This paper examines the economic impact and identifies potential winners and losers of the EU-Albania Stabilization and Association Agreement (ASA). The EU-Albania ASA, signed in June 2006, is part of a wider regional process (stabilisation and association process) and aims to support Albania`s economic transition and strengthen its integration into the EU internal market. Albania`s ASA reform programme is impressive and covers areas ranging from political dialogue and regional cooperation to community freedoms in goods, services, workers and capital, as well as mutual cooperation in the areas of justice and home affairs. It calls for comprehensive trade liberalization with the EU and other countries in the region and provides for essential non-tariff liberalisation through gradual harmonisation with EU structures and directives in the areas of standards, certification, customs administration, competition and intellectual property rights. The decision has been in effect since February 26, 2009 and the agreement since April 1, 2009. In discussions with countries that have expressed a desire to join the European Union, the EU generally enters into association agreements in exchange for commitments on political, economic, trade or human rights reforms in that country. In return, the country may be offered duty-free access to some or all EU markets (industrial goods, agricultural products, etc.) as well as financial or technical assistance. Albanian free trade agreements with the rest of SE Europe are remarkable and together reach 1.5% of GDP. Given Albania`s increasing dependence on the EU for trade, the results also indicate that trade with the Community will boost welfare gains rather than trade with other countries in SE Europe. Non-tariff liberalisation under the EU-Albania ASA also generates remarkable benefits, although less than traditional liberalisation. If Albania modernized its customs administration and fully harmonized EU legislation on standards and technical barriers to trade, this could generate an additional gain of 0.46 per cent of GDP. As harmonization progresses gradually, these gains are not realized immediately, but in the decency of regulatory integration. benefits are not distributed equitably between sectors and workers.
There are both winners and losers of regional liberalization. The impact on total employment is positive, but there are considerable differences by sector. Sectors such as agriculture, clothing and other manufacturing enterprises appear to be benefiting more, while textiles, metals, chemicals and minerals are losing. In declining sectors, it is more unskilled workers who are more affected and therefore more vulnerable to liberalization. Our analysis therefore shows that liberalisation in some sectors can lead to greater inequality between skilled and unskilled labour. This is particularly evident for textiles, metals, chemicals, minerals and certain services such as utilities and utilities. It is therefore important that liberalisation in these sectors is carried out with caution and that the Albanian government, with the support of the donor community, identifies appropriate support policies.