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  • Armenian Businesses Weigh Customs Deal

    ARMENIAN BUSINESSES WEIGH CUSTOMS DEAL

    Institute for War and Peace Reporting, UK
    IWPR Caucasus Reporting #710
    Nov 14 2013

    Joining a former Soviet trading bloc could mean higher prices for
    most imported goods.

    By Tigran Gevorgyan - Caucasus

    As the Armenian government moves further towards joining the Moscow-led
    Customs Union, many businessmen are worrying about the effect the
    trade arrangements could have on their livelihoods.

    On November 6, Prime Minister Tigran Sargsyan formally launched the
    accession process by signing a memorandum with Viktor Khristenko,
    head of the Eurasian Economic Commission, the regulatory body that
    oversees the Customs Union.

    The current members of the Customs Union are Russia, Belarus and
    Kazakstan, a market of 170 million people. Kyrgyzstan is planning
    to join, and Tajikistan may do so in future. The bloc is part of a
    broader project called the Eurasian Economic Union, planned for 2015.

    In Armenia, people are still trying to have figure out what membership
    would mean for them.

    Being part of the grouping would remove trade barriers with other
    Customs Union members, but it would also raise the customs duty
    chargeable on imports from other states. That has to be a worry for
    Armenia, whose trade with the European Union alone far exceeds that
    with Russia, Belarus and Kazakstan taken together.

    Officials are insisting membership will help an economy that has yet
    to recover from the contraction it suffered after the 2008 financial
    crisis, but so far they have been short on detail.

    Interviewed by the Ukrainian news site Segodnya.ua, Prime Minister
    Sargsyan said the country would benefit from closer integration with
    Customs Union members.

    At the same time, he acknowledged that there were risks. "Customs
    Union tariffs are more than double our customs barriers with third
    countries. We will have to struggle with various difficulties."

    Until September, Sargsyan and other officials were making
    very similar claims about the benefits of integration
    with a different economic bloc, the European Union. Then
    President Serzh Sargsyan surprised everyone by announcing
    http://iwpr.net/report-news/after-eu-talks-armenia-swings-back-moscow
    that Armenia was going to join the Customs Union. Three years of
    negotiations for an EU "association agreement", which had only just
    been successfully completed, went down the drain as European officials
    made it clear the country could not be part of two different trading
    arrangements.

    When IWPR asked Deputy Economy Minister Karine Minasyan whether there
    were any positive economic projections associated with Customs Union
    membership, she replied, "At the moment we do not possess conclusive
    data on that, and I'd struggle to give you figures. A great deal
    depends on the terms under which our country joins the Customs Union."

    The deputy minister said the government had formed a working group
    to hammer out the best possible terms of accession.

    Weighing the pluses and minuses of the deal, Minasyan said, "It is a
    positive thing that Armenian goods and services gain access to markets
    in Russia, Belarus and Kazakstan without customs barriers. For us it's
    a problem that there are high customs barriers against imports of goods
    [from non-members], since Armenia imports more than it exports."

    The latest official statistics show that 76 per cent of Armenia's
    external trade is with countries outside the Customs Union zone. This
    implies higher levies on imports from most trading partners, and
    hence higher consumer prices for Armenians.

    "In Armenia's current economic structure, imports are very important.

    If the cost of imported goods rises because of high duties, then life
    will get more expensive," Armenak Chatinyan, economic columnist for
    the Civilnet.am website, told IWPR. "If we intend to join the Customs
    Union at an accelerated pace, then inflationary trends will continue.

    People will have to pay more while their earnings remain where
    they are."

    Local businessmen worry that they will end up caught in the middle.

    Khachatur Sukiasyan, who owns the SIL Group, one of Armenia's largest
    trading and manufacturing firms, warned that businesses would be
    forced to try to deal with Customs Union states, which they were not
    doing now,

    "It's unclear how this will happen," he told IWPR. "At the [October
    2013] meeting in Minsk, it was clear that the heads of these [existing
    member] states intend to bring in new members on terms beneficial to
    themselves, often ignoring the interests of these new members. Our
    government needs to understand that the accession process isn't
    going to be simple, since these are countries which are larger and
    better-resourced than Armenia, and which want to protect their own
    interests. That's what worries Armenian businessmen."

    Moscow, the biggest economy in the Customs Union and the driving
    force behind it, has been keen to draw in new members like Armenia,
    as much for political as for economic reasons. (See Armenian Leader
    Accused of Caving in to Moscow on the political pressures to join.)

    Samson Avetyan, who heads the investment fund Arrow Global Ltd,
    fears that if the Russian economy runs into trouble, other Customs
    Union members could suffer the consequences.

    "Despite high oil prices on international markets, Russia's economy
    has slowed for the seventh quarter in a row. This shows not only that
    the country is unable to secure economic growth from [income from]
    its energy customers, but also that it has systemic problems," Avetyan
    told IWPR. "It follows that Russia might have serious economic problems
    next year. To deliver economic growth, it's likely to close off its
    market through higher customs barriers.... Armenian businessmen would
    face being strangled by big Russian companies in a closed market."

    Tigran Gevorgyan is a freelance journalist in Armenia.

    http://iwpr.net/report-news/armenian-businesses-weigh-customs-deal

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