Armenia’s decision to join a free trade zone comprising Russia and other former Soviet republics will not hamper the signing of a similar but more far-reaching deal with the European Union, a senior EU official said on Wednesday.
Gunnar Wiegand also announced that the Armenian government has pledged to address by the end of this year EU concerns preventing the official launch of negotiations on the creation of a “deep and comprehensive free trade area,” or DCFTA, between Armenia and the bloc.
The DCFTA is a key element of an “association agreement” offered to Yerevan as part of the EU’s Eastern Partnership program covering six ex-Soviet states. It envisages not only mutual lifting of customs duties but also harmonization of Armenia’s economic laws and regulations with those existing in the EU.
Prime Minister Tigran Sarkisian signed the free trade deal with his counterparts from Russia, Ukraine, Belarus, Kazakhstan, Kyrgyzstan, Moldova and Tajikistan after their talks in Saint Petersburg last Friday. Sarkisian described it as “historic” on his return to Yerevan.
Wiegand, who leads an EU team holding association talks with Armenia, insisted that the deal initiated by Russia will not be an obstacle to the planned DCFTA.
“I can confirm that from our perspective there is no problem or incompatibility between negotiating a deep and comprehensive free trade agreement and being in association with the European Union on the one side and having free trade agreements with other countries on the other side,” he said after completing a seventh round of Eastern Partnership negotiations with Armenian officials in Yerevan.
“We knew for a long time what will happen in Saint Petersburg because this is a rationalization of a web of bilateral free trade agreements which already existed in the [Commonwealth of Independent States,]” added the official coordinating Eastern Partnership-related actions at the EU’s executive body, the European Commission.
Echoing statements by Armenian officials, Wiegand also argued that the Saint Petersburg agreement does not run counter to Armenia’s membership obligations to the World Trade Organization (WTO).
Despite reporting major progress in the more than yearlong negotiations on the association agreement with Armenia, the EU has still not set a date for the start of separate DCFTA talks. The European Commission wants Yerevan to abolish first the discretionary authority of the Armenian customs service to ignore payment invoices submitted by importers and determine the market value of imported good in accordance with its own “control pricelists.”
Speaking to RFE/RL’s Armenian service (Azatutyun.am) late last month, a senior Commission official in Brussels said that taxation authority is “arbitrary” and runs counter to WTO rules.
The valuation mechanism, in place since the 1990s, is supposed to complicate fraud in the payment of customs duties and value-added tax at the border. However, Armenian businesspeople regularly dealing with the customs consider it a breeding ground for corruption. Some of them say, though, that customs officers now tend to accept invoices issued in EU member states.
The European Commission is also demanding changes in the collection of excise duties from domestic and imported alcohol. It says the existing tax rates and procedures discriminate against importers of alcoholic beverages.
Wiegand discussed the matter at a separate meeting with Prime Minister Sarkisian and Economy Minister Tigran Davtian earlier on Wednesday. He said he received “every possible assurance” that the Armenian government will enact changes sought by the EU by the end of this year.
Wiegand said this would pave the way for the official start of Armenia-EU free trade talks. “Of course we have to see it happen before this positive assessment [by the European Commission] will be done,” he cautioned at a joint news conference with Deputy Foreign Minister Zohrab Mnatsakanian, the chief Armenian negotiator.
“Our objective is to make every effort to accelerate this process,” Mnatsakanian said in reference to the DCFTA.
Both men reported major progress in their discussions on other areas of the future association agreement. They said they raised to 19 the number of negotiating “chapters” agreed upon by the two sides to date.
“I am very pleased that we were able today to advance much further in our negotiations on giving EU-Armenia relations a much deeper and much more ambitious framework,” said Wiegand.