Export promotion the EU way: Why, how and what kind of partnership with BiH?

Remarks by Jurgis Vilcinskas, Head of EU Integration Section, Delegation of the EU to Bosnia and Herzegovina/EU Special Representative Office.


First of all , I would like to thank  the organizers and moderators for their contribution. I would like to share with you my thoughts on the European way of export promotion and what kind of partnership with BiH is needed.


Generating growth through trade has been a central pillar in the policy strategy of many Western economies. Export-oriented economies boast advantages from improved allocation of resources, economies of scale, know-how and innovation. As a result of these policies, merchandised trade in the EU has more than doubled from around EUR 2000 billion to EUR 4200 billion between 2000 and 2010.


However, like many other things in the age of globalization, export patterns are changing: shifting not only amongst the states, but beyond states. Technology has broadened the scope, supply chains have added complexity. Today, globally speaking, even the largest EU economy – like Germany –  is a small and open economy, whose jobs and incomes depend on exports within and outside the Union.


Export promotion is changing too. Gone are the days when large Governments boasted of their powers to support their businesses and Embassies were the main protagonists of national exports. In fact, today governments have to prove to exporters the value they can add as a service provider, or risk losing business support.


However, this is not to say that governments don’t matter. In today’s extremely competitive environment, export promotion instruments are a substantial factor for economic success, especially for the most vulnerable – small and medium Enterprises  (SMEs). Therefore, it is a pity that this country does not yet have one single vision (strategy) for export growth and promotion. Neither a strategy for SMEs.


Believe it or not — while many European companies work on a European, and increasingly a global scale — export promotion essentially remains in the hands of the EU Member States.


Most of them deal with ‘core’ trade promotion activities: e.g. supporting business matchmaking, trade fairs, business missions and market studies. In many areas of economic diplomacy and large procurement contracts, competitive considerations among EU Member States tend to prevail.


However, the European Commission, Member States and business work in partnership maximizing their leverage to remove trade barriers and gain market access in third countries. The European Commission’s state-of-the-art on-line Market Access Database (please check it!) is a good example of this. And guess what — today it is small and medium sized enterprises which are increasingly exporting and very often facing trade barriers: from technical ones to the non-transparent.


Ladies and gentlemen,


What do the German Porsche, Swedish IKEA and Croatian Meggle have in common? All of these world or regional leaders have reliable suppliers coming from all corners of Bosnia and Herzegovina. These are BiH companies who started as micro businesses in the garage or apartment, but now has grown into successful small and medium enterprises, creating jobs in the local communities, paying taxes and conquering export markets.


If there is anything to learn from the past EU Member States’ mistakes, it is that governments tend to forget that it is small business who are the true leaders and life blood of the local economy.


Their interests are easily forgotten, they are the first to feel the effect of the crisis when their regular buyer is strapped for cash. Despite all this, they are the first to adapt and the first to spot opportunities for trade and retail and create new products.


In the EU, small business generate two-thirds of private sector jobs and, what’s more important, they account for 85% of new job creation over the past five years, ranging from agriculture to manufacturing. They compete with cheaper imports from Asian countries by investing in high value added products, offering new designs.


If there is anything to learn from success stories in the EU it is that increasing the number of active exporters amongst the SMEs is a must!


Increasing the range of products and markets also works magic!


Bringing up the “value added” of BiH products in terms of design, innovation, quality and value-for-money instead of price – will bring in larger profits.


Research amongst nine thousand EU companies shows that internationalisation of SMEs is linked to the size of company and to its awareness of public support programmes. The micro companies are likely to focus on the local market only. If you want size – you have to export.


Use of E-commerce and also imports (e.g. of inputs to the product) also adds to internationalisation. And what I really find breath-taking – an internationally active company is three times more likely to innovate (eg introduce a new product) then other competitors.


Ladies and gentlemen,


History is accelerating. It took 155 years for Britain to double its GDP per capita, 50 years for the US, and just 15 years for China. How many years will Bosnia and Herzegovina need to reach a foreign trade surplus, to get closer to full employment and to double its GDP? I doubt that anyone including Minister Sarovic could give an answer to this question.


Especially when external environment is gloomy with contraction in the Eurozone predicted for 2013, BiH lack of preparedness for Croatia’s accession denying entry to some of the BiH products to the EU and BiH exports not covering even two-thirds of the imports?


However, “never waste a good crisis” as US President Obama’s Chief of Staff used to say.


Getting ready to meet the European standards and smarter promotion of exports will increase the competitiveness of BiH companies. Hopefully, it will lift some out of the price competitiveness “trap”, which is often short-lived advantage – while technology and know-how brings long-lasting benefits.


At the national level it means undertaking structural reforms that have been postponed for decades. Modernising public administration. Reducing wasteful expenditure. Tackling vested interests and privileges. Reforming the labour market to balance security with flexibility, including public sector. Being more decisive about breaking down internal BiH barriers, tapping renewable energy potential. Opening up sectors such as energy, transport or telecoms to promote innovation and drive down prices for consumers.


Many will say that this is too ambitious to expect, that it is not realistic. But is it realistic to go on in the same way?  Is it realistic to see more than 60% of young people without jobs? Is it realistic to think that BiH can win the confidence of the financial markets just by adopting budgets in time, as a pleasant surprise to the contrary practice of last years? To me, it is this reality that is not realistic.


Last, but not least – about the partnerhip.


The EU and its Delegation to BiH/EUSR Office is if not the largest, then the most versatile and enthusiastic BiH export promoter in the country! Let me explain why.


First of all, three years after our “contract” – the Interim Agreement – entered into force, imports from EU increased by 16%, while exports to EU – went up by 53%. If only Croatia’s accession results in full introduction of European standards for food of animal origin – BiH will open up a virtually red-tapeless market for its organic products and bring a bright new future for its agriculture sector. 


Second, each one of our political priorities is directly or indirectly linked to the growth of BiH exports. Take the Household Census that the EU is financing and that we lobbied for – it will bring essential information for business investors and help adjust training and education to the market needs. The State Aid Council – this one is essential for fair competition. The Instrument for Pre-Accession – average 100 million EUR annual investments in the rule of law and public administration reforms. Both are critical for corruption-free and business friendly advances. Not to say money going into infrastructure (roads) development and 15 million EUR worth of projects provide direct benefits to small businesses. Our support to SMEs will focus on transfer of knowledge and new technologies, quality standards, infrastructure and more.


To conclude, the EU is ready to help BiH to develop competitiveness and introduce European standards in order to export to the EU market. However, the EU can not do your homework on your behalf.


Thank you for your attention.

Europa.ba