72569 v1 World Trade Indicators 2009/10 Croatia Trade Brief Trade Policy (the main component of Croatia’s service export) and to attract FDI. The government also announced that Croatia was one of the most developed republics of the control of imported goods will be stepped up.4 former Yugoslavia and is now classified as a high- Croatia introduced safeguard duties on several cheese income country. With its trade liberalization imports in June 2009.5 encouraged by the WTO accession in 2000, Croatia today, based on its 4 percent MFN Tariff Trade Restrictive Index (TTRI)1, has a trade regime very External Environment similar to that of the average high-income non-OECD Judged by its 3.2 percent Market Access TTRI6 or high-income country (4 and 3.9 percent, (including preferences), Croatian exports have worse respectively). Based on the MFN TTRI, it ranks 22nd access to international markets than those of an out of 125 countries (where 1st is least restrictive). average high-income non-OECD country (2.7 Croatia’s trade barriers for agricultural goods (12.8 percent), but better access than those of an average percent) are higher than those for non-agricultural high-income country (3.6 percent). The weighted goods (3.2 percent). The country’s simple average average rest of the world tariff (including preferences) MFN applied tariff is 5 percent, but, taking into faced by Croatian exports is 2.5 percent, account preferences, the applied tariff is 4.3 percent. corresponding to 15.1 percent for agricultural The maximum MFN applied tariff (excluding alcohol products and 0.8 percent for non-agricultural and tobacco) is 60.6 percent, which is lower than the products. In nominal terms, the Croatian kuna regional average of 112.5 percent. The trade policy appreciated by 8 percent against the U.S. dollar in space, as measured by the wedge between bound and 2008.7 However, there was a marked depreciation in applied tariffs (the overhang), has not changed much the second half of the year, which has been followed in recent years and was 1.4 percent in 2008. Based on by a gradual appreciation during 2009. In respect to the extent of its commitment to trade liberalization in the euro, the kuna has in nominal terms steadily services, Croatia ranked 28th out of 148 countries on appreciated for most of 2008, until it started the GATS Commitment Index. depreciating from November 2008. However, it has In the context of rising food prices and in an attempt again appreciated in 2009, and since June has gone to increase domestic availability and to stabilize back to approximately the same exchange rate as in domestic grain prices, Croatia placed temporary export the beginning of 2008.8 taxes on wheat and corn,2 which lasted until July 31, Croatian exports benefited from good access to the 2008, and a temporary export tariff on oil rape from EU market under the trade provisions of the August till end of 2008. Also, at the beginning of 2009, Stabilization and Association Agreement since 2002, in the context of the global economic downturn, the and before that through the Autonomous Trade government adopted a set of anti-recession measures, Preferences (ATPs) which were granted by the EU in including measures to strengthen the tourism sector 2000. EU accession remains a priority for the country, and the negotiations have been ongoing since 2005. Croatia has been a party to the Central European Free Unless otherwise indicated, all data are as of August 2009 Trade Agreement (CEFTA) since 2003, thanks to and are drawn from the World Trade Indicators 2009/10 which it is in a free trade area with its second biggest Database. The database, Country Trade Briefs and export market, Bosnia and Herzegovina (BiH). Trade-at-a-Glance Tables, are available at However, its agricultural exports might be adversely affected in the near future as the BiH parliament has http://www.worldbank.org/wti. adopted a law that re-imposes MFN duties on If using information from this brief, please provide the agricultural products from Serbia and Croatia. For following source citation: World Bank. 2010. “Croatia now, the application of tariffs is suspended as the BiH Trade Brief.� World Trade Indicators 2009/10: Country Trade Constitutional Court is reviewing the constitutionality Briefs. Washington, DC: World Bank. Available at of the law.9 http://www.worldbank.org/wti. World Trade Indicators 2009/10 Croatia Trade Brief Behind the Border Constraints growth since the second quarter of 2002. Imports followed a similar negative trend, contracting even In terms of the conduciveness of its institutional more than exports in nominal U.S. dollar terms in the environment to business, Croatia ranked 103rd out of first half of 2009 (by 37 percent, as compared to the 183 countries in the 2010 Ease of Doing Business 29.5 percent contraction of exports).11 As projected, index. Croatia’s Logistics Performance Index score, the service sector is also affected, with tourist arrivals which reflects the extent of trade facilitation in the dropping by 5 percent in the first seven months of country, is below the income group average, reflecting 2009, compared to the same period in 2008.12 Top a less conducive climate for trade. Croatia scores 2.71 commodity exports in 2008 were ships, heavy on a scale of 1 to 5, with 5 being the highest score, petroleum, electric power transmitting equipment, while the average for the high-income group is 3.67. furniture, and manufactured fertilizers; while the main Croatia is ranked 63rd out of 150 countries in the destination markets included Italy, Bosnia and world. Its strongest logistics indicator is the timeliness Herzegovina, Germany, Slovenia, and Austria. The of shipments in reaching their destinations, while its EU was the destination for 61 percent of exports in weakest one is the efficiency and effectiveness of 20008, but there was a significant drop in exports to customs and other border procedures. new EU member states. FDI as a share of Croatia’s GDP fell to 6.3 percent in 2008 from 8.5 percent the year before. Trade Outcomes Croatia’s trade growth, in real (constant 2000 U.S. dollars) terms, dropped from an average rate of 5.4 Notes percent over the 2005–07 period to 2.8 percent in 1. TTRI calculates the equivalent uniform tariff that 2008, and is expected to turn negative in 2009, with would keep domestic welfare constant. It is weighted by trade falling by 1.3 percent. The slowdown was import shares and import demand elasticity. affected by a fall in both import and export growth 2. World Bank, June 5, 2008, p. 21. (from 5.9 percent in 2007 to 3.6 percent in 2008 and 3. Hina, February 26, 2009. from 4.8 to 1.7 percent, respectively). The two are 4. Government of the Republic of Croatia, June 19, 2009. expected to decline further in 2009, with a steeper fall 5. MA-TTRI calculates the equivalent uniform tariff of in imports, as the economy cools. trading partners that would keep their level of imports In nominal U.S. dollar terms, trade growth was the constant. It is weighted by import values and import same in 2008 as the year before (18.2 and 18.3 percent, demand elasticities of trading partners. respectively). A marginal drop was recorded in the 6. IMF, August 2009. nominal growth rate of imports of goods and services 7. Wemer Antweiler, 2009. (from 19.5 percent in 2007 to 18.7 percent in 2008), 8. Global Trade Alert, July 2, 2009. but this was offset by a marginal increase in the 9. Croatian Bureau of Statistics, 2009. nominal growth rate of exports (from 17.1 percent in 10. Croatian National Bank, 2009. 2007 to 17.6 percent in 2008). National statistics point 11. Ministry of Tourism of the Croatian government, to goods imports growing by 18.9 percent in 2008 August 7, 2009. (compared to 20.9 percent in 2007) and export growth slowing to 14.2 percent (compared to 19.1 percent in 2007).10 While growth of goods trade decelerated, References growth of services trade accelerated in 2008, in Croatian National Bank. “Balance of Payments—Goods comparison to 2007. This is due to growth in Croatia’s and Services.� August 7, 2009. . in 2007 and was the 24th most popular tourist Global Trade Alert. July 2, 2009. “Bosnia: Law on the destination. However, due to the global economic Protection of Domestic Production.� Global Trade slowdown, it is projected that nominal trade of both Alert.org. July 15, 2009 . causing a contraction of the trade deficit. Already in Government of the Republic of Croatia. June 19, 2009. the last quarter of 2008 and first quarter of 2009, “Decision on Implementing the Provisional Croatian exports recorded negative growth on a year- on-year basis, after constantly recording positive Safeguard Measures on Import of Semi-Hard Cheese Croatia Trade Brief World Trade Indicators 2009/10 and Cheese Substitutes.� Government of the Ministry of Tourism of the Croatian government. August Republic of Croatia. September 23, 2009. 7, 2009. “Tourism Minister Says Arrivals Down 5%, . . Hina. February 26, 2009. “Croatian Government Defined Wemer Antweiler. 2009. PACIFC Exchange Rate Services. Anti-Recession Moves.� Government of the The University of British Columbia, Sauder School Republic of Croatia. . donijela_paket_antirecesijskih_mjera>. World Bank. June 5, 2008. Addressing the Food Crisis: The International Monetary Fund (IMF). August 2009. Need for Rapid and Coordinated Action. Washington, International Financial Statistics (Country Tables). DC: World Bank. Washington, DC.