ARMENIA CAN COOPERATE WITH BOTH EUROPEAN UNION AND CUSTOMS UNION NOW
Tatul Manaseryan, the head of Alternative think tank, in an exclusive
interview with ARKA news agency, voiced his views on advantages and
disadvantages of Armenia’s European or Eurasian integration.
ARKA – Could you please comment on President Serzh Sargsyan’s statement
about Armenia’s intention to join the Customs Union?
Manaseryan – I think this statement should be considered the way it
was made – it shouldn’t be separated from the context. The president
said Armenia was ready, but it doesn’t mean that this will be done
right now. The Customs Union is still in the process of formation,
and I would point out that some former Soviet republics, including
Ukraine, haven’t made their final decision yet though there were
statements. This should be considered as a process which Armenia
couldn’t distance itself from. The same applies to the establishment
of the Eurasian Economic Union – it would be reasonable to be its
cofounder rather than to join it later.
I would like to stress that the president’s statement doesn’t downgrade
integration processes between Armenia and Europe. On the contrary
– there was a clear message that membership in the Customs Union
shouldn’t affect our relations with the European Union. Besides, it
would be better to hope that Brussels will show understanding, like
Moscow, though it is difficult to expect it given particular factors.
It is a fact that Armenia has to choose between integration with the
EU or a membership in the Customs Union. However, even if Armenia
signs the Association Agreement, it won’t become a member of the
European Union. I would also like to remember that Turkey, having
a similar status of an associated member, enjoys all the free trade
regime preferences, like European countries.
ARKA – In speculations over Armenia’s choice between European
and Eurasian integration, political, not economic advantages and
disadvantages are pointed out. What can you say about economic pluses
and minuses for Armenia in these integration processes?
Manaseryan – Nobody is gauging economic advantages. Our think tank has
made approximate calculations, since more detailed calculations need
more time and resources. The Customs Union and the Eurasian Union,
if it is established and starts functioning, imply trade without
customs tariffs. Our calculations show that in this event Armenia,
a country which imports huge volumes of commodities from Russia and
the CIS countries and has a sizeable portion of its revenue generated
from customs duties, will lose part of it and will have to cut social,
education and healthcare spending. Our problem with Europe is a little
different. We have quite close trade and economic ties with it.
The European Union and its member countries are our big partners. But
it is rather about export than import. I would like to remember that
seven or eight years ago more than half of Armenia’s exports was sent
to EU countries, particularly to Belgium (jewelry and diamond-cutting
industry’s products). Certainly, such dependency is unacceptable,
since diversification is needed. But this is still export (now also
the mining industry’s products), which implies no customs duties,
and if we enlarge our export (though there are problems related to
European standards, but this is a separate mater), then we will have
not as grave problems in exporting goods as in import.
However, taking into account our imports, including natural gas,
wood, metals, machinery and foods, we know that in dealing with the
Eurasian Union or Customs Zone we will inevitably sustain immense
losses, which shouldn’t be omitted. What will compensate for these
losses? A political union is understandable, but the Eurasian Union
may not live much long without an economic basis. That is why it would
be reasonable to consider room for opening a railway through Abkhazia
and restoring industrial giants, which will be able to revive the
national economy and compensate for budget losses.
ARKA – Nevertheless, Russian experts find it impossible to compete
with the European agriculture, for example, given that this sector
is subsidized by the European Union.
Manaseryan – This concern has ground. I think the lack of subsidies is
a big trouble not only to our country, but also to other developing
countries. This problem loomed large amid the global recession
inflicting a huge damage to the European Union. I think there are
substantial revisions in the European Union now, since subsidies and
budget allocations for these purposes are cut amid the crisis. As a
result, food prices are going up creating a food crisis in the world.
There is the necessity of revision in this case, and I hope that
subsidies will have no considerable impacts. I would like to say that
Armenia has an absolute advantage here in terms of agriculture output,
since very little territories remained in the European Union fit for
cultivating organic products.
The same applies also to our region. If there are no political
problems, then Turkey may become a large market for Armenia’s organic
products. We have also an agreement with Turkey to export 4.5 billion
kilowatt/hour electric power, but the agreement remains only on paper
so far because of known obstacles.
We learned recently that we have quite big opportunities in neighboring
countries. But the European Union put forward tough requirements,
especially those relating to food safety. There are experienced
exporters in Armenia, but I am talking about the entire country and
whether Armenian companies are ready to enter European markets.
ARKA – Nevertheless, imports from Europe dominate Armenia’s
agriculture market. Don’t you think that after signing agreements
with the European Union the government will lose all the levers of
support for the agriculture sector?
Manaseryan – The most vulnerable area in Armenia is still agriculture,
but there are also smaller problems in agriculture, which can be
solved with governmental support. Insufficient awareness of reasons
for cultivation of one or another crop, which is among these problems,
leads either to excessive production or to deficit accompanied with
price hikes. It is necessary to do something here, and this work is
not connected with financing. Organizational problems are waiting
for their solutions as well. It is necessary to explain farmers the
domestic market’s demand for certain agricultural crops and expected
profits. Besides, it shouldn’t be omitted that Armenia caters for
domestic market demand for many types of foods. In this case, farmers,
leaning on this support and professional advice on quality, standards
and requirements, may reach success in exporting their products, if
the process is organized properly. There is the experience of Turkey
that without membership in any political union sells its products
and services across the European Union. Armenia can do the same,
if organizes the process properly.
ARKA -Is it possible for Armenia to maintain economic cooperation
with both the European Union and the Customs Union?
Manaseryan – I think it is possible at the current stage. Cooperation
can be continued. As a rule, any type of economic integration implies
loss of part of sovereignty. For example, Belgium, France or Germany,
can’t independently make decisions related to tax, customs and monetary
policy. Armenia in these matters maintains its independence, but
accepts the European Union’s requirements. It shouldn’t be forgotten
that there is little difference between the EU and WTO requirements. It
would be strange to play off one against the other.
Non-discrimination principle can’t be breached in joining any
regional organization. For example, membership in the Commonwealth of
Independent States doesn’t hinder Armenia from being a member of the
Black Sea Economic Cooperation Organization. But it should be noted
in case of the Customs Union or Eurasian Union that Armenia has no
common borders with any of its member countries. We have discussed
the matter with some economists, including Sergey Glazyev, with whom
we considered Greece as an example. But it shouldn’t be forgotten
that Greece, an EU member, has a common sea border with the EU space,
while Armenia has no border with Eurasian area. It means Armenia will
have to make appropriate procedures with Georgia. Russia should analyze
better geopolitical factors before embarking on Armenia-related issues.
ARKA – Sergey Glazyev, advisor to Russian President Vladimir Putin,
has already threatened Ukraine with economic collapse, if the country
signs the Association Agreement with the European Union. Could you,
please, comment on this statement, considering it also as a warning
to other CIS countries involved in European integration process?
Manaseryan – As for Glazyev’s statement, I regret that such a person
of influence and the economist I respect displays tough approaches,
though I understand Russia’s concern, but as an economist, I think
economic interests are more important than the administrative and
command principles and approaches imprinted in subconsciousness. As
for Armenia, I will say both economy and politics are important here.
But I am opposed to presenting the benefits of Armenia’s membership
in the Eurasian Union by capitalizing on political context. Here
are some arguments indicating that the Eurasian Union is just an
illusion though very desirable and very important to us, since we
should necessarily develop mutually beneficial relations in this
region, but without a clear idea about a mechanism for forming it
and without understanding what result it will produce. The Eurasian
Union is the fourth, the highest form of economic integration, like,
for example, the European Union, and talk about the matter began far
earlier than the signing of the CIS Free Trade Agreement.
This is at least nonsense, in terms of economics, since in classical
sense there are four kinds of economic integration – free trade area,
customs union, common market and economic and political union.
Strange is that in our case talk about Eurasian Union came first,
and after that the topic of Free Trade Area Agreement returned, and
only after that the call to join the Customs Union emerged. I want to
remember that the renowned North American Free Trade Agreement (NAFTA)
space was initially formed as a free trade zone, and for two decades,
three developed countries – the United States, Canada and Mexico –
have not managed to reach the next stage of economic integration –
customs zone. That is why it seems incredible how transition economies
have already formed customs zone without creating free trade zone
before and now want to establish the Eurasian Union without creating
a common market. -0-
18:17 03.10.2013
http://arka.am/en/news/interview/armenia_can_cooperate_with_both_european_union_and_customs_union_now/