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ROBERT KOCHARYAN: I DO NOT SHARE THE ARMENIAN LEADERSHIP'S OPTIMISM OVER CUSTOMS UNION MEMBERSHIP
by Tatevik Shahunyan
http://www.arminfo.am/index.cfm?objectid=B061EC90-9D57-11E3-B8890EB7C0D21663
Monday, February 24, 16:37
To assess the expediency of Armenia's accession to the Customs
Union with Russia, Belarus and Kazakhstan, it is necessary to
conduct a comparative analysis of the approaches to the customs
policy implemented in Russia and Armenia after the collapse of the
Soviet Union, second president of Armenia Robetr Kocharyan said in
an interview with 2rd.am.
"Russia has inherited USSR's powerful industrial potential covering
nearly all the sectors of economy with a strong emphasis on the
military-industrial field.
However, that potential has not been integrated with the global economy
and was mostly concentrated in the domestic market and the post-Soviet
countries. In the Soviet Union, export of oil and gas made up 65% of
total exports. To protect its industry from more competitive imports,
Russia used to apply high customs duties, while domestic market was
big enough to keep its industry function. Imposing export taxes on
energy resources and export quotas, the government ensured low domestic
tariffs, which supported the relative competitive ability of Russia's
economy. This allowed Russia to avoid economic collapse, something
that happened in Armenia in early 90s. Now, accessing the WTO, Russia
is gradually revising foreign trade rules for full integration into
the global economy. This will lead to some short-term problems, but
the country will sure benefit from it in the long- term outlook,"
Kocharyan said.
Further, in the interview, the second president analyses the situation
in Armenia: "We have inherited the industrial potential oriented
at the Soviet market which no longer existed by that time. Domestic
market was miserable for that industry. Having neither common border
not railway communication with Russia, Armenia made vein efforts to
restore its erstwhile cooperation. Some economy sectors in Russia were
also in poor state in mid-90s. With the collapse of the Soviet Union,
Armenia began to export the significant part of industry losing its
traditional sales market and partners. Inherently, it was senseless
protecting many industrial sectors, except agriculture and processing,
with customs duties. Protectionism could be expressed with application
of instruments quite different from customs barriers.
Furthermore, Armenia was in blockade that increased the transportation
costs of nearly all products. Therefore, the Government of Armenia
launched foreign trade liberalization in the mid-90s and Armenia
joined WTO in 2003 to speed up the process of full integration into
the world economy. Actually, Russia and Armenia have been implementing
different approaches to the customs policy because of some objective
circumstances and their economic realities. And the customs codes of
our countries were based on those very approaches.
Considering that the Customs Union's approaches are based on Russia's
Customs Code, a question arises as to whether Armenia will manage to
reverse its approaches painlessly and what tasks of its economy the
country is settling by higher customs charges. Kocharyan said.
Robert Kocharyan said he does not share the Armenian leadership's
optimism over accession to the CU, as economy is sluggish and abrupt
turnabouts are counter indicated. "People have built their business
on effective rules for years, and they need to time for changeover.
Obviously, some businesses will improve their positions, while some
others will experience decline and even collapse. A deep and open
CU market analysis on all groups of products is needed to foresee
possible consequences," he said. The second president said that the
EU will probably revise the Generalized System of Preferences (GSP+)
for Armenia, as EU ambassadors hint at that. Some problems will
probably emerge also with the WTO and the coordinated customs duties.
"This will lead to response measures regarding our products. How
will this influence Armenia's economy and its long-term investment
attractiveness is hard to assess," Kocharyan said.
The growing tariffs of import from the countries outside the CU are
another problem, he said. Considering that such goods dominate in the
consumer market and the level of trade balance deficit we have in
Armenia, this import is rather large-scale. The formula is simple:
the higher are customs fees, the higher is the product price in
the market. There is a third option: replacement of such goods with
similar ones from the CU countries, if there are such.
For instance, meat and dairy products from Belarus may become cheaper
in Armenia and our wine and brandy may become cheaper in Belarus. Time
will show if our cattle breeding industry can stand such competition.
Household equipment, devices and cars imported from other countries
will rise in price, unless there are relevant exceptions. Everything
can be assessed and forecasted and the people must be informed
of these assessments and calculations. We can prevent price hikes
only by introduction of a long list of exceptions and synchronize
it with gradual reduction of customs duties, which is part of
Russia's commitments to the WTO. All this depends on the results of
the negotiations with the CU countries that will also make their
own requirements. This is a very hard process of accommodation of
interests and any hasty step may result in undesirable consequences,"
Kocharyan explained. He stressed that he consciously avoid making
any assessments of the damage the CU accession process has caused to
Armenia's image and the EU's concerns over it.
"Nothing can be changed now. We should not have started the process
of the Association with the EU in a company with the GUAM countries
and with such obtrusive PR. It gave the process excessive geopolitical
coloring. Russia's nature was quite predictable. Anyway, we are where
we are. I'd like the country to access the CU calmly with minimum
geopolitics and with maximum consideration of long-term interests of
Armenia's economy. Any miscalculations will affect all the residents
of Armenia," the second president said for conclusion.
by Tatevik Shahunyan
http://www.arminfo.am/index.cfm?objectid=B061EC90-9D57-11E3-B8890EB7C0D21663
Monday, February 24, 16:37
To assess the expediency of Armenia's accession to the Customs
Union with Russia, Belarus and Kazakhstan, it is necessary to
conduct a comparative analysis of the approaches to the customs
policy implemented in Russia and Armenia after the collapse of the
Soviet Union, second president of Armenia Robetr Kocharyan said in
an interview with 2rd.am.
"Russia has inherited USSR's powerful industrial potential covering
nearly all the sectors of economy with a strong emphasis on the
military-industrial field.
However, that potential has not been integrated with the global economy
and was mostly concentrated in the domestic market and the post-Soviet
countries. In the Soviet Union, export of oil and gas made up 65% of
total exports. To protect its industry from more competitive imports,
Russia used to apply high customs duties, while domestic market was
big enough to keep its industry function. Imposing export taxes on
energy resources and export quotas, the government ensured low domestic
tariffs, which supported the relative competitive ability of Russia's
economy. This allowed Russia to avoid economic collapse, something
that happened in Armenia in early 90s. Now, accessing the WTO, Russia
is gradually revising foreign trade rules for full integration into
the global economy. This will lead to some short-term problems, but
the country will sure benefit from it in the long- term outlook,"
Kocharyan said.
Further, in the interview, the second president analyses the situation
in Armenia: "We have inherited the industrial potential oriented
at the Soviet market which no longer existed by that time. Domestic
market was miserable for that industry. Having neither common border
not railway communication with Russia, Armenia made vein efforts to
restore its erstwhile cooperation. Some economy sectors in Russia were
also in poor state in mid-90s. With the collapse of the Soviet Union,
Armenia began to export the significant part of industry losing its
traditional sales market and partners. Inherently, it was senseless
protecting many industrial sectors, except agriculture and processing,
with customs duties. Protectionism could be expressed with application
of instruments quite different from customs barriers.
Furthermore, Armenia was in blockade that increased the transportation
costs of nearly all products. Therefore, the Government of Armenia
launched foreign trade liberalization in the mid-90s and Armenia
joined WTO in 2003 to speed up the process of full integration into
the world economy. Actually, Russia and Armenia have been implementing
different approaches to the customs policy because of some objective
circumstances and their economic realities. And the customs codes of
our countries were based on those very approaches.
Considering that the Customs Union's approaches are based on Russia's
Customs Code, a question arises as to whether Armenia will manage to
reverse its approaches painlessly and what tasks of its economy the
country is settling by higher customs charges. Kocharyan said.
Robert Kocharyan said he does not share the Armenian leadership's
optimism over accession to the CU, as economy is sluggish and abrupt
turnabouts are counter indicated. "People have built their business
on effective rules for years, and they need to time for changeover.
Obviously, some businesses will improve their positions, while some
others will experience decline and even collapse. A deep and open
CU market analysis on all groups of products is needed to foresee
possible consequences," he said. The second president said that the
EU will probably revise the Generalized System of Preferences (GSP+)
for Armenia, as EU ambassadors hint at that. Some problems will
probably emerge also with the WTO and the coordinated customs duties.
"This will lead to response measures regarding our products. How
will this influence Armenia's economy and its long-term investment
attractiveness is hard to assess," Kocharyan said.
The growing tariffs of import from the countries outside the CU are
another problem, he said. Considering that such goods dominate in the
consumer market and the level of trade balance deficit we have in
Armenia, this import is rather large-scale. The formula is simple:
the higher are customs fees, the higher is the product price in
the market. There is a third option: replacement of such goods with
similar ones from the CU countries, if there are such.
For instance, meat and dairy products from Belarus may become cheaper
in Armenia and our wine and brandy may become cheaper in Belarus. Time
will show if our cattle breeding industry can stand such competition.
Household equipment, devices and cars imported from other countries
will rise in price, unless there are relevant exceptions. Everything
can be assessed and forecasted and the people must be informed
of these assessments and calculations. We can prevent price hikes
only by introduction of a long list of exceptions and synchronize
it with gradual reduction of customs duties, which is part of
Russia's commitments to the WTO. All this depends on the results of
the negotiations with the CU countries that will also make their
own requirements. This is a very hard process of accommodation of
interests and any hasty step may result in undesirable consequences,"
Kocharyan explained. He stressed that he consciously avoid making
any assessments of the damage the CU accession process has caused to
Armenia's image and the EU's concerns over it.
"Nothing can be changed now. We should not have started the process
of the Association with the EU in a company with the GUAM countries
and with such obtrusive PR. It gave the process excessive geopolitical
coloring. Russia's nature was quite predictable. Anyway, we are where
we are. I'd like the country to access the CU calmly with minimum
geopolitics and with maximum consideration of long-term interests of
Armenia's economy. Any miscalculations will affect all the residents
of Armenia," the second president said for conclusion.