Belgian-Macedonian Business Club

A series of tariff reductions have been announced in principle by the Ministry of Finance. Details are not known, but it could concern tariffs for US goods and for specific goods like lithium batteries.

Amendments to the Law on Customs Tariff have been sent to the Parliament and the new regulations should apply from July 1st. It concerns raw materials or intermediate goods in Macedonian industrial capacities for the automotive, metalworking, metallurgy and energy sectors, i.e. certain products needed for the production of products which are exported.

The aim is to align with the customs rate applied in the EU for lithium-ion batteries for storing electricity in the energy sector where the rate should go from 15 % to 2,7 %.

The Minister of Foreign Affairs and Foreign Trade has visited the US and the Prime Minister expects to reach a trade agreement with the US. The Minister of Finance has announced a possible reduction of the tariffs to Zero for US goods.

The US is a rather small trade partner for North Macedonia. According to OEC.world, 2,7 % of the exports and 2 % of the imports in 2023 are done with the US. There has been a dispute which are the correct numbers, this and more details have been reported here by BMBC.

It is unclear at the moment how the country would bring such an agreement in alignment with the Most favored Nation principle that it is supposed to adhere as WTO member. North Macedonia is Member of the WTO since April 2003.

Most Favored Nation (MFN) is a guiding principle in international trade agreements that ensures equal treatment for trading partners. It requires a country to extend its best trade terms and conditions to all other countries with MFN status. In simple terms, a country granting MFN treatment to one nation automatically extends the same benefits to all other nations with MFN status. WTO allows exceptions allow for preferential treatment of developing countries, regional free trade areas and customs unions (like CEFTA).

Country specific favors could become an issue eg. if US goods could come without customs to North Macedonia and would then be re-exported to neighboring countries who charge customs on US goods, e.g. Serbia. Regional trade agreements or bilateral agreements can sometimes override MFN obligations, provided they meet certain criteria and are notified to the WTO.

WTO could grant a waiver from the MFN obligations under certain conditions. These waivers are time-limited and subject to approval by WTO members. They are typically granted for specific purposes that align with the broader objectives of the WTO.

Certain sector-specific agreements may also provide exceptions to the MFN principle, provided they are consistent with the overall objectives and rules of the WTO.

For an agreement to qualify as a Free Trade Agreement (FTA) and be exempt from the Most Favoured Nation (MFN) rule under the World Trade Organization (WTO) framework, it must meet specific conditions outlined in Article XXIV of the General Agreement on Tariffs and Trade (GATT). These conditions are designed to ensure that FTAs contribute to the overall goal of reducing trade barriers and do not create new obstacles for non-member countries. Key condition would be a Substantial Trade Coverage: The FTA must cover “substantially all the trade” between the constituent countries. This means that the agreement should eliminate tariffs and other trade barriers on a significant portion of trade, leaving minimal exceptions. The goal is to ensure that the agreement is comprehensive and not limited to a few selected sectors. This means that also the US would have to grant similar conditions to North Macedonia.

These exceptions are designed to balance the principle of non-discrimination with the need to accommodate specific economic and developmental objectives. They are subject to strict conditions to prevent abuse and ensure that they contribute positively to the goals of the WTO.

Read the announcement here.