The Impact of the Stabilization and Association Agreement on the foreign Trade of the Republic of North Macedonia with EU [ВЛИЯНИЕ СОГЛАШЕНИЯ СТАБИЛИЗАЦИИ И АССОЦИАЦИИ НА РАЗВИТИЕ ВНЕШНЕЙ ТОРГОВЛИ СЕВЕРНОЙ МАКЕДОНИИ С ЕС]

The countries of the Balkan region fall within the EU's sphere of geopolitical interests, and the EU applies there the mechanisms tested during the Eastern Enlargement. Among these mechanisms are the bilateral association and stabilization agreements and the free trade zone. The article explores the provisions of the Stabilization and Association Agreement between the EU and Macedonia of 2001 in terms of the formation of a bilateral free trade regime and reveals its influence on the dynamics and geographical structure of Macedonian export-import flows. The analysis proves that as a result of the implementation of the Stabilization and Association Agreement with the EU, North Macedonia received a significant influx of foreign investment, developed new industries embedded in the global value chains of European transnational corporations in the automotive industry while losing its previously high competitive advantages (traditional textile and metallurgical industries). Imports of North Macedonia became reoriented towards the import of goods necessary to support the production of foreign companies, while exports - towards finished and intermediate products used in the production of final goods in the EU. The concentration of Macedonian foreign trade, especially in exports to the European Union has also increased sharply. The EU investors benefited from the Stabilization and Association Agreement, which facilitated the liberalization of mutual trade, combined with the benefits established by the authorities of North Macedonia for foreign investors and savings on production costs due to the cheaper Macedonian labor force. The described processes contributed to economic growth, industrial restructuring and improving the export structure. However, they also led to almost complete dependence of the country's socio-economic development and its economic policy on the EU. © 2020 Institute of Europe Russian Academy of Sciences. All rights reserved.