Tariffs bite in North Kosovo, but how badly?

Tariffs bite in North Kosovo, but how badly?

On 21st November 2018, Kosovo imposed 100% tariffs on goods from Serbia. On 1st July 2019, businesses in the Serb-dominated north Kosovo shut their doors and protested against the policy. They claimed that the policy is making business and everyday life in the north much harder. 

Tariffs as a political weapon

The Kosovar government imposed 100% tariffs in response to Serbia’s successful efforts to block Kosovo’s bid to join Interpol. This added to a long-held impression in Kosovo that Serbia is undermining the attempts at dialogue. This is based on the fact that Serbia is by constantly lobbying against Kosovo’s membership of international institutions. It is also assumed that it attempts to persuade countries to reverse their recognition of Kosovo.  The tariffs also touch on a broader problem for Kosovo. Despite declaring independence from Serbia in 2008, it has remained economically dependent on Serbian-produced goods. 

Serbia has argued that the tariffs are have made dialogue with Kosovo impossible. The taxes also break the regional CEFTA trading agreement, of which both Serbia and Kosovo are signatories. The EU-mediated dialogue between Serbia and Kosovo has stalled since the tariffs were imposed.

The EU has heavily criticised Kosovo for introducing the tariffs. Public opinion has censured Kosovo for decreasing prospects for cooperation and dialogue by imposing politically-motivated economic measures. 

The Tariffs’ Impact on north Kosovo

Ethnic Serbs overwhelmingly inhabit the four northernmost municipalities in Kosovo. They are close to the Kosovo-Serbia boundary line and have only partially integrated into Kosovo’s institutions. They have also remained integrated with the Serbian state to some degree, especially in the fields of education, healthcare and electricity. 

Ethnic Composition of Kosovo

Ethnic Composition of Kosovo (Public Domain)

North Kosovo’s close connection with Serbia means that it was always likely for the tariffs on Serbian goods to hit it hard economically. However, north Kosovo’s unique position of being partly within the legal systems of both Serbia and Kosovo also means that it has long been a hub for smuggling

Kosovo police conducted a raid in the north to investigate and cut down on smuggling in the area. 28 people, including a Russian UN employee, were arrested. The difficulties facing businesses in north Kosovo are likely related both to the tariffs and the recent attempts to cut down on long-standing smuggling routes, which were used even more than usual following the imposition of the tariffs. 

The Protest

Businesses in north Kosovo closed their doors to protest against the tariffs. They have claimed that the tariffs are severely affecting local businesses in north Kosovo.

Members of Kosovo’s government, meanwhile, have accused Serbia and Serbs in north Kosovo of manufacturing a fake humanitarian crisis. They base this argument on the idea that Serbs in north Kosovo are refusing to accept substitutes for Serbian goods. The Government of Kosovo responded to the protest by sending mobile shops to north Kosovo to show that the inhabitants do not have to go without food, despite local shops being closed. 

The protest demonstrates how the government of Kosovo and Serbs in north Kosovo use economic policies as a political tool. Serbian businesses have an interest in stressing the negative impact of the tariffs in order to increase the pressure on the government in Pristina to lift them. Meanwhile, the Government of Kosovo needs to demonstrate that the tariffs the protesters widely criticise can be a successful policy. Consequently, they have an interest in underplaying the impact on food prices and businesses. 

The Wider Dispute over north Kosovo

The tariffs go to the heart of the issue of northern Kosovo. The inability of the Pristina government to effectively implement them in the north highlighted its limited control of the area. Serbian politicians have described raids by the Kosovo police to halt the smuggling as an attempt to intimidate the local population. Police raids in northern Kosovo have frequented over the past year, while previously inspiring other protests.

Nevertheless, northern Kosovo has significant issues with organised crime. This was highlighted in 2017 by local Serb politician Oliver Ivanović, who was assassinated in early 2018 in north Mitrovica. The authorities have still not managed to identify the perpetrators.

The dispute over the tariffs is playing out in front of a backdrop of EU-mediated dialogue that should supposedly resolve Serbia’s longstanding refusal to recognise Kosovo. The dialogue process has now largely stalled. This is partly a result of the tariffs, with the Presidents of Serbia and Kosovo no longer meeting regularly

In this atmosphere, the tariffs will continue to serve as a political football between the government in Pristina and the Serbs in north Kosovo. Both sides have an interest in either underplaying or exaggerating the tariffs’ effects. It is not clear how long the tariffs will last. Although they damage north Kosovo the most, they are also affecting the rest of Kosovo, with food prices rising everywhere.

Public pressure could grow as people have to pay significantly more for food. Kosovo may lift the tariffs before they cause more major disruption. While a full-scale humanitarian crisis is unlikely, the longer the duties last, the more the Serbs of northern Kosovo will feel that their businesses have been unfairly targeted. More protests aiming to highlight the issue as widely as possible are likely to follow.

Categories: Economics, Europe

About Author

Luke Bacigalupo

Luke Bacigalupo is a political analyst currently based in Belgrade, Serbia. He holds degrees in South Eastern European Studies and Modern History from the University of Belgrade and the University of Oxford, respectively. He has previously worked as a political reporter at the Office of the EU Special Representative in Kosovo and at UNDP in Serbia.