of a serious problem on the part of the Chinese production which, of course, is valid for the whole world. From a more regional aspect already - for Turkish production, to which, as this will be mentioned a little bit later, together with the Macedonians, the establishment of free economic zones is interpreted absolutely ambiguously, irrespective of the entire positive effect on trade, there are certain, I would say, seasonal misbalances, particularly when specifying key sectors.
Along with this, the elaboration of comparative analyses on the problem is necessary as this have to be done by the responsible institutions. In this case I would like to focus on one concrete example. In the summer of 2002 it was particularly drastic, but it usually repeats almost every summer. Bulgaria was swarmed over by protests of the agricultural producers. They had occupied the Parliament and protested against the illegal import of vegetables from Turkey, Macedonia and Syria. The growing social tension was one of the basic incentive for the Ministers of Agriculture and Finance to make a proposal to adopt protective duties. But upon coming into force, however, this proposal, adopted urgently by the Cabinet, was met by an immediate respective reaction by the Ministers Solomon Pasi and Meglena Kuneva, explaining that they would block such a position because it would be an obstacle to Bulgaria's negotiations for the EU membership.
All this suggests a typical lack of coordination among the institutions in Bulgaria both among the governors, and also among the whole political sector which hinders the elaboration of an adequate economic policy and contributes at the same time to the deprivation of respective foreign political mechanisms to be enforced.
The principled understanding that the trade agreements, particularly the free economic zones, stimulate directly the export, is not completely true. Upon lack of a estimates of the possibilities provided by these agreements, economic subjects of flexible market position and an optimum trade policy are those that make profits predominantly out of them. As an example I can mention the agreements with Turkey and Macedonia. The dumping import of certain goods, as agricultural production and textiles, provokes periodically not only the acute reaction of the local producers, but also tension in a social aspect, the problem not being in the conclusion of such agreements, but in the necessity of an entire building up of a national conception. Its framework as well as the creation of an efficient export strategy would turn into major factors for the economic growth.
Part of the principles, included in the export conception, should be: drawing it as a national priority, setting an optimum ratio between protectionism and liberalization, restructuring of the commodity exchange to the foreign markets and other related principles.
The necessity of the availability of such a strategy seems glaring at the availability of several cases in which Bulgaria will obviously suffer serious losses. One of them is the denunciation of the signed agreements for free trade between the Bulgarian party and the five CEFTA member-countries after their recent accession to the EU on 1st May. The possible consequences and terms of action were known for a long time, but almost nothing was undertaken in due time for the optimization of the export and the overcoming of the potential losses. Recently the 'Foreign Economic and Trade Policy' Directorate to the Ministry of Economics stated successfully achieved aspects of trade concessions on the export of some processed agricultural goods.
The only achievement for the period of a half a year ago were the agreed quotas for the cheese export, not at null, but at decreased tariffs, the total quantity being 450 tons.
I would like to focus on one concrete example. Some years ago the export especially of this kind of production - dairy and cheese, was concentrated in the Arab countries - 35% and another 35% - in the NAFTA countries, the North American Zone for Free Trade in Mexico, the States and Canada. During the regular round of negotiations of the World Trade Organization in Cancun last autumn, the Bulgarian government demonstrated an exceptional lack of interest. A far more serious attitude was demonstrated by the representatives of the nongovernmental business organizations. Out of the entire context of the global trade interests this was the place where a certain commodity list of Bulgarian products should have been launched on the basis of which definite institutional guarantees would have been undertaken for the observance of such contracts. It is necessary to work out an export strategy in order to make this happen.
I would like to emphasize that in this aspect Mexico is one of the countries which in the middle of the 90s experienced an exceptional insufficiency of cheese and dairy products and at the same time it was a very serious importer of such a production. The gaining of a certain market niche opens the doors immediately leads to taking of the control over far more complex markets as the United States, Canada and eventually later on an access to the South American markets after the expansion of the free trade zone which has started already to become a fact after the negotiations in Montreal of the Latin American states attended also by George Bush himself.
For the working out of a national export strategy it is needed to consider a number of factors, one of which is the strengthening of the cooperation between administration and business. This condition is not only missing in the Bulgarian economic reality but the preconditions for its emergence are less too. One should not omit the fact that in Bulgaria a business lobby is still interpreted in practice as clientelism. On the other hand, such an interaction becomes difficult to achieve upon lack of any interest on the part of the ruling for the conduct of actions whose useful effect will be reported in a next mandate earliest. That is why, however, the disunited opposition political sector assists too with the multitude of its internal contradictions, lack of clear and detailed programs.
Business in Bulgaria would hardly achieve such united consensus concerning the ways of achieving national prosperity, which is a serious obstacle not only because of the non homogeneous interests of the various manufacturers, which can not simply be specified as small companies or large business configurations.
To a large extent the standpoints on the part of the business - here I would like to open a bracket - as the term 'young people', and also the term 'business in Bulgaria' are interpreted as a homogeneous community, which has almost similar interests, this is a certain segment of the society, which is far from the truth. The Bulgarian business can not be divided either into small and average-sized enterprises or into large structures. Within the large corporate public partnerships many different viewpoints and strategies on the further development both of production and of the entire financial policy exist , which undoubtedly is presented respectively in their different approaches in relation to the application of their viewpoints in political circles, either opposition or ruling ones.
With a disunited opposition political system working out of such a strategy becomes exceptionally complex. The structures of the civil society should be sought on the part of the nongovernmental sector. In this case, however, what is the question about in the native surroundings?
These structures of the civil society, NGOs, the large business NGOs in practice represent formations of the same business configurations, as I have mentioned - with their contradictory interests, in practice they are blocked by the possibility for an optimum action. In this case, the option, enforced by the world practice, is not only drawing of strategic conceptual and analytical developments by a far more flexible small brain analytic trusts, but also their successful use as a buffer between the structures of the business, the administration, the policy and a consecutive eventual development of such a scheme and a following reaching of an international level in regard to the international institutional formations.
I would like to underline that with the enforcement of Bulgaria at the international markets a very important aspect is underestimated (above all the result of a serious international legal activity) - taking into account the mechanisms of this system. Till now only European mechanisms are taken into consideration. We forget that yet from the agreement on the European Union association all these regulations in practice are based on the regulations of the World Trade Organization and the long term negotiations and mechanisms, built up within the multilateral trade system for cooperation. This to a great extent is not available in Bulgaria and this deprives us in practice of the possibility not only of negotiations, but also of efficient foreign policy. Because, when a country has no economic policy, it is absurd according to me to consider that there could be any foreign policy.
The diplomatic role, more or less, is already of secondary importance. They have to know what they are fighting for. And when they do not know then ready made prescriptions are introduced, most often from Brussels and most often in no conformity with the national reality.
In this aspect, and I would like to come to the end with this, we can take lessons even from the experience of the Czech Republic, Poland and Hungary, which have come to the conclusion, long before us, that besides the Washington consensus, opposed by many Latin American countries, there is one clearly developing Brussels consensus, which may happen to be a more democratically acting one, but in a case when a certain country has no clear drawn priorities, it will use ready made prescriptions only, part of them, however, being inapplicable within the national frames and in most cases they cause serious damages on the development of economy and slow down the economic growth.
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