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JAMES ROBERTS: "ARMENIA SHOULD ALLOW ITS PEOPLE TO REALIZE THEIR POTENTIAL"
Thursday 19 December 2013 09:44
Photo: http://www.heritage.org
James M. Roberts
James M. Roberts is Research Fellow for Economic Freedom and
Growth in the Center for International Trade and Economics (CITE)
at The Heritage Foundation. In November, together with Ariel Cohen
and Jonathan Blaisdell co wroted an article "The Eurasian Union:
Undermining Economic Freedom and Prosperity in the South Caucasus".
Mediamax talked to James Roberts, who served in the U.S. State
Department for 25 years, before joining Heritage Foundation in 2007.
- Mr. Roberts, Russia created a Customs Union with Kazakhstan and
Belarus in 2010 and is now trying hard to expand it. What are Russia's
new regional economic ambitions? And will these ambitions be fully
realized in 2015 as it is promised?
- Speaking of economic ambitions, Russia is trying to increase its
regional competitiveness without modernizing its economy. The Customs
Union imposes high tariffs on outside imports, while less competitive
Russian goods may be freely imported into Belarus and Kazakhstan.
Without the protection of the Customs Union, many Russian goods sold
in Belarusian and Kazakhstani markets would not be competitive with
goods and services produced in the West (and many Russian businesses
would lose an important source of income).
It is not clear what you mean by "fully realizing these ambitions."
Economic integration is a continuous process and there is no threshold
where you can say that a goal has been fully achieved. For example,
the United States has not yet reached its full economic potential.
However, the Customs Union and the Eurasian Union are not only about
the economy. We cannot leave the political aspect of out of the
analysis. President Vladimir Putin is trying to realize his goal of
creating a repackaged version the Soviet Union, a "USSR 2.0."
- Can you name at least one example of any benefit for post-soviet
countries in case of joining Customs Union?
- When we speak about benefits, we have to ask - benefits compared to
what? Yes, there is an economic benefit in joining the CU relative to
not joining any organization at all. The reason for that is simple -
most production in post-Soviet countries is still today, more than
20 years after the end of the USSR, of too low a quality to succeed
in Western markets, and without the Customs Union many goods from
former USSR countries would not even make it into the Russian market.
In the long run, however, I do not see any benefits of the CU
relative to joining a free trade area with the EU. The Customs Union
and the subsequent Eurasian Union are dominated by Russia, where
the post-Soviet Republics will have little leverage. Joining the
free-trade area with the EU would provide many incentives for economic
modernization and would attract direct foreign Investment. In the
short-run, there might be some economic contraction, as inefficient
firms would be forced to shut down. However, in the long-run, the
reorganization of the economy would result in its becoming more
competitive.
We have witnessed this happening in the countries of Central Europe
in the two decades since the collapse of the Soviet Union. After the
Communist bloc imploded, its member economies also suffered from a
lack of competitiveness, similar to those of the former Soviet Union.
However, thanks to "shock therapy" and other good economic policies
the countries of Central and Eastern Europe opened up to foreign
investment, provided investors with qualified workforce, stable
institutions and a predictable economic environment, which allowed
them to attract enough private financial capital inflows to become
export-oriented economies. To be sure, they have not all become
"little Switzerlands," but they are doing much better than they were
in 1989. There is no reason to believe that, with the correct mix
of positive, free-market policies, the post-Soviet countries cannot
achieve the same success.
- It is clear that Armenia will not sign DCFTA with EU in near future.
But if it did, what would be the possible advantages that Armenia
could get in case of signing it?
- There would be potential advantages both in the short run and in
the long run. In the short run, Armenia would send a signal to Russia
that it wishes to conduct an independent foreign economic policy,
which would force Russia to start taking it more seriously. In the
long run, Armenia could take advantage of the possibilities to sell
more of its products to EU countries. In practice, however, Armenia
could take advantage of a DCFTA with EU only if it successfully
reformed its institutions to attract foreign investment.
The DCFTA with the EU is not about free money flowing into Armenia. It
is about providing new opportunities for economic growth that Armenia
currently does not enjoy.
- Please mention 3 main benefits that Russia will gain after Customs
Union becomes a reality?
- The Customs Union has already become a reality. The Eurasian Union,
which is to become operational in 2015, would provide Russia with
the following benefits:
Economic gains. Russian production is largely uncompetitive in
Western markets, but is competitive in the markets of the post-Soviet
Republics. Thus, as I mentioned earlier, Russia will push out Western
competition and take over these markets, which would otherwise be
dominated by more competitive Western production.
Security gains. Russia continues to adhere to a medieval "besieged
fortress" mentality. It views NATO as a threat and is also wary of
China becoming too powerful. Therefore, the Eurasian Union will provide
Russia with an additional guarantee that none of its neighbors that
are gullible enough to join Eurasian Union will align themselves
with the West or any third party to a greater extent than Russia
deems acceptable.
Political gains. Russia is seeking to create a multipolar world,
where it will be one of the poles. The Eurasian Union will advance
this Russian foreign policy goal and will increase Russia's leverage
in dealing with its international partners. After 2015, Moscow will
speak not only on behalf of Russia, but de facto also on behalf of
the other EAU members, which will allow it to be taken more seriously
in the UN and by the U.S., China, and other countries.
- Your report advices Armenia to reduce reliance on the World Bank,
the International Monetary Fund, the Asian Development Bank, and
Russia. Can you describe how do you imagine this in terms that small
countries always need some financial support from abroad?
- Small countries do not always need some financial support from
abroad. Switzerland and the Netherlands are small countries, too,
but they certainly do not need any foreign support! The issue is not
whether a country is small or large. What matters is the quality of its
institutions and how much space its citizens have for realizing their
full potential (so called "earned success" from hard work, thriftiness,
and investments). Foreign aid may alleviate some economic hardships
in the short run, but reliance on it in the long run only increases
an unhealthy dependence of people on government hand-outs and deepens
the problems that caused the need for foreign aid in the first place.
Instead of focusing on a steady and seamless flow of foreign aid
into the country, Armenia should allow its people to realize their
potential and creativity by ensuring that they will be able to enjoy
the benefits of their work through a fair economic system protected
by strong and transparent rule of law. Creating a more merit-based
public sector and curbing corruption would be good areas to start.
- In the report you are mentioning different governmental and non
governmental bodies in Armenia that are formed on Russian experience.
Do you consider them as "not so good examples" just because of their
Russian basis, or do you have other arguments, too?
- It does not matter whether an institution is based on a model from
Russia or anywhere else. What does matter is whether that institution
promotes democracy or hinders it. The Russian NGO Coordination
Council was created, it seems to me, not to support pro-democracy
NGOs that genuinely deserve help, but rather to regulate their
activity and suppress any NGOs that might threaten the power of the
Putin government. If this is what the Armenian Public Council is
de facto meant to do, it will not serve the best interests of the
Armenian people.
- What future do you predict for Armenia after joining the Eurasian
Union officially in political, social and economic terms?
- I do not like being a pessimist, but I cannot be an optimist in
this case. The most likely scenario seems to be a continuing slow
deterioration of the Armenian economy. Substantial economic reforms
are unlikely, as the Eurasian Union does not encourage them. When
one visits Yerevan these days (as I did in 2011), one can often hear
the "man in the street" complain about a lack of future prospects
in Armenia. As the result of easy access for Armenian citizens to
Russia, many Armenians temporarily or permanently live and work in
Russia. Armenia suffers from a brain drain. Unfortunately, this trend
is likely to continue.
Narine Daneghyan talked to James M. Roberts.
- See more at:
http://www.mediamax.am/en/news/interviews/8551/#sthash.4yqxPkRu.dpuf
From: Emil Lazarian | Ararat NewsPress
Thursday 19 December 2013 09:44
Photo: http://www.heritage.org
James M. Roberts
James M. Roberts is Research Fellow for Economic Freedom and
Growth in the Center for International Trade and Economics (CITE)
at The Heritage Foundation. In November, together with Ariel Cohen
and Jonathan Blaisdell co wroted an article "The Eurasian Union:
Undermining Economic Freedom and Prosperity in the South Caucasus".
Mediamax talked to James Roberts, who served in the U.S. State
Department for 25 years, before joining Heritage Foundation in 2007.
- Mr. Roberts, Russia created a Customs Union with Kazakhstan and
Belarus in 2010 and is now trying hard to expand it. What are Russia's
new regional economic ambitions? And will these ambitions be fully
realized in 2015 as it is promised?
- Speaking of economic ambitions, Russia is trying to increase its
regional competitiveness without modernizing its economy. The Customs
Union imposes high tariffs on outside imports, while less competitive
Russian goods may be freely imported into Belarus and Kazakhstan.
Without the protection of the Customs Union, many Russian goods sold
in Belarusian and Kazakhstani markets would not be competitive with
goods and services produced in the West (and many Russian businesses
would lose an important source of income).
It is not clear what you mean by "fully realizing these ambitions."
Economic integration is a continuous process and there is no threshold
where you can say that a goal has been fully achieved. For example,
the United States has not yet reached its full economic potential.
However, the Customs Union and the Eurasian Union are not only about
the economy. We cannot leave the political aspect of out of the
analysis. President Vladimir Putin is trying to realize his goal of
creating a repackaged version the Soviet Union, a "USSR 2.0."
- Can you name at least one example of any benefit for post-soviet
countries in case of joining Customs Union?
- When we speak about benefits, we have to ask - benefits compared to
what? Yes, there is an economic benefit in joining the CU relative to
not joining any organization at all. The reason for that is simple -
most production in post-Soviet countries is still today, more than
20 years after the end of the USSR, of too low a quality to succeed
in Western markets, and without the Customs Union many goods from
former USSR countries would not even make it into the Russian market.
In the long run, however, I do not see any benefits of the CU
relative to joining a free trade area with the EU. The Customs Union
and the subsequent Eurasian Union are dominated by Russia, where
the post-Soviet Republics will have little leverage. Joining the
free-trade area with the EU would provide many incentives for economic
modernization and would attract direct foreign Investment. In the
short-run, there might be some economic contraction, as inefficient
firms would be forced to shut down. However, in the long-run, the
reorganization of the economy would result in its becoming more
competitive.
We have witnessed this happening in the countries of Central Europe
in the two decades since the collapse of the Soviet Union. After the
Communist bloc imploded, its member economies also suffered from a
lack of competitiveness, similar to those of the former Soviet Union.
However, thanks to "shock therapy" and other good economic policies
the countries of Central and Eastern Europe opened up to foreign
investment, provided investors with qualified workforce, stable
institutions and a predictable economic environment, which allowed
them to attract enough private financial capital inflows to become
export-oriented economies. To be sure, they have not all become
"little Switzerlands," but they are doing much better than they were
in 1989. There is no reason to believe that, with the correct mix
of positive, free-market policies, the post-Soviet countries cannot
achieve the same success.
- It is clear that Armenia will not sign DCFTA with EU in near future.
But if it did, what would be the possible advantages that Armenia
could get in case of signing it?
- There would be potential advantages both in the short run and in
the long run. In the short run, Armenia would send a signal to Russia
that it wishes to conduct an independent foreign economic policy,
which would force Russia to start taking it more seriously. In the
long run, Armenia could take advantage of the possibilities to sell
more of its products to EU countries. In practice, however, Armenia
could take advantage of a DCFTA with EU only if it successfully
reformed its institutions to attract foreign investment.
The DCFTA with the EU is not about free money flowing into Armenia. It
is about providing new opportunities for economic growth that Armenia
currently does not enjoy.
- Please mention 3 main benefits that Russia will gain after Customs
Union becomes a reality?
- The Customs Union has already become a reality. The Eurasian Union,
which is to become operational in 2015, would provide Russia with
the following benefits:
Economic gains. Russian production is largely uncompetitive in
Western markets, but is competitive in the markets of the post-Soviet
Republics. Thus, as I mentioned earlier, Russia will push out Western
competition and take over these markets, which would otherwise be
dominated by more competitive Western production.
Security gains. Russia continues to adhere to a medieval "besieged
fortress" mentality. It views NATO as a threat and is also wary of
China becoming too powerful. Therefore, the Eurasian Union will provide
Russia with an additional guarantee that none of its neighbors that
are gullible enough to join Eurasian Union will align themselves
with the West or any third party to a greater extent than Russia
deems acceptable.
Political gains. Russia is seeking to create a multipolar world,
where it will be one of the poles. The Eurasian Union will advance
this Russian foreign policy goal and will increase Russia's leverage
in dealing with its international partners. After 2015, Moscow will
speak not only on behalf of Russia, but de facto also on behalf of
the other EAU members, which will allow it to be taken more seriously
in the UN and by the U.S., China, and other countries.
- Your report advices Armenia to reduce reliance on the World Bank,
the International Monetary Fund, the Asian Development Bank, and
Russia. Can you describe how do you imagine this in terms that small
countries always need some financial support from abroad?
- Small countries do not always need some financial support from
abroad. Switzerland and the Netherlands are small countries, too,
but they certainly do not need any foreign support! The issue is not
whether a country is small or large. What matters is the quality of its
institutions and how much space its citizens have for realizing their
full potential (so called "earned success" from hard work, thriftiness,
and investments). Foreign aid may alleviate some economic hardships
in the short run, but reliance on it in the long run only increases
an unhealthy dependence of people on government hand-outs and deepens
the problems that caused the need for foreign aid in the first place.
Instead of focusing on a steady and seamless flow of foreign aid
into the country, Armenia should allow its people to realize their
potential and creativity by ensuring that they will be able to enjoy
the benefits of their work through a fair economic system protected
by strong and transparent rule of law. Creating a more merit-based
public sector and curbing corruption would be good areas to start.
- In the report you are mentioning different governmental and non
governmental bodies in Armenia that are formed on Russian experience.
Do you consider them as "not so good examples" just because of their
Russian basis, or do you have other arguments, too?
- It does not matter whether an institution is based on a model from
Russia or anywhere else. What does matter is whether that institution
promotes democracy or hinders it. The Russian NGO Coordination
Council was created, it seems to me, not to support pro-democracy
NGOs that genuinely deserve help, but rather to regulate their
activity and suppress any NGOs that might threaten the power of the
Putin government. If this is what the Armenian Public Council is
de facto meant to do, it will not serve the best interests of the
Armenian people.
- What future do you predict for Armenia after joining the Eurasian
Union officially in political, social and economic terms?
- I do not like being a pessimist, but I cannot be an optimist in
this case. The most likely scenario seems to be a continuing slow
deterioration of the Armenian economy. Substantial economic reforms
are unlikely, as the Eurasian Union does not encourage them. When
one visits Yerevan these days (as I did in 2011), one can often hear
the "man in the street" complain about a lack of future prospects
in Armenia. As the result of easy access for Armenian citizens to
Russia, many Armenians temporarily or permanently live and work in
Russia. Armenia suffers from a brain drain. Unfortunately, this trend
is likely to continue.
Narine Daneghyan talked to James M. Roberts.
- See more at:
http://www.mediamax.am/en/news/interviews/8551/#sthash.4yqxPkRu.dpuf
From: Emil Lazarian | Ararat NewsPress