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ARMENIA AND EU LAUNCH DCFTA TALKS
Lilit Gevorgyan
Global Insight
June 25, 2012
Armenia and the EU have officially launched Deep and Comprehensive
Free Trade Agreement talks, set to integrate Armenia and the European
bloc further.
Deep and Comprehensive Free Trade
Preparations for the Deep and Comprehensive Free Trade Agreement
(DCFTA) between Armenia and the EU that launched last week had
intensified in the past three years. To be able to start the talks,
the Armenian authorities had to meet a number of criteria, or
"recommendations" set out by the EU in 2009. This included a number
of trade-related reforms that Armenia managed to get through with the
EU's technical help. As a World Trade Organization (WTO) member since
2002, Armenia had already significantly improved its regulations to
gain membership of the international trade-regulating body. The EU
had much more stringent demands in terms of intellectual property
rights protections, however, as well as on some of the sanitary and
phytosanitary measures that were deemed to be restricting free trade.
The last remaining obstacle was the Armenian customs services'
valuation and taxation of imported alcoholic beverages, which the EU
insisted should be abandoned in order to start the talks, a condition
eventually met by Armenia.
The actual process of economic and regulatory integration started
even earlier, in November 2006. At that time, the Armenian government
signed an action plan within the framework of the Eastern Partnership
(EaP) and the EU Eastern Neighbourhood Policy (ENP). The European
bloc initiated these two drives to co-ordinate its economic and
political relations with those of its neighbour states that are
not bidding for EU membership. The ENP includes some of the former
Soviet countries--Belarus, Ukraine, Moldova, Georgia, Armenia,
and Azerbaijan--but also all Mediterranean North African countries
and Middle Eastern countries. The EaP thus overlaps with the ENP,
including only the six abovementioned former Soviet states, some
of which aspire to joining the EU at some point. Both policies
are essentially designed to promote good relations through economic
co-operation with EU neighbours, but the key difference is that, unlike
other bilateral government-level economic co-operation agreements, the
EU is using its vast economic market as a leverage on its neighbouring
countries to promote good governance, political reforms, and economic
suitability. In return for compliance, the EU bloc offers the DCFTA.
On 17 February, the EU's executive branch, the European Commission,
concluded that Armenia has achieved sufficient progress in its
preparations. It then recommended that the member states launch
the talks, a decision backed by the European Council's Trade Policy
Committee. Commenting on the event, EU trade commissioner Karel De
Gucht stated that it marks "a turning point in our trade relations
with Armenia. We are entering a new phase that will bring our economic
ties to a new level of depth and ambitions. The EU is Armenia's first
trading partner and a deep and comprehensive free trade area will
enable closer economic integration of Armenia with the European Single
Market, thereby helping to boost economic growth in the country."
Balanced Foreign Policy
Given the lengthy preparations and willingness on both sides, the
talks are likely to end successfully. The parties now have 15 chapters
to go through, which will fully harmonise relations between the bloc
and Armenia. The talks are likely to conclude by the end of 2012 or
the beginning of 2013.
Developing economic relations with the EU will help Armenia to
counterbalance its already close relations with the Commonwealth of
Independent States (CIS), and particularly Russia. The news of the
DCFTA comes less than one year after Armenia joined the Russian-led
CIS Free Trade Agreement, which also is designed to facilitate
trade between CIS member states. Along with Belarus, Kazakhstan, and
Russia--the core countries united within a Customs Union--Armenia,
Kyrgyzstan, Moldova, Tajikistan, and Ukraine have also become members.
It has to be said that Armenia, Moldova, and Ukraine are currently
engaged in DCFTA talks with the EU. Armenia has never hidden its
intentions not to be part of the post-Soviet integration process
that is to culminate in the creation of the Eurasia Union. Indeed,
Armenia has very close political and economic ties with Russia, but on
a number of occasions has stated that it is not planning to join the
Customs Union, nor the Eurasia Union that is to be modelled on the
troika customs bloc. One of the arguments against this integration
has been the lack of a common border with Russia or any other member
of the customs bloc.
Once the DCFTA talks are tackled, it will be relatively easy for
Armenia to push ahead with the Association Agreement, although it
still has to make a significant effort to meet some of the rule
of law and good governance benchmarks set by the EU. Some work has
already been done in this regard, however. Much like other former
Soviet states, Armenia signed its first comprehensive agreement with
the EU in the late 1990s, entering into the 10-year Partnership and
Cooperation Agreement in July 1999. The EU is currently in the process
of negotiating an Association Agreement that will replace the old
deal. The difference is not only the economic advantages offered by
the DCFTA, but also relaxed visa regulations and further assistance
with the regulatory reforms that will benefit Armenia, making it
more attractive for foreign investors. The Association Agreement in
particular puts an emphasis on strengthening democracy, the rule
of law, the judicial system, and the fight against corruption. It
also covers the issues of energy security and the eventual closure of
Armenia's Soviet-era Metsamor nuclear power plant (NPP). The bloc does
not condition signing the Association Agreement to the closure of the
NPP. Being a political document, the Association Agreement is also
about peacefully resolving the regional conflicts, in particular the
Armenian-Azerbaijani standoff over the final status of the ethnic
Armenian self-declared republic of Nagorno Karabakh (NK). When
launching the action plans for EaP members, particularly Armenia and
Azerbaijan, the EU has made sure not to take sides in the conflict by
invoking the two relevant principles of international law: the right
of self determination of NK and Azerbaijan's territorial integrity.
Outlook and Implications
The DCFTA is a good example of how the EU can exercise its leverage
on some of the EaP countries to promote economic and political reform.
The Armenian parliamentary election on 6 May signified how these
incentives work. Although a number of irregularities were reported,
significant progress was made nonetheless, especially in terms of
balanced media coverage and free campaigning. The Armenian government
was fully aware that failure to uphold democratic principles could
derail the upcoming talks.
The EU is Armenia's largest trading partner and main export market.
Bilateral trade has increased by 16.3% year-on-year, reaching USD1.8
billion. With the removal of further obstacles to trade, this figure
is set to increase. A large part of exports is non-ferrous metals,
mineral products, diamonds, and foodstuffs. As mentioned, Armenia has
already lowered its trading tariffs and improved its trade regulations
in the run-up to and after becoming a WTO member. By signing the
DCFTA and eventually the Association Agreement, however, Armenia
could benefit from an improvement of its business environment with the
EU's technical help. Solid economic relations with the EU and easier
travel could boost the country's economy. In this way, Armenia could
also benefit from its relatively large Armenian diaspora in the EU.
Unlike a number of former Soviet states, since its independence,
Armenia has been keen to avoid a scenario where it has to choose
between close ties with Russia or the West. Successive governments
have tried to develop equal relations within the limitations of the
ongoing military standoff with Azerbaijan and broken down relations
with Turkey. Unlike Georgia, Armenia does not have any aspirations
to join NATO. EU membership is also a somewhat distant project that
is overshadowed by more pressing economic and security issues. While
the EU's policy towards the South Caucasus, Armenia included, remains
somewhat unclear, the country is content to push ahead with economic
ties with the bloc.
From: Emil Lazarian | Ararat NewsPress
Lilit Gevorgyan
Global Insight
June 25, 2012
Armenia and the EU have officially launched Deep and Comprehensive
Free Trade Agreement talks, set to integrate Armenia and the European
bloc further.
Deep and Comprehensive Free Trade
Preparations for the Deep and Comprehensive Free Trade Agreement
(DCFTA) between Armenia and the EU that launched last week had
intensified in the past three years. To be able to start the talks,
the Armenian authorities had to meet a number of criteria, or
"recommendations" set out by the EU in 2009. This included a number
of trade-related reforms that Armenia managed to get through with the
EU's technical help. As a World Trade Organization (WTO) member since
2002, Armenia had already significantly improved its regulations to
gain membership of the international trade-regulating body. The EU
had much more stringent demands in terms of intellectual property
rights protections, however, as well as on some of the sanitary and
phytosanitary measures that were deemed to be restricting free trade.
The last remaining obstacle was the Armenian customs services'
valuation and taxation of imported alcoholic beverages, which the EU
insisted should be abandoned in order to start the talks, a condition
eventually met by Armenia.
The actual process of economic and regulatory integration started
even earlier, in November 2006. At that time, the Armenian government
signed an action plan within the framework of the Eastern Partnership
(EaP) and the EU Eastern Neighbourhood Policy (ENP). The European
bloc initiated these two drives to co-ordinate its economic and
political relations with those of its neighbour states that are
not bidding for EU membership. The ENP includes some of the former
Soviet countries--Belarus, Ukraine, Moldova, Georgia, Armenia,
and Azerbaijan--but also all Mediterranean North African countries
and Middle Eastern countries. The EaP thus overlaps with the ENP,
including only the six abovementioned former Soviet states, some
of which aspire to joining the EU at some point. Both policies
are essentially designed to promote good relations through economic
co-operation with EU neighbours, but the key difference is that, unlike
other bilateral government-level economic co-operation agreements, the
EU is using its vast economic market as a leverage on its neighbouring
countries to promote good governance, political reforms, and economic
suitability. In return for compliance, the EU bloc offers the DCFTA.
On 17 February, the EU's executive branch, the European Commission,
concluded that Armenia has achieved sufficient progress in its
preparations. It then recommended that the member states launch
the talks, a decision backed by the European Council's Trade Policy
Committee. Commenting on the event, EU trade commissioner Karel De
Gucht stated that it marks "a turning point in our trade relations
with Armenia. We are entering a new phase that will bring our economic
ties to a new level of depth and ambitions. The EU is Armenia's first
trading partner and a deep and comprehensive free trade area will
enable closer economic integration of Armenia with the European Single
Market, thereby helping to boost economic growth in the country."
Balanced Foreign Policy
Given the lengthy preparations and willingness on both sides, the
talks are likely to end successfully. The parties now have 15 chapters
to go through, which will fully harmonise relations between the bloc
and Armenia. The talks are likely to conclude by the end of 2012 or
the beginning of 2013.
Developing economic relations with the EU will help Armenia to
counterbalance its already close relations with the Commonwealth of
Independent States (CIS), and particularly Russia. The news of the
DCFTA comes less than one year after Armenia joined the Russian-led
CIS Free Trade Agreement, which also is designed to facilitate
trade between CIS member states. Along with Belarus, Kazakhstan, and
Russia--the core countries united within a Customs Union--Armenia,
Kyrgyzstan, Moldova, Tajikistan, and Ukraine have also become members.
It has to be said that Armenia, Moldova, and Ukraine are currently
engaged in DCFTA talks with the EU. Armenia has never hidden its
intentions not to be part of the post-Soviet integration process
that is to culminate in the creation of the Eurasia Union. Indeed,
Armenia has very close political and economic ties with Russia, but on
a number of occasions has stated that it is not planning to join the
Customs Union, nor the Eurasia Union that is to be modelled on the
troika customs bloc. One of the arguments against this integration
has been the lack of a common border with Russia or any other member
of the customs bloc.
Once the DCFTA talks are tackled, it will be relatively easy for
Armenia to push ahead with the Association Agreement, although it
still has to make a significant effort to meet some of the rule
of law and good governance benchmarks set by the EU. Some work has
already been done in this regard, however. Much like other former
Soviet states, Armenia signed its first comprehensive agreement with
the EU in the late 1990s, entering into the 10-year Partnership and
Cooperation Agreement in July 1999. The EU is currently in the process
of negotiating an Association Agreement that will replace the old
deal. The difference is not only the economic advantages offered by
the DCFTA, but also relaxed visa regulations and further assistance
with the regulatory reforms that will benefit Armenia, making it
more attractive for foreign investors. The Association Agreement in
particular puts an emphasis on strengthening democracy, the rule
of law, the judicial system, and the fight against corruption. It
also covers the issues of energy security and the eventual closure of
Armenia's Soviet-era Metsamor nuclear power plant (NPP). The bloc does
not condition signing the Association Agreement to the closure of the
NPP. Being a political document, the Association Agreement is also
about peacefully resolving the regional conflicts, in particular the
Armenian-Azerbaijani standoff over the final status of the ethnic
Armenian self-declared republic of Nagorno Karabakh (NK). When
launching the action plans for EaP members, particularly Armenia and
Azerbaijan, the EU has made sure not to take sides in the conflict by
invoking the two relevant principles of international law: the right
of self determination of NK and Azerbaijan's territorial integrity.
Outlook and Implications
The DCFTA is a good example of how the EU can exercise its leverage
on some of the EaP countries to promote economic and political reform.
The Armenian parliamentary election on 6 May signified how these
incentives work. Although a number of irregularities were reported,
significant progress was made nonetheless, especially in terms of
balanced media coverage and free campaigning. The Armenian government
was fully aware that failure to uphold democratic principles could
derail the upcoming talks.
The EU is Armenia's largest trading partner and main export market.
Bilateral trade has increased by 16.3% year-on-year, reaching USD1.8
billion. With the removal of further obstacles to trade, this figure
is set to increase. A large part of exports is non-ferrous metals,
mineral products, diamonds, and foodstuffs. As mentioned, Armenia has
already lowered its trading tariffs and improved its trade regulations
in the run-up to and after becoming a WTO member. By signing the
DCFTA and eventually the Association Agreement, however, Armenia
could benefit from an improvement of its business environment with the
EU's technical help. Solid economic relations with the EU and easier
travel could boost the country's economy. In this way, Armenia could
also benefit from its relatively large Armenian diaspora in the EU.
Unlike a number of former Soviet states, since its independence,
Armenia has been keen to avoid a scenario where it has to choose
between close ties with Russia or the West. Successive governments
have tried to develop equal relations within the limitations of the
ongoing military standoff with Azerbaijan and broken down relations
with Turkey. Unlike Georgia, Armenia does not have any aspirations
to join NATO. EU membership is also a somewhat distant project that
is overshadowed by more pressing economic and security issues. While
the EU's policy towards the South Caucasus, Armenia included, remains
somewhat unclear, the country is content to push ahead with economic
ties with the bloc.
From: Emil Lazarian | Ararat NewsPress