Time To End the War Against Yugoslavia

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This Sunday, June 10, marks the second anniversary of the end of NATO'sbombing campaign against Yugoslavia. Much has changed since then, most of itfor the better. Last year, the people of Yugoslavia took to the streets ofBelgrade to topple the regime of Slobodan Milosevic. Today, the formerdictator sits in jail awaiting possible trial for corruption and murder. Inhisabsence, political freedom has been restored, a free press is flourishing,and ethnic Albanian political prisoners have been released.

Yet not all is well. In particular, Yugoslavia's economy remains a majorsource of instability, threatening both Serbia's fledgling democraticgovernment and the stability of the region. And despite the revolutionarychanges in Belgrade, Washington's trade policy looks much like it did twoyears ago.

Since the end of NATO's air strikes, Yugoslavia's economy has foundered.Indeed, the situation there today is dire: Unemployment hovers around 41percent while inflation is running at nearly 40 percent annually. At thesame time, trade is drying up: Exports and imports fell by 21 percent fromJanuary to February of this year alone. That poor performance is draggingdownfragile neighboring economies.

Policymakers in the United States have largely ignored the Balkan economiccrisis. While it's true that many of the explicit sanctions againstYugoslavia were lifted after Milosevic was deposed, Yugoslavia's businessesremain barred from the U.S. market. If Washington wants to help relieveeconomic misery and put Yugoslavia onto a self-sustaining path of economicrecovery, several things must be done.

First would be to immediately assist Yugoslavia in clearing away thedestroyed Danube bridges that make river traffic all but impossible. TheDanube was a main trade and transport channel for countries in SoutheasternEurope. Since the bombing, goods traffic on the river has dropped from 100million to 30 million tons a year. The OECD estimates that the blocked rivercosts Bulgaria $1.25 million a day. Romania calculates losses of $300million a year. Yugoslavia's ability to transport its products to market hassimilarly been compromised, and it's hard to imagine vibrant economic growththere as long as waterways are obstructed and internal roadways are severed.Washington destroyed the bridges and so has a responsibility to helpcash-strapped Yugoslavia rebuild them, either through direct aid or loanguarantees.

A longer-term—but ultimately more important—task is to establish free tradewith Yugoslavia. Free trade and open markets are a crucial component ofAmerica's post-Cold War world foreign policy. Open markets play a centralrole in stimulating economic growth, interdependency, regional cooperationand political stability. Trade liberalization needs to be at the heart ofany reform movement in the Balkans generally and Yugoslavia specifically.

Washington should grant Normal Trade Relations (NTR) status to Yugoslaviaand work to have it admitted to the World Trade Organization. At presentYugoslavia is still designated as a “Column II country,” which means thatits exports to the United States are subject to punitive Smoot-Hawley-eratariffs. Those tariffs average 44 percent, as opposed to less than 5 percentfor NTR countries. Beyond NTR, Yugoslavia should also be admitted to theGeneralized System of Preferences (GSP), which allows many exports fromdeveloping countries to enter the U.S. market duty-free. Most of Yugoslavia's neighbors—such as Bulgaria, Romania and Slovakia—are members of the GSP.

Washington should use the carrot of open markets to encourage the Balkancountries, especially Yugoslavia, to streamline the functioning of their taxregimes to ensure the effective refund of taxes on exports. It should alsopush for the inclusion of Yugoslavia in regional initiatives, like the BlackSea Economic Cooperation initiative and the Southeast European CooperativeInitiative, which aim to liberalize and harmonize the foreign traderegulations of member states in the region.

The Bush administration has repeatedly, and correctly, made the case thattrade helps bring peace, stability and freedom to troubled regions of theworld, including to non-democratic countries such as China. If trade willhelp promote positive changes in communist China, surely it will go a longway in furthering democratic Yugoslavia's re-integration with the globalcommunity.