Yugoslavia became a member of the General Agreement on Tariffs and Trade ( GATT--see Glossary) in 1965, when Tito's reform program brought tariff and trade regulations into line with international practice. The International Monetary Fund ( IMF--see Glossary) began substantial loan support to Yugoslavia in 1965. Although the United States provided Yugoslavia substantial financial aid throughout the postwar years, Yugoslavia's trade with the industrialized West focused on Western Europe. In the 1980s, economic relations with that region, which was also the greatest source of foreign loans to Yugoslavia, became even more important. A 1981 agreement with the European Economic Community allowed Yugoslavia to sell 70 percent of its industrial goods duty-free in EEC markets. This concession led to a Yugoslav policy of large-scale below-cost export to Western Europe, and to resentment from EEC members whose products were undercut. The quality of Yugoslav products often remained unsatisfactory to West European markets, however, and competition increased as EEC members granted concessions to their former colonies in the 1980s. Overall trade between Yugoslavia and the EEC fell by 15 percent between 1980 and 1985. The trade deficit with the EEC was cut by 75 percent in the same period (from US$4 billion to US$1 billion), but only because of severe cuts in imports associated with Yugoslavia's overall economic decline.
The Common Agricultural Policy of the EEC, designed to protect EEC farmers from low-priced outside competition, excluded most Yugoslav agricultural products from that market in the 1980s. In the late 1980s, Yugoslavia's trade imbalance crisis brought EEC concessions in the sale of specific products such as wine and veal, but clothing, textiles, and most produce remained subject to EEC duties.
Full membership in the EEC became a goal of Yugoslav economic policy in the late 1980s, and the media discussed the prospect constantly; in 1990 Prime Minister Ante Markovic officially declared that recent economic and political reforms qualified his country for inclusion. In response, the EEC strongly encouraged Yugoslav emulation of Western market economics and extended favorable financial terms wherever possible. Nonetheless, formidable reasons remained to delay full membership. One major obstacle, the Yugoslav trade deficit with the EEC, had virtually disappeared by 1989. But Yugoslavia would also have to eliminate all duties and accept all EEC standards to include itself in the EEC free trade zone; the Yugoslav economic structure did not permit such changes in 1990.
Politically, in 1990 Yugoslavia was still far from the genuine national multiparty system required of EEC members, and continued regional conflict jeopardized the long-term credibility of overtures by the Markovic government. Yugoslavia's strongly neutral international position also was a negative factor until Austria, neutral but wealthy, applied for EEC membership in 1989. Meanwhile, Yugoslavia had established special trading relationships with EEC members West Germany and Italy (accounting for 70 percent of Yugoslavia's EEC trade in 1989), as well as most members of the neutralist European Free Trade Association ( EFTA--see Glossary). In 1988 the EEC granted a five-year extension of Yugoslavia's special commercial status. West European experts generally agreed that if it remained politically stable, Yugoslavia would be admitted to the EEC ahead of former Soviet bloc members such as Poland and Hungary.
Data as of December 1990