1. With the support of the European Commission 1 BILATERAL FREE TRADE LIBERALISATION MACEDONIA With the support of the European Commission

2. 2 BILATERAL FREE TRADE LIBERALISATION The Republic of Macedonia currently applies eleven free trade agreements (FTAs). Nine of these agreements are applied on bilateral basis and two on multilateral basis Serbia and Montenegro, the FTA was concluded on 04.09.1996, implemented as of 16.10.1996 Republic of Croatia, the FTA was concluded on 09.05.1997, implemented as of 30.10.1997 Republic of Bulgaria, the FTA was concluded on 13.10.1999, implemented as of 01.01.2000

3. With the support of the European Commission 3 BILATERAL FREE TRADE LIBERALISATION Republic of Turkey, the FTA was concluded on 07.09.1999, implemented as of 01.09.2000 Ukraine, the FTA was concluded on 18.01.2001, implemented as of 10.09.2001 Bosnia and Herzegovina, the FTA was concluded on 24.04.2002, implemented as of 01.07.2002 Republic of Albania, the FTA was concluded on 29.03.2002, implemented as of 15.07.2002 Romania, the FTA was concluded on 07.02.2003, implemented as of 01.01.2004

4. With the support of the European Commission 4 BILATERAL FREE TRADE LIBERALISATION Republic of Moldova, the FTA was concluded on 28.01.2004, implemented as of 01.01.2005 Free Trade Agreement with the EFTA states (Switzerland, Norway, Iceland and Liechtenstein), concluded on 19.06.2000, implemented as of 01.05.2002 Stabilisation and Association Agreement with the European Communities and their Member States (Interim Agreement on Trade and Trade Related Matters) implemented as of 01.06.2001.

5. With the support of the European Commission 5 BILATERAL FREE TRADE LIBERALISATION Macedonia has concluded symmetrical free trade agreements with: Serbia and Montenegro, Republic of Croatia, Republic of Albania, Republic of Bulgaria, Romania, and with the Republic of Moldova. There are also asymmetrical Free Trade Agreements in favour of the Republic of Macedonia concluded with: the Ukraine, Republic of Turkey, EFTA states and EU member-states. The only asymmetrical free trade agreement that the Republic of Macedonia has concluded in favour of the other contracting party is the FTA with Bosnia and Herzegovina.

6. With the support of the European Commission 6 BILATERAL FREE TRADE LIBERALISATION At present, the Republic of Macedonia has more than 95% liberalisation of the trade in industrial and agricultural products with: Serbia and Montenegro (99%), Republic of Croatia (97%) and Bosnia and Herzegovina (97%). The trade liberalization level with the Albania is 60%. The liberalization level in the trade with industrial products is 70%, (100% from 01.01.2007) while the liberalization level in the trade with agricultural products is 50%. Macedonia has about 90% liberalization level of the trade only in industrial products with: Bulgaria, Romania, and Moldova.

7. With the support of the European Commission 7 BILATERAL FREE TRADE LIBERALISATION ECONOMIC COOPERATION: REPUBLIC OF ALBANIA The economic cooperation between the two countries is not at the desired level. It consists mainly of trade and lacks higher forms of cooperation. The 2003 trade volume between the two countries was increased, primarily as a result of the increase of imports from Albania, which in the period thereto was significantly lower. During 2004, the same trend is maintained, as compared with the same period in 2003. The Republic of Albania has a 0.6% share in the total foreign trade of the Republic of Macedonia.

8. With the support of the European Commission 8 BILATERAL FREE TRADE LIBERALISATION REPUBLIC OF BULGARIA The economic cooperation between the Republic of Macedonia and the Republic of Bulgaria has been of varying intensity in the last period. The trade volume between the Republic of Macedonia and the Republic of Bulgaria in the last two years, is featured by increase, in terms of exports from the Republic of Macedonia, contributing towards a more balanced bilateral trade.

9. With the support of the European Commission 9 BILATERAL FREE TRADE LIBERALISATION SERBIA AND MONTENEGRO The bilateral trade is based on the signed Trade Agreement under which a larger number of goods are traded freely, by payment of 1% customs handling duty, while only a small number of goods are under the contingent regime. Serbia and Montenegro is the second ranked trading partner of the Republic of Macedonia, with a 12.9% share in the total foreign trade.The export share is significant, resulting into a surplus in the bilateral trade on the side of Macedonia.

10. With the support of the European Commission 10 BILATERAL FREE TRADE LIBERALISATION ROMANIA Economic Cooperation is not at the satisfactory level, in terms of volume and quality, and is mainly reduced to trade, which in the last period has had a decreasing trend. 2004 is an exception with progressive trend especially in terms of import.

11. With the support of the European Commission 11 BILATERAL FREE TRADE LIBERALISATION TURKEY Turkey is the eighth ranked trading partner in terms of volume of the trade with the Republic of Macedonia, with a 3.3% share in the total foreign trade. The Republic of Macedonia has had a deficit in the trade with the Republic of Turkey for several years. In 2004, there is an increasing trend in the exports from the Republic of Macedonia, indicating a tendency towards a more balanced trade. The opportunities for economic cooperation have not been sufficiently explored.

12. With the support of the European Commission 12 BILATERAL FREE TRADE LIBERALISATION REPUBLIC OF CROATIA Croatia is the ninth ranked trading partner of the Republic of Macedonia, having a 3.2% share in the total foreign trade. The trade between the two countries is almost totally balanced, featured, but not burdened, by a slight surplus and there are further possibilities to enlarge and enhance the economic cooperation.

13. With the support of the European Commission 13 BILATERAL FREE TRADE LIBERALISATION BOSNIA AND HERZEGOVINA The cooperation does not correspond with the possibilities of the two countries. Bosnia, having a 1.1% share in the total foreign trade of the Republic of Macedonia is among countries with which there are opportunities to enhance the trade and the overall economic cooperation

14. With the support of the European Commission 14 BILATERAL FREE TRADE LIBERALISATION

15. With the support of the European Commission 15 BILATERAL FREE TRADE LIBERALISATION

16. With the support of the European Commission 16 BILATERAL FREE TRADE LIBERALISATION

17. With the support of the European Commission 17 BILATERAL FREE TRADE LIBERALISATION Dynamics of the asynchronous liberalisation between the EU and the Republic of Macedonia DEADLINE PROGRESSIVE REDUCTION ON CUSTOM DUTIES (IN %) ON 1 JANUARY OF THE FIRST YEAR AFTER THE ENTRY INTO FORCE OF THE AGREEMENT 90 ON 1 JANUARY OF THE TENTH YEAR AFTER THE ENTRY INTO FORCE OF THE AGREEMENT COMPLETE REDUCTION OF CUSTOM DUTIES

18. With the support of the European Commission 18 BILATERAL FREE TRADE LIBERALISATION The Republic of Macedonia could overcome disadvantage of a small market economy through free trade agreements, since it provides duty free access for goods originating from its territory. With these agreements it could be achieved a regional trade integration of the countries in South-East Europe, preparing the economic entities easier to accomplish their integration in the EU.