The effects of a full trade liberalization of Serbian imports originating from the Stabilization and Association Agreement (SAA) and European Union (EU) countries shall be measured using the global simulation model (GSIM) for individual Serbian industries. The model estimates trade effects, welfare effects (producer surplus, consumer surplus, and change in tariff revenue), and price and output changes. This information shall be used to identify those sectors that would be affected most by full liberalization. The impact on tariff revenues shall be investigated as tariffs are an important source of revenue for the Serbian budget. In this exercise, we follow closely the methodology developed by Mario Holzner (2004, 2006, 2008). Serbia signed an SAA in April 2008. This is a specific type of agreement on the association created by the EU for the Western Balkan countries. SAAs are similar in their nature and objectives to the European Agreements, signed during the 1990s between the European Community and Central and Eastern European Countries (CEECs). The main goal of the above-mentioned agreement is boosting economic cooperation by establishing a free trade zone. Apart from the rules concerning economic cooperation, the agreement consists of many other instruments that should support the stabilization of the political, social, and economic situation in the associated countries. However, our aim in this article is to specifically estimate the effects of tariff liberalization of Serbian imports originating from the SAA and EU countries.
