Background and framework conditions of the free trade agreement between Serbia and China
With the recent signing of a comprehensive free trade agreement between the Republic of Serbia and the People’s Republic of China, both states are setting a significant accent in international economic law. The agreement, concluded on October 17, 2023, during a high-level meeting in Beijing, is primarily intended to elevate bilateral trade, investment, and strategic cooperation to a new level. It is the first agreement of its kind between a country in the Western Balkans and China. The contents and anticipated effects require a differentiated analysis from both a trade law and corporate law perspective.
Legal framework and classification under international law
The free trade agreement is directly linked to the multilateral principles of the World Trade Organization (WTO), while granting the parties extensive flexibility for bilateral regulations. This creates a dedicated legal regime for companies, providing clear rules for the import and export of goods, technical trade barriers, rules of origin, investment protection, and dispute resolution. Through the agreement, both states have created the possibility to gradually reduce or completely eliminate tariffs on numerous goods. In addition to the movement of goods, this also applies to certain service sectors and provides for institutionalized cooperation mechanisms.
Rules of origin and tariff reductions
At the heart of the agreement are provisions regarding proof of origin and tariff preferences. Only goods of Serbian or Chinese origin benefit from the advantages of the agreement. The rules of origin comply with modern international standards and require evidence that often goes beyond existing bilateral or regional agreements. The phased elimination of tariffs on up to 90 percent of all products will be implemented in stages, thus providing companies with planning security.
Technical standards and regulatory compliance
Another core element concerns the harmonization of technical standards and the mutual recognition of certifications. This aims to reduce non-tariff trade barriers, such as differing product and safety regulations, or at least minimize their impact.
Investment protection and dispute resolution
The agreement contains protective provisions to safeguard the investments of both contracting parties. These include, in particular, regulations on protection against expropriation, equal treatment with domestic investors, as well as the transferability of capital and profits. In addition, the free trade agreement provides for a special arbitration procedure for potential disputes between investors and the state, further emphasizing the importance of legal certainty.
Geopolitical and economic relevance
The signing of the free trade agreement comes at a time of dynamic changes in global trade. Serbia positions itself as a hub between East and West, while China continues to expand its “Belt and Road” initiative. The agreement serves not only as a means of market opening, but is also linked to geopolitical interests. Companies on both sides gain new market access opportunities, particularly in the sectors of mechanical engineering, agriculture, IT, and textiles.
Challenges and possible effects on the EU
As an EU accession candidate, Serbia is in close dialogue with European institutions. The European Commission has announced that it will carefully examine the compliance of the free trade agreement with Serbia’s existing obligations under the EU association process (see communications from the EU Commission, 2023). Legally, implementation of the agreement—especially concerning rules of origin and tariff preferences—could have interactions with the association agreements and customs union provisions between the EU and Serbia. Any potential conflicts will continue to be monitored in the course of ongoing negotiations; so far, no violations have been identified (source: official communications of the EU Commission, as of June 2024).
Significance for companies, investors, and private individuals
For stakeholders from industry, trade, and capital markets, the new regulatory framework offers significant room for maneuver, requiring precise examination of legal, tax, and corporate strategy implications. Questions may arise regarding contract drafting, cross-border taxation, IT compliance, or the protection of intellectual property. Business-oriented investors also have new opportunities in the Serbian and Chinese markets, with the interplay between international and national law always needing to be considered.
Outlook and legal advisory options
The free trade agreement between Serbia and China marks a forward-looking step for both states and their economic relations. The concrete effects will only become clearer with future implementation steps and practical legal experience. It is advisable to closely monitor further developments and regulatory publications. Companies, investors, and high-net-worth individuals with specific questions on this topic can take advantage of the comprehensive advice and support offered by the internationally experienced Rechtsanwalt at MTR Legal Rechtsanwälte.
