ZAGREB, 11 April (Hina) - Croatian exporters (HIZ) have issued recommendations regarding the US and EU customs policies, aiming to prevent further damage to the strength of the Croatian economy and the loss of people with the necessary knowledge and skills.
Among other suggestions, they stress the need to find measures to maintain employment and production in factories and industries that may be affected by tariffs, and to prevent the relocation of domestic production to the United States.
HIZ points out that Wednesday's US delay of reciprocal tariffs is not particularly significant if it is likely that a higher tariff will be applied in a few months. The situation remains fluid, the agony continues and the future of business operations and exports for some companies remains uncertain, they say.
The US decision to impose tariffs creates considerable uncertainty and concern about the future of product distribution on the US market, both for direct Croatian exports to the US and for indirect exports, such as the production of intermediate goods for other European manufacturers who rely on exports to the US.
"For Croatia, this means a reduction in exports of goods to our main markets in the European Union, as well as a lower demand for Croatian services in tourism, the IT sector and related industries. The decline in demand for European exports, both on the US market and other markets, which will also be affected by lower demand, will have significant effects on slower GDP growth in all EU member states, including Croatia. For many large EU member states and the Union as a whole, this means an inevitable entry into recession with prolonged effects," they warned on Thursday.
There is particular concern among traditional Croatian and European exporters, a significant portion of whose exports are directed to the US. As they point out, for a large part of their production, they will not be able to find alternative export markets globally, and they will become far less competitive on the US market due to tariffs compared to American manufacturers. Furthermore, HIZ notes, the contraction of global markets will lead to significantly greater competition among exporters from all parts of the global economy, raising the question of which Croatian and European producers will be able to maintain their exports and production at levels close to previous ones and which will disappear from the market.
Croatia must clearly advocate for the interests of its industry
As part of the EU, Croatia must advocate for exceptions from customs duties on exports to the US for products that are systematically and strategically important for preserving Croatian industry at a macro level, but also for products whose Croatian producers play a key role in regional employment, job retention, demographics and living standards in specific Croatian regions.
Croatia needs to clearly represent the interests of its industry and its companies and, in this context, seek opportunities for agreement with other EU member states, the exporters' association says.
They stress that the risk is primarily on the side of preserving Croatian exports to other EU member states, not just in terms of direct exports to the US. This often involves exporters that account for a significant portion of economic activity in specific regions of Croatia, and the closure of existing factories and layoffs in those regions could lead to increased unemployment, a decline in living standards and a new wave of demographic shifts, as part of the population may move to other regions within Croatia or even emigrate in search of work abroad.
There is also the issue of the already low share of manufacturing industry in Croatia's total gross added value, as well as the fact that a significant portion of domestic industry and manufacturing enterprises has been lost over the past decades. Additionally, some manufacturers in Croatia have been facing a significantly worse economic position for some time, despite strong GDP expansion in recent years.
The effects are never linear, and the overall macroeconomic situation does not reflect the adverse impacts on individual producers and changes in the structure of the economy, they note.
Prevent the relocation of production to the US
In the given circumstances, the government and all economic policy makers need to consider these non-linear effects and the risks to Croatian manufacturing industries and export-oriented production companies that will be most affected, and their employees, in order to prevent further damage to the structure and strength of the Croatian economy and the loss of people who possess the knowledge and skills upon which the industry relies.
Therefore, economic policies must prevent the relocation of part of Croatia's production and industry to the US, as the US currently advocates such a policy. They must also prevent the collapse of factories, industries and enterprises that will be directly and indirectly affected by US tariffs, as well as prevent the loss of employment opportunities for workers in these factories and industries.
Furthermore, HIZ says, fiscal and social measures, as well as other methods, must be found to maintain employment and production in the affected factories and industries. They also emphasise the need to support the domestic manufacturing industry, agriculture and exports, both in terms of strengthening production capacities for the domestic market to reduce reliance on imports and in terms of strengthening production capacities for export. They suggest that more substantial EU funds should be directed towards large and medium-sized manufacturing companies that form the backbone of domestic production and exports, which often cannot compete for funding due to their size or business orientation.
European response to tariffs is not the solution
They note that in response to the US decision to impose tariffs on European products, the EU administration has proposed retaliatory tariffs on imports of a number of products from the US, with the potential introduction of European tariffs on US services and/or additional regulations on service providers, as well as the potential introduction of taxes on digital transactions and other levies.
None of these measures are adequate solutions and are detrimental to European producers and consumers, HIZ says. Europe is dependent on foreign service providers for payment processing and is also reliant on the import of energy supplies from the US.
Croatian exporters are therefore advocating for the removal of tariffs in trade relations between the European Union and the United States on both sides, or for a reasonable agreement between the EU and the US on the future of free trade without tariffs, and in any case for the reduction and removal of tariffs and retaliatory tariffs that have been announced or are already in effect.
What the EU must not aim for, they wrote, is to view tariffs on imports from the US and other markets as a source of increased financial resources to fill the EU budget. In this context, the EU budget, which today is significantly funded by customs duties on imports from other economies, should at least be used to compensate for the adverse effects of US tariffs on companies in EU member states, including Croatian companies that are most affected by them.
