The European Union and Armenia cleared what appears to be the final hurdle to the Association Agreement between them when they successfully concluded yearlong free trade negotiations in Yerevan on Wednesday.
The EU’s executive body, the European Commission, announced that the two sides worked out “the key elements” of a deal on the Deep and Comprehensive Free Trade Area (DCFTA) that will be the most significant component of the landmark agreement.
“The DCFTA will strengthen Armenia's economic integration with the EU by providing better market access for European and Armenian goods and services to each other's markets,” the commission said in a statement. “It will offer Armenia a framework for modernizing its trade relations and for economic development on the basis of far reaching harmonization of laws and regulations in various trade-related sectors.”
“These reforms will create the conditions for Armenia to bring key sectors of its economy in line with EU standards,” added the statement.
Armenian and EU negotiators drafted virtually all other chapters of the Association Agreement earlier this year. The announced conclusion of the separate DCFTA talks puts Yerevan and Brussels firmly on course to finalize the entire agreement during an EU summit slated for November. The EU also plans to initial similar accords with Georgia and Moldova during the summit that will take place in Lithuania’s capital Vilnius.
The DCFTA deal, reached after seven rounds of negotiations, is a further indication that Armenia will not seek to join the customs union of Russia, Belarus and Kazakhstan, which Moscow hopes will eventually evolve into a broader Russian-led alliance of ex-Soviet states. EU officials have repeatedly stated that membership in the customs union is “not compatible” with the DCFTA.
The DCFTA envisages not only removal of trade barriers but also harmonization of Armenia’s entire economic legislation with EU laws and regulations. The authorities in Yerevan will thus have to embark on extensive legislative reforms.
“Regulatory reform will focus on areas such as sanitary and phytosanitary issues, aiming to bring food safety standards in Armenia up to a par with those in the EU,” the European Commission said. “Armenia will also adapt various laws relating to industrial goods, with an emphasis on domestic safety and consumer protection.”
Armenia has already enjoyed in recent years a preferential trading regime with EU member states through the EU’s Generalized System of Preferences (GSP) covering some developing nations. The arrangement has entitled Armenian companies to selling virtually all products in the European market with significant discounts on import duty or no duty at all.
The EU is Armenia’s leading trading partner, accounting for roughly one third of the South Caucasus state’s external commercial exchange. Armenia imported $1.13 billion worth of goods from EU countries last year. Armenian exports to the EU, most of them non-ferrous metals and ore concentrates, totaled $560 million, according to Armenian government data.
The European Commission expects the DCFTA to have “significant impacts” on Armenia’s foreign trade. “An independent study suggests that in the long run the Armenian economy could gain an extra 146 million euros ($190 million) a year, representing a 2.3 percent increase in GDP,” said the commission statement.
Yerevan sought a number of EU concessions during the previous round of DCFTA talks held in April. In particular, it asked Brussels to allow Armenia to continue levying import duties from some European agricultural products and prepared foodstuffs for several years after the creation of the free trade zone. It is not yet clear whether the EU has agreed to this.
The Armenian government made no statements on the completion of DCFTA talks on Wednesday.